06-08-2026 - Agenda Packet City Council - Work Session

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• Wages and benefits. Wages and Benefits make up approximately 62% of General Fund expenditures. It is expected that this expenditure category has the greatest impact on the budget. The city has five labor unions that cover most of the city's employees. The contracts are for 2026 through 2028. Items that are set in the contracts are the wage increases and health insurance coverage plan as well as other benefits such as the MN Paid Leave program. Health insurance premiums are not received until after preliminary budget is adopted, thus a 10% increase is budgeted. • Professional service. Professional services make up approximately 22% of the General Fund expenditures. Internal services provided by the City to other departments includes IT, Fleet and Facilities service, which makes up approximately 10% of the General Fund Budget. • 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 2.8% for March 2025 to March 2026, with May 2025 to May 2026 to be used. 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. The cap for all contracts at 5%, however, wage increases are at 6% for Sergeants and Officers. • Taxable Market Value/Tax Capacity. The City's property tax base continued to increase during the 2026 assessment period. While Hennepin County numbers are not final, the current estimated taxable market value has increased 4.5% to $5,623,563,200, which is an increase of $244,582,700. The current estimated tax capacity is $66,222,665. Taking additional factors in, the estimated adjusted net tax capacity for taxes payable in 2026 is $65,609,832, an increase of 4.8%. • 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. 2026 budget had $225,000 budgeted for Streets and Parks tree removal. • 2050 Comprehensive Plan is required to be completed per state mandate. The impact to the General Fund is projected to be around $100,000 to $150,000 with staff to follow up in the first draft budget with a more defined estimate. • Shoreline Fire Department went into effect on January 1, 2026 as a standalone entity funded by the cities of Long Lake and Orono, with a contract through 2028 with Minnetonka Beach. Current budget increase for the department is 10-12%. In the future, the city will see some relief in the pressure on the levy as debt service payment falls off. The 2014 GO Improvement Bonds will be eliminated from the levy in 2029. The 2027 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 and the 2050 comprehensive plan while balancing the remainder of the City's needs. The City's strong financial reserves and long-term funding identified for the 2of7 4