Lake Elmo council adopts preliminary 2026 budget, sets levy hearing after 3-2 vote

The Lake Elmo City Council on Aug. 25, 2025, approved Resolution 2025-060 adopting a proposed 2026 general fund budget and property tax levy and set a public hearing for Dec. 16, 2025, at 7 p.m. The motion passed on a 3-2 vote.

Council members and city staff framed the vote as a first step in a larger strategic financial planning process. Finance Director Adler presented the proposed 2026 numbers: estimated tax revenues of about $6.3 million, non-tax revenues of just over $2.2 million and total general fund expenses of about $8.8 million — an 11% increase over 2025. The total proposed levy shown in the presentation was $11,497,785, a roughly $1.4 million (14%) increase from the prior year. Adler told the council the median-home impact in Lake Elmo would be about $179 annually (roughly $15 per month) under the proposal.

Adler said the package includes several new capital levies the city has not previously used: an infrastructure reserve for larger street reconstruction and reclamation, a City Center capital-improvement levy, a vehicle and equipment levy and a street-maintenance levy. "Part of the levy that we've discussed a lot are the capital levies," Adler said, noting the package is intended to begin building dedicated capital reserves rather than relying solely on bonds.

Council member Hearn urged a slower approach and pressed staff for scenario modeling. Hearn said he was concerned about long-term tax targets and asked whether a smaller near-term contribution to the infrastructure reserve could still produce stable long-term debt outcomes. "I was told that we're as a city, that we potentially would have to work towards 50 to 60% tax rates," Hearn said, framing his request for additional analysis on fund balances and alternative levy pacing.

Adler and other staff responded that the city has modeled multiple scenarios. Adler said a scenario reducing the proposed infrastructure reserve contribution by $200,000 would change long-term debt projections — moving a 2038 debt projection from about $20 million to about $23 million in one model — but that the projections are modeling exercises tied to other assumptions the city will refine during its strategic planning process. "These are just modeling at this point," Adler said.

Council members split on approach. Council member Holtz argued for more aggressive savings now to avoid a larger one-time funding shock later, saying earlier investment could reduce future borrowing. Other council members, including Hearn, favored a slower build-up in reserve funding and asked staff for more comparative data on infrastructure value, depreciation and the fund-balance effects of different levy levels.

The council voted to set the public hearing for Dec. 16, 2025, at 7 p.m. as part of adopting the proposed levy; the resolution notes that the proposed levy may be reduced but not increased at final adoption.

Votes at a glance

- Resolution 2025-060, approving the 2026 proposed general fund budget and property tax levy and setting the public hearing for Dec. 16, 2025 — Passed 3-2.

Next steps

Staff and council members said they will continue scenario modeling and present further strategic financial materials ahead of the Dec. 16 public hearing. The council invited additional modeling on infrastructure fund balances and long-term debt projections before final levy adoption.