Lake Elmo council reviews proposed 2026 levy, asks staff to seek cuts and options

Finance Director Clarissa Hadler told the Lake Elmo City Council at an Aug. 14 workshop that the city's proposed levy for 2026 is $12,205,453, an increase of about $2 million and a 21% rise from the prior year.

"We are projecting the tax rate. We go from the current the 2025 rate of 26.84 up to 31.72," Hadler said, describing the preliminary levy and the estimates that underlie it.

Why it matters: The increase would raise the tax impact on a median-value home by a little more than $300 (from about $1,616 to $1,926 in Hadler's example) and comes as the city budgets for new positions, software and maintenance of recently completed city facilities. Hadler told the council the larger levy supports increased general-fund operations, the start of several capital projects and a step toward setting aside money for long-term asset depreciation.

The council's discussion centered on whether to accept the preliminary levy as proposed or ask staff for revisions to reduce the tax increase. Council Member Jairusic said the levy as presented was too large: "I just don't see that we can increase our tax levy 20%." Other council members agreed the city needs to be more gradual in raising taxes while addressing deferred capital needs.

Key drivers and trade-offs - General fund expenditures: Hadler presented general fund spending of $8,977,154 for 2026, a roughly 12.9% increase over the prior year, driven by personnel costs (including three new fire captain positions proposed for 2026), added public-works staffing and the multi-year costs of planning and engineering contracts. - Capital and debt: The draft budget shifts some intergovernmental revenues into dedicated capital funds, increases the infrastructure reserve levy (Hadler proposed $500,000), and shows capital levies totaling about $2,050,000. Debt-service costs rise modestly in 2026 because of new issuance. - Utilities and enterprise funds: Hadler said enterprise fund numbers include depreciation and that presentation differences make comparability to 2025 tricky; example enterprise balances showed negative results largely due to included depreciation.

Council direction and staff actions - Council asked staff to return with options to reduce the levy before the preliminary levy certification in September and before the final certification in December. Mayor (acting as meeting chair) summarized the direction: "To recap, I heard you say, look at the street projects over the next 5 years and see if you can stretch them to 7." That instruction was one of several requests for scenarios staff should model. - Specific items the council asked staff to examine: stretching some street projects from a 5-year program to a 7-year program to lower near-term levy pressure; re-examining capital levies (including the park CIP levy); identifying capital projects that could be delayed or phased; and using one-time fund balance for select nonrecurring studies or planning work rather than placing those costs on the levy. - Compensation and COLA: Councilors asked staff to recheck assumptions about cost-of-living adjustments (Hadler used a 3% COLA assumption) and how steps and COLA interact in the 2026 personnel cost projection.

Council members repeatedly emphasized trade-offs. Council Member Hearn said the city should seek a smaller near-term levy increase (he suggested a target nearer 10%) while accepting that the city has underfunded depreciation and capital needs historically. Several council members flagged road spending and the city's pavement-management plan as the single largest contributor to the capital program and levy pressure.

Next steps and schedule - Staff will refine the numbers and return to the council with scenarios, including the impact of stretching road work over a longer period, options to lower the capital levy, and proposals for one-time uses of fund balance. Hadler said the city would fine-tune projections through December; the Truth in Taxation hearing is planned for Dec. 16 and the preliminary levy must be certified in September.

Ending: The workshop closed with council agreement to reconvene the budget discussion in a September follow-up workshop so staff can present specific scenarios that would reduce the proposed levy and explain the consequences of delaying capital work or using reserves.