08-06-2003 Council Work Session - Laserfiche WebLink

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ih' Preliminary 2004 Budget 0\’er\'iew August I, 2003 Page 4 the General Fund budget. There is expected to be a balance of $65,000 available in the PIR Fund as of December 31,2003. In addition, the 2004 levy includes another $35,000 levy into the PIR Fund. It is recommended that up to $62,000 of PIR Fund reserves be used in the 2004 budget to offset the $62,000 reduction in the funding for street overlays in the General Fund. Levy Limit The legislature placed levy limits on cities for 2004. The levy limit freezes levies at the 2003 level, with the exception that the levy can be increased to recoup 60% of the lost Market Value Credit Aid and Local Government Aid. For Orono. this means that although we lost $63,693 in State Aid, we can only recover 60% of the aid loss through a levy increase. Tax Levy The tax levy required to fund the proposed 2004 General Fund budget is $2,587,535. Although the levy is $ 1 6,915, or .6% lower than the actual levy for 2003, when the amount of the City's State Aid is included as part of the levy, the levy increases by $46,778, or 1 .84%. The total tax levy required to fund the proposed 2004 budget is $3,1 58,485. This is an increase of $ 123,778, or 4.08%. The total levy includes a Fire Facilities and Equipment Bonds debt service levy of $ 128,000. This levy will be used to pay the debt service on the bonds used to finance the Navarre Neighborhood Fire Station, and the purchase of fire apparatus and equipment needed for the Navarre Fire Station. The total levy also includes a special levy of $83,000 to fund the repayment of one-year equipment certificates for the purchase of three replacement police squad cars, and a special levy of $85,000 to fund the re]>ayment of equipment certificates for the purchase of replacement equipment for the Public Works Department. The breakout of the use of tax levy revenues by fund is shown in attachment A-1 Tax Capacity Rate, and Impact of Tax Lew on Property Ow ners Because we do not yet have an updated estimate of the City's tax capacity, the projected tax capacity rate and impact on property owners have not been calculated. These will be provided at the second budget worksession. However, based on the updated valuation by the City Assessor, it appears the City's tax capacity has increased by at least ten percent. Given the 4.08% increase in the tax levy, and the ten percent increase in the tax capacity, the City's tax capacity rate will be reduced in 2004. Additional Work to Fine-Tune Expenditures and Revenues Staff will continue to w ork to fine-tune expenditures and rev enues. A key expenditure item is the adjustment to pay levels. Althou;^ both the CPI and the current budget environment would point to a general pay adjustment of about 1%, a number of cities have settled multi-year contracts at levels higher than that, which is causing some cities to consider pay adjustments for 2004 in the range of 1.5% to 2.5%. Staff will closely monitor this issue over the coming weeks to assist in making a final determination regarding pay adjustments.