6.0. SR 07-14-2003, mlve r
TO:
FROM:
DATE:
SUBJECT:
MEMORANDUM
Mayor and City Council
Pat Klaers, City Administrator
July 14, 2003
Staff Updates: 2004 Budget
Item # 6
I will provide the Council with a verbal update on the items listed on the agenda as "staff updates."
The following memo relates to the 2004 budget staff update item.
I would like for the City Council to start thinking about the 2004 municipal budget. Any feedback
you can provide me on your budget goals would be appreciated. The 2004 budget, at this time, looks
like it is going to be "skimpy" in terms of being able to afford additional services, programs and
employees. Accordingly, the budget goals of the City Council for 2004 may be much different than
the budget goals that we have seen in the past or which we may see in the future.
As everyone knows, the city ~vill be receiving $644,138 less in local government aid (LGA) in 2004
as compared to the original 2003 figure. As I understand the legislation that was approved, the city
will be allowed to recapture 60% of this reduction through increased property taxes. The State
Legislature approved levy limits for 2004 that included this provision. At this time, I am assuming
that the City Council will take advantage of this opportunity and increase its tax levy for general
government activities by $386,482 (this is 60% of $644,138). Hopefully, the city tax capacity will
increase so that this additional tax levy for general government activities will not result in a
substantial change in the city tax rate. If the City Council is not interested in recapturing 60% of the
LGA cuts through increased property taxes, then I need to know this as soon as possible.
I have requested all of the department heads to start their 2004 budgets at the same point as the
recently amended 2003 budget. It will to be very difficult for the departments to live with the status
quo and some operations are simply going to require increased expenditures. This is especially true
for building maintenance with the new City Hall and Public Safety Facility, and for operating
expenses for these two new facilities. Also, as we previously discussed, not all of the adjustments
that were made from the originally adopted 2003 budget can be repeated in 2004 so, therefore, there
are going to be some "automatic" increases from the amended 2003 budget to the 2004 proposals.
It is clear that there will not be sufficient funds available to do everything that is desired by the
department heads, the citizens, or the City Council. In terms of employees, it would be a surprise if
additional employees were hired in 2004. In terms of wages and benefits for employees, it is hopeful
that "normal" adjustments can be made. By normal, what I mean is a 3% inflationary increase, pay
plan step increases and some additional monthly employer contribution to the insurance plan.
Estimates are being put together as to how much these "normal" increases are going to be in terms
of a general fund expenditure. If normal increases can not take place, then Council feedback on
priorities for increases in employee wages/benefits would be helpful to me in putting together the
2004 budget proposal.
Any Council comments on existing or desired services, programs, employees, or reorganization of
the city departments, whether it is for 2004 or 2006 or 2008 is always welcomed input. It is also
important for me to hear Council comments regarding programs or services that are no longer a
priority.
At this time, it also appears unlikely that the city will be able to balance the 2004 budget without use
of some city reserves. The logical source of reserves is the liquor store enterprise fund. Every
attempt possible will be made to keep the additional use of the liquor store reserves to a minimum.
(Liquor store funds in the amount of $145,000 were included as revenues in the original 2003
adopted budget.)
The city still needs to certify its proposal maximum levy to the county by September 15. The f~rst
Council budget worksession is scheduled for August 25, 2003.
The 2004 budget is in the very early stages of being put together. 2004 is certainly not going to be a
typical budget year for the city but on the other hand, I do not believe that city programs and
services are going to be significantly impacted. City staff will be stretched very thin in 2004 but we
all look forward to better years ahead (for staffing levels) in 2005 and beyond.
S:~COUNCIL~Pat~Budget\ 714budgetupdate.doc