Montrose council workshop trims budget, weighs $300K–$500K street levy options after drop in tax capacity

City of Montrose council members and staff discussed the 2025 preliminary budget at a Sept. 5 workshop after the county returned a lower-than-expected preliminary tax-capacity figure that staff said would raise the city's tax rate unless spending was reduced.

The staff member leading the presentation said the city's preliminary tax capacity dropped by about $352,000 — from roughly 4.175 to about 3.86 — and attributed the fall primarily to a state change expanding homestead credit eligibility. "We got the prelim tax capacity back from the county, and it is dropping $352,000," the staff member said, adding that the change could push the city's previously modeled tax increase from single digits into the high teens without cuts.

Why it matters: the shortfall forces the city to choose between raising the levy for one-time capital such as street improvements or trimming recurring expenses to keep the tax-rate increase smaller. Staff presented three borrowing/levy scenarios for funding street work and other capital: a smaller $300,000 option, a middle $400,000 option and a $500,000 option staff recommended as a flexible upper bound if capacity improves.

What staff proposed and what was cut: to limit the 2025 levy impact, staff said they reduced several line items in the draft budget. Notable adjustments included returning the public-works street-maintenance line to $110,000 for 2025 (down from a prior $125,000 proposal), keeping the fire department's annual operating transfer to capital at $100,000 rather than increasing it to $150,000, reducing parks repair-and-maintenance from $15,000 to $10,000 and cutting planned park improvements (other than buildings) from $55,000 to $10,000 because no major projects are currently slated. The community-center repair and maintenance line was also reduced from $20,000 to $10,000 pending clearer near-term needs.

Capital items deferred: staff said a planned $300,000 SCADA purchase was removed from next year's capital plan because of an upcoming wastewater-plant project that will change system needs; expansion of the lower shop and parking-lot work were also pushed to later years rather than included in the 2025 budget. "We're not going to spend $300,000 when we've got a new plant coming down the line," the staff member said.

Intergovernmental and security notes: a council member reported Wright County had contacted the city about co-investing in a new salt shed; council asked for cost and land details before committing. Staff also said a cybersecurity assessment identified subscription services the city needs and that a proposal for that subscription will come to the council at its next meeting.

Numbers and uncertainty: staff ran preliminary levy-rate comparisons for typical property values under the different street-improvement scenarios and said the $500,000 option would create the most flexibility if tax capacity improves. Staff described the $500,000 figure as a cushion: "If capacity goes up, at least the rate will come down on $500," they said. Staff also used numerical phrases in the presentation that lacked explicit units in the transcript (for example, saying they would "put our rate at 56.69" and certify "roughly 2.167"); the units for those figures were not specified in the workshop discussion and are recorded in the clarifying details below.

Council reaction and next steps: council members acknowledged the preliminary nature of the figures and expressed concern that publishing high preliminary rates without explanation could alarm residents. Staff said final county capacity numbers should arrive at the end of September and that levy certification is finalized in December, allowing the council to scale back levy/borrowing before final action if capacity recovers. The staff member said they would prepare options for the council meeting on Monday, including the $300,000, $400,000 and $500,000 street-improvement scenarios, and the council directed staff to bring materials for decision-making.

What remains unresolved: the council did not adopt a levy or formal budget at the workshop. Final decisions will depend on the county's final capacity figures expected in late September and the council's December certification.

Clarifying details (selected): the transcript records the preliminary tax-capacity drop as "about $352,000" and models an earlier, uncut scenario as a roughly 20.3% tax-rate increase if no changes were made; staff discussed three borrowing options ($300K, $400K, $500K) for street improvements; the transcript records the staff phrase "put our rate at 56.69" and "certify roughly 2.167" without specifying units; the SCADA item estimated at $300,000 was deferred.

Next procedural steps: staff will bring formal options and supporting materials to the council's next meeting for potential action after reviewing final county figures.