11-12-2025 (Budget Workshop - Enterprise Funds)HUTCHINSON CITY COUNCIL
REVIEW OF 2026 ENTERPRISE FUND BUDGETS
MINUTES
TUESDAY, NOVEMBER 12, 2025, AT 4:00 PM
CITY CENTER — COUNCIL CHAMBERS
1. Call to Order
Mayor Forcier called the workshop to order at 4:00 p.m. Members present included Chad
Czmowski, Pat May, Tim Burley and Dave Sebesta. Others present were: Matt Jaunich, City
Administrator and other city directors and managers.
REVIEW OF 2026 ENTERPRISE FUND BUDGETS
Matt Jaunich, City Administrator, spoke before the Council. Mr. Jaunich noted that a review of
the following preliminary budgets will be held at today's workshop: Liquor Hutch, Creekside,
Refuse/Garbage, Water/Wastewater/Storm Water. In addition, there will be a review of the local
sales tax option and the enterprise fund transfers to the general fund.
2. Liquor Hutch Budget
Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich reviewed the
proposed budget for 2026 which sees a 3.5% decrease in sales revenue over the 2026 forecasted
sales. Staff is budgeting a 1% increase in sales revenue over the 2025 budgeted sales. 2025 sales
are down 2.5% and the customer count is down 1.9%. These trends are following national trends
in the liquor industry. THC sales did increase over the last year. Proposed expenses for 2026
have decreased 3.6%. The transfer to the general fund is budgeted at $550,000. Capital projects
include a new refrigeration system for an import/craft beer cooler. Mr. Jaunich also provided a
10-year liquor fund forecast.
Creekside Budget
Mr. Jaunich explained that Creekside's 2026 budget includes a 15.2% increase in revenue. Sales
revenue for bagged product is budgeted at an increase from 2025 based on increased sales from
one of the larger customers. Sales revenue for bulk product is budgeted at a 131.1% increase
from 2025 due to the availability of bitcon. Total expenses are budgeted at an increase of 6.0%.
Capital projects include a wheel loader replacement and a live bottom trailer. The transfer to the
general fund is budgeted at $125,000. The ending cash balance for Creekside is budgeted at
$2,685,385. Mr. Jaunich also provided a 10-year compost fund forecast.
Refuse/Garbage Budget
Mr. Jaunich noted that the refuse/garbage budget sees an increase in revenue of 4.9% from 2025.
This includes a 5% rate increase for all refuse rates, which is the third of five proposed rate
increases. Expenses for the refuse/garbage budget will see an increase of 6.8% for 2026. There
is a $55,000 transfer that goes out to the tree disease infestation/mitigation fund. Capital
purchases include a skid steer loader replacement. Mr. Jaunich provided an overview of the
Spring/Fall white goods pick up related to costs to the City for the program. Due to increases in
landfill and hauling costs, the program itself has obviously increased, which is also part of the
reason refuse rates are increasing. The proposed cost for 2026 is just over $43,000. Staff did
draft options the Council could consider on how to administer the program to save costs. This
program is paid for by user fees of refuse customers. The ending cash balance for the refuse fund
is budgeted at $778,813. Mr. Jaunich also provided a 10-year refuse fund forecast.
Water Fund Budget
Mr. Jaunich explained that the Water Fund budget shows a -14.1% decrease in total revenue for
2026. The 2026 budget does not include an increase in water rates, however rates may need to be
adjusted in 2027 or 2028. The rate adjustment likely will be a right -sizing of the City's base rate
and consumption rate, with a net neutral or small impact to the customer. Reduced debt levels
and the end of the local sales tax revenue are the main factors for the change. Water fund
expenses are budgeted at a -20.6% decrease. Capital improvement projects included are water
meter replacements, Well 5 rehabilitation and recovery treatment, compressor replacement, plant
optimization study phase 3, forklift replacement, fire ladder truck funding and roadway
infrastructure improvements. Transfer to the general fund will increase to $110,000 for 2026.
The ending cash balance for the water fund budget is budgeted at $4,732,607. Mr. Jaunich
provided a 10-year water fund forecast.
