HomeMy WebLinkAbout2025.09.15 CC Minutes - Midyear Budget ReviewMINUTES
City Council-Midyear Budget Review
Hugo City Hall Council Chambers
Monday, September 15, 2025
5:30 p.m.
Mayor Weidt called the meeting to order at 5:30 p.m.
PRESENT: Krull, Miron, Petryk, Strub, Weidt
ABSENT: None
STAFF PRESENT: City Administrator Bryan Bear, Finance Director Anna Wobse, Fire Chief
Jim Compton, Public Works Director Scott Anderson, Community Development Director Rachel
Juba, City Clerk Michele Lindau
Finance Director Anna presented the City of Hugo’s preliminary 2026 budget and tax levy. For
Pay 26, Hugo is projected to see a 5% increase in estimated market value. The city continues to
follow its long-standing flat tax rate policy, where tax collections adjust based on property
values.
The 2026 levy was prepared using the same tax rate as Pay 25, proposing a levy of $13,567,000,
a 5.6% increase over 2025, without increasing the urban tax rate. Of this amount, $990,753 is
for debt service. Non-general fund levies total $2,713,516 and support the Street CIP, Equipment
Fund, Stormwater Fund, Special Parks Fund, and the Firefighters Relief Fund. The General
Fund remains the largest component of the budget, funding core city services such as public
works, public safety, utilities, and building maintenance.
The 2026 General Fund budget was proposed to increase by $728,162 due to inflation, wages,
rising benefit costs, and investment in city operations. Included in the budget was 26 regular
full-time employees and three vacant positions. A salary increase of 4.4% was proposed. This
was made up of a 3% cost of living, 1% matrix increase, and .44% to absorb the MN Paid Leave
premiums. Health insurance premiums increased by 14.95%. Thirteen new unfunded mandates
by the state were projected to increase premiums by 5%. The proposed budget also included
vision insurance which is offered to employees of comparable cities. The Fire Department
budget accommodated officer salary increases, firefighter retention incentives, and funding for
increased rescue call volume. New initiatives include funding for future software upgrades, a
reclamite road preservation program, and the 2050 Comp Plan update.
The proposed budget maintained conservative revenue forecasting, budgeted permit revenue for
just 50 housing starts and excluded investment earnings due to market unpredictability. The city
continued to benefit from the state’s fiscal disparities program, which would contribute
$1,124,330 million in 2026 and cover over 8% of the 2026 levy.
With the median home value rising 2.95% to $408,700, the average city property tax will
increase by about $42. Hugo’s tax rate remains in the mid-range among Washington County
cities. Staff emphasized that Hugo does not impose additional service fees such as stormwater or
franchise fees, which many nearby cities use to raise revenue. These fees are often not reflected
in tax comparisons, meaning Hugo residents may pay less overall despite similar or higher
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published tax rates elsewhere.
Staff concluded that adhering to a flat tax rate allowed for continued Street and Trail CIP funding
while maintaining financial stability, and recommended adoption of the proposed 2026 levy,
which may be lowered in December but not increased.
Petryk pointed out that the COLA for Social Security was 2.9%. Wobse explained that was in
line with what the staff was proposing.
Weidt questioned the reason for the increase in officers’ salaries. Fire Chief Jim Compton, Jr.,
explained that while the hours themselves have not changed, the department is looking at how
to fairly compensate staff for the time they commit. The proposal covered a two-year period,
with 16 hours allotted for captains and 12 hours for lieutenants. Compensation was based on
their hourly rates for calls and drills. This adjustment would affect six employees, with an
estimated total annual cost of $10,000. Jr. emphasized that this change would help sustain the
department’s “farm” system.
Weidt asked about the need for contracted park inspections. The Public Works department was
finding and correcting the majority of issues currently. It was explained that the League of MN
Cities recommended certified inspections be done once every seven years. This could potentially
save money on insurance premiums. Public Works Director intended to work on a schedule to
begin the rotation of the parks for inspections.
Weidt asked about the adjustment to the salary matrix and if that would be comparable to other
cities. Wobse responded that it would after other cities made their adjustments. explained that a
position in the community development department was currently a placeholder, allowing
flexibility if applications increase. The comprehensive plan may also require additional work.
The deputy clerk’s position would be filled when there is a more compelling need and could
help the City focus on communications.
Weidt asked about a roadmap to achieve the city’s highest possible bond rating. Anna noted
that such a goal should be a priority, though it may take years to complete. Bear explained that
the City has various fiscal policies not yet adopted, but achieving a AAA bond rating is
reasonable and would significantly lower borrowing costs. Weidt further stated that if the city
considers another facility, obtaining a higher rating beforehand would be very beneficial.
Petryk inquired about the City’s current reserves, totaling $10.7 million, and how they are
invested. Anna explained that funds are placed in bonds and CDs, noting that the city made
approximately $2 million in investment earnings last year but may not see those returns at the
same level moving forward.
Miron asked about the street CIP and if significant projects were covered in the current budget
and existing assessment policy. Anna confirmed that they would be, provided the levy remains
at $2 million. It was noted there needed to be a discussion in the future about changes to the
assessment policy.
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Reclamite
Public Works Director Scott Anderson provided an update on new public works technology that
was being considered as a replacement for traditional seal coating noting that it was also less
expensive. He explained that while traditional seal coating had worked well for many years,
changes in bituminous pavement design led to issues. Specifically, moisture became trapped
beneath the surface, causing premature failure. As a result, the City discontinued seal coating in
2017. The new method, which uses a maltene-based emulsion, penetrates the surface rather than
sealing the top layer. A thin layer of limestone dust is then applied to complete the treatment.
