1 ## City Council ## Work Session Monday, August 17, 2026, 5:30 PM ## 106 Center Street Members of the public may attend the work session either in person or by joining via Zoom either online or by telephone at: https://us02web.zoom.us/j/86346794494 Meeting ID: 863 4679 4494 --- One tap mobile ## +13092053325,,86346794494# US +13126266799,,86346794494# US (Chicago) ## AGENDA ## 1. Call to Order/Roll Call ## 2. Agenda Approval ## 3. New Business ## a) 2027 Preliminary Budget Discussion 4. Adjournment Page 1 of 16 ## Preliminary 2027 Budget Overview This memorandum provides the City Council with its first review of the City of Excelsior’s preliminary 2027 budget. The purpose of this work session is to review the major factors affecting the budget and tax levy, discuss the potential impact on taxpayers, and provide staff direction as the budget is refined. During 2026, the City made significant investments in infrastructure and purchased a permanent location for City Hall. The City also completed a comprehensive compensation study to evaluate employee wages relative to the market. The preliminary 2027 budget continues these investments and includes wage adjustments intended to bring staff compensation in line with the study. ## General Fund Budget Key factors impacting the 2027 General Fund Budget include: ## Revenue Considerations  Fiscal Disparities: Revenue is currently estimated to decrease in 2027.  Interest Earnings: Interest earnings are expected to decrease because the City will hold fewer bond proceeds available for investment during 2027.  Building and Development Fees: Several development-related revenues are trending below prior years, including building; mechanical and plumbing permits; zoning and subdivision fees; conditional use permits; application processing fees; and plan check fees.  Special Events Fees. Revenue has been reduced to reflect current activity, including the discontinuation of the Klondike Dog Derby. ## Expenditure Considerations  Employee Compensation: Wage adjustments are included to bring staff compensation in line with the compensation study completed in 2026.  Health Insurance: A 15% increase in health insurance costs has been included as a preliminary estimate. Final renewal information has not yet been received from the City’s insurance agent.  Insurance: Workers’ compensation and property and casualty insurance costs are estimated to increase by 5%. ## Item 3—2027 Preliminary Budget ## Date: ## Jenny Palmer, Finance Director ## City Council ## MEMORANDUM ## Re: ## To: August 17, 2026 ## From: Page 2 of 16  Seasonal Employees: Funding for seasonal employee wages has been increased to bring the City’s seasonal pay rates more in line with surrounding communities.  Comprehensive Plan: Includes $17,500 for Comprehensive Plan-related costs.  Elections: Includes the cost for a special election depending on the results of the Governor’s race.  Debt Service Levy: The preliminary budget includes an additional $209,178 in debt levy associated with the three bonds issued in 2026. The portion of debt for 261 School Avenue is $223,148. The preliminary budget represents the City’s continued investment in its infrastructure, facilities, and workforce while recognizing areas where revenues are expected to decline and operating costs continue to increase. Staff will continue to refine revenue and expenditure estimates as additional information becomes available throughout the budget process. ## Next Steps Next Steps in the 2027 budget process are: ##  September 8 - Preliminary Budget Work Session  September 21 - Preliminary Budget Work Session and adoption