Watertown, SD, Reviews Nearly $80 Million 2027 Budget With $11 Million Street Facility

Northeast Radio SD News – Watertown, SD - The Watertown City Council held the first reading of Ordinance No. 26-37 for the 2027 municipal budget appropriation and reviewed the 2027 Enterprise Funds budget during its Nov. 2 meeting, examining a financial plan just under $80 million that prioritizes a 5 percent employee cost-of-living wage adjustment, holds full-time staffing nearly flat, and sets aside $11 million for a new municipal street facility.

Chief Financial Officer Kristen Bobzien noted that municipal budgets require two readings by ordinance and must be formally adopted before the end of November. No vote was required during the first reading.

Budget Overview, Revenues, and Mill Levy

City Manager Alan Stager presented the 2027 spending plan, describing the city's overall financial position as stable while emphasizing the need for continued growth in population, sales tax, and property valuation.

Across all funds, the proposed 2027 budget totals just under $80 million, including $26.5 million in General Fund expenditures (a $1 million, or 4 percent, increase from the 2026 budget) and $28.9 million in special revenue funds (a $2.7 million increase driven by capital projects). Total capital outlay across the city is budgeted at $25.3 million, with debt service at $6.7 million.

Stager explained that while the adopted 2026 budget totaled $65.4 million, actual 2026 expenditures are projected at $81.3 million due to multi-year capital carry-forwards for the wastewater treatment facility, airport improvements, and a solid waste project.

On the revenue side, the city expects to collect nearly $32 million in total taxes in 2027:

·         First and Second Penny Sales Tax: Projected at $23.5 million based on $1.175 billion in taxable transactions, modeling a conservative 2.5 percent growth over prior-year actuals. The first penny funds general government operations, while the second penny funds capital improvements and debt service.

·         BBB Sales Tax (Third Penny): Projected at $1.4 million on $142 million in hospitality, dining, and entertainment spending, dedicated to the Convention and Visitors Bureau (CVB) and Parks, Recreation, and Forestry facilities.

·         Property Taxes: Budgeted at roughly $4.8 million, reflecting a 4.31 percent increase composed of the state-capped 2.7 percent inflation factor plus new construction growth. Because new properties are sharing the tax base, Stager reported the city’s municipal mill levy is projected to decrease from $1.71 per $1,000 of valuation to $1.60 or less in 2027. Answering a question from Councilman Kyle Peters, Stager confirmed that figure reflects only Watertown’s municipal levy.

Major 2027 expenditure categories include $16.5 million for capital projects, $13 million for public safety (police and fire), $5.6 million for general government, and $0.4 million for health and welfare (including mosquito and animal control), alongside public works, culture and recreation, and enterprise operations (wastewater, solid waste, and the regional airport).

The General Fund budget balances $21 million in direct revenues with $3.3 million in enterprise transfers (including $1.5 million from Watertown Municipal Utilities, to whom the city also pays roughly $2.5 million annually for utility services) and $1.9 million in budgeted unrestricted reserves. Stager noted that because Watertown historically collects 103 percent to 104 percent of budgeted revenue and spends 95 percent to 97 percent of budgeted expenditures, the actual draw on reserves is projected closer to $500,000, preserving a six-month unassigned reserve balance.

5 Percent Wage Increase and Staffing Ratios

Personnel services represent the primary driver of the General Fund increase. The 2027 budget provides a 5 percent across-the-board cost-of-living adjustment (COLA) with no step increases, resulting in a 4.1 percent net increase in overall personnel costs. Non-personnel operating expenses were held to a 2.5 percent increase despite factoring in a 10 percent rise in fuel costs.

Stager said the city was able to invest directly in starting and base wages—particularly to remain competitive in recruiting and retaining police and fire personnel—because the city’s Wellmark health insurance renewal increased by approximately 1 percent for the second consecutive year.

Full-time city staffing will remain nearly unchanged from the 242 full-time employees on payroll in 2026, adding only one fee-funded full-time position at Cattail Crossing Golf Course. In response to a question from Councilman Doug Allen, Stager said the new employee will bring turf management expertise that will also assist with municipal ballfields and parks during the winter off-season.

Stager cautioned the council that full-time city staffing grew 7 percent since 2021 while Watertown’s population grew roughly 5 percent over the same period. Moving forward, he recommended limiting municipal headcount growth to one-third to one-half the rate of population growth. He also noted the city employed 462 temporary and seasonal workers in 2026 (equating to roughly 306 total full-time equivalents) and plans to evaluate ways to rely on fewer temporary employees working more consistent hours. Councilman Michael Heuer asked staff to keep retirees and seasonal workers who prefer limited hours in mind during that review.

