East Grand Forks leaders set an upper limit to the property taxes they’ll ask residents to pay next year.

City Council members on Tuesday unanimously agreed to a $5.71 million preliminary tax levy for the city’s 2021 budget, a figure that’s 5% higher than the $5.44 million levy they set for this year’s budget.

That preliminary figure is the highest that the city’s property tax revenue can legally rise. When council members hammer out a final budget this winter, they can only enact a total property tax levy that’s equal to or lower than the preliminary figure they set this week.

A 5% increase in budgeted property tax revenue doesn’t necessarily mean that Eastside residents’ property tax bills will rise by that amount. Minnesota cities work backward, so to speak, from a specific revenue figure, and a larger or more valuable tax base can help hit that mark. The city’s budget for this year included a 5% property tax hike, but a larger tax base meant that most residential properties only saw an approximately 2% increase -- and several properties tracked by the city had a property tax bill that was lower that year.

Property taxes are the city’s financial bread and butter, and revenue from them accounts for nearly half of the city’s total income in a given budget year. Capping the city’s property tax revenue at $5.7 million means it’s on course, at least for the moment, to spend some of its reserve cash to close a predicted $399,000 budget gap or cut back on expenses. East Grand Forks’ municipal savings account has grown considerably the past few years and now exceeds the level recommended by the city’s fund balance policy.

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The city was in similar circumstances in September 2019, when council members agreed to a preliminary tax levy that would have resulted in a $229,000 deficit. Staffers whittled that down to $182,000, which came out of the city’s cash reserves.

Setting, at least tentatively, the city’s biggest source of revenue is important, but there are still several other pieces that have yet to fall into place. City administrators are still negotiating new contracts with the unions that represent their police officers, firefighters, public works employees and administrative heads, and the figures they agree upon would presumably hike spending. At present, budget projections presented to council members assume employees will receive predetermined raises -- “steps” -- based on length of service, but they do not assume that employees will receive cost-of-living raises.