of the 2027 Preliminary Budget for certification to Hennepin County  October - November include General Fund adjustments, review of the Enterprise Funds, Parking Fund ## and School Building Fund  December 7 - Truth in Taxation hearing ##  December 16 - Final Budget Adopted ##  December 30 - Final Budget Certified to Hennepin County Page 3 of 16 ## 2027 Tax Levy Components The preliminary 2027 levy is $3,552,198, an increase of $644,226, or 22.15%, from the 2026 adopted levy. Three primary factors account for the increase: General Fund revenues decreased by $228,124, General Fund expenditures increased by $209,224, and the debt service levy increased by $209,178. The total levy for the three debt issues sold in 2026 is $625,214. Of this amount:  $100,000 from the completion of the 2010A debt levy  $316,036 from the 2026 levy  $209,178 from the 2027 debt service levy No additional debt issuance is anticipated in 2027. For context, the first review of the 2026 budget showed a 17.12% levy increase over 2025. Through the budget process, the final 2026 levy increase was reduced to 8.5%. The 22.15% shown for 2027 is similarly a starting point for Council discussion and refinement. ## 2027 Tax Levy 20262027 $ change% change ## ComponentsAdoptedPreliminary from 2026from 2026 General Fund1,929,551$ 2,364,599$ 435,048$ Capital Improvement-$ -$ Total General Revenue1,929,551$ 2,364,599$ 435,048$ ## Debt Service ## 2010A100,000$ -$ (100,000)$ ## 2017A80,188$ 80,188$ -$ ## 2019A152,486$ 152,486$ -$ ## 2020A96,635$ 96,635$ -$ ## 2021A233,076$ 233,076$ -$ ## 2026A75,613$ 112,500$ 36,887$ ## 2026B140,423$ 207,114$ 66,691$ ## 2026C100,000$ 305,600$ 205,600$ Total Debt Service978,421$ 1,187,599$ 209,178$ Total Levy2,907,972$ 3,552,198$ 644,226$ 22.15% Page 4 of 16 ## Summary of the City’s Market Value Growth Excelsior’s market value continues to grow, but at a slower rate. Estimated market value growth for 2027 is 2.57%, compared with 5.79% for 2026. Slower market value growth means levy increases are spread across a tax base that is growing less rapidly. Page 5 of 16 ## Comparison to Other Communities The chart below compares Excelsior’s 2026 tax rate with other communities. Lake Minnetonka communities are highlighted in yellow and Excelsior is shown in green. Excelsior’s tax rate is higher than several neighboring Lake Minnetonka communities, but lower than a number of communities with comparable downtown areas, including Osseo, Hopkins, Robbinsdale, Victoria, and Edina. Page 6 of 16 ## Tax Rate and Levy Comparison Below is a summary of Excelsior’s tax rate history. The proposed tax rate in 2026 is 32.29% for the first look at the budget. Last year the preliminary tax rate was 28.27% for the first look at the budget. The final tax rate was 26.14%. Page 7 of 16 As market value growth slows, the gap between the City’s tax capacity and tax levy narrows. This means future levy increases have a greater effect on the City tax rate than they would during periods of stronger tax-base growth. 107,894 106,730 103,997 94,458 82,046 35,522 29,080 26,802 25,618 23,311 0 20,000 40,000 60,000 80,000 100,000 120,000 20272026202520242023 ## HUNDREDS ## Tax Capacity vs. Tax Levy ## Net Tax CapacityTax Levy Page 8 of 16 ## Impact to Residents Property tax impacts vary by property value, changes in individual property value, homestead status, and changes in the overall tax base. Under the preliminary 2027 budget, the levy would increase 22.15%. If property values are held constant, a home with the current median value of $739,600 is estimated to see a $492 increase in the City portion of its annual property