Allen and Councilman Lynn Jurrens both praised the 5 percent COLA, the city’s health insurance management, and the decision to hold full-time staffing flat. Jurrens noted that leaving the assistant city manager and public works director positions unfilled over the past year helped free up resources for frontline employee wages.

Parks, Recreation, and Cattail Crossing Golf Course Fees

General Fund transfers for 2027 include just under $2 million to subsidize Parks, Recreation, and Forestry, $500,000 to the Watertown Regional Airport, and $100,000 to the 911 communications fund. With the department spending roughly $6.5 million annually and generating $3.7 million in revenue, Stager reviewed cost-recovery targets across facilities:

·         Cattail Crossing Golf Course: Currently recovering 91 percent of its operating costs—losing 9 cents on every dollar spent—compared to a budgeted 101 percent target. Stager announced the city will raise course fees and food and beverage prices in 2027, specifically citing below-market concession pricing such as $7 hamburgers and $2.50 bottles of beer. The goal is to generate an annual surplus of $100,000 to $200,000 to reinvest into course improvements and a future clubhouse.

·         Watertown Family Aquatic Center: Achieving 70 percent cost recovery, outperforming the 55 percent national average.

·         Bramble Park Zoo: Maintaining current admission fees (averaging roughly $6 per visit across 60,000 annual visits) while working toward Association of Zoos and Aquariums (AZA) re-accreditation.

·         Prairie Lakes Ice Arena: Improving cost recovery through updated concession pricing while holding ice rental rates steady to attract more tournaments and user groups.

·         Recreation Programs and Mount Hope Cemetery: Recovering 34 percent to 35 percent in recreation programs and 53 percent at the cemetery.

Jurrens voiced support for adjusting golf course concession rates so municipal operations do not undercut local bars and restaurants while eliminating the 9 percent taxpayer subsidy.

Enterprise Funds and Outside Agencies

Both the wastewater and solid waste enterprise funds are projected to operate at a combined $3.2 million operating profit prior to direct debt service. At the Watertown Regional Airport, recent hangar and fee adjustments reduced the projected 2027 operating deficit to $74,000. Answering a question from Councilman Brent Mohrmann regarding agricultural land leases at the airport, Stager said the budget conservatively estimates $95 per acre for hay land rather than higher row-crop rates so the Airport Board can prioritize wildlife and aviation safety.

Stager also announced plans to reform how the city distributes funding to outside community organizations. Rather than treating General Fund allocations as automatic annual entitlements, organizations will apply through a competitive process evaluated on fiscal stewardship, existing reserves, and measurable returns on population, sales tax, and property tax growth. Economic development funding with the Watertown Development Company (WDC) will remain tied to specific infrastructure initiatives, including investments in the Calvin Industrial Park and design work for a future southern roadway network.

2027 Capital Improvements and $11 Million Street Facility

Stager outlined the city's major 2027 capital projects:

·         Municipal Street Facility ($11 million): Planned purchase and development of a new street maintenance facility funded through previously bonded reserves set aside for the project. Jurrens highlighted the $11 million price tag as a major savings compared to a $27 million facility proposal rejected three years ago.

·         Street Reconstruction ($3.8 million): Maintained at prior-year funding levels, with a major focus on a wastewater and utility corridor project in north-central Watertown.

·         Bramble Park Zoo Habitats (just under $1 million): Upgrades to the carnivore exhibit, alligator habitat, and kangaroo exhibit along the pathway toward 2030 re-accreditation, budgeted in full prior to Lake Area Zoological Society contributions.

·         Prairie Lakes Wellness Center / Ice Arena & Parks: Purchase of a used Zamboni matching the configuration of the primary unit at the ice arena for tournament operations, $400,000 for storm drainage improvements, $300,000 for concrete repairs, ongoing maintenance across 30 miles of recreational trails, and new playground equipment at Morningside Park and Nelson Park. Heuer praised the planned playground upgrades at Morningside and Nelson parks following recent improvements at McKinley Park.

·         Public Safety Equipment: Purchase of a Type II ambulance designed specifically for daily inter-facility hospital transfers, along with snow removal equipment, police radio upgrades, and replacement of aging police service pistols.

Councilman Dan Schutte thanked city department heads for holding back on departmental wish lists to keep the budget balanced and maintain the city’s six-month reserve target. Mayor Ried Holien thanked Stager, Bobzien, and city staff for their work preparing the 2027 budget book ahead of the second reading later this month.