The Duluth City Council met at 6:00 PM on August 25, 2025, following a Committee of the Whole session that began at 5:15 PM with a preliminary 2026–2027 budget presentation and a library update. The regular agenda included consent calendar approvals, a pulled resolution for CDBG fund transfer, first readings of two ordinances, and public comments.
Good evening. It's 515, so we will begin our budget presentation. Mayor, would you like to start I can make some opening. Oh, thank you, President Tomonic. Uh thank you, counselors. Um we'll invite um uh Josh uh and uh Melissa up to uh walk through just some of the preliminary information again, counselors. The goal here is just to kind of set the stage for both you and the public, kind of about the scope and what is underlying the budget challenges that we have this year. Um of course I'll be with you on September 4th to make uh um the full-blown budget and levy presentation. And I think uh uh President Tomonik uh, if I might just take a moment to remind the public that what we'll do in September is set the max max levy. Can't be higher, it could be lower, and then of course the final budget would be adopted in December. But um, Madam President, I would turn it back to you. Thank you so much. Can we call Melissa and Josh forward? And thank you for being here this evening to give us this preview. President Tomonic and Counselors, good evening. Um it's my pleasure to present this uh preliminary budget data. As the mayor had mentioned, uh this is just a high-level kind of overview of setting the framework of kind of where we're at in this uh current budget session. This first slide, and I won won't go into all the numbers. This is uh kind of the projection of where we're sitting with the general fund budget for 2026 and also looking forward to 2027. There's a projected seven point three million dollar budget deficit in the general fund in two thousand twenty-six. And then what this slide also shows is that you know revenue is not projected to grow much between twenty-six and twenty-seven. If we were to increase the the tax levy seven point three million in the general fund, we'd still have a ten point four eight percent uh increase that we're looking at in twenty seven. The major budget drivers, uh it really comes down to to salaries and benefits. That's there'll be some slides in the in further in the presentation that show what percentage of the general fund budget is uh personnel and and and benefits. Um, we have approximately 900 employees citywide. Um not all in the general fund. Seven union contracts, bargain four benefits. We have four contracts that are on a uh 2025 to 2027 union contract cycle, and then our police contracts will be 26 to 28. And in order to be competitive, um we've seen cost of living increases in the contracts, we've seen market value adjustments, we've seen additional steps, we've seen longevity pay decrease the number of years you have to qualify to get that. Because really what we're we're competing against other municipalities, we're competing against the state too. The market has changed. We have people leave employment with the city, go work for the state, where you can make similar, but you might be able to work remote. So just things have changed. I think this since the pandemic, just in in the uh in the employment world. And our people, I mean, these represent our core investment in essential city services. As I mentioned, we're in a competitive wage and employment environment. We don't always see as many people applying for jobs as we did in the past. I've already spoken about this. We have seven union contracts, basically cover all but a handful of city employees. And again, these are bargained for benefits that the employees are entitled to. And I've already spoken about the uh contract cycle. So again, this is the repeat of the first screen with some additional context on here. It kind of shows the two extremes, right? So you could not increase the levy at all and just simply reduce services by 7.3 million. The other end of the extreme is you could do a uh no reductions and just balance the budget through the levy. Keep in mind if you did that the second option, you're still looking at a 10.48% increase in 27. Neither of those options is sustainable. You know, there'll be more coming on September 4th when the mayor presents, but you know, this this budget that the mayor is going to present is going to include some new revenue for the general fund and also significant expense reductions. Keep in mind, too, that if we factor in new property tax growth, um, for example, you have 10 houses and everyone pays a dollar, and you build another 11th house and everyone pays a dollar, taxes have gone up. The levy's gone up 10%, but everyone's still paying a dollar.