6.6. SR 01-13-2003MEMORANDUM
TO:
Mayor and City Council
FROM:
DATE:
Pat Klaers, City Administrator
January 13, 2003
SUBJECT: 2003 Budget Update
Item 6.6.
The City of Elk River has adopted its 2003 general fund budget and yet we are in a time of
great financial uncertainty. The state iS experiencing significant budget deficits and everyone
believes that local government aid (LGA) will be part of the state's solution. In 2002, the city
received about $937,000 in LGA and this same amount is in the adopted 2003 city budget.
We know that some cuts are forthcon)ing, but we don't know how much; we don't know if
the city will be allowed to replace the LGA reduction with additional tax revenues in 2004;
and we don't know if levy limits will he extended. All of this uncertainty is leading staff to
take a conservative approach to spending city funds.
At this time, I have asked for ideas from all the department heads on how to reduce
spending from what is in the adopted 12003 budget. If we have a 25% reduction in LGA,
then we should be able to manage the situation with appropriate cuts, delays in hiring, and
use of reserves. If we have a 50% reduction, then life will be more difficult and municipal
services and programs will be impact{d by way of delayed services and/or elimination of
some programs and services. If all of the local government aid is cut, then I believe that we
will be looking at employee layoffs and municipal services may be significantly impacted.
In general, I am more concerned abo~t operating expenses than capital expenses, and it is
important that the city does not fall behind in meeting both our capital needs and in
providing services/programs. It will bie much easier for the city to get back to "normal" if
our capital needs continue to be met and we only have to "get back up to speed" in
providing the appropriate level of serVices and programs. In truth, the LGA cuts are making
everyone seriously evaluate and prioritize expenses and needed services and programs. Over
the next few months, the City Counci! will see a number of items being presented which will
challenge everyone in evaluating which services and programs are nice to have, versus
necessary to have; all of which relates l to City Council priorities for providing services to our
citizens.