ELY—The city council here unanimously approved a maximum 2026 levy Tuesday night that includes a 6.54 percent increase. The city’s total projected budget would increase to $2.464 million despite concerns from councilors about the burden on residents.
The maximum levy must be set in September, but councilors can choose to spend less before the budget is finalized in December.
The approved levy represents a $151,300 increase from the 2025 budget of $2.312 million. The overall budget will total $4.493 million, up from $4.365 million in 2025.
Councilors expressed reluctance about the tax increase, particularly given the community’s economic circumstances.
“I personally would like to get down to four percent,” Councilor John Lahtonen said. “We would have to find $60,000. We have to remember this is a very poor community. Most of our money, 70 percent of our budget, is from LGA (money from sources outside the city). I believe people can find $60,000 and get this down to four percent.”
The budget breakdown shows property taxes will account for 18.23 percent of the general fund revenue in 2026, up from 15.68 percent in 2025. The largest revenue source remains Local Government Aid and other state aid, comprising 70.15 percent of the budget at $3.152 million. Other revenue categories in the general fund include $220,500 from public safety (4.91 percent of the budget), $54,000 for general government operations (1.2 percent), and smaller amounts for public works, parks and recreation, and interest earnings.
Mayor Heidi Omerza acknowledged the difficulty of budget planning.
She thanked department heads and staff for their work in attempting to control costs.
“This last night was difficult, and it’s going to continue to get more difficult to talk about the numbers and where we can cut,” she said, referring to a budget meeting held the previous afternoon. “But I appreciate that hard work that people are putting in to continue to find ways for us to lower our levy, so we can save the taxpayers.”
Clerk Harold Langowski cautioned that the approved figures represent the city’s “current best guess” and noted that unknown factors like health insurance costs could affect the final budget before it’s set in December.
Tax on short-term rentals
Paul Kess of the Lodging Tax Board addressed the council, outlining efforts to modernize tax collection and expand oversight of short-term rentals while announcing changes to the board’s structure and funding priorities.
Kess reported that the lodging tax board has contracted with a firm specializing in identifying short-term rentals, to ensure all applicable properties are included in the tax collection process.
The move comes as the board seeks to capture revenue from the growing number of vacation rentals that may have previously escaped taxation.
Currently, Cook County collects lodging taxes on behalf of the board, but Kess indicated the system may be strained due to staffing limitations. The board is exploring transferring collection duties to the Minnesota Department of Revenue, similar to how businesses file sales taxes with the state.
“The state just seems a natural choice for collection,” Kess said, though he acknowledged the board doesn’t yet know what administrative fees the state would charge.
Cook County currently takes a two percent collection fee.
Looking ahead to 2026 funding decisions, Kess indicated the board will move away from its previous practice of directing all lodging tax revenue to the travel bureau, the area’s primary tourism promotion organization. Instead, the board plans to consider multiple funding proposals.
The board is also grappling with how to support various tourism-related events and organizations, including the tourism bureau, chamber of commerce, and parks and recreation. Kess acknowledged this remains an unsolved challenge that requires further discussion.
Council members expressed support for exploring state-administered tax collection, with one member noting surprise that Cook County had been handling collection for communities outside its jurisdiction.
Kess reported the lodging tax generates approximately $320,000 annually.