MARSHALL — The economic effects of the COVID-19 pandemic are a subject of concern for many — including city governments. Marshall City Council and staff members said one of the hard things about planning a levy and budget for 2021 was not knowing if they would see decreased property tax payments, cuts in state aid, or additional costs for COVID-19 response.

On Tuesday, council members approved a preliminary levy of about $7.3 million, an increase of 3.5% from this year. While council members said they would still try to whittle the increase down, they wanted to leave some leeway because of COVID-19 uncertainties.

The city has until the end of the year to approve a final levy. The final version of the levy can be lower, but not higher, than the preliminary levy. A public meeting on the proposed levy will be held Dec. 8.

Council members and city staff have been talking about the 2021 budget and levy over the past few weeks, said Marshall City Administrator Sharon Hanson. At an Aug. 18 work session, city staff brought forward a proposed levy increase of 6.4%. City staff also brought forward an option to take the preliminary levy increase down to 2%, but council members thought that might be too low, Hanson said.

“The council did direct staff to do 3.5%,” mostly because of the unknowns about the COVID-19 crisis and how it might affect Local Government Aid (LGA) from the state.

“The League of Minnesota Cities has urged caution on LGA,” Hanson said. If the state decides to cut or unallot LGA funding, it would have a big impact on the city’s budget.

Annette Storm, director of administrative services for the city of Marshall, said another concern is the city doesn’t know what its costs will be for health insurance yet. Storm said the city will know more after Oct. 1, and will need to adjust its budget before final approval.

Hanson said the 3.5% preliminary levy increase, if it is finalized, would mean a city property tax increase of about $15 a year for the average Marshall homeowner, and a $50 increase for a business property at average valuation.

Not all council members were supportive of the proposed 3.5% levy increase. Council member Russ Labat said many cities are seeing a reduction in property tax payments because of business shutdowns and other effects of COVID-19.

Marshall Mayor Bob Byrnes agreed that caution was needed. But so far Marshall isn’t seeing a decrease in property taxes or high unemployment rates.

Council members Steven Meister and James Lozinski said the council also still has a chance to reduce the levy more before they finalize it in December.

“We’re still probably going to work this down, but we worked really hard to get this far,” Lozinski said.

The council voted 5-2 to pass the 3.5% preliminary levy increase, with council members Labat and Glenn Bayerkohler voting against. A public meeting on the proposed 2021 budget and levy will be held at 6 p.m. on Dec. 8, at the Minnesota Emergency Response and Industrial Training (MERIT) Center.