12-04-2025 (Truth in Taxation Hearing)MINUTES
CITY COUNCIL
TRUTH IN TAXATION HEARING
DECEMBER 4, 2025
CALL TO ORDER — 6:00 P.M.
Members Present: Mayor Gary Forcier, Pat May, Tim Burley, Dave Sebesta and
Chad Czmowski.
Others present: Matt Jaunich, City Administrator and Andy Reid, Finance Director.
2. TRUTH IN TAXATION HEARING
Mayor Forcier opened the hearing at 6:00 p.m.
Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich
explained the budget process the City has used to date. Four work sessions have been
held over the past seven months. The Council adopted the preliminary budget and tax
levy in September and recently truth in taxation notices were mailed to all City
property owners. Mr. Jaunich explained the purpose for tonight's hearing is to
enhance public participation in the property tax system by allowing a public forum to
discuss the budget, discuss the proposed tax levy, explain the budget and tax levy
increases and hear public comments and questions on the budget and tax levy. If the
hearing needs to be continued it will be continued at the next Council meeting on
December 9, 2025, and the final budget and tax levy is expected to be adopted by the
Council on December 23, 2025. Mr. Jaunich noted that at tonight's hearing the
Council discusses the City's share of citizens' total 2026 proposed tax bill, not
property valuations. Mr. Jaunich explained that property valuation open book
meetings are held in May/June by McLeod County. Mr. Jaunich briefly explained
valuations and noted that the market value of a property is determined by January 2 of
the year prior to the year in which taxes on that property are due. Therefore, market
values for taxes payable in 2026 were set in January 2025. Property values on
statements recently received are based off of home sales from October of 2023 to
September of 2024. Property owners will receive new notices of market values from
the assessor in March/April of 2026. Questions on valuations should be addressed in
May/June with the County Assessor/County Board.
Mr. Jaunich explained that the preliminary tax levy set in September showed a City
tax increase of 9.2% and included a balanced budget. The revised budget has reduced
the tax levy increase to 6.9% while maintaining a balanced budget. The City has
adjusted its revenue and expense projections and eliminated roughly $214,243 in
taxes since its preliminary budget was adopted in September.
Hutchinson's 2025 average City tax rate ranked the second lowest in McLeod
County, however ranked in the average range amongst other outstate regional centers.
The state-wide city average tax rate is 62.59% and Hutchinson is at 56.53%.
Hutchinson is the fourth lowest of all outstate regional centers for the poverty level,
Yd highest of all outstate regional centers for median household income, 51h highest of
all outstate regional centers for median home value and is the third lowest of all
outstate regional centers in LGA payments. The 2026 state-wide proposed property
tax increase of cities is 8.7% and the 2026 state-wide proposed property tax increase
for all taxing agencies is 6.9%. Mr. Jaunich provided data on the price of government
for the City of Hutchinson related to enterprise funds and governmental funds.
Mr. Jaunich noted that there are 14 reasons property taxes vary from year to year.
These include: the market value of property may change; the market value of other
properties in the taxing district may change, shifting taxes from one property to
another; the State general proper
rope tax may change; the city budget and levy may
change; the Township budget andevy may change; the County budget and levy may
change; the School District's budget and levy may change; a Special District's budget
and levy may change; special assessments may be added to a property tax bill; voters
may have approved a school, city/township, county or special district referendum,
federal and state mandates have changed; aid and revenue from the state and federal
governments may have changed; the state legislature may have changed the portion of
the tax base paid by different types of properties; and other state law change may
adjust the tax base. Mr. Jaunich also reviewed Minnesota's property tax system and
how it is based off of five components, those being: local property tax levies city,
school district, county, etc.), property tax classification rates (ranges from 0.25 /o to
2.0% - set by the state), property value (based off of property sales and is set by the
county assessor), tax credits (only certain properties get this) and state general tax (set
by the state and assigned to mainly commercial/industrial properties). Hutchinson's
property tax rate is set by taking the city's tax levy and dividing it by its total tax
capacity. Tax capacity is determined by multiplying a property's market value by its
classification rate. Each property rate is assigned a classification rate depending on
its use by the State Legislature. Properties associated with income production
(commercial & industrial) have a higher classification weight than other properties.
