Duluth City Council Meeting: Mayor Presents 2026 Proposed Property Tax Levy and Budget Strategies - September 4, 2025
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Duluth City Council Meeting: Mayor Presents 2026 Proposed Property Tax Levy and Budget Strategies - September 4, 2025
The Duluth City Council met on September 4, 2025, for an agenda session primarily focused on Mayor Reiner's presentation of the proposed 2026 maximum property tax levy and a multi-pronged strategy to address a projected $7.3 million general fund deficit. The meeting also included discussion of several consent agenda items, including resolutions on the levy, parks, housing, transit, a Pride resolution, public works contracts, public safety grants, and a new transportation commission ordinance.
Consent Calendar
- Several resolutions were pulled from the consent agenda for further discussion, including: Resolution 697 (general levy), Resolution 698 (parks levy), Resolution 700 (HRA levy), Resolution 702 (DTA levy), Resolution 701 (recognizing Duluth Superior Pride), Resolution 706 (appointment to Public Utilities Commission), Resolution 703 and 704 (auto theft prevention grants), and Resolution 695 (railroad street reconditioning contract amendment).
- The remaining consent items were not discussed in detail but are expected to be approved on Monday, September 8, 2025, unless further pulled.
Public Comments & Testimony
- No public testimony was given during the meeting. The mayor referenced public feedback received via email and community conversations.
Discussion Items
- Mayor's Budget Presentation: Mayor Reiner proposed a 2026 maximum property tax levy increase of 2.7%, tied directly to the Consumer Price Index (CPI) for the trailing 12 months ending July 2025, plus capturing 1.4% in new tax base growth, resulting in a total proposed levy increase of 4.13%. The mayor emphasized that the city only receives 27% of every property tax dollar, with 41% going to St. Louis County. The presentation outlined a $7.3 million deficit for 2026, driven primarily by salary and benefit increases from collective bargaining agreements. The mayor proposed a six-part strategy: (1) the 2.7% CPI levy, (2) active management of existing finances (including investing community trust fund proceeds, budget line-item adjustments creating a contingency fund, and redirecting the 0.5% housing trust fund levy to life safety and rental inspection), (3) addressing Duluth Fire overtime (adding three FTEs), (4) evaluating and aligning open FTEs (targeting 12 of 55 vacant positions), (5) earned revenue opportunities (e.g., credit card fees, better revenue projections), and (6) evaluating administrative and support functions. The mayor assured no deficit spending, no hiring freeze, and no targeting of single departments. The budget retreat, originally scheduled for September, was moved to mid-November, though councilors expressed interest in an earlier date.
- Councilor Questions and Comments:
- Councilor Forsman praised the diverse proposal and requested more detail on new growth sources and earned revenue (e.g., credit card fees on permits).
- Councilor Der Wachter questioned the timing of the budget retreat and whether a cushion should be added to the max levy; the mayor and attorney confirmed the levy cannot be changed after September, but the council could amend the resolution if needed. The mayor stated confidence in the 2.7% figure.
- Councilor Al asked about the status of the sustainability officer position (on hold during budget talks) and raised concerns about the housing trust fund being used for general operations. The mayor clarified that no money is being withdrawn from the housing trust fund; instead, the 0.5% levy dedicated to the fund will be redirected to the general fund for life safety and rental inspection, while other housing funds (e.g., $14 million transferred to DITA, HUD, CDBG) remain available. Councilor Al also requested historical data on the Community Investment Trust Fund (CIT).
- Pride Resolution (Resolution 701): Councilor Al introduced a resolution recognizing Duluth Superior Pride and supporting LGBTQ+ communities, including action items such as creating a queer and trans business directory, supporting a community-run queer and trans hub, and modernizing city code to use gender-neutral language. Councilor Kennedy expressed concern that the resolution was not brought forward by the city's NQ Commission and requested it be pulled from the consent agenda. Councilor Al noted the commission has been understaffed and without quorum since 2023 and that she consulted with community members and commission members. The resolution was pulled for further discussion on Monday.
- Public Works Contract Increases: Councilor Swenson and Der Wachter questioned several contract amendments, particularly Resolution 695 (Railroad Street reconditioning, increase of $246,150) and Resolution 694 (2024 street preservation, increase of $95,695). Administrator Staling explained that some increases are due to unforeseen conditions (e.g., subcontractor work not meeting standards, soil conditions) and improvements to pedestrian safety. Vice President Nephew asked if further cost overruns are possible. Staff will provide detailed breakdowns before Monday.
- Public Safety Grants: Fire Chief Kujet clarified that Resolution 703 provides $72,586 for an auto theft investigator, overtime, and purchase of 10 fixed ALPR cameras as a pilot project, and Resolution 704 provides $29,100 to host a regional training conference, including lodging for officers from distant agencies. Both were pulled from consent for more explanation on Monday.
