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MEMORANDUM <br /> <br />TO: Mayor and City Council <br /> Pat Klaers, City Administrator <br /> <br />FROM: Lori Johnson, Finance Director <br /> <br />DATE: January 25, 2002 <br /> <br />SUBJECT: Proposed 2002 State Aid Cuts <br /> <br />As you all know, Governor Ventura is proposing sizable cuts is state aids to cities in an <br />attempt to deal with the State's estimated budget shortfall. The Department of Revenue has <br />calculated the proposed cuts for each city for 2002 and 2003. Elk River's proposed cut for <br />2002 is $317,722. The 2003 cut increases to $430,886. In 2003 the $200,000 growth-based <br />cut can be added to the levy with voter approval. The rest of the cut ($230,886) could be <br />replaced with property taxes in 2003. <br /> <br />If the Govemor's proposal passes, the City will need to deal with its own budget shortfall. <br />Program expenditures and personnel additions will need to be carefully evaluated and <br />monitored. Fortunately, the City has a healthy fund balance that, if necessary, will be able to <br />absorb this state aid cut. But it will come at a cost including a possible negative impact on <br />the City's bond rating, less Council flexibility to add new programs or cover costs, such as <br />natural disaster preparation or recovery, not anticipated when the budget was adopted, and <br />possible reductions in the City's level of service. With possible ongoing aid cuts, it will be <br />increasingly difficult for the City to fund its current service levels or add new programs, <br />particularly if the cuts are not included in the City's tax levy. <br /> <br />Finally, I will continue to monitor this issue as it works its way through the legislature. I am <br />sure it will be a frequent item of discussion for most cities until we know the end result and <br />then evaluate how to best deal with it. In the meantime, feel free to contact me if you have <br />any questions. <br /> <br /> <br />