Our city staff, especially our department heads, our city administrator, countless hours on all parties as we look through all those needs in the community and prioritize the needs and what we can fund within the constraints that we have.”

Cottage Grove Finance Director Brenda Malinowski.

Cottage Grove has an official 2025 budget. Approved at the Dec. 4 Council meeting after a presentation and public hearing, the 2025 city budget is $28,446,310, and includes $26.128 million from property tax and related levies. The overall property tax levy for 2025 represents a roughly $3 million or 12.98 percent increase over that for 2024.
With Open Forum to address non-agenda items seeing no public comment Dec. 4, the 2025 budget details were presented by Cottage Grove Finance Director Brenda Malinowski.
“Thank you mayor, members of the Council,” Malinowski said. “I have a brief presentation tonight regarding the property tax levy and budget before you hold that public hearing and adopt the resolutions that relate to that.”
Next going into her presentation, Malinowski said the city had been working on the budget since January, five budget workshops held through the year by the council. A strategic planning workshop was held in early 2024, the budget kickoff with Council starting May 1 of this year.
“It’s never an easy process as all these needs of the community come forward, so thank you for that,” she said. “Our city staff, especially our department heads, our city administrator, countless hours on all parties as we look through all those needs in the community and prioritize the needs and what we can fund within the constraints that we have.”
Earlier in her budget presentation Malinowski went into the property tax levy history.
“Our property tax levy history is shown on the screen,” Malinowski said as she went on. “It’s important to note that this is a component of our city tax rate that we apply to an individual property.”
With the 2025 budget representing a $3 million increase over the year previous, Malinowski said that tax capacity would have gone down, if the city were not growing.
“Our tax capacity for 2025 as you can see on the screen, that’s the second component that we use in calculating our city property tax rate,” she said. With a growing property tax base via new development, the tax capacity increased from $68.9 to $69 million, an increase of 0.1 or $100,000.
“It’s really net neutral for 2025,” Malinowski said of the levy. “However, I would like to point out that were we not growing and had new construction in the community that would have went down for 2025. The city of Cottage Grove is fortunate that we’re a growing community or that tax capacity actually would have went down for 2025.”
Next touching on the city tax rate, Malinowski laid out the math involved.
“So when we take the city property tax levy divided by tax capacity, we come up with the city tax rate,” she said. “For 2025 that’s 37.177 percent.” Consistent with the rate in 2021 and 2022, the new rate represents an increase of just over four percent from 2024, which represented a drop of just over one percent from 2023, chalked up to increases in property valuation during those years.
“It’s consistent with what we had back in 2021 and 2022,” Malinowski said of the 2025 city tax percentage.
Included in the 2025 property tax levy are the following:
• General Fund Levy $21,667,200
• Equipment Levy $321,000
• Municipal Building Levy $300,000
• EDA Levy $137,500
• Debt Levies $3,564,800
• Total Property Tax Levy $25,990,500
• HRA Levy $137,500
“The majority of that increase is in the general fund levy,” Malinowski said for 2025. “That’s our chief operating budget in the city. That funds our police services, fire services, our parks, recreation, our streets and snowplowing services.”
General fund revenues came from many different sources, it was made known.
“On the general fund side we’ve got a budget of $28.4 million,” Malinowski said for the general fund. Included in the general fund were operational services like police and fire, funded via property taxes.
“When we provide those services to our community, we’re not sending them a bill,” she said. “When we go to a fire call or a police call and so we need to generate revenue to fund those operations. And we fund that through property taxes. So the general fund is funded by about 76 percent in property taxes.”
Also included in general fund revenue sources were things like licenses and permits.
“Since we are a growing community, license and permits are a large portion of our budget,” Malinowski said, this furnishing 8.33 percent towards general fund revenues. This in turn helped fund home inspection and other building related projects.
Charges for services furnished six percent of general fund revenues, with intergovernmental furnishing 5.84 percent, transfers in 2.41 percent, and other at 1.26 percent.
As for general fund expenditures, personnel accounted for 70.61 percent of city budget expenditures, contractual for 22.84 percent, commodities for 5.58 percent, and budget contingency for 0.97 percent.
