SCC Item 1.TO: Mayor and Councilmembers
FROM: Adam Flaherty, City Administrator/Finance Director
DATE: November 10, 2025
SUBJECT: Budget Meeting #5
__________________________________________________________________________________________________
On Monday, the City Council and staff will continue with review and discussion of the 2026 budgets and property tax
levy. I have developed an outline of discussion topics below.
General Fund Budget
The City Council reviewed draft revenue and expenditure budgets for the General fund during a meeting on August 4,
2025. The proposed revenue budget totals $10,850,321, an increase of 9.16% compared to the current year. The
proposed expenditure budget totals $11,019,558, an increase of 10.86% compared to the current year. The proposed
budget is an un-balanced budget in the amount of $169,237.
The City’s fund balance policy outlines that the ending fund balance in the General Fund should be 45% of the
subsequent year’s budget. The policy further outlines that any balance more than the defined 45% minimum can be
transferred to a capital reserve fund at the Council’s discretion.
During the 2026 budget review process the City Council has determined that the $169,237 fund balance more than City
policy guidelines will offset the budget and tax levy within the General Fund rather than be transferred to a capital
reserve fund.
City staff will review any revisions to the information presented at the previous meetings.
Materials for Review and Discussion
1)Summary of Expenditure Changes
2)Summary of Revenue and Expenditure Budgets, with comments
Capital Improvement Plan
The proposed Capital Improvement Plan (CIP) covers the years 2026-2035. A summary of the CIP is included and is
organized by funding source. Inclusion of an item within the CIP does not commit final approval by the City Council,
rather it directs staff to plan towards and gather necessary information for an educated final approval on each
respective item. Each individual item is planned, researched, and brought back to City Council for final approval when
the respective item is ready to move forward.
City staff will review the CIP Document.
Materials for Review and Discussion
1)Capital Improvement Plan – Projects by Funding Source
SCC Item 1.
Property Tax Levy
At the September 22, 2025, meeting, the City Council adopted a resolution Adopting a Preliminary Property Tax Levy for
Taxes Payable in 2026 in the amount of $11,206,138. This amount is the maximum amount the City can levy and is the
amount used for truth-in-taxation notices.
City staff will review the levy summary included in the packet and will review and discuss the changes with the City
Council. A brief description of each column is as follows:
- Green: Preliminary levy as adopted with tax capacity estimates available at that time.
- Yellow: Preliminary levy as adopted with updated tax capacity information from Wright County.
- Purple: Current working levy with updated tax capacity information from Wright County.
The current working levy totals $11,105,525, which is a decrease of $100,613 from the adopted preliminary levy. The
changes include: 1) a reduction of the levy for lease payments to the EDA in the amount of $63,765, and 2) a reduction
of the levy in the General Fund in the amount of $36,848 because of revenue and expenditure budget changes discussed
earlier in this meeting.
The current working levy remains subject to change until the City Council adopts a final levy. The City Council should
continue discussions on the tax levy and provide direction to City staff for updates that can be presented at a future
budget meeting.
Materials for Review and Discussion
1) Tax Levy Summary
Next Meetings
November 24 – City staff will provide final review of numerous budget and property tax levy components, including but
not limited to Cost-of-Living Adjustments, the Capital Improvement Plan Document, changes to operating budgets, and
the proposed property tax levy.
December 2 – The City will be conducting the Truth-in-Taxation meeting at 6PM in accordance with requirements from
the Minnesota Department of Revenue. The proposed budget and property tax levy for payable year 2026 must be
discussed, and the public will be given the opportunity to comment and ask questions.
December 8 – The City Council will be presented for consideration of approval: 1) a resolution adopting operating
budgets, 2) a resolution setting the property tax levy for payable year 2026, and 3) a resolution adopting the capital
improvement plan.
