September was a busy month for finances, with preliminary levies for 2027’s budgets due by the end of the month. Once the preliminary levy is set, work begins on settling numbers for the final version of the levy in December. Two Harbors adopted their preliminary levy during their City Council meeting on September 28th, with the City’s Finance Director Miranda Pietila presenting on what the numbers are, how they compare to the past, who would possibly pay what, and where the money gathered by the levy would go.
To be clear, it is usually expected there will be a significant difference between the preliminary levy and the final version, with the preliminary levy aiming high, then being whittled down before the draft adopted in December to save as much money as possible for taxpayers while still being able to hold up the expected budget. The preliminary levy “is just a starting point,” Pietila explained, for the work between now and December. For example, 2026’s preliminary levy increase was set at 9%. After a few months of further research and work by the City’s finance department, the final levy increase was down to 4%. Similarly, the five-year average from 2022 to 2026 went from a preliminary 5.80% to a final 2.70%, almost half of the preliminary amount.
The 2027 preliminary city tax levy was adopted at a 9% increase, the same amount as 2026’s preliminary levy. In raw numbers, this would mean a prospective $2,945,123 for the City’s general fund, a 9% increase over 2026’s $2,701,948. Pietila noted this was not the entirety of the 2026 levy, as that year the City also levied $15,031 for an abatement; this abatement is no longer required this upcoming year. If that extra amount were included, the % change from 2026 to 2027 would actually be 8.40%.
To ground these figures in how they will impact residents, we need to look at property values, specifically the City tax portion, prior to the Homestead Taconite Credit. Pietila’s calculations also assumed an average market value increase of 3.87% from 2026 to 2027. For this example, start with a house assessed at $150,000 in 2026. The tax amount owed that year would have been $673.98. In 2027, that property value would go up to $155,805 due to a market value increase. With an 8.9% levy increase (assuming 2027’s levy amount didn’t change from the preliminary to the final, which is unlikely), the tax amount would now be $733.96, or an additional $59.98 from 2026 to 2027. This evens out to a difference of $5 a month, or $1.15 per week.
Two more examples: a house worth $200,000 in 2026 had a tax amount of $988.07. In 2027, that house would be worth $207,740 and have a tax amount of $1070.87, or an increase of $82.80 given the preliminary levy increase of 8.4%. Note that the tax levy percent increase continues to go down as the property value goes up: a $400,000 house in 2026 would have had a tax amount of $2,244.40, changing in 2027 to a $415,480 house with a tax amount of $2,419.13, an increase of $174.73 at 7.8%.
The money generated by the levy is only a portion of Two Harbors’ general fund revenue sources, but they are expected to be the largest source by a good margin. Pietila’s estimate for the 2027 preliminary budget lists general property taxes – the preliminary levy – as providing a good-sized 46.43% of the City’s projected $6,315,454 revenue. For comparison, the next largest source of revenue, local government aid, is 33.59%, with an estimated inflow of $2,121,155. Third largest is transfers from other funds at roughly 10%, and below that, no single source provides above 4% of revenue. In response to a question from Councilor Todd Redmann about comparison to similarly-sized communities, Pietila answered that Two Harbors’ balance has been improving, pointing to property taxes being a larger share of revenue than local government aid as a positive sign.
So, what is this tax levy being spent on? Pietila laid it out in general terms first: personnel costs. 74% of the General Fund Budget is used for paying wages and benefits, including state policies. Recruitment, retention, and succession planning are also part of the package, along with increased operational costs, especially in recent years due to rising insurance premiums and inflation.
In more specific terms, Pietila’s 2027 preliminary budget has the largest piece of the pie go to Public Safety: the police and fire departments, taking just over 36% or $2,277,874. The second-largest would be Public Works, which covers streets, utilities, and infrastructure maintenance, taking almost 32%. General government services: city admin, finance, and planning, would be just over $1 million, or 16.48%. Other expenditures go no more than 6% each and include transfers to other funds which support the library and capital projects; culture and recreation: parks, library, recreation, and community programs; miscellaneous for contingencies and expenditures that don’t fall in other categories; and finally, the cemetery. The grand total of the 2027 preliminary budget’s general fund expenditures is $6,309,868.
For a different view of the levy increase’s effects, Pietila showed just how a resident’s taxes would be used with the prospective numbers. Say the resident paid taxes on a home valued at $150,000. Given the figures mentioned earlier, their levy would increase by $59.98 in 2027. Of that $59.98, $21.65 would go towards Public Safety for Two Harbors. In turn, $19.03 would go to Public Works, $9.89 to General Government, $3.10 to transfers to other funds, $3.00 to Culture and Recreation, $1.82 to miscellaneous, and $1.50 to Health and Welfare, the cemetery. Add it up between all the residents, and it goes a ways towards making a place like Two Harbors able to function and take steps to improve.
Keep in mind, again, these numbers are subject to change and likely to go down before the budget is finalized. The goal at this point was to aim for the maximum estimated amounts that might be needed. With the 2027 preliminary levy approved by the City Council, the next step for Pietila and the Finance Department is to continue their review of the levy, the budget, CIP (Capital Improvement Plan), utility rates, and fee schedule – all parts that will influence the final numbers guiding Two Harbors’ government next year.
On October 26th, the 2027-2031 Capital Improvement Plan will undergo review and discussion. On November 9th, the 2027 Utility Rates & Fee Schedule is estimated to undergo Council consideration for adoption next year. Finally, the big day for the levy will be Monday, December 14th, at 6:00 pm: the Truth in Taxation Hearing, where the public will have the opportunity to add their opinions and commentary on the budget.