tax bill. If a home increased in value by an average of 2.57% from prior year, a median home value of $739,600 would see an increase of $553 in the City’s portion of their annual tax bill. Page 9 of 16 ## Tax Rate and Levy Analysis The chart below breaks out the preliminary budget of $3,551,198. This is a 22.15% levy increase and 5.38% tax rate increase over 2026. If the tax rate stayed the same as last year, it would be a $63,028 increase or 2.17% levy increase over 2026, which doesn’t even cover the debt levy of $209,178. The bottom section of the chart shows the taxes payable for houses at various market values from $375,000 to $1,500,000. ## KNOWN: 2025 Total Tax Capacity12,380,869 2027 Estimated Total Tax Capacity12,590,863 Less Fiscal Disp.(1,243,020) Less Fiscal Disp.(1,336,591) Less Increment(464,870) Less Increment(464,870) Tax Capacity - Local Rate10,672,979 Tax Capacity - Local Rate10,789,402 2026 Taxes885 1,218 2,090 2,941 4,575 Est Market Value375,000$ 500,000$ 739,600$ 1,000,000$ 1,500,000$ B. Tax increase over 2026 at ## Preliminary Requested ## Budget 209$ 287$ 492$ 692$ 1,077$ ## Proposed Preliminary Budget Levy $ (Includes ## Debt Levy) 20272026 ## Tax Rate Increase/ ## Decrease Over Prior Year levy $ increase ## B. Preliminary Requested Budget 22.15% levy increase, 5.38% tax rate increase 3,552,198 32.29%26.91%5.38% 644,226 B. Preliminary Requested Budget 22.15% levy increase, 5.38% tax rate increase est market value375,000$ 500,000$ 739,600$ 1,000,000$ 1,500,000$ homestead exclusion12,800 1,550 - - - taxable market value362,200 498,450 739,600 1,000,000 1,500,000 net tax capacity3,387 4,661 7,995 11,250 17,500 tax rate32.29%32.29%32.29%32.29%32.29% net tax payable1,094 1,505 2,582 3,633 5,652 PROPOSED 2027 (Henn County - 8/2026): ## Incremental Tax Payable over Prior Year Page 10 of 16 ## General Fund Budget Summary ## Revenues ## Description202720262026202620252024% Increase Dollar Increase Requested YTD x 2YTDAdoptedActualActual2026 v. 20272026 v. 2027 Budget06.30.26 06.30.26Budget ## Delinquent Ad Valorem Taxes12,000 12,0636,03120,0009,51825,323-40.00%(8,000) Fiscal Disparities47,000 55,04127,52061,374 47,51152,813-23.42%(14,374) ## Franchise Fees Gas75,000 73,72636,86375,000 61,08771,0030.00%0 ## Penalties and Interest AdValTx3003001,200302860-75.00%(900) ## Tree Removal Permit1,5001,6008002,0002,400400-25.00%(500) ## Tree Trimmer License1,2002,4001,2001,0009501,15020.00%200 Alchoholic Beverages115,000 115,000250115,000 116,909 128,8400.00%0 ## Cigarettes & Tobacco650650650975975975-33.33%(325) ## Garbage Haulers1,5001,5251,5256006753,350150.00%900 ## Sidewalk Café Permits9009009001,3501,200600-33.33%(450) Special Events45,000 52,60326,30165,000 27,03059,653-30.77%(20,000) ## Peddlers License3003002703001202400.00%0 ## Refueling Permit4500900450600-50.00%(450) ## Right of Way Registration Fee400720360700160625-42.86%(300) ## Street Use/Dumpster Permit1,5001,5001,2001,0001,5201,28050.00%500 ## Food Truck Permit5,5006,0005,4355,0004,2755,13010.00%500 Building Permits80,000 90,77445,387115,000 80,097 101,127-30.43%(35,000) ## Sign Permits9009204602,0002,2631,244-55.00%(1,100) ## Variance4,0008,4004,2003,0003,0002,50033.33%1,000 Mech Permit-Base & Unit Chrg13,000 15,3367,66820,000 17,03418,597-35.00%(7,000) ## THC License01,0501,0501,7501,7501,350 -100.00%(1,750) ## Plumbing Permits8,000 10,3685,18410,0008,4075,268-20.00%(2,000) ## Right of Way Permits4,000 55,00051,2054,0004,3132,9350.00%0 ## Animal Licenses0350315300295315 -100.00%(300) ## Multiple Dwellings Lic/Permits33,000 32,95032,95037,000 36,05030,490-10.81%(4,000) ## Short-Term Rental