HomeMy WebLinkAbout05-26-2026 (Workshop - Budget Kickoff)HUTCHINSON CITY COUNCIL
2027 BUDGET KICKOFF
MINUTES
TUESDAY, MAY 26, 2026 — 4:00 PM
CITY CENTER — COUNCIL CHAMBERS
1. Call to Order
Mayor Gary Forcier called the workshop to order at 4:00 p.m. Council Members present
included Pat May, Chad Czmowski, Tim Burley and Dave Sebesta. Others present were: Matt
Jaunich, City Administrator, Andy Reid, Finance Director and other city directors.
2027 BUDGET KICKOFF REVIEW
2. 2027 Budget Kickoff
Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich noted that today's
workshop is to begin the 2027 budgeting season. Mr. Jaunich noted that the purpose of today's
workshop includes reviewing the budget calendar, looking at some historical data, reviewing
items that staff have identified as items/concerns that need to be addressed and getting direction
from the Council on what they would like to see during the 2027 budget preparation season. Mr.
Jaunich noted that there are three ways to approach a budget: staff driven; Council driven; or
combination of the Council working with staff, which has historically been how the City of
Hutchinson's budget has been developed. Mr. Jaunich further noted that setting the annual
budget is one of the biggest policy decisions of the City Council. The City's budget documents
drive the work of the city and are the forces behind achieving the City's Mission Statement. Mr.
Jaunich reviewed the City's mission statement, vision statement, the seven core areas of focus
which include public safety, health & recreation, transportation, economic development,
environment, good government and housing. Mr. Jaunich spoke about statements identified in
the City's last strategic plan. Those statements included wanting to be known as a destination
place for recreation, art and leisure; wanting to have a growing, diverse economy with a skilled
workforce; wanting to have adequate, affordable housing for all; wanting to have welcoming and
safe city facilities to service current and future generations; wanting to have cost effective,
reliable and sustainable energy and practices; wanting to have high quality, multi -modal
transportation and infrastructure systems; wanting to have active citizen engagement,
participation and involvement and wanting to have fiscally responsible management to serve
community needs. Mr. Jaunich also reviewed five long-term goals the Council should consider
every budget season. Those goals include: 1. What should future tax levies look like? 2. What
levels of services should the City perform and provide in the future? 3. What is an acceptable
level of debt? 4. What is our level of investment in technology and equipment, and what period
of payback is acceptable? 5. What are our future infrastructure needs (roads, utilities, buildings,
etc.) and how are we going to pay for them?
Mr. Jaunich reviewed the current policy statements used when developing the budget, which
includes the Financial Management Plan, Revenue Policy and operating budget.
Mr. Jaunich reviewed tax rate comparisons of Hutchinson with other McLeod County cities as
well as with other regional center city rates. Hutchinson is the second lowest in the county and
ranks the eighth lowest amongst regional centers. Mr. Jaunich spoke about the price of
government which is the percent of every dollar earned going to pay for City services, excluding
electric and gas utilities. Hutchinson is approximately 2.5% for a total cost of government. Mr.
Jaunich provided data on economic comparisons, the 10-year tax rate trend, the 10-year total tax
levy trend, the total market value history, the total taxable market value history and the total tax
capacity history. Mr. Jaunich explained that the City's tax rate is determined by the tax levy and
tax capacity and tax capacity is determined by the market value. The City's modest tax increases
over the past ten years have been offset by large increases in the city's market values, however it
appears there is a slowdown in market value increases. Since 2018, total market values have
exceeded a billion and are the highest in the history of the City. However, 2026 values increased
by only 0.6% which was on top of a 1.7% increase in 2025, the two lowest amounts in over 10
years. Taxable values are matching market values and the 2026 report shows values increasing
by only 1.7%, the lowest increase since 2014. Tax increases without value increases end up
having a negative effect on the tax rate. The valuation changes over the past few years have
shifted more of the City tax burden onto residential properties. While commercial and industrial
properties likely will see a tax decrease as their valuations have remained flat or had minor
changes. As values increase, the market value homestead credit decreases, impacting residential
tax bills. In general, the City's market value increases have not kept up with the City's tax levy
increases, increasing the tax rate the last three years. With the lower market values and taxable
values, the pressure to maintain tax rates and/or no tax rate increase will be extremely difficult.
General discussion was held on different ways to approach a budget with a 0% tax levy and how
it could impact the services provided to the community.
Mr. Jaunich further reviewed historical budget numbers including the tax levy from the last eight
years and tax levies as a percentage. Mr. Jaunich provided information on certified city levy
changes for 2026 for other McLeod County cities and throughout the state. The average tax levy
increase was 4.6% within the county and the average state-wide tax levy increase was 7.7%. The
average regional center tax levy increase was 6.4%.
Mr. Jaunich then provided a very preliminary general fund budget for 2027. This includes wages
and benefits expected to increase by 6.0%. This includes increased health costs of 15%. This
includes adjustments for full-time positions that were not factored into 2026 but does not include
any new positions, such as a Communications Director which has been discussed. Other
expenditures are assumed to remain flat at this time. The current look has a 7.9% general levy
increase to balance the budget. HUC's Pilot has an increase of $38,853. All other revenues are
at 2026 budgeted amounts. Revenues are assumed to remain flat at this time. A 1% tax levy
increase is equal to $72,636. Mr. Jaunich presented a preliminary general fund five-year budget.
