Agenda Packet Cc - work session 6/23/2025

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•Wages and benefits. Wages and Benefits make up approximately 68% of General Fund expenditures; it is expected that this expenditure category has the greatest impact on the budget. The city has four labor unions that cover most of the city’s employees. These contracts are all up for negotiation for the 2026 budget cycle. The City has received initial requests and are working through negotiation rounds with each unit. Health insurance premium coverage change are included in union requests so this may impact the budget. The City will be going out for health insurance request for proposal in fall of 2025. Additionally, beginning 2026, Minnesota is enacting a Paid Leave program that employers are required to cover cost at a minimum of 50%. •Other Revenues. The police service contracts have built-in cost inflators. For Mound, the service contract pricing is based on CPI-U with a minimum of 1% and a cap of 5%. Current CPI-U is 2.4%. The challenge with this service contract is with the union requests and negotiation. Minnetonka Beach and Spring Park have costs associated with the contracted increase in wages. •Taxable Market Value/Tax Capacity. The City’s property tax base continued to increase during the 2025 assessment period. While Hennepin County numbers are not final, the current estimated taxable market value has increased 6.4% to $5,333,244,972, which is an increase of $320,796,690. The current estimated tax capacity is $63,082,316. Taking additional factors in, the estimated adjusted net tax capacity for taxes payable in 2026 is $62,664,353, an increase of 6.45%. •At the May 6, 2025 Park Commission meeting, a Tree Inventory Analysis & Maintenance Strategy report was presented. The report identified over $300,000 per year in tree maintenance needs over the next five years. Current demands for tree removals in the right-of-way are exceeding the budget. •In 2025, the Orono Fire Department was budgeted for a full-year of operation in the Navarre/Casco Point areas. Cities of Orono and Long Lake have reached a tentative agreement mid-2025 and a long-term agreement is currently in work. The Long Lake Fire Department contract ends on December 31, 2025 and the amount budgeted for Long Lake Fire will be eliminated along with the amount budgeted for Orono Fire Department and the amount for the newly created fire department will be determined as more information becomes available. In the future, the city will see some relief in the pressure on the levy as fire service matter settles and debt service payment falls off. The 2014 GO Improvement Bonds will be eliminated from the levy in 2029. The 2026 budget process has some challenges, with phasing in the levy increases needed to properly fund the capital and operating needs of a new fire department to funding a long-term tree maintenance program while balancing the remainder of the City’s needs. The City’s strong financial reserves and long-term funding identified for the City’s capital plan has the City in a good position to navigate the current situation. Over the past several years, the Council’s budget guidance has been to deliver a general fund budget that keeps the tax rate steady. If the Council determines that there is a different objective, Page 2 of 7 4