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