MANKATO — Property tax collections by the city of Mankato will rise by nearly $1 million under a preliminary levy set by the City Council Monday night, but the 4% increase could potentially decline a bit later this fall when a final budget is approved.
The preliminary levy is actually higher than what was proposed last month by City Manager Susan Arntz, who suggested a 3% increase. At the Aug. 26 work session, Council members Jessica Hatanpa and Mike Laven said they wanted to look at slightly higher collections to provide some cushion for future budgets.
Arntz and Administrative Services Director Parker Skophammer brought back three alternative levy hikes Monday night — 3.5%, 4% and 4.5%, along with the original 3%.
Hatanpa, noting that the preliminary levy sets the ceiling and that the increase could be trimmed before a final decision is made in early December, suggested 4%. The extra collections could be put in reserves to protect against potentially steeper property tax hikes in future years.
“As a taxpayer, I don’t want to see taxes shoot up,” Hatanpa said.
Council member Dennis Dieken agreed, saying the higher budget reserves made possible by a 4% levy hike will help Mankato sustain its lofty AA bond rating.
Laven, too, thought 4% would provide a financial cushion if the city learns late in the year that the estimated increase in the local tax base needs to be adjusted downward — something that’s happened at times in the past, forcing last-minute spending cuts. And he hinted that there might be a pre-Christmas reduction in the levy if the tax base projections hold and there are no other surprise hits to the budget.
“We can have maybe a festive conversation lowering this,” Laven said.
Each half of a percentage point increase in the levy boosts total tax collections by about $120,000.
The 3% levy hike proposed by the administration would have collected $24.826 million from property owners across the city, $723,000 more than this year. Bumping up the levy increase to 4% will generate $25.07 million — a jump of $964,000 from 2024 levels.
The impact on a typical home in Mankato is relatively negligible regardless of the percentage increase.
According to figures provided to the council, the 3% levy hike would have pushed up the city portion of a $315,000 home’s 2025 taxes by $7. The increase would rise to $18 under the 4% jump.
If a particular property sees an increase in its taxable market value for 2025, the increase will be higher. And properties may very well also see hikes in taxes collected by Blue Earth County and Mankato Area Public Schools.
In recent years, Arntz and Skophammer have been attempting to look further into the future in calculating the various implications of spending and taxing decisions. Among the goals has been to ensure that budgets enacted now make it likely that future tax increases can be kept at 5% or less in each of the ensuing four years. Another target has been to maintain the city’s budget reserves, which are critical for cash-flow purposes and as a rainy-day fund, at a size equal to between 40% and 55% of the city’s general fund.
Looking ahead to 2029, the budget reserves would stay in the target range with each of the levy increase options. But with a 3% hike, the reserves would be at 40.5% whereas they would be more than 43.6% with the 4% levy increase.
With either the 3% or the 4% increase, future levy increases through 2029 are projected to be at 4.5%.
Whether the city’s final budget retains the 4% increase unanimously adopted Monday night or the council trims it closer to 3% later in the year, Mankato’s tax rate will beat those of comparable regional centers around Minnesota, Skophammer said.
“We’re considerably lower than any of the others,” he said.