The Sleepy Eye City Council approved a preliminary budget and tax levy for 2012 Tuesday evening. Next year’s property taxes in Sleepy Eye are tentatively set to increase by more than $93,000, or about 7.5%. The tax hike is primarily due to the city losing around $241,000 in Local Government Aid and other state subsidies. The final budget and tax levy for 2012 will be approved in December following a Truth In Taxation hearing. In other business Tuesday, the Sleepy Eye City Council approved an annexation request from the City Limits Lounge. The agreement calls for the city to reimburse Home Township $78 a year for 3 years for lost real estate taxes. The council also continued to discuss a proposed $7.6 million worth of street and utility improvements for next year, mostly on the south side of town, including the former Snow Farm property.