Edina Council Tackles Budget, Water Plant, and Utility Fee Changes
The Edina City Council held a work session on May 6 to discuss major budget and infrastructure decisions for 2026-2027, including a proposed new water treatment plant at Yorktown Park and changes to how the city charges for utilities. No formal votes were taken, but council members directed staff to develop detailed scenarios and return with recommendations in coming months.
The council spent much of the meeting debating how to approach the 2026-2027 budget, particularly around capital improvements and property tax increases. Staff presented two scenarios for funding capital projects: a $1.4 million annual levy contribution or a $2 million contribution. Council members expressed concern about making budget decisions piecemeal without understanding the total impact on property taxes. They asked staff to develop a percentage-based approach tied to property value appreciation—roughly 6 to 8 percent—to give residents a clearer picture of cumulative tax increases. A second budget work session is scheduled for May 20, with the city manager's preliminary proposal due August 19.
On utilities, the council showed support for shifting from flat fees to a percentage-based model that would increase annual revenue from $2.6 million to approximately $4 million. The new 4% model, effective January 2026, would tie fees to energy consumption and reward efficiency. However, council members want staff to show how this change would affect residential versus commercial customers and whether residents would actually see lower property taxes if the additional utility revenue offsets street reconstruction costs. Staff will prepare detailed scenarios for council review.
The council also endorsed Yorktown Park—currently home to Fire Station #2 and the Tri-City State Skate Park—as the site for a new Water Treatment Plant #5. The $31.5 million facility is necessary to meet future water demand; storage alone cannot suffice. One council member expressed hesitation about demolishing the existing building and asked that the decision be deferred pending a master plan for the park. Staff will conduct a rate study this year to model the impact on water bills, develop a Yorktown Park master plan in 2026, and schedule construction for 2030.
Finally, the council deferred action on how to use approximately $8 million in accumulated tax increment financing funds from the Centennial Lakes and Southdale 2 districts. Staff will schedule a full policy discussion when all council members are present. The council also agreed to extend existing human services contracts into spring 2026 rather than convening an annual task force now, allowing more time to review the August budget before making funding decisions.
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Votes (5)
2026-2027 Budget Development - Capital Improvement Plan Direction
Dissent: No dissent recorded; council expressed shared concerns about process timing and need for benchmarked approach to levy increases.
Council debated two capital funding scenarios ($1.4M vs. $2M annual levy contribution). Primary tension centered on whether to establish a percentage-based levy increase target (tied to property value appreciation, approximately 6-8%) versus making incremental decisions. Council members expressed concern that piecemeal budget discussions prevent understanding of cumulative levy impact until August, when it may be too late to adjust. Staff indicated willingness to provide scenario modeling and pre-August dialogue to prevent surprises. Council requested stack-ranked project priorities to enable informed trade-off decisions.
Utility Franchise Fee Structure - Percentage-Based Model Consideration
Dissent: No formal dissent; Council Member Carolyn expressed substantive concerns about cost-shifting without demonstrated resident benefit, but indicated openness to proceeding if scenarios demonstrate net savings.
Staff presented two options: updating flat fees or adopting a 4% percentage-based model effective January 2026. The percentage model would increase annual revenue from $2.6M to approximately $4M, with the additional $1.3M potentially offsetting street reconstruction levy costs. Council expressed support for the percentage model because it ties fees to consumption and rewards energy efficiency, but raised concerns about whether the levy reduction would actually benefit residents or simply shift costs. Council requested scenario analysis showing: (1) residential vs. commercial impact comparison, (2) individual property tax examples comparing levy reduction to franchise fee increase, and (3) whether residents would see net tax reduction. Staff indicated ability to run scenarios with differentiated rates for residential vs. commercial classes.
Water Treatment Plant Number Five - Yorktown Park Site Feasibility and Recommendation
Dissent: Council Member expressed hesitation about demolishing existing building; suggested deferring demolition decision pending master plan and exploration of alternative uses. No formal opposition to site selection.
Staff presented updated engineering analysis confirming Yorktown Park (current Fire Station #2 location) as viable site for Water Treatment Plant #5. Key findings: (1) existing building cannot be reused due to building code requirements for hazardous chemical storage and water processing; (2) site layout accommodates the facility with skate park remaining; (3) York Avenue provides suitable distribution corridor; (4) storage alone cannot meet future demand—treatment plant is necessary; (5) estimated construction cost is $31.5M including contingency, professional services, and transmission upgrades. Staff recommended proceeding with site selection, conducting rate study in 2025, developing Yorktown Park master plan in 2026, and scheduling construction for 2030. Council expressed general support for the location but some hesitation about demolishing the existing building. No immediate action on building demolition; future decisions will be informed by master plan and rate study.
Tax Increment Financing (TIF) Districts - Policy Direction on Fund Use
Dissent: No dissent recorded; council expressed shared interest in establishing clear policy direction.
Staff provided update on approximately $8M in accumulated TIF funds from Centennial Lakes and Southdale 2 districts. Council discussed whether to continue using these funds as discretionary rainy-day reserves (past practice) or redirect them back to original TIF purposes. Staff noted that decision will not impact 2026-2027 budget proposal and is awaiting state-level interchange project funding determination. Council indicated desire to establish clear policy direction on TIF fund use to avoid recurring flux in decision-making. No immediate action taken; staff indicated conversation can occur when full council complement is present.
