NORTH MANKATO — Longtime North Mankato City Administrator Wendell Sande has been retired since the end of May, but a recent meeting between Sande and Finance Director Clara Thorne has sent the proposed 2013 levy increase spiraling downward.

The City Council had been facing a proposed levy hike of more than 16 percent under the first draft of the administration’s proposed budget — much of the increase prompted by a 27 percent leap in the portion of property taxes aimed at paying off debt.

Thorne, tackling the budget for the first time after the retirement of finance director Steve Mork, cautioned the council a week ago that she was still trying to sort out the city’s bonded indebtedness.

Thorne was attempting to reach Mork or Sande for an explanation for why previous budgets showed bonds sold by the city that didn’t have accompanying levies to pay them back. She was hopeful there were sources of non-levy revenue she hadn’t discovered.

“There’s a possibility there are other sources of income that could come in,” she said last week.

After meeting with Sande, that was the case, Thorne said. New budget sheets distributed to the council at a budget workshop this week showed a huge reduction in the 27 percent jump proposed for servicing the past debt.

The change would allow the city to increase its overall levy for next year by as little as 2.5 percent, Thorne said.

Councilman Bob Freyberg, who typically works to push levy increases lower, was frustrated by the dramatically changing numbers.

“Mr. Mayor, I’d like to know why we’re even having this meeting tonight,” Freyberg said. “I mean, we get a whole new second set of budget pages — 200-some pages I went through this weekend with my highlighter pen with lots of questions. And now we get another update. We haven’t even had a chance to look at this.”

Skeptical that the debt service numbers wouldn’t change again, Freyberg suggested boosting the preliminary levy higher than 2.5 percent. The preliminary levy, which must be set by Sept. 15, can be decreased before a final budget is approved in December but can’t be increased.

“We’re going the right direction,” he said. “But can you tell me — I don’t know how to ask this — why so many changes, being we just came out of an audit?”

Thorne said a large change came about because some bonds were refinanced with an escrow fund created to pay the bonds back, taking them off the tax rolls. In another case, special assessments came in higher than anticipated, reducing the need for property-tax revenue to repay the bonds.

Based on the new numbers, the 2013 levy could be increased as little as 2.5 percent if a vacant building inspector position is left unfilled and if requested increases in spending by department heads are not funded, she said. If the department head requests are all approved, the levy would need to rise 5.2 percent.

And if the building inspector position is filled, the jump would be 6.2 percent.

“At this point, I think we do include everything and then whittle,” Councilman Billy Steiner suggested, referring to reductions in increased spending that could be made at budget workshops this fall.

Councilwoman Diane Norland was relieved that, even with departments getting all that they’d asked for, the levy could be kept at a 5-6 percent increase.

“Boy, that’s way better than some other years,” Norland said. “... I’m just very, very pleased that they’re headed in the right direction.”

Freyberg, though, was concerned the debt service numbers might change again.

“I don’t think you better set the levy too low just in case something else comes up that isn’t accounted for,” he said. “... We’ve got this pingpong ball going here. ... Other questions may come up to swing it back the other way.”

Thorne agreed with Freyberg that some wiggle room might be helpful as the budget discussions progress.

“That would be a very prudent course,” she said.

Mayor Mark Dehen, too, suggested a higher preliminary levy would give the council the option of reducing city debt if it chooses.

The council settled on a preliminary levy of $5.5 million — a 7 percent increase.

At least one member of the audience disagreed. Kim Spears, who is running for a City Council seat, wished the council had stuck with the 2.5 percent preliminary levy. He noted that property tax hikes have consistently topped inflation in recent years, that many retirees are trying to get by on minuscule interest earnings off their savings, and that the council was ratcheting up the preliminary levy as they discussed spending areas that needed to rise.

“All of a sudden, it’s like Christmas came early to North Mankato,” Spears said.

The 2.5 percent levy increase was caused largely by a previously approved 3 percent increase in salaries for city workers — part of which went into effect July 1. Health insurance costs for employees are also expected to rise.