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2023 Budget – Page 1 <br />MEMORANDUM <br />To: Mayor Walsh and Orono City Council <br />From: Ron Olson, Finance Director <br />Subject: 2023 Budget <br />Date: June 26, 2023 <br /> <br />Attachments: 2024 Budget <br /> <br /> <br />Work on the 2024 budget has begun. Individual departments are currently preparing their budget <br />requests. The City Administrator and Finance Director have begun to meet with the General <br />Fund departments to discuss and refine the department budget requests. <br /> <br />This will be the second year of utilizing the budget committee in the budget process. A chart <br />illustrating the budget process is attached to this memo. In brief, department heads provide their <br />budget requests to the Finance Department. These requests are reviewed and adjusted during <br />meetings between the Department Heads, the City Administrator, and the Finance Director. The <br />budget committee is meeting once per month to review and provide guidance to the development <br />of the Preliminary Budget and Tax Levy. The full Council will be updated at monthly work <br />sessions. The Preliminary Budget and Levy will be publicly presented at the first council <br />meeting of September. Adoption of the Preliminary Budget and Tax Levy will be at the second <br />meeting in September. Major expenditures that are driving increases include: <br /> <br />• Inflation has slowed from the previous year but continues to be a factor in building the <br />2024 budget. The current annual (May to May) CPI-U is 4.0%. The CPI includes a wide <br />variety of items in its calculation so it does not mean all budget lines are equally <br />impacted. For example, energy has decreased by 11.7% over the same time frame. <br /> <br />• Wages and benefits. The city has four labor unions that cover most of the city’s <br />employees. There contract all have a 3% increase for 2024. Wages and Benefits make <br />up approximately 65% of General Fund expenditures; it is expected that this expenditure <br />category will have the greatest impact on the budget. It is expected that health insurance <br />premiums will increase by approximately 10% for next year. <br /> <br />• Insurance – Liability and Workers’ Comp. Information provided by the League of <br />Minnesota Insurance Trust (LMCIT), suggests that the upward pressure on rates is <br />lessening. Recent changes made by the 2023 legislature should reduce the increase in <br />Worker’s Compensation due to PTSD retirements among Public Safety Personnel. <br /> <br />• Tax Levy/Tax Capacity Rate. The City’s property tax base continued to increase during <br />the 2023 assessment period. While the County numbers are not final, the tax base has <br />increased to $4,912,740,729 this is an increase of $579,292,385 (13.37%). The attached