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Fergus Falls staff present preliminary 2026 budget driven higher by health-insurance jump
Summary
City staff presented a preliminary 2026 budget with proposed revenues just over $59 million and a proposed tax levy of $9,279,000 (an 8.53% increase); officials said a 24.9% health-insurance increase and other fixed costs pushed the estimate higher and that the levy could be reduced before final action in December.
Mayor Hicks convened the Committee of the Whole on Sept. 10 to hear the city’s preliminary 2026 budget, which staff presented as a work-in-progress with a proposed $9,279,000 tax levy and total revenues just over $59 million.
Bill Somner, who led the presentation, said staff compiled the budget after months of internal review and tax-levy committee meetings. “We are coming in higher than anyone on the committee wanted to do,” Somner said, adding that the figure represents a high-water mark the city intends to trim before final adoption in December.
Somner and staff identified several cost drivers. The single largest near-term pressure was an increase in the city’s health-insurance costs; Somner said, “our health insurance increase is 24.9%,” calling it a primary reason the levy estimate rose. He said that the total health-insurance increase across all city funds would be roughly $502,000 and that roughly $350,000 of that figure affects levy-supported funds.
Other pressures include negotiated wage adjustments, higher utilities and insurance costs, and ongoing capital projects. Somner said proposed expenditures are about $56.5 million and that the preliminary levy represents an 8.53% rise over 2025. He emphasized the number is not final: staff plan a series of actions through the fall to bring the levy down before December’s truth-and-taxation hearings.
On revenues, Somner flagged volatility in energy-transition aid tied to the Hoot Lake plant’s tax base impacts: the city received approximately $256,000 this year and is budgeting about $243,000 next year but said the formula’s interaction with general assessment growth means a legislative fix may be needed to preserve that aid stream.
Council members pressed staff on details: tree-management carryovers, Humane Society support (maintained at $12,000 in the preliminary numbers), and whether cannabis retail would affect liquor-store sales (staff said they had not modeled a decline and had held liquor revenues flat). Somner said staff will continue to refine utility rate reviews and other lever options this fall.
The council voted to place the preliminary budget on the Monday council meeting agenda for additional review; staff said the city must submit levy figures to Otter Tail County on the statutory schedule and that the December meetings will include a public hearing and final adoption steps.
Next steps: staff will continue fall analyses (insurance, utility rates, fund transfers and one-time fund balance uses) and return to the council ahead of the December truth-and-taxation process.