Permits1,4001,4001,4002,5002,7000-44.00%(1,100) ## Trolley/Driveway Permits (Miscellaneous)100100501001751250.00%0 ## Conditional Use Permit7001,0007001,0006000-30.00%(300) ## Other State Aid Grants30,0001,46673335,000 20,61935,105-14.29%(5,000) ## County Grants6,0006,4906,4905,0003,0271,76320.00%1,000 ## Zoning and Subdivision Fees5003601802,5002,4801,000-80.00%(2,000) ## Plan Check Fee40,000 65,60432,80260,000 43,48259,876-33.33%(20,000) ## Application Process Fees8,0009,7564,87811,000 12,34913,312-27.27%(3,000) ## Street, Sidewalk and Curb Fees12504001251,035-68.75%(275) Transfer from Parking Fund350,000 350,000350,000 350,000 499,9540.00%0 ## Garden Plots Rental2,7004,8604,8602,0001,8902,74535.00%700 ## Park Vendor Lease Agmt20,000020,000 23,74822,3370.00%0 ## Cemetery Lots2005,0005,00020,000 10,900200-99.00%(19,800) Fines and Forfeits15,000 15,00012,90715,000 27,98084,5610.00%0 Interest Earnings80,000 95,00020,863120,000 95,633 135,138-33.33%(40,000) ## Kayak Rental Revenue Sharing5002501255007807210.00%0 ## Rent-Water Tower Antennae50,000 50,00049,66146,000 66,86344,6558.70%4,000 ## Refunds & Reimbursements2,0002,0001,00010,0007,11220,915-80.00%(8,000) ## Insurance Dividend3,0004,5004,5002,4845,611-33.33%(1,500) ## Hennepin Cnty Recycling Reimbursement9,0009,6804,84017,0001,96417,150-47.06%(8,000) Transfer from Other Funds-Concert10,000 30,00030,000 30,0000-66.67%(20,000) Transfer From Other Fund-Docks245,000 245,000245,000 225,000 200,0000.00%0 1,325,325 1,436,9911,367,9461,551,949 1,374,441 1,704,924-14.60%(226,624) Page 11 of 16 ## Expenditures 202720262026202520252024Dollar Percent ## Preliminary 06.30.26BudgetActualBudgetActualChange Change ## GENERAL FUND ## COUNCIL Wages and Benefits15,467 7,682 15,469 14,345 17,361 15,260 (2) 0% Professional Services2,030 830 1,800 1,336 1,800 3,676 230 13% Community Events and Support- - - 2,500 2,500 2,500 - 0% Total Council17,497 8,512 17,269 18,181 21,661 21,436 228 1% ## CITY MANAGER/CLERK Wages and Benefits277,073 130,524 245,652 229,555 269,810 316,197 31,421 13% Total City Manager/City Clerk277,073 130,524 245,652 229,555 269,810 316,197 31,421 13% ## ELECTIONS Election Judge Pay4,424 - 4,424 - - 8,413 - 0% Operating Supplies2,600 867 2,600 - 1,000 6,024 - 0% Repair and Maintenance600 - 600 - - 782 - 0% Total Elections7,624 867 7,624 - 1,000 15,219 - 0% ## FINANCE Wages and Benefits91,874 41,816 84,549 77,845 82,511 78,461 7,325 9% Professional Services- - - - - 2,592 - 0% Total Finance91,874 41,816 84,549 77,845 82,511 81,053 7,325 9% ## PLANNING AND ZONING Wages and Benefits298,179 98,652 260,411 213,918 229,543 132,317 37,768 15% Professional Services37,000 36,616 15,000 43,380 5,000 30,095 22,000 147% Total Planning and Zoning335,179 135,267 275,411 257,298 234,543 162,412 59,768 22% ## CITY ADMINISTRATION Operating Supplies18,600 9,004 17,800 12,987 17,200 16,194 800 4% Professional Services204,500 100,131 181,000 206,054 215,500 98,463 23,500 13% Utilities5,000 1,624 5,500 3,254 3,500 2,693 (500) -9% Repair and Maintenance16,500 8,169 15,000 15,166 14,000 81,241 1,500 10% Other Charges & Supplies70,502 57,347 80,353 61,241 57,783 44,196 (9,851) -12% Building Rent- 13,009 35,000 83,812 80,000 44,640 (35,000) -100% Capital Outlay2,000 77 2,000 1,638 4,000 6,651 - 0% Total City Administration317,102 189,361 336,653 384,152 391,983 294,079 (19,551) -6% ## HERITAGE PRESERVATION Professional Services25,500 10,215 25,500 21,276 26,200 466 - 0% Total Heritage Preservation25,500 10,215 25,500 21,276 26,200 466 - 0% ## POLICE Professional Services1,074,471 799,877 1,049,764 974,332 963,076 713,103 24,707 2% Code Enforcement15,000 1,334 