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MEMORANDUM <br />To: Mayor Walsh and Orono City Council <br />From: Maggie Jin, Finance Director <br />Subject: 2025 Budget <br />Date: June 24, 2024 <br />Attachments: 2025 Budget <br />Work on the 2025 budget has begun. Individual departments are currently preparing their budget <br />requests. The City Administrator and Finance Director will begin to meet within the week with <br />each department to discuss and refine the department budget requests. <br />This will be the third 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. As <br />each process is completed by staff, the budget committee follows up with a meeting to review <br />and provide guidance to the development of the Preliminary Budget and Tax Levy. The full <br />Council will be updated at the work sessions. Adoption of the Preliminary Budget and Tax Levy <br />will be at the second meeting in September. <br />Major factors that impact the budget are as follows: <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 2.6%. The CPI includes a wide <br />variety of items in its calculation so it does not mean all budget lines are equally <br />impacted. <br />Wages and benefits. The city has four labor unions that cover most of the city’s <br />employees. These contract all have a 3% increase for 2025. 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 anticipated that health <br />insurance premiums will increase by approximately 10% for next year. As part of the <br />budget process, staff will review non-union compensation in response to concerns <br />regarding competitiveness with neighboring cities. <br />Tax Levy/Tax Capacity Rate. The City’s property tax base continued to increase during <br />the 2024 assessment period. While the County numbers are not final, the current <br />estimated taxable market value has increased to $4,997,539,503, which is an increase of <br />$86,145,185 (1.75%). The current estimated tax capacity is $58,985,547. Taking <br />additional factors in, the estimated adjusted net tax capacity for taxes payable in 2025 is <br />$58,597,796, an increase of 1.76%. <br />1 3