06-26-1989 Council Packet - Laserfiche WebLink

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long predicted recession sometime in 1990. Some maintain we are currently going through a rolling recession or depression as there are sectors of the economy which are hit for various reasons such as the energy downturn for the last four or five years following downturns in the "rust ’ elt". As is true with the national economy, the Minnesota economy particularly in the Metro area has continued to expand. The problem however, has been a growing sentiment for taxpayer revolt particular!ly regarding property taxes. The Minnesota Miracle which was initiated in the early *70*s, has now become a victim of its own success. The Legislature continues to use bandaids attempting to solve the expenditure driven formulas, particularly in trying to keep taxes down in the Out State area. This complicated system however, has become unpredictable. Property tax reform that was passed in 1988 for 1989 resulted in tax increases, not cnly in the Metro suburban area, but in the areas Out St • that are substantially more than Legislators had anticip. This c.,'used the 1989 Legislature to moderate these increases by additional State monies being poured into property tax relief together with making the levy limits and expenditures as tight as possible for local units of government. This attempt was hoped to have property taxes at a palatable level for 1990 in advance of the 1990 elections. It was anticipated that the 1990 Legislature will work to get money into programs that they have held back on in *89 in hopes of making a positive impressici on property taxpayers together with constituent support groups that have not received much during 1989. With the Governor's veto and possible special session which may undertake a substantial change in direction for 1990, this may be significantly altered. Regardless of a sepcial session a significant recession in the latter part of *89 into the early part of *90 may cause rubstantial problems in funding these relief and expenditure measures. For Orono the tight levy limit is exacerbated by the need for selected expenditure increases during 1990. This will result in a rather tight budget year in 1990. A recession may materialize because of higher interest rates, at least in the housing sector. This could cause a downturn in construction activity as could a general recession. Price Increases in current items primarily in the energy sector will translate into unit costs for these products that are higher than the rate of inflation. GOALS - Primary budgetary goals for 1990 include: - Continued utilization of a capital budget framework which may include the following projects for 1990: Old Crystal Bay/Bridge Replacement North Ferndale/MSA Willow Drive/Seal Coating Projects in either 1989 or 1990