15,000 27,645 2,500 14,191 - 0% Total Police1,089,471 801,211 1,064,764 1,001,977 965,576 727,294 24,707 2% ## FIRE CONTRACT Professional Services384,312 271,406 361,208 293,777 293,777 330,818 23,104 6% Total Fire Contract384,312 271,406 361,208 293,777 293,777 330,818 23,104 6% ## CITY OF EXCELSIOR ## 2027 UPDATED BUDGET ## General Fund Expenditures by Department Page 12 of 16 202720262026202520252024DollarPercent ## Preliminary 06.30.26 BudgetActualBUDGETActualChangeChange ## BUILDING INSPECTION Professional Services60,000 22,279 75,00096,25755,000 72,311 (15,000) -20% ## ENGINEERING Professional Services40,0007,374 50,00068,54547,250 62,362 (10,000) -20% ## STREETS Wages and Benefits212,978 105,976 199,952174,245 187,252 121,518 13,026 7% Operating Supplies34,200 20,771 33,70029,12733,700 23,031 500 1% Professional Services5,5006,1042,0501,6452,050 4,621 3,450 168% Utilities20,500 10,500 15,50015,85917,000 10,918 5,000 32% Repair and Maintenance47,000 24,210 51,00034,60251,000 22,425 (4,000) -8% Other Charges & Supplies7,9447,5976,0006,4227,000 6,263 1,944 32% Total Streets328,122 175,159 308,202261,900 298,002 188,775 19,920 6% ## PARK MAINTENANCE Wages and Benefits454,620 196,290 403,928381,704 359,621 298,637 50,692 13% Operating Supplies33,100 27,217 31,54032,17629,900 37,777 1,560 5% Professional Services16,3008,002 25,40015,52420,400 15,515 (9,100) -36% Utilities32,000 16,229 29,00028,16229,000 25,240 3,000 10% Repair and Maintenance12,0003,433 12,00025,64811,000 12,046 - 0% Other Charges & Supplies23,350 17,257 26,50014,25918,703 15,659 (3,150) -12% Total Park Maintenance571,370 268,428 528,368497,473 468,624 404,874 43,002 8% ## RECREATION Entertainment in the Park09235004581,000 434 (500) -100% Total Recreation09235004581,000 434 (500) -100% ## TREES AND PLANTINGS Tree Care125,000 63,231 88,000122,469 144,000 37,000 42% Plantings13,5008,3733,0001,90310,500 350% Maintenance Supplies6,3001,3109,0000(2,700) -30% Total Trees and Plantings144,800 72,913 100,000124,372 144,000 44,800 45% ## TOTAL GENERAL FUND3,689,924 2,136,254 3,480,700 3,373,687 3,343,662 2,711,511 209,224 6.01% ## CITY OF EXCELSIOR ## 2027 PRELIMINARY BUDGET ## General Fund Expenditures by Department Page 13 of 16 ## General Fund Summary of Significant Changes in Expenditures ## City Manager/City Clerk ## Line Item Dollar Change Reason Wages and Benefits $31,421 ## Increase Incorporating wages from the 2026 compensation study in addition to an estimated 15% increase in health insurance. ## Finance ## Line Item Dollar Change Reason Wages and Benefits $7,325 ## Increase Incorporating wages from the 2026 compensation study in addition to an estimated 15% increase in health insurance. ## Planning and Zoning ## Line Item Dollar Change Reason ## Wages and Benefits $37,768 ## Increase Incorporating wages from the 2026 compensation study in addition to an estimated 15% increase in health insurance. ## Professional Services $22,000 ## Increase Increase of $17,500 for a portion of the comprehensive plan. An additional $4,500 for an attorney to attend Planning Commission meetings. ## City Administration ## Line Item Dollar Change Reason ## Professional Services $23,500 ## Increase Increase for attorney fees for both City Attorney and Prosecution Attorney. ## Other Charges and ## Supplies $9,851 ## Decrease Reduced due to no moving expenses and reduced expenses for building repairs and maintenance now accounted for in the 261 School Avenue building fund. ## Building Rent $35,000 ## Decrease Rent Expense no longer needed. ## Police ## Line Item Dollar Change Reason ## Professional Services $24,707 ## Increase ## Increased per the recommended 2027 South Lake Minnetonka Police budget. ## Fire ## Line Item Dollar Change Reason ## Professional Services $23,104 ## Increase Increased per the recommended 2027 Excelsior Fire District budget. ## Building Inspection ## Line Item Dollar Change Reason ## Professional Services $15,000 ## Decrease Decreased due to reduced number of building permits issued. Page 14 of 16 ## Engineering ## Line Item Dollar Change Reason ## Professional Services $10,000 ## Decrease Decreased due to more engineering fees being allocated to individual departments and not allocated to the general engineering account. ## Streets ## Line Item Dollar Change Reason Wages and Benefits $13,026 ## Increase Incorporating wages from the 2026 compensation study in addition to an estimated 15% increase in health insurance. ## Professional Services $3,450 ## Increase Increased for engineering fees for the street department, also included $798 for a portion of a peer coach for the Public Works Director. ## Park Maintenance ## Line Item Dollar Change Reason Wages and Benefits $50,692 ## Increase Incorporating wages from the 2026 compensation study in addition to an estimated 15% increase in health insurance. Also, increasing seasonal wages by $5,000 to increase wages and hire for more fall help. ## Professional Services $9,100 ## Decrease ## Moved expenses for Men’s Garden Club and Uncommon Gardners to Plantings in the Trees and Plantings budget. Also includes $570 for a portion of a peer coach for the Public Works Director. ## Other Charges and ## Supplies $3,150 ## Decrease Decreased for less than anticipated costs for organic weed spraying. ## Recreation ## Line Item Dollar Change Reason Entertainment in the ## Park $500 Decrease Combined with the Park Maintenance Fund under the Professional Services line item. ## Trees and Plantings ## Line Item Dollar Change Reason ## Tree Care $37,000 ## Increase Increased for additional tree removal anticipated for next year. Plantings $10,500 ## Increase Allocated $10,000 to Men’s Garden Club and $500 to Uncommon Gardners. ## Maintenance Supplies $2,700 ## Decrease Reduced for fewer maintenance supplies purchased than anticipated. Page 15 of 16 ## Council Discussion Items ## Revenue Questions  Does the City Council want to discontinue animal licenses?  Should the $350,000 transfer from the Parking Fund to the General Fund remain the same or be lowered to reflect the revenue trends in the Parking Fund?  Does the City want to continue the kayak rental agreement with the revenue only being $500 a year?  Does the City want to reduce the transfer from the Park Capital Fund due to the reduced contribution from Concerts in the Commons? ## Expenditure Questions  Should the wage adjustments from the compensation study be phased in more?  Does the Council want to hire an outside firm to complete a more thorough update of the comprehensive plan or complete it in-house with basic updates?  Does the Council want to allocate Comprehensive Plan expense to the Capital Fund instead of the General Fund?  Does the City Council want to shift some of the debt levy to the General Fund expenses by paying building rent in City Administration?  Does the Council want to allocate $10,000 to the Men’s Garden Club or lower the amount? They spent $6,535 to date in 2026, $5,538 in 2025, and $4,118 in 2024.  Should the City continue hosting Cinema in the Commons at a cost of $3,300? Council Action: Review the preliminary 2027 budget and levy, discuss priorities and potential adjustments, and provide staff direction for the next phase of the budget process. Page 16 of 16