City of OtsegoGeneral Fund Budget - 2026Budget Changes Tracking - ExpendituresTotal Expenditures - Draft Budget Binder (August 1) 11,087,481$ Fire ProtectionRevised Contract for City of Albertville (53,583) Total Expenditures - Preliminary Levy (September 22) 11,033,898 Police ServicesBudget Adjustment for Lawful Gambling Funds on Hand (50,915) Multiple DepartmentsProperty & Casualty Insurance Quotes Finalized (1,865) CommunicationsNewsletter - Internal Production vs. Contracted Service (10,300) EngineeringNet Adjustment - YTD Activity & Removal of County GIS Map Fee (1,180) Street LightsBudget Adjustment to Better Reflect YTD Actuals 3,060 Fire ProtectionRevised Contract for City of Elk River 16,280 Multiple DepartmentsBenefit Enrollment Adjustments 30,580 Street MaintenanceCompost Site Cost Sharing Calculation Adjustments - Total Expenditures - Final Budget (December 8) 11,019,558 Increase or (Decrease) Compared to Draft Budget Book (67,923)
City of OtsegoGeneral Fund Budget - 2026Budget Changes Tracking - SummaryDraft PreliminaryFinalBudget Budget Budget2026 2026 $ Change Comments 2026 $ Change CommentsRevenuesTaxes 7,861,364$ 7,807,781$ (53,583)$ Levy Reduction for Expenditure Reduction7,553,534$ (254,247)$ Net for: Fund Balance Use, Lawful Gambling, Revenue & Expense ChangesCable Franchise Fees 109,000 109,000 - 106,000 (3,000) Quarterly Revenue Continued DeclineLicenses & Permits 1,878,642 1,878,642 - 1,904,463 25,821 Additional Months of Activity to Estimate BudgetIntergovernmental 173,533 173,533 - 186,333 12,800 Increase (Police Aid); Decrease (Ag MV Credits)Charges for Services 261,870 261,870 - 268,365 6,495 Additional Months of Activity to Estimate BudgetSpecial Assessments 3,500 3,500 - 3,400 (100) Additional Months of Activity to Estimate BudgetFines & Forfeitures 38,000 38,000 - 37,100 (900) Additional Months of Activity to Estimate BudgetInvestment Interest 149,572 149,572 - 175,126 25,554 Additional Months of Activity to Estimate BudgetMiscellaneous 12,000 12,000 - 13,000 1,000 Additional Months of Activity to Estimate BudgetInterfund Transfers 600,000 600,000 - 603,000 3,000 Recalculated Post Benefit EnrollmentSubtotal11,087,481 11,033,898 (53,583) 10,850,321 (183,577) ExpendituresGeneral Government 2,553,921 2,553,921 - 2,549,850 (4,071) Benefits, Newsletter & Property InsurancePublic Safety 4,915,008 4,861,425 (53,583) Albertville Fire Contract4,827,286 (34,139) Benefits, Sheriff (Lawful Gambling) & E.R. Fire ContractPublic Works 2,215,610 2,215,610 - 2,234,775 19,165 Benefits, GIS Aerial Maps, Property Insurance, Street Light UtilitiesCulture & Recreation 1,301,792 1,301,792 - 1,306,497 4,705 Benefits, Property InsuranceEconomic Development 101,150 101,150 - 101,150 - Interfund Transfers - - - - - Subtotal11,087,481 11,033,898 (53,583) 11,019,558 (14,340) Net Change in Fund Balance-$ -$ (169,237)$ Description
