The city of Austin may get an extra $1 million next year due to state mandates, increased LGA, and market values, but the Austin City Council is hesitant to slash an already decreasing property tax levy and further lower residents’ taxes.

The council gave a preliminary recommendation to city staff during a work session Monday to fund the property tax levy to the maximum amount for 2014 and research where the money could be used as expected costs come up.

While the city could put the money toward decreasing the city’s property tax levy portion for Austin residents, city staff cautioned the council to wait on tax breaks, as it’s uncertain whether the state will need to cut LGA funding to make up a Minnesota budget deficit over the next few years.

Finance Director Tom Dankert told council members the city of Austin is estimated to receive about $750,000 in increased LGA next year. In addition, a new state law no longer requires cities to pay sales tax on almost all kinds of purchases, which city staff estimates will save an additional $250,000. City staff wanted clarification from the council before starting on next year’s budget.

“Based on our recent history, we know that legislators are going to want to look at LGA funding in one or two years to make up for a budget deficit,” City Administrator Jim Hurm told the council.

Dankert said the city will pay off a service bond and levy limits from the state will push the city’s tax levy down by 1 percent, or about $41,000, in 2014. That amounts to less than $5 in savings for the average homeowner, Dankert said. In addition, rising agricultural costs and the increased business appraisals done last year should leave homeowners with a lower tax levy rate for the next few years. City officials hope business owners’ property taxes will stay level.

Council members agreed any excess money should be put into funds and projects they know will take place, such as Vision 2020 requests or the Austin Police Department’s upgraded radio system.

City staff will evaluate each department over the next two months before going back to the council with potential requests.