Rochester City Council Budget Study Session and Updates - April 13, 2026
Rochester City Council Budget Study Session and Updates - April 13, 2026
The Rochester City Council convened for a study session on April 13, 2026, to discuss the 2027 supplemental budget, golf course operations, a natural gas franchise fee, transformational capital projects, and performance metrics for Destination Medical Center (DMC) investments. The session included presentations from city staff, discussion among council members, and direction for future actions. No formal votes were taken, but several policy directions emerged.
Discussion Items
2027 Supplemental Budget Overview
- City Administrator Alison Zelms presented the early-stage budget, noting the projected levy of $127 million, a 7.4% increase from 2026. The general fund budget is projected to increase by 3.6%, but this is muted by building permit fee revenue for specific projects like Forward/Unbound.
- The total 2027 budget across all funds (including RPU) is $742.4 million, with operations at $411.7 million, capital improvements at $284 million, and debt service at $46.7 million.
- Economic indicators: total employment increasing, non-medical employment growth, permit valuation up 50% from 2024 (over $1 billion in permits), lodging tax growth, sales tax steady around $15.5 million, and airport passenger traffic rising.
- Preliminary estimated market valuation from Olmsted County shows 4.3% year-over-year growth (1.06% from new construction, 3.27% from valuation adjustment).
- Staff highlighted that the 2027 budget is the first without any CARES Act subsidies, returning to pre-pandemic levy adjustments of 6-7%.
- Councilmember Keen expressed concern about projecting 7.5% increases annually for five years, calling for a mindset of constraint rather than new spending. Councilmember Miller echoed worries about structural imbalance and suggested tying spending to financial sustainability benchmarks.
Golf Course Operations
- Paul Woodman presented: Golf revenue reached a record $2.3 million in 2025, exceeding targets. However, expenses (fuel, fertilizer, labor) are rising. The recommendation is to provide $150,000 in operating levy support (up from $50,000) and $200,000 for capital improvements (down from the originally planned $400,000).
- Councilmember Miller noted that despite revenue increases, expenses are outpacing, creating a structural imbalance. Councilmember Doran questioned the subsidy level and asked for data on the percentage of the community that golfs and the cost per taxpayer.
- Mayor Norton defended golf, stating it is a legitimate sport that attracts visitors and benefits people of all abilities, and criticized singling it out when other sports (hockey, parks, trails) are also subsidized.
Credit Card Convenience Fees
- Staff discussed options to offset credit card processing fees currently absorbed by the levy (especially for building inspection, recreation, and city clerk). Options include a convenience fee, cap, or percentage fee, similar to RPU’s approach. The mayor cautioned against pushing people back to checks. Councilmember Miller asked about best practices from other cities.
Natural Gas Franchise Fee Engagement Results
- Aaron Lustein and Kayla Betzel presented the results of extensive community engagement (over 50 activities, 30,000+ reached, 200+ survey responses).
- Overall, 61% of respondents supported some form of fee, but support was conditional: strongest at $1-2/month for residential, with 39% preferring no fee. Commercial support was only 37%.
- The community preferred directing revenue to community-facing programs (60+%) rather than city projects. Home rebates, business support, and housing improvements were top priorities.
- Affordability was the largest barrier to broader support. No clear consensus on fee structure (flat, tiered, or per-therm).
- Staff recommended not pursuing a franchise fee at this time and instead developing 1-2 pilot programs (under $100,000) focused on energy cost reduction, housing improvements, or community-based initiatives. Pilot programs would demonstrate value and build trust before considering a fee structure.
- Councilmember Wall was strongly opposed, calling the fee a tax and citing inequity. Councilmember Palmer noted no nonprofits supported it. Councilmember Keen supported pilot programs funded from council contingency. Mayor Norton expressed disappointment, noting the Sustainability Commission supported the fee, but acknowledged the pilot approach as a step forward.
Transformational Capital Projects Update
- Irene Woodward provided an update on the Forward/Unbound project review process, emphasizing the Medical Overlay District and the “Iconic Building Alternative” within the UDC. She showed examples of design evolution for the North Arrival building, where city staff pushed for more transparency, pedestrian-friendly features, and screening.
- Councilmember Palmer raised concerns about the linear park at the former Lourdes building, noting that promised elements (artifacts) may not be used. Staff confirmed the park plan is not yet submitted and will be reviewed against council decisions.
- Steve Schmidt reported on the Sixth Street Bridge project (90% design, $36.8 million budget) and the South Broadway project (federal planning grant, $2.5 million for design). Councilmember Palmer expressed concern about overlapping closures with the Highway 14 interchange project.
- Councilmember Miller requested a broader conversation on public safety and fire station staffing, noting these are high levy implications.
DMC Performance Metrics Discussion
- Brooke Carlson of DMC led a discussion on developing project-specific KPIs to measure impact of DMC infrastructure investments. Council members identified key concerns: how to communicate return on investment to taxpayers, mitigate disruption to neighborhoods, track housing unit occupancy, and demonstrate value to the state legislature. Councilmember Keen stressed the need to differentiate between Mayo Clinic projects and DMC community investments. Councilmember Palmer noted the importance of communicating the “light at the end of the tunnel” for quality of life.