This process replenishes lost maltenes, keeping the asphalt more pliable and flexible.
Anderson noted that an eight-year study showed the method was most effective on new
pavement, extending pavement life by an additional five to seven years. He shared comparisons
of treated versus untreated asphalt, which showed significant difference after two years. The
process was already used in other communities and gaining popularity across the Twin Cities,
and he had observed its effectiveness elsewhere. He stated that if Council was interested, he
would like to identify a project for next year. Bear confirmed that a project had been included in
the budget.
Strub raised questions about the dependence of the treatment on changes in pavement design and
if there would be other changes in the future that would affect the way roads were treated. Bear
explained that the City relies on professional associations to stay informed about any changes.
Anderson clarified that the treatment could help maintain good roads in good condition but will
not improve roads that are already failing.
Strub asked whether the Public Works Department would apply the product themselves.
Anderson explained that it would be put out for competitive bid and limited to roads that are
between one and seven years old, with preference for treating one-year-old pavement. Initially,
the City would need to catch up on eligible roads.
Petryk asked if traditional seal coating could still be used on older roads, but Anderson stated it
was not advisable. He added that crews performed skim overlays on some older roads and had
observed positive results.
Personnel Policy
City Administrator Bryan Bear explained that staff was working on updates to the personnel
policy due to multiple state law changes and evolving administrative practices. Items to be
addressed in the updated policy included Paid Family Medical Leave, cannabis use, dress code,
termination of temporary and seasonal workers, Council out-of-state travel, and many new types
of mandated leave. In addition, staff conducted an in-house comparison with other cities on
benefits, focusing on those that offered personal leave. Staff found that overall Hugo offered a
very competitive benefits package, but personal leave benefits were below average. Some cities
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provided separate vacation and sick time, while others, like Hugo, combined the two into
personal leave time. Bear presented a chart comparing Hugo to other cities that use personal
leave time, which showed that Hugo was behind at the beginning of employment, in line
between five and ten years, but lacking again after fifteen years or more. He proposed a revised
personal leave schedule that would make the City more competitive.
Other proposed items in the updated policy include double-time for work on holidays, vision
coverage, short-term disability versus Paid Family Medical Leave, parental leave, bereavement
leave, and other mandatory leaves. There would be no policy for remote work, though exceptions
could be made.
Strub asked about the carryover program for personal leave time. Bear replied that employees
were allowed to carry over 520 hours and would be eligible to receive payment for that amount
upon termination.
Weidt questioned whether there had been pushback from new employees. Bear responded that
the policy had been modified to provide them with 40 banked hours at the start of employment,
with the opportunity to earn more after six months. He acknowledged that not providing time off
for new hires could place the City at a competitive disadvantage.
Strub shared that in his past employment, vacation time increased gradually, and another
employer allowed employees to purchase additional vacation time using sick leave hours.
Bear stated that staff would continue to review the policy and welcomed additional feedback.
Krull expressed support for Bear setting the policy, and the Council generally agreed that he was
on the right track.
Staff will present the updated policy for adoption by the end of the year.
Hopkins Schoolhouse
City Administrator Bryan Bear provided background information on the restoration of the
historic schoolhouse. It was noted that the project had accomplished the first part of its mission,
with assistance from the City on brush removal, mowing, and snowplowing. Progress had been
made on the exterior of the building.
The Mayor reported he had met Liz to talk about the remaining work to be done. Bear stated he
received a list of from Hopkins Schoolhouse and Heritage Center Chair Liz Cinqueonce of
remaining work to be done that was estimated at approximately $400,000 to make the building
occupiable.
The Council discussed whether the City should participate financially in the completion of the
schoolhouse, and if so, to what extent. What needed to be considered was the City’s
expectations for the site and whether that should influence the outcome, and how the future use
of the building might affect design decisions.
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Weidt noted that although the project once faced the possibility of demolition, the current plan
had accomplished a great deal. He observed that while donations had been strong, progress may
begin to slow. He suggested it would be a better use of funds to invest now to make it a
worthwhile City asset. He stated that the building should be made into a usable facility for
residents and not allowed to drift into an unfinished “Crazy Horse” type project. He proposed the
possibility of matching donations.
Becky asked whether the committee envisioned a change in purpose. Bear replied that the
Committee intended to maintain it as a heritage center. He added that the City had already been
required to carry additional insurance coverage as improvements were made.
Miron voiced his support for the project, stating that the group had done good work and that the
City should help bring it to completion. He suggested the possibility of a joint workshop but
noted the challenge of deciding whether to commit financial support immediately or evaluate the
project’s future purpose first.
Krull stated his preference to avoid the use of taxpayer funds but acknowledged the good points
raised. He emphasized the importance of ensuring that all private donations were utilized before
City funds were committed.
Petryk added that small rental venues are in short supply and suggested the building could be
used for rentals similar to other City facilities. She questioned whether the City’s role should
focus on recouping its investment or supporting the committee’s vision.
Weidt noted that the project should remain aligned with the committee’s goals but emphasized
that the City owned the building and retained rights over its future use.
Strub stated that the schoolhouse represents a valuable asset that could serve as a heritage center
while also offering additional possibilities. He noted its location at a trailhead expanded its
potential uses. He supported holding a workshop to further evaluate the City’s role in the project.
Weidt, made motion, Miron seconded, to adjourn at 6:57 p.m.
Respectfully Submitted,
Michele Lindau,
City Clerk