Isanti council leans toward preliminary levy that holds tax rate flat while weighing fund-balance tradeoffs

Isanti — City council members and staff spent the bulk of a budget work session debating whether to set a preliminary levy that keeps the tax-rate change at 0% while relying on the city’s elevated fund balance, or to set a more conservative preliminary levy that preserves wiggle room for insurance and other renewals.

Staff presented a levy and tax-rate analysis workbook with historical data and told the council the proposal on the table would be “a roughly 6 and a half percent increase in the levy and that equates … to about … roughly 2 and a half percent tax rate increase,” a staff member said. Council members discussed whether that preliminary levy should be the ceiling or whether the council should set the preliminary levy lower (including a proposal to aim for a 0% tax-rate change) and then make adjustments before final adoption.

The discussion centered on two trade-offs. Several council members argued for setting a higher preliminary levy to protect against late-arriving cost increases — notably insurance renewals — and the risk of not having a quorum for a follow-up meeting. One councilmember urged caution, saying such protections avoid being forced to issue debt or make abrupt cuts if unexpected mandates appear. Others pressed to use some fund-balance capacity to hold the tax rate flat this year and tasked staff to prepare materials showing how to set a preliminary levy at a 0% tax-rate change for the September meeting.

Staff described how fund balance rose recently from roughly 42% to about 54% because an interfund loan to utilities was forgiven and operating expenditures were cut in the prior budget year. The staff member said that while fund balance provides an insurance cushion, it can be volatile: inflows from investment-market adjustments or one-time transactions may not repeat. “If that money goes back, it will also come back again,” the staff member said, arguing for preserving some cushion; other councilmembers said they wanted to return money to taxpayers where possible.

Council asked staff to prepare presentation materials that would allow the council to act at the first September meeting if members are comfortable doing so; otherwise, staff will prepare for the second September meeting. No formal preliminary levy was adopted at the session. Procedural business earlier in the meeting included a motion to adopt the agenda (moved by Councilman Heaman, seconded by Councilman Lundin) and a motion to adjourn (moved by Councilman Merrill, seconded by Councilman Holmgren); both motions carried 5-0.

Next steps: staff will deliver levy materials showing a scenario in which the tax rate change is held to 0% and other scenarios with higher preliminary levies; the council planned to set the preliminary levy at the September meeting after reviewing those materials.