“So as you can see it’s the same amount as the revenue so we have a balanced budget,” Malinowski said of the $28,446,310 in total general fund expenditures. She went on to say that personnel includes police, fire, and other services.
In terms of department budgets in general fund, public safety takes up 48.35 percent of the 2025 general fund budget, followed with public works at 19.34, general government at 12.76 percent, parks and recreation at 11.54 percent, and community development at 8.01 percent. These are roughly analogous to previous years.
With median home value decreasing from $369,500 in 2024 to $354,000 in 2025, the proposed property tax bill for said home of $4,344 is divided by individual government as follows:
• ISD 833 at $2,141.11 or 49.29 percent
• City of Cottage Grove at $1,261.42 or 29.04 percent
• Washington County at $816.70 or 18.8 percent
• Metropolitan Council at $63.28 or 1.45 percent, and
• Other Special Taxing District at $61.49 or 1.42 percent.
Doing a 10 year study in 2023 on the needs for current and projected city operating costs, meanwhile, a need was determined.
“We looked at our current debt, our future debt based on street management projects that would be done in the future. We looked at increasing our capital,” Malinowski said. “And need about a $100 increase on that median home per year, was the consensus that came out of that financial management report. So based on the property tax levy and budget that’s in front of you, that median home, we are within that target at $58.” Malinowski went on to say the city also tracked four other properties in terms of market valuation change, with the impact depending on the market valuation change of each as set by the Washington County Assessor’s Office each year.
Shifting next to from future needs back to the current budget, Malinowski drew comparison with other cities in Washington County.
“We also compare to other cities in Washington County to see how we compare against those other cities,” Malinowski said of city property tax percentage on a median home.
Cottage Grove currently ranks. 11th of 12 cities in terms of its city property tax percentage for a median home, between Oakdale (in 10th) and St. Paul Park (in 12th). Newport was ranked sixth of 12 in terms of percentage of city property tax impacting a median home.
Moving from Washington County to growing cities of over 40,000 in the larger metro, Cottage Grove currently ranks 10th of 12 cities with comparative population metrics, sandwiched between Maple Grove (in ninth place) and Blaine (in 11th place). Woodbury ranked sixth of 12 in the larger metro.
“We also compare favorably in this metric,” Malinowski said of the larger metro and tax impact for Cottage Grove residents. “We are the third from the bottom in this category. There are only two cities that can provide city property taxes at a lower amount.”
Closing out her comparison with tax rates for 2025 in other Washington County municipalities, Malinowski said that the rate was, “not at the bottom, but there are only four other communities that are lower the Cottage Grove” in terms of the tax rate they can offer for services. Cottage Grove ranked eighth of 12 in terms of city tax rates in the county, between Hugo (in seventh) and Mahtomedi (in ninth).
Growth in a city’s overall tax base helps spread out the tax burden for services, allowing for the same amount to be raised with a lower ‘per capita’ assessment to individuals in larger communities.
So what does it all pay for anyway? Malinowski was ready with answers.
“Lastly, on that median home that went down 2.4 percent, if instead of paying property taxes on a yearly basis they mailed in a check once a month they would send us about $105,” Malinowski said of monthly comparison.
Broken down further, that $105.80 would go as follows:
• Public Safety $45.20
• Public Works $14.78
• General Government $13.69
• Parks and Recreation $10.94
• Community Development $1.47
• Debt Service $15.54
• Capital Equipment $1.29
• EDA $0.55
• HRA $0.55
• Contingency $1.07
The General Fund supports a variety of budget needs including staff pay, with Community Development involved with things like granting permits. Debt service in the budget is used to fund past projects like pavement management and building of the central fire station.
Malinowski also touched briefly on tax relief programs though the state like regular credit refund, special property tax refund, and senior citizen or disability property tax deferral program. The website for the senior citizen or disability property tax deferral program is http://www.revenue.state.mn.us/property-tax refund, while the phone number for the Department of Revenue is 651-296-3781.