Wastewater Fund Budget
Mr. Jaunich explained that the wastewater fund budget sees a 69.1% increase in revenues for
2026. The 2026 budget does not include an increase to the wastewater, however rates may need
to be adjusted in 2027 or 2028. The rate adjustment likely will be a right -sizing of the City's base
rate and consumption rate, with a net neutral or small impact to the customer. Reduced debt
levels and the end of the local sales tax revenue are the main factors for the change. Local sales
tax revenue is being allocated more heavily to Wastewater in 2026 due to the significant decrease
in the Water fund's debt service in 2026. Miscellaneous Revenue includes an assumption for new
debt of $2,880,000 to help fund the Biosolid capital improvement project. Total expenses have a
budgeted increase of 12.4%. Capital improvement projects included are year 2 of 3 of the
Biosolids project, clarifier rake mechanism & drive replacement, clarifier dome replacement,
MBR fine bubble diffuser system replacement, replace solar field inverters, sewer lining, fire
ladder truck funding and roadway infrastructure improvements. The wastewater fund budget has
an ending cash balance budgeted at $7,470,126. Mr. Jaunich provided a 10-year wastewater fund
forecast.
Local Option Sales Tax
Mr. Jaunich reviewed the local option sales tax program and the purpose of it which is dedicated
solely to retiring the debt in water and sewer funds and expires after 2026. Mr. Jaunich provided
quick facts in reference to local option sales tax, which included: local sales tax on a $100
purchase amounts to $.050; local sales tax is applicable to the same retail purchases subject to
Minnesota sales tax; sale of vehicles by dealers are exempt and instead are subject to an excise
fee of $20 per vehicle sold; local sales tax is applicable to any sale made within city limits as
determined by the last four digits of your zip code; point of possession determines taxability;
purchases item/service received/performed within city limits is subject to the local sales tax;
purchased items/service is received/performed outside city limits is exempt from local sales tax;
organizations exempt from paying state sales tax are also exempt from the local sales tax. Mr.
Jaunich noted that the use tax process is applicable so if a purchase is taxable but the vendor did
not charge sales tax, then use tax must be reported and paid to the State. Mr. Jaunich also
reviewed other nearby cities with local option sales tax. Mr. Jaunich reviewed the purpose of the
current local option sales tax and what happens when the tax ends.
Mr. Jaunich noted that the state moratorium on local sales taxes expired on May 31, 2025, and
cities may submit requests to the legislature during the 2026 legislative session. No changes to
the previous local option sales tax process were made. Local option sales taxes can only be used
for "regionally significant" capital projects. State law limits these projects to "a single building
or structure, including associated infrastructure needed to safely access or use the building or
structure; improvements within a single park or named recreation area; or a contiguous trail".
Mr. Jaunich noted that in recent years, several of the requests were modified to exclude road and
other infrastructure projects on the basis that those projects are not "regionally significant" and
can be financed at least in part with other revenue sources. Mr. Jaunich reviewed the steps that
need to be taken to renew a sales tax. The steps include adopt a resolution, submit the resolution
and supporting materials to state tax committees, get legislative authorization, adopt a resolution,
hold a referendum and pass an ordinance.
Stormwater Fund Budget
Mr. Jaunich explained that total revenue in the stormwater fund budget is seeing an increase of
6.2%. There is a planned rate increase of 8% over nine classifications. This increase is needed
due to increasing improvement and maintenance costs and large capital items. The $50,000
transfer -in in 2025 was from the refuse fund for its share of a new leaf vacuum that was
purchased. Expenses are budgeted at a 1.6% increase. City's leaf vacuuming program is
accounted for in this fund and street sweeping is also funded by this account. Capital
improvement projects included for 2026 include Summerset pond cleaning, Holtz stormwater
pond planning/design, tractor with tracks and roadway infrastructure improvements. The ending
cash balance in the stormwater fund is budgeted at $1,097,929 for 2026. Mr. Jaunich provided a
10-year stormwater fund forecast.
Lastly, Mr. Jaunich provided an overview on enterprise fund transfers to the general fund. Mr.
Jaunich noted that the liquor fund continues to do well. 2026 sees the third rate increase in a
series of five in garbage rates. Water and sewer user rates will have to be revisited when the sales
tax ends. There is an 8% increase in the stormwater fees. Enterprise fund transfers into the
general fund account for about 5.5% of general fund revenue. Cash balances continue to remain
healthy. Capital needs continue to increase especially in the Creekside/Water/Sewer funds. In
addition, regulatory agencies have and likely will impact future needs.
3. Adjournment
Motion by Czmowski, second by Burley, to adjourn the workshop at 5:10 p.m. Motion carried
unanimously.
ATTEST:
Gary T. Forcier
Mayor
Matthew Jaunich
City Administrator