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1998 Budget Memo <br />October 27, 1997 <br />Page 5 <br /> <br />tax rate change can be accomplished, but it will require a significant amount <br />of reserves and/or a significant amount of cuts. Staff would prefer using cuts <br />to achieve a balanced budget with no tax rate change, but it is believed that <br />this cannot be accomplished unless the Council looks at a zero percent wage <br />increase and no new employees, including COPS FAST officers. <br /> <br />A reduction in expenditures is preferable to increasing the use of reserves <br />due to the concern over the impact on future budgets. If we become too <br />dependent on reserves and run out of available reserves in the future, or have <br />a desire to not use reserves in the future, then additional tax revenues will <br />need to be generated to absorb this shift in revenue. This may be very <br />difficult to accomplish when considering the normal increases in services that <br />additional taxes fund. Overall, staff supports a small increase in the tax rate <br />in order to limit cuts and use of reserves and to decrease the possibility of a <br />significant tax rate increase in the future. In 1997, there was a 2.7 percent <br />increase in the city tax rate and in 1996 the city tax rate increased by .3 <br />percent. <br /> <br />Once the goal of the City Council is known regarding the city tax rate change, <br />it will be easier to discuss other revenue increases, expenditure cuts, the <br />exact level of cash flow reserves to be used, expenses to come out of the City <br />Council contingency fund, new employees for 1998, and the city contribution <br />policy. Regarding the city contribution policy it should be noted that I am not <br />proposing any contributions out of the departmental budgets in 1998. If the <br />city is going to contribute to an organization in 1998 it should come out of the <br />City Council contingency fund. We have recently heard a request from the <br />Rivers of Hope organization and the Historical Society for contributions. <br />Also, the EDA has recommended a $2,500 contribution to the Minnesota <br />Central Initiative Fund from the EDA and from the city in 1997 as a one time <br />only contribution to their capacity fund campaign. The Central Minnesota <br />Initiative Fund request is attached for your information. <br /> <br />Attached for your information and consideration is the proposed 1998 pay <br />resolution. This resolution closely mirrors the 1997 adopted pay resolution <br />with only minor adjustments to reflect recent changes in policies for <br />employees. The resolution reflects a 3 percent increase in the pay plan. <br /> <br />At the end of the evening the Mayor would like to discuss with the City <br />Council some approaches to add money to the city development fund and <br />possible ways that the city can fund its share of the Lion's Park teen center. <br />The final agenda update item is a staff update on the County Government <br />Center building expansion and public improvement project. <br /> <br />\\elkriverXsys\shrdoc\98bdtmm.doc <br /> <br /> <br />