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HomeMy WebLinkAbout09-08-2026 (Workshop - Budget)HUTCHINSON CITY COUNCIL REVIEW OF 2027 PRELIMINARY BUDGET MINUTES TUESDAY, SEPTEMBER 8, 2026, AT 4:00 PM CITY CENTER — COUNCIL CHAMBERS 1. Call to Order Mayor Gary Forcier called the meeting to order. Members present were Pat May, Dave Sebesta and Chad Czmowski. Member absent was Tim Burley. Others present were Matt Jaunich, City Administrator, and other City directors REVIEW OF 2027 PRELIMINARY BUDGET 2. 2027 Preliminary Budget Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich noted that today's agenda will include a review and reminders, the state budget impact, preliminary levy and past levies, general fund revenue and expenses, proposed staff changes, enterprise funds revenue and expenses, debt management plan and next steps. Mr. Jaunich also reviewed the City's mission statement, vision statement, the seven core areas of focus, the City's strategic plan, and 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 reminded the Council that the City Charter requires staff to submit an annual budget by September 1st. The City Charter also requires the Council to act on the preliminary budget by the second regular meeting in September. After the preliminary levy is set, it can only be lowered, not raised. The Council will need to set the date and time of its Truth -in -Taxation hearing at the second meeting in September and provide a phone number and mailing address that taxpayers may call/contact if they have questions related to the City's property tax levy/budget. The hearing is usually held in early December. The budget will be adopted in mid -late December. Mr. Jaunich commented on the State budget situation which in February 2026 showed a budget surplus projected to be at $3.7 billion. The next projection will come out in November. Early estimates expect a slight surplus, perhaps $1 billion. At this point, nothing is pointing towards any state financial issues that should impact the City's 2027 budget planning. Mr. Jaunich did note that future years don't necessarily look good. The next budget biennium currently shows a small surplus of $377 million and uncertainty that federal funding cuts could have an impact. Staff is proposing to increase the general fund levy by 9.8% and the debt fund levy by 8.1% with a total preliminary levy increase of 9.3%. With a 0.6% increase in the EDA tax levy and a 0.0% increase in the HRA tax levy, total tax impact is 8.9%. Mr. Jaunich provided an overview of past tax levies from 2018 to the present. Mr. Jaunich provided the Council six options for the Council to consider for the preliminary tax levy. The first option would hold both levies flat; the second option would see an 8.1% increase in the general fund levy and an 8.1% increase to the debt levy; the third option would increase the general fund levy by 1.2% and the debt levy by 8.1%; the fourth option would increase the general fund levy by 5.0% and the debt levy by 8.1%; the fifth option would increase the general fund levy by 8.0% and the debt levy by 8.1% and the sixth option would increase the general fund levy by 9.8% and the debt levy by 8.1%. The sixth option, or a 9.3% total levy increase, would mean a 1.1% change in tax rate or a $17.00 annual increase on a median home value of $275,000. Mr. Jaunich also reviewed a 10-year tax rate trend. He also provided information on a tax rate comparison from 2025 of Hutchinson to other regional centers, state-wide and county -wide cities which shows that Hutchinson is basically at the mid -point yet lower than other cities county- wide. He noted that the average tax levy increase amongst cities in 2026 was 7.7%. Mr. Jaunich provided a market value history which is a 7.5% increase from 2025 to 2026. Mr. Jaunich reviewed general fund revenues and how they are proposed to be increased and decreased, with an average of a 4.5% increase. Mr. Jaunich commented items to note for the general fund include that general fund revenues include a 9.8% tax levy increase ($25,000 of the levy is allocated to the Uponor tax abatement); there is a very minor increase in the LGA amount to the general fund; a $38,853 PILOT payment increase from HUC along with an increase in reimbursement rates for Legal & IT ($12,800); there is a $40,000 decrease to cable tv franchise fees due to the recent downward trend; there is a $6988 increase in charges for service; a $18,750 increase contribution to the general fund from Water/Sewer/Compost funds; and a 1% tax levy increase in the general fund is equivalent to $72,517. Mr. Jaunich spoke to the LGA allocation with 50% of the LGA in 2027 being allocated to the general fund and 50% going to the capital fund; this is the sixth straight year of a 50%/50% split; originally when LGA was split in 2011 the split was 40%/60%; LGA was significantly increased in 2024; there is a minor increase in 2027; and $210,950 is undesignated for future capital needs. 