Milaca council trims preliminary levy, defers major purchases to build reserves for 2027 projects

City of Milaca elected officials on Aug. 12 reviewed a draft 2025 budget that trims the preliminary levy and delays most major equipment purchases so the city can rebuild reserves ahead of anticipated 2027 capital work.

City Manager Tammy Pfaff told the council the administration is not recommending large equipment buys in 2025 because the city needs to “build up the funds again for the 2027 project” and reduce the amount it will need to bond. Pfaff also cited an insurance estimate of a 17% increase in health-insurance costs presented by the city’s insurance representative, Bill Singer, as a driver of budget pressure.

The council agreed in principle to lower the preliminary levy by $30,000, which Pfaff said would produce a preliminary levy rate of about 4.94. Pfaff noted that the general fund is already thin and cautioned that using reserves or pulling investment CDs to cover projects would reduce operating cash; she said the city aims to keep about five months of operating cash on hand.

Pfaff walked the council through several near-term and midterm expenditures the city faces: a planned repaint of the water tower in 2027 estimated at $1.2–$1.5 million; anticipated contributions of $100,000 each from the city’s water and sewer funds for MnDOT Highway 23 improvements; and a 2027 roundabout/reset of 3rd Avenue with an estimated $520,000 remaining that the city may need to bond. Pfaff said a water-rate study due in November will inform necessary rate increases to support future water and sewer projects.

Councilors discussed funding options including assessing infrastructure costs for new lots, drawing down a CD to pay for a $250,000 sidewalk project (Pfaff said the city has about $3.8 million in RBC investments), and holding off on some street reconstructions until larger projects are completed. Pfaff said the city receives about $13,000 per month in interest from investments, which helps cash flow but is not a substitute for reserves.

On wages, staff proposed a 4.5% step schedule for 2025 that incorporates a 1.5% cost-of-living adjustment; the council indicated general agreement with that plan. Pfaff said salary increases were included in the balanced preliminary budget.

The meeting closed with the council’s acknowledgment of the preliminary levy reduction; no final levy resolution was adopted at the session. Mayor Dave Dillan called for adjournment, and Councilor Ken Muller moved to adjourn; the motion was seconded by Norris Johnson and passed unanimously. The council will consider the formal levy and budget later in the statutory process.