Minnetonka previews preliminary 2026 budget; staff propose roughly 7.9% levy increase to fund public safety and seed facility debt

Minnetonka City staff presented a preliminary 2026 budget framework at an Aug. 18 council study session that would require a proposed overall city levy increase of about 7.892% if council adopts the full package under discussion. City Manager Mike Fonick and Finance Director Darren Nelson framed three decision questions for council: whether to support a base levy increase of 7.2% (including 2.6% for the Public Safety Master Plan); whether to add 0.735% for new debt service for facility improvements (community center and Fire Station 2); and whether to certify a $300,000 HRA levy.

Darren Nelson said the operation portion of the levy accounts for roughly 78% of tax levy allocations and that public safety is the single largest portion of general fund operations (about 44% of the general fund). He described key 2026 cost drivers: full‑year funding for nine firefighters hired mid‑2025 (budgeted as about $630,000 for 2026), negotiated market adjustments and cost‑of‑living increases (about $1.45 million), an 8.9% rise in health‑insurance costs, and the state’s new Paid Family Medical Leave program (estimated city cost about $150,000).

On capital and facilities, Nelson summarized earlier council direction and a community facilities study. Staff presented an illustrative financing pathway: an approximate $10 million bond combining an estimated $4 million community center renovation and a $5 million Fire Station 2 rebuild (amounts are preliminary). "That $10,000,000 bond is about $810,000 a year over 20 years at current interest rates," Nelson said as an illustrative example, and staff proposed a 0.735% levy increment (about $405,000) to begin accumulating local resources.

Nelson and Fonick also described a financing technique to ‘‘hold’’ an existing small park‑bond levy when the bond could be paid early in order to preserve that levy capacity as a transfer to a facility savings fund. That approach would preserve a roughly $300,000 annual levy amount and, combined with the new levy increment, could create roughly $700,000 in a dedicated fund by year‑end to reduce the size of a future bond issuance or cover upfront costs.

On police operations, staff noted a 10‑year Axon service agreement that consolidates tasers, in‑car and body cameras and records systems, a personnel request for a community engagement officer, and a drones‑as‑first‑responders concept that staff have budgeted in the CIP for its first year; staff estimated drones would cost about $300,000 annually in later years if moved into operations. "We currently have an application in with FEMA for an additional 9 [SAFER] positions," Fire Chief Kevin Fox said about grant efforts to help staffing.

Staff provided homeowner impact illustrations: median home values rose (staff cited a median near $521,000), and staff estimated the typical homeowner impact would be in the low‑hundreds of dollars annually depending on property value and pending fiscal‑disparities county adjustments. Nelson said revenue trends are favorable mid‑year (about 53% of revenues collected through June 30) and that the city is projecting a balanced budget for 2026 while preserving targeted fund‑balance policies.

Council members voiced support for implementing the Public Safety Master Plan while urging caution about near‑8% levy impacts on residents. Mayor Brad Weir said he supported the 7.2% base that funds public safety, but many council members asked staff to continue exploring grants, phased approaches and other creative financing before final certification. The HRA levy was proposed to remain unchanged at $300,000.

No formal vote was taken at the study session; staff said the preliminary levy will be formalized in September with opportunities for public comment in November and a December final levy adoption. Staff were directed to return with more detailed, department‑level numbers and additional scenarios that could reduce the preliminary levy before final adoption.