The City's total tax capaci is an accumulation of all parcels within the city, minus
adjustments. Mr. Jaunich also explained how the City's portion of a proposed tax bill
is determined.
Mr. Jaunich shared four options that the Council is considering for the tax levy that
range from a 0% increase to a 6.9% increase. Mr. Jaunich noted that with the
proposed 6.9% levy increase that means a $60.00/year increase on a home valued at
$275,000. Again, this is the City's portion of the tax statement. Mr. Jaunich also
explained the homestead exclusion and market value history. He noted that the State
adjusted the Homestead Market Value Exclusion amounts upwards to address rising
residential property values. The increased MVHE will result in a lower Net Tax
Capacity and ultimately a higher tax rate than under the prior HMVE. Mr. Jaunich
shared information on market value growth since 2017 with the commercial/industrial
type seeing the biggest change. Mr. Jaunich reviewed the entities that share a
Hutchinson tax bill those being the County, the School (operating), the School (debt),
the City, the EDA, the HRA and Region 6E.
Mr. Jaunich then reviewed the City's mission statement and seven core areas of
focus, which include public safety; health & recreation; transportation; economic
development; environment, good government and housing.
Mr. Jaunich reviewed the proposed tax levies for 2026 which includes a 6.9%
increase for the City's portion and a 1.7% increase for the EDA levy and a 1.8%
increase for the HRA levy, for a total tax impact increase of 6.7%. The statewide
preliminary average levy for cities is at an 8.7% increase and the overall preliminary
statewide increase is at 6.9%. Mr. Jaunich reviewed the 2026 debt levy and the tax
levy comparison since 2018. The proposed 2026 tax levy includes the eleventh
straight year of an increase in the general fund portion of the levy. The proposed
2026 tax levy includes the fifth straight year of an increase to the debt fund portion of
the levy (2.5%). Compared to 2016, the City's total tax levy has increased by 46.5%.
The average annual tax levy increase since 2016 has been 3.9%. The 2026 total tax
levy accounts for a per capita tax of $696, which is up from $656 in 2025.
Mr. Jaunich provided additional information on the City's tax rate such as: 1.) The
City's growth in tax capacity (2.7%) has slowed down, increasing the pressure on tax
rates; 2.) This will be the third time that the tax levy (6.9%) outpaces the tax capacity
in 11 years, resulting in a likely increased city tax rate; 3.) The median home value
would see a $60 city tax bill increase, based on their home value remaining steady at
$275,000 (a property possibly might not see a city tax increase if its value does not
increase at the same rate as the median home value or its value decreases). A
property valued at $275,000 in 2025 with the same value in 2026 would see a $60
increase in its city tax bill. Mr. Jaunich also provided data on the 10-year tax rate
trend.
Mr. Jaunich reviewed the general fund revenues and expenses. Mr. Jaunich explained
that the general fund revenues include property taxes, other taxes, licenses &permits,
intergovernmental revenue, charges for service, fines & forfeitures, miscellaneous
revenue, and transfers -in. He noted additional facts on general fund revenues which
include: general fund revenues include an 8.6% tax levy increase ($579,872);
property taxes account for approximately 44% of the General Fund Revenues; there
will be no increase in the PILOT payment from HUC for 2026 but there will be an
increase in reimbursement rates for Legal and IT services; there is a minimal increase
in LGA and the Fire & Police Pension Aid; includes a slight increase in building
permit fees ($32,000); $200,914 increase in charges for services (various park and rec
user fee increases, school liaison program, etc.); increase contribution to the general
fund from Water/Sewer/Compost funds of $50,000; transfer -ins account for
$2,862,628 and is equivalent of a 42% tax levy increase (Liquor Fund, Water/Sewer,
Creekside and HUC); and a 1% tax levy increase to the general fund is equivalent to
$67,290. Total general fund expenses are comprised of wages & benefits, supplies,
services & charges, miscellaneous expenses, transfers -out and capital outlay. Public
safety accounts for 33.9% of general fund, 26.1% is general government, 23.6% is
culture and recreation, 13.9% is streets and highway and 2.6% is miscellaneous. Mr.
