Agenda Packet Cc - special meeting 9/27/1989

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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 belt'. As is true with the national economy, the Minnesota economy particularly in the tletro area has continued to expand. The problem however, has been a growing sentiment for taxpaver revolt particularily regarding property taxes. The Minnesota Mi-acle which was initiated in the early '70's, has now ',.!come a victim of its own success. The Legislature continues co use b:ndaids attempting to solve the expenditure driven formulas, particularly in trying to keep taxes down in the Out State aria. This complicated system however, has become unpredice-ibl-. Property tax reform that was passed in 1988 fur 1989 resulted in tax increases, not only in the Metro suburban area, but in the areas Out State that are substantially more than Legislators had anticipated. This caused 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 hell back on in '89 ir. hopes of making a positive impression 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 substantial 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. t. recession may materialize because of higher interest rates, at least in the Musing sector. This could cause a downturn in construction activity as could a general recession. Price increases ire current items primarily in the energy sector will translate into unit costs for these products that are higher than the race 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 Coacing Projects in either 1989 or 1990 Negotiations still continue between the Governor and Legislature. A target date for agreement was set for September 30, 1989. If no agreement is reached there may be no session this fall. If no special Session it is expected that refunds for 1990 will comv to property owners in advance of the 1990 election as a result of the regular 1990 Legislative session. The economy continues to grow with fears of an 'e9 recession significantly diminished. Construction activity in Orono for 1989 is ahead of the same time in 1988.