City of OtsegoProperty Tax Levy CalculationsPayable 2026Revised: November 6, 2025$% $% $%2024 2025 2026 Change Change 2026 Change Change 2026 Change Change CommentGeneral Fund 6,336,000 7,000,000 7,802,000 802,000 11.46% 7,802,000 802,000 11.46% 7,545,000 545,000 7.79%UPDATED - Staff to Review ChangesTax Abatements 88,224 87,436 108,624 21,188 24.23% 108,624 21,188 24.23% 108,624 21,188 24.23%Debt ServiceSeries 2018A 102,144 104,308 106,314 2,006 106,314 2,006 106,314 2,006 Series 2020A 197,000 186,000 186,000 - 186,000 - 186,000 - Series 2024A - - 1,339,065 1,339,065 1,339,065 1,339,065 1,275,300 1,275,300 Sub-total 299,144 290,308 1,631,379 1,341,071 461.95% 1,631,379 1,341,071 461.95% 1,567,614 1,277,306 439.98%Capital ReservesPavement Management 1,000,000 800,000 600,000 (200,000) 600,000 (200,000) 600,000 (200,000) Trails Management 70,000 76,000 82,000 6,000 82,000 6,000 82,000 6,000 Parks Equipment 400,000 425,000 450,000 25,000 450,000 25,000 450,000 25,000 Capital Equipment Revolving 550,393 587,937 613,954 26,017 613,954 26,017 613,954 26,017 Fire Reserve 210,000 - - - - - - - Fire Capital Revolving - 6,189 8,333 2,144 8,333 2,144 8,333 2,144 City Buildings & Property 35,000 120,000 130,000 10,000 130,000 10,000 130,000 10,000 Sub-total 2,265,393 2,015,126 1,884,287 (130,839) -6.49% 1,884,287 (130,839) -6.49% 1,884,287 (130,839) -6.49%Use of Fund Balances (220,152) (220,152) (220,152) (220,152) Grand Total 8,988,761 9,392,870 11,206,138 1,813,268 19.30% 11,206,138 1,813,268 19.30% 11,105,525 1,712,655 18.23%Growth (%) -3.66% 4.50%Tax Capacity 39,516,976 39,284,126 40,707,494 42,446,791 42,446,791 UPDATED - Per Wright CountyGrowth (%) 23.20% -0.59% 3.62% 8.05% 8.05%Net Tax Capacity 38,897,895 38,570,629 40,337,056 41,701,870 41,701,870 UPDATED - Per Wright CountyGrowth (%) 23.29% -0.84% 4.58% 8.12% 8.12%Tax Rate 23.109 24.352 27.781 26.872 26.631 Population 22,705 23,132 23,790 23,790 23,790 Source = MN State DemographerTax Levy Per Capita 396 406 471 471 467 Residential City Tax City Tax City Tax City TaxValuation Tax Capacity 2025 2026 Change ($) Change (%) 2026 Change ($) Change (%) 2026 Change ($) Change (%)200,000 1,715 418 476 58 13.88% 461 43 10.29% 457 39 9.33%300,000 2,805 683 779 96 14.06% 754 71 10.40% 747 64 9.37%402,500 3,922 955 1,090 135 14.14% 1,054 99 10.37% 1,044 89 9.32%500,000 4,985 1,214 1,385 171 14.09% 1,339 125 10.30% 1,327 113 9.31%600,000 6,250 1,522 1,736 214 14.06% 1,680 158 10.38% 1,664 142 9.33%Description 2024 2025 2026 Change ($) Change (%) 2026 Change ($) Change (%) 2026 Change ($) Change (%)Median Appraised Value 402,700 386,400 402,500 16,100 4.17% 402,500 16,100 4.17% 402,500 16,100 4.17%Less: MV Exclusion (997) (11,774) (10,325) (10,325) (10,325) Taxable Market Value 401,703 374,626 392,175 392,175 392,175 Tax Capacity 4,017 3,746 3,922 175 4.68% 3,922 175 4.68% 3,922 175 4.68%Taxing Estimated Estimated Estimated Estimated EstimatedAuthority Tax Tax Tax Change ($) Change (%) Tax Change ($) Change (%) Tax Change ($) Change (%)City of Otsego 928 912 1,090 178 19.52% 1,054 142 15.57% 1,044 132 14.47%Levy DescriptionCity Taxes Only. Bold valuation is the Median Value of all residential properties within the City and is provided by the Wright County Assessor. This range of values represents 92.8% of all residential homesteads within the City.City Taxes Only. Based on the Median Value for each respective year. Note: The formula for tax capacity changed in 2025 to due legislative changes for the Homestead Market Value Exclusion Program.Preliminary Levy - (9/22/2025) Preliminary Levy - UPDATED Tax Capacity Current Working LevyY:\Budget\2026\Property Taxes\Tax Levy Calculations (2026)2026-V4