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MEMORANDUM <br />To: Mayor Tunheim and Orono City Council <br />From: Maggie Jin, Finance Director <br />Subject: 2026 General Fund Budget and Tax Levy and 2026 Internal Service Fund Budgets <br />Date: July 28, 2025 <br />Attachments: <br />A. Levy Detail <br />B. Estimated Tax Rate <br />C. Estimated Tax Rate Impact <br />D. 2026 General Fund Budget <br />E. 2026 Internal Service Funds Budgets <br />F. 06-23-2025 Work Session Memo <br />Work is continuing on the 2026 budget and tax levy. Individual departments requests have been <br />received and department heads have discussed their requests with the City Administrator and <br />Finance Director. A draft of the preliminary budget and tax levy has been completed and is <br />attached for Council review, input and further guidance. <br />The tax levy required to fund the General Fund, Capital Funds, and Debt Service Funds has been <br />calculated to fund all of the needs with an increase to the tax rate. The goal of the City is to <br />maintain a stable tax rate while funding the needs of the City. The current projected tax rate with <br />the draft preliminary budget comes in at 16.797%, which does come in higher than the last five- <br />year average tax rate (16.576%). Staff will continue to work with each department head to <br />further refine the budget prior to the adoption of the preliminary budget in September. The draft <br />budget and tax levy information is being provided as an update of the budget process to the <br />council for further suggestions and recommendations. <br />There are a couple of variables that could still impact the budget and the tax rate: <br />• Wages — the City is currently undergoing union negotiation to determine the wage <br />increase for staff. <br />• Health Insurance — the City is currently undergoing union negotiation with City <br />contribution not yet agreed upon. Additionally, the City will be going through a request <br />for proposal (RFP) for health insurance in the late summer/early fall. The City will not <br />receive the actual amount of any rate increase until the end of September or early <br />October. <br />• Property Values — The final property values will not be received from the Hennepin <br />County Assessor until December. The tax rate calculations are based on the most recent <br />numbers available and generally do not change significantly in either direction between <br />now and the final. <br />2026 Budget Memo 07/28/2025 — Page 1 <br />3 <br />