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The Austin City Council continued its discussion on the 2021 budget during its work session Monday evening.

Administrative Services Director Tom Dankert went over a preliminary budget proposal with council members during the meeting. City staff created the preliminary budget based on the following direction from the Council:

• A maximum tax levy increase of four percent;

• Elimination of several current vacant City job openings, as well as not filling other City jobs upon retirement/vacancy in the future;

• No layoffs of existing City employees; and

• Contracting out for the removal of trees.

The preliminary budget includes an allocation of $8.5 million in Local Government Aid (LGA), the amount the City is scheduled to receive in 2020. Dankert said that while the City is scheduled for an inflationary increase in LGA next year (about $8.66 million), it is highly unlikely to receive that much because the State of Minnesota is facing a deficit due to the COVID-19 pandemic.

A budget forecast from July shows a projected deficit of $4.7 billion for the State’s next two-year budget cycle.

If LGA comes back at a number less than $8.5 million, Dankert noted strong budget reserves at 54 percent of expenditures at the end of 2019 and the ability to delay capital items in the 2021 budget until the State’s budget is finalized in early 2021.

The preliminary budget also includes a proposed tax levy of $7,436,000. This is an increase of $286,000, or four percent, from the 2020 tax levy ($7,150,000). A four percent increase is the equivalent of an increase of $17.97 for the year on a property valued at $100,000.

A 2019 comparison of Austin city property taxes versus those of four cities of comparable size (Albert Lea, Faribault, Owatonna and Winona) showed that Austin ranked third (below Owatonna and Albert Lea, above Faribault and Winona).

The Council will have another budget discussion during its work session on Tuesday, Sept. 8, with the goal of voting on it during the Sept. 21 meeting.

The City must submit an approved preliminary tax levy amount to the County and the State by Sept. 30. After that, the Council may lower the tax levy amount, but not increase it. Dankert noted that if the Legislature convenes for a special session after Sept. 30 and adjusts the budget in a manner that reduces LGA, the Council will not be able to rectify for lost LGA unless the Legislature changes that statute.