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City staff present first look at 2026 budget; draft levy up 6.7% overall, general fund levy up 7.5%
Summary
City staff previewed a draft 2026 budget and tax levy, citing known cost increases — including the end of a federal SAFER grant and new payroll mandates — that together push a draft overall levy up about 6.7% and the general fund levy about 7.5%. Council was asked to target a Sept. 8 preliminary levy adoption to meet the Sept. 30 state deadline.
City Administrator Wilson and Finance Director Amy Hov gave the Inver Grove Heights City Council a first look at the city's draft 2026 operating budget and tax levy, projecting a draft overall levy of $36,499,899 — an increase of $2,285,142, or about 6.7% from 2025.
The draft general fund budget is shown at $36,737,519 and the proposed general fund levy is $30,684,754, which Hov described as a 7.5% increase for that component. Wilson and Hov told the council that roughly $1,450,000 in additional expenditures tied to previously committed items (including phase-ins after grant support ends and settled union contract increases) account for much of the upward pressure on the levy.
Why it matters: staff stressed timing and statutory requirements. Under Minnesota state statute cities must adopt a preliminary property tax levy by Sept. 30; staff recommended aiming for the council's first September meeting on Sept. 8 to allow time for adjustments before the county compiles parcel notices in November and the final-levy deadline in late December.
What's driving the change: Hov and Wilson listed specific, budgeted items they called "known increases." Those include a new state payroll tax to fund Minnesota paid family and medical leave; baseline contract settlements with several unions (roughly a 3.5% baseline for many settled contracts); rising health insurance costs (staff used a 14% health-insurance rate cap as a worst-case assumption); and the end of the federal SAFER grant that had paid firefighters' wages. The SAFER grant paid wages and benefits for nine firefighters hired in February 2022; Hov said the city has been phasing those costs onto the levy and must now budget the full cost for those positions.
Staff estimates: Wilson told the council that those known commitments add about $1,450,000 in expenditures (a 4.26% levy effect before other requests). When all department requests are totaled, the draft shows about a 5.6% increase to the general-fund spending level compared with 2025; part of the difference between the general fund spending increase and the general fund levy figure reflects nonproperty revenues and transfers.
Other budget items and assumptions: Hov reviewed nonproperty revenue categories (licenses and permits, charges for services, permits, fines, investment interest and transfers in). She said nonproperty revenues are projected to decline by about $195,515 overall compared with 2025, including a $24,000 drop tied to franchise-fee sharing changes requested by Town Square Television. Hov also noted a planned use of SAFER-related savings (about $340,000 in 2026 under the current plan) to smooth the transition off the grant. The council was also shown proposed transfers for pavement management and parks capital and a 5% planning placeholder for those levies.
Council questions and staff responses: council members asked about schedule choices (recodification of city ordinances, compensation study timing and procurement), the mix between one-time projects and ongoing costs, and when the council would see health-insurance renewal numbers (Hov said the 14% cap had been factored into the operating budgets and renewals typically arrive in August). Wilson said a compensation study is required under the AFSCME agreement before that contract expires Dec. 31, 2026, and that staff would issue an RFP to select a consultant.
What's next: staff asked the council for feedback and said they will return with finalized administrator recommendations, prioritized staffing requests, and more detailed numbers on nongeneral funds (community center, utilities and pavement management) at upcoming work sessions in September, October and November. Hov said staff hope to adopt a preliminary levy at the Sept. 8 meeting and finalize the levy before the statutory Dec. 28 deadline (staff said they hope to be done by Dec. 15).
Ending: the presentation closed with staff inviting council direction on whether to defer any one-time projects (for example, code recodification) to reduce the levy impact and with reminders about upcoming work sessions on non-general funds and the capital-improvement plan.
