2.0. SR 08-22-2005 - Laserfiche WebLink

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Budget Worksession August 22, 2005 Page 2 on BUDGET GAP The draft 2006 budget shows a budget gap in the amount of $1,156,050 between projected revenues and requested experiditures. The city is starting the 2006 budget with a larger than normal budget gap. A major cause for this large budget gap is the capital outlay category. We are starting the 2006 draft budget with almost all of the capital outlay requests being placed into the general fund budget. This amount is $900,850. When compared to the capital outlay amount of $56,600 that is in the 2005 general fund budget, you can immediately identify the major reason why there is a substantial budget gap in the draft 2006 budget. Reducing the capital outlay in the general fund will be necessary in order to close the 2006 budget gap. The city budget and the purchasing of equipment goal is to have everything financed within the general fund, but this will take a number of years to accomplish. A workable approach for 2006 budget and capital outlay category is to keep approximately $250,000 of requests in the general fund budget and have the remaining $650,850 fmanced with equipment certificates or equipment reserves (including funds available per Council resolution in April when the 2004 audit was accepted) and to consider some cuts in the requests. When looking at the preliminary levy sample page, two items need to be highlighted. The first item is that the levy sample includes a $120,000 for 2006 equipment certificates. This amount is sufficient to fmance approximately $300,000 worth of 2006 capital equipment and have the payments be planned out over a three-year period. The second item to note in the levy sample page is the 2005 equipment certificate is broken down between capital equipment and the fire pumper. In this regard, it is appropriate to pay for the fire pumper with equipment reserves and therefore, "free up" this $85,456 tax levy amount to go into the general fund. Another likely partial solution to the budget gap is the NTC increase. The draft 2006 budget uses a 10% NTC growth amount with no city tax rate change and I believe that this is conservative and that we will realize a 14% increase. This 4% additional NTC growth will generate approximately $304,950 for general fund activities without a tax rate change. If the above three budget adjustments are realized, then the budget gap is reduced to $114,800. Starting budget gap Capital outlay adjustments Using reserves for 2005 fire pumper NTC increase $1,156,050 $ 650,850 $ 85,450 $ 304,950 New budget gap $ 114,800 In addition to the tax revenue and capital outlay changes, other budget adjustments are going to be required in order to produce a balanced budget for 2006. This will include some cuts in expenditures and some revenue additions, but $114,800 is a manageable budget gap amount.