Lake St. Croix Beach officials recently informed residents that the city mistakenly gave everyone a property tax break over the past three years.
City Clerk/Administrator Dave Engstrom said the city’s former contract accountant did not account for the city’s fiscal-disparity tax benefit in the city’s certified tax levy starting in 2023. “The wrong information was submitted by the contract accountant,” he said.
The total shortfall over the three-year period was $178,197. In 2023, for example, the city should have submitted to the county a tax levy of $630,597 instead of $560,829, an almost $70,000 shortfall, he said. The 2024 shortfall was $51,215; the 2025 shortfall was $57,214.
Lake St. Croix Beach residents learned about the error in a post written by City Attorney Christina Benson in the city’s August newsletter. “Residents will find, if they look at their 2023 tax record, that there was a significant percentage drop compared to the previous year,” Benson wrote. “The result of the Fiscal Disparity Levy not being accounted for is that residents were undercharged for taxes dating back to 2023.”
The Lake St. Croix Beach City Council went into closed session during a special meeting on Aug. 18 to discuss “potential litigation against … the city’s former financial consultant, regarding claims the city has asserted for professional malpractice,” Mayor Tom McCarthy said prior to the session. Engstrom said Thursday that he could not comment on what happened during the closed session, citing possible pending litigation.
The shortfall “did not cause any disruption to the day-to-day running of the city,” McCarthy wrote in the August newsletter. “All projects were completed as scheduled drawing from reserves. The micro-surfacing projects throughout the city streets were not impacted and will keep the roads in good condition. Rest assured that the budget for 2026 will reflect the Fiscal Disparity Levy.”
Fiscal-disparity revenue is property tax money collected on new commercial and industrial tax base growth in the seven-county metro area, Engstrom said. The money is placed in a pool and redistributed to communities and taxing districts. The system shifts the property tax base from the wealthiest areas to those with less tax base.
“It is a way to spread the wealth from the Bloomingtons and Woodburys of the metro area to smaller cities and cities that have minimal commercial and industrial development,” Engstrom said.
The city’s 2025 budget is $992,000; the city has a population of 1,060. City officials may decide to increase the city’s levy for 2026 and beyond to help make up for the shortfall; Engstrom said the city has until Sept. 30 to submit a preliminary levy for 2026. After that, city officials can adjust it lower, but not higher, by the end of the year, he said.
Residents seek investigation
A group of Lake St. Croix Beach residents has obtained the necessary number of signatures – 20 percent of the city’s voters in the last presidential election – to ask the Office of the State Auditor to investigate, said Cindie Reiter, who served on Lake St. Croix Beach City Council for more than 10 years, most recently from 2021 to 2024.
“We are concerned about the repetitive errors that have been made,” Reiter said. “They didn’t let anyone know that there was a shortfall when it was confirmed in early 2024. We are worried about the lack of transparency.”
Once that petition is received, the Auditor’s Office will likely meet with residents and decide whether to examine the books, records, accounts and affairs of the city, Reiter said.
Engstrom said the city would be responsible for covering the cost of the audit, which he estimated would cost around $30,000.
“We would have to take that $30,000 out of something else, probably road repairs,” he said. “I don’t think it would prove anything that the city audit didn’t already show.”
Reiter said: “Cost of the state audit is unknown until OSA reviews our request. We don’t know what it will cost. It’s based on what they determine they will look into. We think it’s worth asking for the review. It’s up to them to decide what they will review.”
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Doug Williams, who has lived in Lake St. Croix Beach since 1985, said he can’t fathom how such an error could have recurred over the course of three consecutive years and not been caught.
“That is stunning to me,” he said. “I find it to be extremely unusual. If I had made a substantial mistake like that when I was working, my employer would have taken immediate, substantive, substantial corrective action.”
He and others hope the Auditor’s Office will decide to investigate.
“It would be good to have the state come in and look at everything and say, ‘This is good, this needs to be fixed,’” he said. “And then there could be a reasonable sit-down to figure out how to fix it, and it gets taken care of, and life goes on. There’s no need for confrontation, conflict in a community of this size. I would really like to see that as the outcome.”
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