Jaunich noted the following: wages & benefits increased 6.4% for 2026 which
includes costs for general performance increases, union impacts and staff
timing/allocation changes & minor shifts; 14% increase to health insurance, increase
of $30,501 to account for MN Paid Family Medical Leave; new IT full-time
employee; Waterpark/Recreation Building Manager position that was inadvertently
left out of the 2025 budget, but approved in the 2024 budget; Engineering/Public
Works staffing changes; wages and benefits account for 68% of general fund
expenses; increase in operating supplies to replace outdated equipment at Park & Rec;
increase in contractual R&M for aquatic center/ice rink; additional $25,000 for fleet
funding; and the 2026 budgeted expenses are balanced with revenues. Mr. Jaunich
provided information on the tax levy allocation for each department and the
percentage of expenses covered by fees/taxes/LGA-other.
Mr. Jaunich then reviewed the enterprise funds — consisting of the liquor, compost,
garbage, water, wastewater and stormwater funds. No tax dollars are used to support
any of these funds. Mr. Jaunich noted that the Liquor Hutch and Creekside continue
to do well and will contribute $675,000 to the general fund in 2026. There will be a
5% increase in garbage rates which is the third of probably five straight increases
since 2008. All enterprise funds continue to have healthy fund balances. There will
be a rate increase to stormwater rates of 8%. Transfers to the general fund from the
enterprise funds will be at $920,000 in 2026. Total enterprise money is $2,862,628
when HUC money is included. Mr. Jaunich noted that capital needs are due to the
age of all of the facilities continuing to be a factor.
Mr. Jaunich reviewed the 2026-2030 capital improvement plan. The capital
improvement plan is made up of infrastructure, enterprise funds, public safety, public
works, Park & Recreation, and general government and is approximately $73 million.
The approximate breakdown of distribution of the funds is as follows: $23.11 million
to infrastructure; $2.68 million to public safety; $22.97 million to Enterprise Funds;
$13.89 million to Public Works; $7.26 million to Park & Rec and $2.64 million to
General Government. Funds for the CIP come from new debt, enterprise funds,
taxes, special assessments, aids/grants/donations, special funds/reserves and unfunded
(no current funding sources). Major capital items included in the capital plan are:
liquor store improvements, Creekside equipment, Water/Wastewater improvements
and equipment, water meters, storm water improvements, Edmonton Avenue, 2026
street improvements, sealcoating, airport, cemetery, vehicles/equipment, pool
repairs/features, playgrounds, campground expansion, outdoor basketball courts, fire
truck, sqquad car/police robot and City Center improvements. The splash pad and
picklebaiI courts have been removed from the capital improvement plan. Mr. Jaunich
reviewed the debt management plan. The big impact was the new police station.
2022 was the first increase in the debt levy since 2016. The 2026 increase is set at
2.5%. Increased interest rates have/will impact future debt decisions. The debt levy
has not kept up with inflation and special assessment rates still need to be reviewed.
Mr. Jaunich reviewed that staff is recommending a 5.7% increase in general fund
revenue/expenses which means an 8.6% increase in the total general fund and a 2.5%
increase in the debt tax levy with an overall tax levy increase of 6.9%. With the EDA
tax levy proposed to increase 1.7% and the HRA tax levy proposed to increase 1.8%
the total tax impact is 6.7%. One of the biggest factors behind the levy increase is the
general wage and benefit increases along with a couple of additional positions that are
expected to cost the City an additional $676,219 in 2026.
Mr. Jaunich reviewed additional information to note: The 2026 budget includes an
additional IT staff position, Waterpark/Recreation Building Position and
Engineering/Public Works staffing changes — no other significant increases or cuts in
staffing or changes in service; the budget includes a 14% increase in health insurance
costs and new costs for the MN Paid Family Medical Leave; staffing costs and capital
needs are the biggest driver of the budget; major capital improvements are needed at
the pool and ice arena; fund balances continue to remain high and the fiscal condition
of the City is healthy; the State's budget forecasts aren't great and could have an
impact in future years; home values continue to increase and the city is continuing to
see growth at all levels; and inflation and supply chain issues continue to impact the
City as well.
Mr. Jaunich noted that there will be significant changes within the police department
in 2026 due to retirements and resignations.
The final budgets and levy will be adopted at the December 23, 2025, City Council
meeting.
ADJOURN
Motion by Czmowski, second by Burley, to adjourn at 7:00 p.m. Motion carried
unanimously.
ATTEST:
Gary T. Forcier
Mayor
Matthew Jaunich
City Administrator