Key Outcomes
- No formal votes were taken; the session was informational.
- Direction for staff: Proceed with developing 1-2 pilot programs for energy efficiency/housing improvements (funded under $100,000) instead of a natural gas franchise fee. Return to council with detailed proposals.
- Budget direction: Staff will consider council feedback on the meeting room renovation ($688,000) and other supplemental items. Councilmember Keen called for a moratorium on new meeting room spending; Councilmember Palmer supported the concept but not in the supplemental year.
- Golf levy: Staff will include a $150,000 operating levy increase in the recommended budget, with continued monitoring of capital investment.
- Upcoming sessions: April 27 study session on RCTC sports center partnership and stormwater plan; May 11 walking tour of DMC projects; April 20 council meeting with public hearings on ethics board appointments and flood map/housing code text amendments.
Meeting Transcript
In the 2027 supplemental request and really helps me to finalize what I bring to you later this summer with the actual recommended budget with all of the adjustments in there. And if there are any specific issues that you either have concerns about that you want us to look into, also that could be thoughts for a future year. We are always budgeting in Rochester. We are always open to budget ideas. So did just want to sort of set the stage there. We do have your strategic priorities and foundational principles at thought here. Obviously, very important strategic priority is having that economic resilience and inclusive growth management. We have to have capital projects and services to be able to provide for the housing access that we are looking for and fiscal responsibility and sustainability of the budget always in mind when we're thinking of what we bring to you. As I pointed out, the team has been working hard on this. So I do want to give a shout out to our friends at Finance, Rachel Hoduk, Josh Doer, Brian Anderson, Aaron Parrish, and then everyone across the team that works to make sure that they are they're forecasting the budget accurately, making adjustments as needed, and then of course managing their budget throughout the year to make sure that we meet budget. So again, this kicks things off. We have a schedule in July to be focusing on another budget update. So the audit is what happened last year. An important part of looking into the future is understanding how successful we were in the past year at meeting meeting budget and where we maybe have some challenges, and then hoping to bring you the fee schedule much earlier on in the process, often in the past. We haven't brought that to you until close to when the budget's being adopted, but fees are an important part of our budget. So if there are concerns about the fee schedule, be helpful to know. We do have a draft in the study session packet today, and then that all helps us build out the final recommended budget coming in August 24th and September 14th. And then we do have some deadlines to be able to meet the county's requirements. So setting the preliminary levy after which the levy cannot go up, but it can stay the same or go down. And then we have you schedule for a budget hearing on December 7th. So again, supplemental process, and in this process, we do not update the six-year CIP. So in the first year, you adopt a six-year CIP. Obviously, as projects adjust, we might have to change some of the details within there, but we don't add the sixth year. We do a lot of the lion share of that work in the two-year process on the front end. We only look at revisions for things that are significant known that weren't known or that we know that we need to plan for that we weren't planning for last year around this time. We have an opportunity for departments to put in a supplemental budget request in order to address a baseline adjustment that maybe we weren't predicting. But we don't ask for new decision packages. So that's part of trying to be planful. We change our plan every year. So right now, very early stages of the budget, we are sitting at the same projected levy as we had last year in the two-year budget. Um, so 127 million dollars that represents a 7.4% increase from 2026. So that's anything that's tax levy funded. Uh library uh parks and recreation, the general fund, so police fire, a lot of the general services there. Um, and then um we also are looking at a general fund budget that increases by about 3.6%. I just want to point out that part of why this looks like a disconnect is because we also saw a lot of building permit fee revenue come in. So it's sort of falsely lowering that percent increase in the general fund because we have revenue coming in, but we'll be transferring that for the specific expenses for uh whole board unbound and other projects like that. So the 7.64% is a real number, and some of those general fund costs are muted by the fact that we have that revenue coming in for specific purposes. Um we did review the action plan here around this table a couple weeks ago, um, and the next action plan update is scheduled for August. And then again, I mentioned that the audit would be coming to you for the 2025. What we did accomplish and how we did that financially coming forth here in the June time frame. So you might recall this is our also our last slides that will maybe be quite this pretty. These are not digitally accessible, but as of next week, we will need to be doing that. So you might recall there used to be a chart here. So the total budget sitting of that's all funds, including RPU, 742.4 million dollars of that operations is sitting at about 411.7 million. Capital improvement for that year, 284 million again, just one year of that six-year CIP, and then debt service at 46.7 million. So that all rolls up to that 742.4 million dollars, lots of different sources and uses of funds there to get all the capital projects, utilities, etc. Um, working. Our estimated reliance hasn't really changed, um, so we do not uh fund any of the uh DMC capital projects with tax levy, so those new projects that are going forward all come from resources that are related to destination medical center. Um we do have a slight burden on internal service funds, so things like the equipment revolving fund there that require some tax levy, and then um capital improvement projects, about eight percent of the levy is going um to uh non-utility related capital improvements, um, primarily our road resurfacing um projects that we that we do. Um so not a lot available there, about eight million dollars a year, a little more.
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