Human Services Task Force - Deferral and Contract Extension
Dissent: No dissent recorded; council accepted staff recommendation.
Staff recommended deferring the annual human services task force to allow council more time to review the August budget proposal before making funding decisions. Rather than conducting a task force now, staff will extend existing contracts into spring 2026, with task force potentially reconvening then if council directs. This approach avoids the work of a task force only to have council potentially reduce funding based on budget constraints.
Notable Quotes (19)
if we wanted to have a budget that didn't exceed a certain percentage... my answer is I don't know... maybe it should be less maybe it should be more... I'm rather interested in how do we get to a percentage of a potential levy increase that I would say tracks more along the lines of people's property value increases
what Carolyn felt very strongly about at retreat was not wanting that to be... to reduce capital as the way and means... of value choices of how we go about doing that
the problem though is... August is when we would see the department budgets... it's not really okay that on August 9th we'll know if we're at 8% 9% 10%... it's almost too late at that point... we're trying to get to that answer sooner
I do think that the conversation that we had at the retreat... getting to that rough number that we were kind of able to equate to what's the rough percentage felt like a good step... I also think that August this time around is going to feel a lot different because of this preparation... we have these two options here now of the 1.4 capital improvement plan versus the 2 million capital improvement plan
could we get this list to the stack ranked priority that we want to see and then once we see some of these numbers then we can snap the line of what's in what's out
we had talked about a staffing study... why is it long term... what if we do drop into a deep recession... do we have any kind of emergency scenario setback... I'm getting increasingly concerned about that... I think we ought to have a rainy day or tornado day scenario
I really like it the fact that big users pay more because we're trying to reduce energy consumption... that's my two cents worth at this point
I'm trying to rationalize us saying we're trying to reduce the levy which impacts residents and we're going to take this cost out of the levy but we're going to increase the fee that then gets allocated back to the residents... I struggle with that... I would want to see everything that we're taking out of the levy that still has to be allocated somehow... I want my allocation to be less than it was before
if we're saying we have we need another we need 2.6 million and we want to reduce the burden on the taxpayers... we could say we're going to spend $2 million less... we're going to roll back the pedestrian the packs fund... we're going to do less conservation and sustainability... that's the rich conversation that we need to be able to have
I think you you pointed out we have two questions one is to do the percentage and then the second is to add the street reconstruction million dollars into it... I would be in favor of doing the percentage... and the million dollars... I don't I don't have an opinion at this point
why do we like this model... because so why do we like this model now I would say one when we look at the direct impact to the residents it is relatively small and we are already talking about potentially increasing that we do see more of the impact of commercial and industrial so I like that part of it the second part that I like is it gives people more of a lever
my assumption is in terms of payment out the door for residential whether it's through tax levy or through franchise fees residents are going to see a more... they're going to see a cut on their bill at the end of the day because now you're shifting it to the commercial... we just have to let us run we just have to say that like we got to put that story together so people can say if it's true
the current building does not meet the building code for this type of facility it has to store hazardous chemicals has to meet fire safety standards for operations has to hold large volumes of water and they have to process large volumes of water... we basically have to take the building down and dig a swimming pool for this... there's really not a point to keeping that existing building
we asked that question well if we didn't build a plant could we just do it with water storage needs and we learned that we can't... we need both we need updated storage we need some better efficient storage and the treatment plants needed
I just hate to tear the building down... I don't know what we do with it but I feel like that skate park is hitting basically roped off behind there it gets no use... if we unwind that three city deal put the water tower back or the water treatment plant back there and hang on to the building for the time being we see if there's a future use for it
we don't have any action tonight we just want to see if it was generally supported... there may be future actions on demoing that building which would come back to council and we can have whether or not that's supported at this time or not
the threshold question I think for the council would be should we continue to use that money the way we've used it in the past or should we be thinking about turning it back... I've got my own personal feelings about that i like the way you've used it in the past as a security blanket for rainy day fund others may have different opinions
we'd like that too to have an understanding of of the council's kind of collective position on that as a policy so that we don't have to so it doesn't have to be in flux every time we have a question about
we're not going to hold a task force this year instead what we're going to do is give you guys more time to see the budget proposal in August think about whether or not you want to make any changes... we would just extend those contracts and then do a task force if you wanted us to continue to do this again in the spring
Ordinances & Resolutions (6)
City Manager's preliminary budget proposal due August 19, 2025; includes capital improvement allocations and levy increase recommendations
Staff-prepared document comparing original CIP presentation (blue) with revised recommendations (orange) based on council feedback; includes 26 projects with justifications for deferrals
Technical analysis of water distribution, storage, and treatment plant feasibility; included in council packet for Yorktown Park site evaluation
Planned for 2026 development; will address integration of water treatment plant, fire station relocation, skate park, and other park amenities
To be conducted in 2025; will model impact of Water Treatment Plant #5 ($31.5M estimated cost) on water utility rates
To be drafted and approved in July-August 2025 for implementation January 1, 2026; establishes percentage-based utility franchise fees at 4% (subject to council direction on residential vs. commercial differentiation)
Source document
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Other Topics from This Document
Capital Improvement Plan (CIP) 2026 Discussion
Tax Increment Financing (TIF) Districts - Centennial Lakes and Southdale 2
Human Services Task Force
Utility Franchise Fee Structure and Rate Adjustment
Water Treatment Plant Number Five - Yorktown Park Site Feasibility
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