Rochester officials present 2026-27 budget; preliminary levy up 5.9% after cuts

Administrator Zelms on Sept. 8 presented the city’s proposed two‑year 2026–27 budget and explained that the recommended preliminary levy increase for 2026 is 5.9%, down from a previously projected 10% after reductions and use of one‑time funds. The council continued discussion in a study session to review decision packages, utility fee adjustments and other budget details before the Sept. 22 preliminary levy adoption deadline.

The preliminary levy remains below 50% of the city’s net tax capacity, Zelms said, and the recommended budget totals about $664 million in 2026 and $636 million in 2027. Zelms said the city absorbed cost increases in part through valuation growth and new construction and by drawing on budget stabilization funds the council had set aside earlier: “We are in this September phase of answering questions,” Zelms said. “That’s really what we’re here to do today is to respond to some of, more deeper questions that had come up on the first … study session conversation.”

The staff presentation noted that most levy increases reflect personnel and contractual obligations for levy‑supported services such as 24/7 police and fire operations. The budget also includes planned adjustments to sewer, electric and water rates and projected swings in capital and debt service related to large projects, including a $72 million Minnesota Public Facilities Authority loan for the water reclamation facility previously approved by the council.

Council members praised staff work to reduce the levy request. Mayor Norton thanked Zelms and the team and noted the council will review whether decision packages align with the city’s strategic priorities. Council members requested clarifications about the operations line showing a rise in 2026 and a dip in 2027, details on the capital improvement plan and the equipment revolving fund, and additional information about Rochester Public Utilities’ fee proposals that staff said will come to a later meeting.

Staff said several decision packages were reduced to limit levy growth and that many recommended items were one‑time investments rather than ongoing baseline spending. Zelms emphasized the council will still have a supplemental budget process for 2027 and asked council members to flag any 2027 priorities now so staff could plan accordingly.

Next steps: the council will continue the study session series Sept. 15 and must set a preliminary levy at the Sept. 22 meeting. Staff said additional budget detail and department follow‑ups would be provided at future study sessions.