- Transportation Commission Ordinance (Ordinance 14): Councilor De Luca proposed a friendly amendment to add the word "freight" after "commercial" in the commission's scope. Councilor Al, the sponsor, agreed. The amendment will be formally moved and voted on at Monday's meeting; the final ordinance vote will also occur Monday.
Key Outcomes
- The council will vote on the proposed 2026 maximum property tax levy (2.7% CPI increase plus 1.4% new growth, totaling 4.13%) at the Monday, September 8, 2025, meeting. Councilors may propose a different figure.
- The budget retreat date may be moved from mid-November to October; the council president will ask members for available dates.
- The Pride resolution (Resolution 701) and the two auto theft prevention grants (Resolutions 703 and 704) were pulled from consent and will be discussed further on Monday.
- The transportation commission ordinance will be amended on Monday to include the word "freight" and then voted on.
- Staff will provide detailed cost breakdowns for several public works contract amendments (Resolutions 694, 695, and 696) before Monday.
- The council will hold a study session on the Unified Development Code (UDC) after Monday's regular meeting, with a memorandum to be sent by the planning department.
Meeting Transcript
Good evening. We will begin our evening with a presentation by the mayor on the budget. Welcome, Mayor Reiner. Please go ahead. Thank you, uh, President Tamonic, Counselors, Minister DeStaling, Attorney Lair, members of the public. So, you know, counselors a lot. I think I feel like about half of what I'm going to say uh you already know, but I think it's important for the public to always be tracking along with what we're doing and why we're doing it. So, you know, we of course have two responsibilities to the public uh under state statute. One is to set the maximum property tax levy by the end of September, the other is to adopt our 2026 budget by the end of December. The two, of course, are linked, but they are distinct steps in this process. So what we're here to propose to you today, and I have uh both uh Josh and uh Missy from our finance team who can also help answer any uh questions that you might have is to talk about the recommended maximum property tax levy for 2026. Maybe all right. This is my favorite slide ever, and I use it every chance I can. In fact, I'm gonna use it twice in today's presentation because uh counselors, you know as well as I do that no matter what we do in this chamber, uh folks think that every single property tax dollar collected in the city of Duluth goes to the city of Duluth, and that's just not accurate. So this is based on last year's levy about of a dollar uh paid in property taxes in the city of Duluth, 41% goes to St. Louis County, 27% goes to the city, 26% to the school district, 2% for our dedicated park levy, and then the other 4% is other miscellaneous uh taxing authorities. But again, I already had a back and forth with someone today who was upset about the levy that the county has uh the maximum levy the county adopted. And when I explained that we don't control the county, uh that was not an acceptable uh answer. So be that as it may, we're here to talk about the city's levy. I think it's also helpful for us to discuss what does a 1% levy increase mean um for the different taxing entities. So for us it's actually the smallest. We're about 443,000. ISD 709 is just slightly ahead of us at 449,000. But a 1% levy increase for St. Louis County is worth nearly uh $2 million. We talked a little bit a couple weeks ago about what's coming for us in 2027 and 2026 and 2027 in terms of our projected deficits. So, counselors, I use this slide just to point out to you what is driving our projected de uh deficits, and it's really salaries and wages and benefits. You know, the top line demonstrates that really clearly. The additional medical insurance lines uh kind of flesh that out. Uh and this should be no surprise. We are a people intensive organization. We don't make a thing, we provide services. Uh and as I like to say, there is no city without our city workers. And we are in the same competitive employment market as any other organization is. Um and we add in the fact that we have seven collective bargaining units, and all of those contracts were redone last year or into 2025. Uh most recently you approved the uh IAFF local 101. So when we see salary increases within those contracts that cover 99.95% of city employees, um uh we should not be surprised that we see the uh wage line item increase. And um we also want that. Those are our uh most precious assets. Um it's an investment in our people. But this graph, counselors really shows you again why we have a deficit in 26 and why we have one in 27 and even a small one projected into 28. Because each year as wages go up, um our revenues stay relatively flat. Uh and we'll wrap up by talking to you again about where our revenue sources come from. So a couple weeks ago when you had us here and we talked about uh the city uh budget for 2026, um we said we've got a couple different options that we could pursue. We said we've got a couple different options that we could pursue. You know, if we were only to do the budget by reductions, we would need to find 7.3 million dollars in the city general fund budget. And we said if we were only to do the levy, we would need a 17% levy this coming tax year. And then we would also need a 10.5% levy the following year. So at that time, I argued that neither of those is assist is a sustainable option. The $7.3 million in reductions to the organizations would be a noticeable reduction in services to our residents.
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