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Finance director outlines fund-balance, utility-rate and SCEC assumptions ahead of 2026 budget
Summary
Finance Director Schmuck presented assumptions for a Financial Management Plan—proposing fund-balance ranges, balanced budgets for enterprise funds and the SCEC, exploring monthly billing for water conservation, and accelerating the 2026 budget calendar with a draft model due by late May/early June.
Finance Director Schmuck presented the assumptions staff will use to build a Financial Management Plan and the 2026 budget model at the work session reconvened March 24.
Schmuck asked the Council whether to formalize a change to the City’s fund-balance policy. She reported the City has been operating with reserves higher than the existing language implies and proposed a structured policy with a range, expressing comfort maintaining a 50% target for the General Fund. Councilmembers Sanschagrin and DiGruttolo supported reducing the target toward 50% in order to allow reserves to be used strategically.
On the Shorewood Community Events Center (SCEC), Councilmembers said the goal should be to work toward a balanced budget. Schmuck described the SCEC’s current reserve notes and recommended building a fund-balance objective for that facility so the subsidy is transparent and easier for the public to understand.
Schmuck also outlined options for capital funding, including return of franchise fees to the street capital fund and a mix of pay-as-you-go and debt service for CIP projects. She recommended flexibility in the financial model to test these scenarios.
Utility rates and billing drew extended discussion. Schmuck noted that the City purchases water and sewer from neighboring jurisdictions (Excelsior, Tonka Bay and Chanhassen) but currently bills residents Shorewood rates even when they are on another city’s system; she asked whether the Council wanted to align billed rates with the actual supplier in mixed-service areas. She also raised monthly billing as a conservation tool and noted the City’s low-income utility discount requires a time-consuming manual review; only six accounts currently use the low-income rate. Councilmembers discussed whether to create a street-lighting enterprise fund or a city-wide infrastructure fee to better match costs to users.
On the schedule, Schmuck said staff will provide a draft financial model by late May or early June, with a formal presentation at the July 28 work session and a preliminary levy set in September. The Council expressed support for moving budget conversations earlier in the year and for using targeted public-engagement tools—surveys or town halls—to test resident appetite for trade-offs between service levels and levy impact.
Next steps: staff will deliver a draft financial model, and return in July with a formal presentation and options the Council can test for SCEC funding, fund-balance policy, utility-rate adjustments, and capital-funding scenarios.
