NEW ULM — The City of New Ulm is aiming for a 6% tax levy increase.

The City Council held a work session Tuesday to discuss the 2022 budget. No formal action was taken during the meeting, but the council wanted to review options for potentially reducing the tax levy.

During an Aug. 17 work session, the council was looking at a 12.65% levy increase. The council wanted to find options to further reduce the levy.

At the start of the Sept. 7 work session, Finance Director Nicole Jorgensen informed the city the levy increase was down to an 8.66% increase. This reduction was achieved through a debt levy reduction through a bond sale. Some park shelter repairs funds were taken from a maintenance fund. The sinking fund was reduced and capital improvement budgets were also slightly reduced.

City Councilor David Christian asked if this reduction to 8.66% was achieved without using the city’s fund balance.

Jorgensen confirmed the fund balance was not used to make this reduction. The city’s fund balance is currently at 60% of its annual budget. This is 10% higher than what is recommended for the city. The city has the option of using fund balance savings to pay down the levy increase. For every $83,000 reduced, the levy goes down 1%.

The city tries to maintain a fund balance of over 50%. Any lower and the city’s bond rating could be impacted.

New Ulm had a fund balance of 83% in 2015. Jorgensen said the city has not been below 54% since 2011.

Council President Andrea Boettger asked if the city was trying to build the fund balance back up to 2015 levels. She believed that goal was unrealistic.

Councilor Les Schultz agrees that if fund balances were too high, the city will be accused of taxing too much.

City Manager Chris Dalton asked the council what tax levy they were comfortable with to help staff make necessary cuts.

Christian wanted to see it at 6% for the preliminary levy. He believed the city could achieve this or possibly reduce it further. Schultz said he was also comfortable with a 6% or 6.5% increase.

The council also discussed a potential increase in the city’s tax capacity. This would not reduce the levy increase, but it would spread the cost over a greater number of taxpayers.

The council must set a preliminary 2022 budget on Tuesday, Sept. 21. A second work session was held on Sept. 7 to further review options to reduce the levy increase.

Once a preliminary tax levy is set, the city has the option to further reduce the levy before the end of the year but cannot increase the levy.