When Prior Lake Mayor Mike Myser discovered last month that his city had a $2 million surplus, "it was a huge surprise," he said.

Then Myser, at a City Council meeting last month, made an almost equally surprising suggestion -- that the city give the money back to taxpayers in the form of rebate checks.

"I simply said, 'Why couldn't we consider giving the money back?'" he said last week.

City Council members were not prepared to act as quickly as the mayor, perhaps not surprisingly given the financial difficulties nearly all Minnesota cities are experiencing.

At that February meeting, a majority of council members criticized the mayor for bringing up the idea and for making a presentation about the surpluses and possible rebates without giving them advance notice.

"I wasn't actually trying to get a vote at the time," Myser said. "But I would have no qualms about giving [the money] back."

Since that meeting, the mayor has continued to talk with council members and city staff to see if there is a way to convert the surplus into rebates.

"I do believe there's a chance that it might pass," Myser said.

Another thing he's been trying to work out is how the city ended up with such large surpluses in the past three years despite the worst economic crisis in the country since the Great Depression.

Jerilyn Erickson, Prior Lake's director of finance, said the surpluses came about because of better-than-expected building and development permit totals and conservative city budgets. Also, property taxes in Prior Lake have gone up about 15 percent in the past three years, which has increased revenues. And the number of city workers has been kept to a minimum, she said.

"We do conservatively budget our revenues because development has been down," Erickson said. "Also, we have a very lean staff. Our staff is pretty much stretched."

Erickson said the city will have a surplus of about $979,000 from 2010, in large part because the city budgeted for 50 building permits but ended up issuing almost twice that many, 92.

The 2010 surplus came on top of surpluses of about $500,000 in 2009 and about $468,000 in 2008, she said.

As a result, the mayor has begun asking questions about why he and the City Council were not notified earlier about the near $1 million surplus. He said if the council had known about the large surplus, it might have made some different budget choices.

Myser said he hopes to bring the matter back before the council this month or next for a fuller discussion on what to do with the surplus, which for now is in the city's general fund.

"I have no idea what happened or how [the surplus] grew," said Myser, elected in 2009 in part on a tax-cutting platform. "The point is, when did we know what?"

Heron Marquez • 952-707-9994