Pine City Council passes preliminary 2026 budget, tax levy; calls future of HRA into question

The Pine City Council called the future of the city's Housing and Redevelopment Authority into question at a special meeting last week.

The council met on Friday to discuss the city's preliminary 2026 budget and tax levy.

At the meeting, finance director Nicole Tricker explained that the budget including all of the requests made by the council and department heads would represent a 21.69% tax levy increase.

The budget recommended by the finance department marked a 7.49% increase in the levy.

Tricker said she'd like the city to reach a 4% increase in the levy by the time the council passes the budget in December.

She also shared potential outlets for reducing the levy, including increasing fees, lowering the EDA and HRA levies, transferring in from the liquor store fund balance, and cutting expenses.

"Our fee schedule needs to be looked at, and I think we need to be raising our prices on stuff," Tricker said. "Places we can look at would be liquor licenses, event permits, planning fees, swimming lessons ..., zoning permits, rental inspections, annual installer licenses. Simply raising them a little bit would help us bring revenues."

Tricker added that expenses associated with the 315 Main Street property are still in the 2026 budget, but when the building officially changes hands, it will cut roughly $12,000 from the Pine City budget.

"There's areas where I already know we're going to be able to cut some expenses," Tricker said. "How much, I don't know."

The preliminary budget presented by Tricker included decreasing property taxes by 1% for both the EDA and HRA to help lower the total levy.

The HRA, which was established by Pine City in 1966, owns and manages the 34-unit, income-based Hillside Court Apartments. The property is managed by SMR Management.

Mayor Kent Bombard and council member Gina Pettie both expressed concerns about lowering the HRA levy below the maximum due to a necessary foundation and drainage project at the Hillside Court Apartments.

"I do know the project needs to be done," said council member Kyle Palmer. "I have a really hard time with the fact that it should never have gotten to this point, I don't think."

Bombard said the HRA is "biting off numbers that are well in advance of what our budget and what our revolving loan funds are at the HRA level."

"We're talking about something that needs to get done, but we don't have the funds to do it," Bombard said. "Federal funds are up in the air, and state funds are up in the air."

Council member Dan Swanson asked whether the HRA is insolvent, and needs to sell the property because the authority is not in a fiscal position to take care of it.

"This isn't a new problem," Swanson said. "This is seven, eight years of a problem. And even if we go full max levy with HRA, it isn't even going to be close to enough money."

Bombard said the max levy would put the HRA at about half of the total cost of the foundation repair project.

The mayor also said going private with the complex would be difficult, because of restrictions put in place from receiving Housing and Urban Development funds.

Palmer posed the possibility of Pine County potentially taking over the HRA.

"The hard part that I look at is the services we provide should benefit the entire city," Palmer said. "There's services being provided for public housing, but how does that benefit people that are maybe right at that breaking point, that are paying for that increase for somebody else to have very affordable housing?"

"That's what the HRA does," Pettie said. "The HRA exists to provide housing. So it's not like they're not doing their job."

Bombard explained that the HRA is working with an engineering report prepared by SEH within the last calendar year for the foundation repair.

"I think serious consideration for the sale of this property needs to be looked at," said council member Dave Hill.

Palmer shared concerns about moving forward with the max tax levy for the HRA without exploring options for long-term management planning.

"Looking back, I don't want this to happen again," Palmer said.

"It sounds like you guys are ready to consider options for the long-term viability of a city-run HRA. I think that's two separate issues," Pettie said.

Pettie motioned to approve the 2026 preliminary budget and tax levy with the HRA fully funded, reflecting an 8.49% levy increase from 2025. Hill seconded the motion.

"I think it's important that we look at passing at the 21.69% department/council level, and not the finance level," Swanson said. "Because if we're starting at the finance level, we don't have a lot of room to go up if we need to go up."

Pettie added that the finance department-recommended budget helps the city tighten its financial belt for another year, as was recommended by auditors.

"As a council, we haven't had the chance to truly litigate what tightening belt looks like," Swanson said.

Palmer pointed out that the maximum HRA levy was not part of the finance-recommended budget.

"I feel like I have to be the voice for the entire city, not just one committee," Palmer said. "So if you're going to talk about tightening your belt and going with the recommendation, than HRA, you shouldn't be going to the council recommendation. Right now, it feels like you're picking and choosing."

Hill said it's important to remember that the preliminary levy can be reduced before it's finalized in December.

"I worry that we're going to whittle it down to a point where it's below what the inflation rate is, and we're going to be trying to find money that we don't have to sort this issue out," Palmer said.

Pettie's motion passed 3-2, with Pettie, Hill, and Bombard voting yes, and Palmer and Swanson voting no.

The council reached a stalemate when a motion made by Pettie for the following resolution, to fully fund the HRA's preliminary budget at a $63,328 levy, failed in a 2-3 vote, with Bombard and Pettie voting yes, and Hill, Swanson, and Palmer voting no.

"I do want it noted that I think that this is at the detriment of the rest of the taxpayers of the city," Palmer said. "I think that the management portion for this project that's being proposed is lacking, and I don't think that the city has any business in being in the business of HRA, and that it should go to the county, because we can't seem to figure it out."

The HRA budget is set separately from the general fund due to having its own levying authority.

The council recessed after a motion made by Hill to rescind the previous resolution failed for lack of a second.

"They need to be funded at some aspect, because we're talking about people's lives and peoples' homes," Bombard said. "So we've got to give the property some money somehow. At this point in time, I don't really care if we give them $40,000 or $60,000, but we've got to give them some money."

Pettie expressed concerns about discussing the future of the HRA without having representatives from the board present.

"I don't feel that there's sufficient controls in place to have proper management of HRA going forward," Palmer said. "It scares me."

"I don't 100% disagree with you," Hill responded. "But I don't think we're at that point. I think we need to get through October and see where we're at, in terms of what comes in from funding."

Bombard reiterated the need for the HRA to be funded.

"At this point in time, we're leaving our HRA unfunded. And we know that the HRA is already strapped for cash and already having issues, and whether you have issues with the management of the building or not, you just pulled the rug out from underneath them for next year and said, 'you get zero dollars, sorry to all the residents who live there,'" Bombard said. That's what I'm seeing."

Palmer said he didn't want the city to give the HRA "basically a blank check for a problem that just keeps snowballing worse and worse."

"If this is the hill I have to die on to put checks and balances in place for HRA, then I'm going to use that to my advantage," Palmer said.

After further discussion, Palmer made the motion to approve the HRA's 2026 preliminary budget — which includes a property tax levy of $42,312 — with the addition that by the end of 2026, Pine City separates all ties with the HRA.

"It gives them a budget in 2026, and then it lights a fire under HRA to partner up with the county," Palmer said.

According to Palmer's motion, if that separation fails to occur, the HRA would be responsible for paying the $42,312 back to the city.

"I don't want HRA anymore, because I don't think that the city is capable of managing it, and I don't think the HRA is capable of managing themselves, given the history of it," Palmer said. "I don't want to see this in our control. I want to see it at the county level, because I think that they have a lot more operational controls in place to manage it wisely."

Swanson seconded Palmer's motion, and the vote passed unanimously.