A Minneapolis board agreed to a new 3.4 percent higher ceiling in the city's tax collections Monday, as proposed by Mayor Betsy Hodges, despite a last-minute skirmish over pension funding.

Hodges wants to raise the levy — the dollar amount the city collects in property taxes — by about $10 million in 2016 to just over $297 million. Because of the city's growing tax base, however, 52.2 percent of homes will see a decrease in their property taxes.

The actual $1.2 billion budget now faces approval by the City Council, which will take a final vote Dec. 10. The largest chunk of it, about 29 percent, supports public works operations. The police department comprises the next largest share, at 13 percent.

The Board of Estimate and Taxation, an obscure board made up of city officials, a park commissioner and two citizen members, approved a maximum levy increase at a meeting Monday.

But that was only after extended debate over whether to use some potential savings in pension obligations to either reduce the city's levy or pay for road and park improvements.

The discussion was initiated by the strong recent performance of the city's Minneapolis Employees Retirement Fund. A change at the state level reduced the city's annual obligation to the fund by about $2.2 million, potentially making the money available to reduce the levy or for other city needs.

City Council President Barb Johnson proposed using the savings to reduce the city's levy to a 2.7 percent increase, arguing that the property tax increases will be felt by homeowners in her ward.

"We are not a bank," Johnson said. "So in my opinion … the city's obligation is to tax for the needs that they have as a city and not a nickel more."

City staff argued that the city may have higher-than-expected obligations to its police and fire funds, however, essentially wiping out any savings.

"I don't want us to take a huge risk based on one year. One year is not a trend," Hodges said. "So reducing the levy based on one year of results is I think imprudent."

Johnson's proposal failed to pass.

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