Mr. Jaunich provided a list of things to think about when establishing the 2027 general fund
budget — such as program changes — need for increase/decrease?; enterprise fund transfers to the
general fund; analysis of certain line item projections; performance increase percentages;
fleet/facility funding; funding of wages and benefits; inflation impacts; payroll allocations
(general vs. enterprise); continued discussion on general staffing levels and service level
needs/wants; new position requests/retirements; Communications Director position; appropriate
CIP funding and needs; state budget/tax agreements; charges for service/fee increases; local
government aid; state legislative impacts; moving start of performance increase to January 1;
funding of major/special projects; wage survey impacts; union contract impacts; impact of
selling event center; sales tax and public wants/needs. Mr. Jaunich spoke about use of LGA
funds. He noted that the City is set to receive $3,123,625 in LGA in 2027 which is an increase
of $20,158 from 2026. He noted that 50% goes to the general fund and 50% goes to various
aspects of the capital improvement fund. Capital Projects Fund is for various projects currently
not designated. He noted that 2027 will be the fourth year of the Fleet designation of Capital
LGA ($50,000). He also noted that 2027 will be the fifth year of a 50150 split with LGA
between the CIP and the general fund. Mr. Jaunich also noted there are no known LGA cuts
from the State at this point in time.
Mr. Jaunich then reviewed the debt management plan. He noted that the 2027 increase is
projected to be at about 2.6%. He explained that rising project costs have put pressure on
increasing the debt tax levy. He noted that the debt levy has not kept up with inflation. He also
explained that special assessment rates will continue to be reviewed and the City still has future
debt needs for heavy equipment. Future facility need costs are rising and decisions need to be
made on the fire truck purchase and City Center remodel project. Lastly, he noted that HUC
debt may impact interest rates.
Mr. Jaunich also reviewed two major projects scheduled for 2027 which include the fire ladder
truck and the City Center remodel. Other CIP projects included for 2027 are the airport snow
shed, Creekside office expansion, Montreal/Edmonton roundabout, Holtz property pond, other
equipment/vehicle replacements and other storm/water/wastewater and other facility
improvements. A future sales tax could take years for approval, if at all.
Mr. Jaunich then reviewed the various current City fund balances. Mr. Jaunich noted that the
target cash balance is based on 50% of the 2026 budgeted operating expenses plus the 2026 debt
service payments. It is a measure of liquidity and the ability of the enterprise fund to pay for its
short-term obligations. Future capital needs and debt service are not taken into consideration
when looking at the target cash balance. Mr. Jaunich also reviewed special projects fund
balances which include the Community Improvement Fund, Capital Projects Fund and the Public
Sites Fund as well as a fund balance history.
Mr. Jaunich also reviewed a list of staff concerns or items in need of being addressed/watched
These include: another challenging year?; staff is in need of guidance, direction and a voice
from the City Council on the public's needs/wants; levy expectations and meeting costs of
employee wages/benefits; growth of salaries/benefits is the biggest cost driver; funding for
Communications Director; construction/replacement costs increasing — no funding adjustments
have been made to address these increases; examine all revenues and expenses; regulatory
impacts to Water and Wastewater infrastructure; moving pay adjustments to January I"; selling
of City assets (Event Center) and impact on operations; Event Center operations; increased costs
with an election year; additional staffing requests; pay review/performance review/wage system
review; interest rates/inflation; funding for heavy equipment/fleet and fire ladder truck; wage
allocations; special assessment rates; sales tax extension; and legislative impacts.
Mr. Jaunich also noted current challenges/constraints which include balancing the growth of the
community vs. the costs associated with that growth; increased facility maintenance costs;
funding dedication not keeping up with inflation/rising costs; increased labor costs; tax levy
appetite and the pressure from the public to staff to do more within the community; defining
needs and wants and what is willing to be paid for; and sales tax availability. Mr. Jaunich also
asked the Council to consider their overall goals for the community and how do we budget to
support that; wants vs. needs — who is defining that? He asked them to think about what their
expectations are — what does staff need to provide the Council to meet their objectives? What
data/information has staff not provided the Council that you want to see?
Mr. Jaunich asked the Council's thoughts/ideas on the 2027 budget: 1. tax levy goal? — 0%,
moderate increase, or significant increase; 5-year budget plan called for an annual general levy
increase of 6-7%; "very early look" calls for something around 7.9%; 2. Any services Council
would like to see provided and/or increased/decreased in 2027? — Park & Rec, streets,
equipment, etc.; 3. Is there a specific project/item the Council would like to see budgeted for
and/or done in 2027? — Communications Director, housing, infrastructure, etc. "Think Strategic
Plans"; 4. Any fee/rate/transfer changes to look at in 2027? — utilities, licenses, rentals,
programs, park dedication, etc.
Council Member Czmowski noted that he has received a lot of negative feedback on the
increased Park/Rec fees from young families. Council Member May commented that if the
community wants the amenities it wants they will need to be paid for with fees and/or a tax levy
increase.
Mr. Jaunich noted that staff can provide a budget with a 0% levy for the Council to review to see
what the impacts would be.
3. Adjournment
Motion by May, second by Burley, to adjourn the workshop at 5:15 p.m. Motion carried
unanimously.
ATTEST:
Gary T. Forcier Matthew Jaunich
Mayor City Administrator