2027 general fund revenues include property taxes see an increase of 46%; other taxes see a 2% increase; licenses & permits increase 38%; intergovernmental revenue increase 13%; charges for service increase 17%; no increase in fines & forfeitures, increase of 2% in miscellaneous revenue, and a 17% increase in transfers -in. General fund expenses are proposed to increase 4.5%. Wages & benefits increased 5.9%, supplies increased 0.2%, services & charges increased 2.7%, miscellaneous expenses decreased 0.4%, transfers -out stayed flat and capital outlay remains flat. Mr. Jaunich noted that the largest impact on the City's general fund expenses is associated with wages and benefits which includes costs for general performance increases, union impacts and staff timing/allocation changes and minor shifts. A 12% increase in health insurance is budgeted for next year but may come in lower. A new Communications position is included in the budget, along with $20,000 included for contribution to the center for the Arts, and an increase of $78,560 for new police body cameras. The preliminary budget is currently balanced. Mr. Jaunich then reviewed expenditures from 2026 to 2027, historical general fund budget information and staffing levels. Again, proposed staffing changes include a Communication Coordinator position to begin April I and a request to add a compost bagging machine operator starting January 1. Mr. Jaunich reviewed the enterprise funds and their proposed increases/decreases. Mr. Jaunich noted that these numbers include depreciation. The sales tax will be ending in March. The water/wastewater rates will need to be monitored but should be good for another two or three years. The liquor fund continues to do well even with the industry seeing a decline in sales. The City is in the fourth of five rates increases for garbage with the previous increase being in 2008. There is an 8% increase in the stormwater rates. Creekside is looking at an office expansion and scale improvements in 2027. There is a decrease in fund balances due to capital needs with a high need in wastewater. The enterprise fund balances are healthy Additional budget factors include a $17.1 million capital improvement plan, no major changes in services, one new position added in the preliminary budget (Communications Coordinator position), staffing costs and capital needs are the biggest driver of the city's general fund budget with staffing costs being the biggest reason behind the request of a tax levy increase within the general fund, no new significant revenue increases for 2027, $174,000 included in new debt payments to account for the fire ladder truck and City Center remodel(I.8$ levy increase), expecting building permit revenue to remain steady and the general fund balance continues to remain healthy. Mr. Jaunich then briefly reviewed the debt management plan which is for 2027 and beyond based off of previously approved projects. The annual debt levy will increase by an average of 3.7% for the years 2027-2029 then will stabilize in 2030. The 15-year debt for the new fire truck was approved by the City Council in 2026. The plan includes new debt for the City Center remodel. Increased interest rates have/will impact future debt decisions. Rising project costs have put pressure on increasing the debt tax levy. The debt levy has not kept up with inflation. Mr. Jaunich reviewed the following considerations: a 1% levy increase is equal to $98,625, staff is proposing apreliminary City tax levy increase of 9.3% (9.8% increase in general fund), combined with the EDA and HRA tax levy increases, the preliminary total tax impact to Hutchinson residents will be the equivalent to an 8.9% increase, the current budget is balanced, the budget includes year 4 of 5 of a rate increase to garbage rates, the current proposed tax levy increase would increase the City's tax rate for the fourth straight year, and the large increase in market value will ease the 9.3% tax burden increase to the city's property taxpayers with a median home seeing a $17/year increase. Mr. Jaunich noted that there are still decisions that need to be made between now and the end of December such as health insurance, possible new revenues, interest rate impacts, etc. He also noted that staff have made significant efforts to have the preliminary levy closer to the actual final levy. However, there are some costs that are still unknown that could have a significant impact on the budget and noted again that there are no new significant revenue sources. Mr. Jaunich noted that there are items not included in the preliminary budget for 2027 which include costs to come up with a sales tax plan, costs to extend utilities in the east/northeast side of town, and funding for an additional police sergeant. Other revenue options could be discussed as well as considering long-term costs associated with added facilities/services. In summary, Mr. Jaunich reviewed noted budget changes. On the revenue side there is a $708,182 increase in general fund taxes; a $38,853 increase in PILOT from HUC; a $40,000 decrease in cable tv franchise fees due to downward trends; $18,750 in new transfers from city utility accounts into the general fund and a $212 114 increase in debt levy funds to mainly account for ladder truck payments and city center remodel. On the expense side there is a $663,246 increase in wages and benefits; $20,000 is included for Center for the Arts funding; an increase of $78,560 for new police body cameras; and $28,000 is budgeted for a community survey. Lastly, Mr. Jaunich reminded the Council that the biggest factors behind the levy increase are wage and benefit increases of $663,246 and the increase in debt levy costs to pay for a new fire ladder truck and the City Center remodel in the amount of $212,114. Formal action of the preliminary budget will be taken at the September 22, 2026, Council meeting. 3. Adjournment Motion by May, second by Sebesta, to adjourn the workshop at 5:15 p.m. Motion carried unanimously.