“Otherwise please just contact me at the city,” Malinowski said. “I’m always happy to talk to residents and citizens regarding those programs and help them navigate those programs.” Residents should also watch for a 2025 valuation notice from the Washington County Assessor’s Office around April, it was made known.
After Malinowski’s presentation she stood for questions.
“Thank you Brenda,” Mayor Bailey said. “Another fine job putting together a budget.” Bailey was followed by Justin Olsen.
Echoing the mayor’s thanks and touching briefly on the budget process, Olsen posed a question.
“There are a couple of pieces of information that are critical and I was hoping you could share a little more about that,” he said. “You mentioned earlier the value of someone’s property, someone’s home. There was a law change as it related to property valuations that probably those with a valuation higher than I think $513,000 saw on their property taxes. Could you explain that to some degree just so people know what that was?”
“There was a change in the Homestead Market Value Exclusion,” Malinowski said. “So lower valued properties received more of a change in that, but some of the higher valued properties did not. So that had an impact in the shift.” The city was watching the shift, particularly that from residential to commercial.
“But those higher value properties saw some of those increases more,” she said. Those with questions on their valuation should contact the county assessor when valuation notices are sent out in spring, Malinowski said.
Olsen’s next question was on the HRA levy.
“I noticed you had that on your chart as well,” Olsen said. “Maybe you could just tell the public at home what we chose to do this year with HRA vs. EDA?”
Malinowski explained.
“Yes, so last year, current year 2024, for the EDA levy we had $275,000,” she said. “During the financial management process council consensus was to start doing an HRA levy for housing and redevelopment in the community. Instead of leaving the EDA levy at $275,000, we took half of the EDA levy (and) put it in an HRA levy.” Malinowski went on to say this was more transparent as a separate line on the tax statement, being listed as ‘Cottage Grove HRA’ on the tax statement.
“Our property tax payer will understand the taxes that they are going to pay the city for housing and redevelopment activities,” she said. Olsen thanked Malinowski and mentioned the HRA levy could be used for aging infrastructure, with several neighboring cities already having an HRA levy.
“The good news is, it’s budget neutral,” he said. “It doesn’t change anything.”
Olsen had one last query for Malinowski.
“Coming out of 2020, we all remember, probably not very fondly, the challenges of COVID,” he said. With recovery funds from state and federal sources during the COVID era coming to an end, the question of what came next was in order.
“Maybe you could speak on how some of those funds sunset, or have sunset, and what that means going forward, because certainly we still have to maintain those things that were initially paid for,” Olsen said.
Malinowski answered.
“Yes, and I can specifically talk about our one time public safety aid,” she said. With Cottage Grove receiving $1.7 million from the state fro public safety during the pandemic, the city was using a staged approach of using those funds to spread out over three to four years. This was to soften the impact from what would otherwise be a large property tax swings as the city transitions to the post-pandemic era.
“We’re doing that with those one time public safety funds,” Malinowski said of softening the tax impact for city residents.
Council member Tony Khambata had a question on debt service.
“Since our bond rating was updated we probably haven’t had a chance to convert those into low interest bond sales, but do you have a rough idea of what the long term net savings will be on having that upgraded rating on projects we’ve put out for bond since we’ve gotten that rating? Did we have a noticeable drop in the rates that were being offered to us?” He asked.
“We did, I think with that bond issue that we did at the beginning of the year,” Malinowski said. With two bond issues since the new AAA rating, the savings was included in the debt service figure for the present budget.
“Ok,” Khambata said, thanking Malinowski for her and other staff’s work during the process.
“That’s a heavy lift, and I appreciate all the work you’ve put into this,” he said.
Council member Dave Thiede spoke next.
“My dad raised me to be pretty frugal,” he said. “So there are definitely some this and I know a lot of people are feeling the burden of those increases…we do try to make an effort to hold the line on some of those taxes,” he said. “We’ve seen some increases in labor costs and to other things.” It would be nice to never see taxes rise, but the reality of costs meant that wasn’t always possible.
No comment was given during the public hearing that followed.
With council members taking turns to motion and second the necessary resolutions, the 2025 Cottage Grove budget is now official.