07-11-1988 - Agenda Packet City Council - regular meeting

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19 TO Mayor and City Council FROM: Mark Bernhardson, City Administrator DATE: June 7, 1988 SUBJECT: 1989 Budget - Preliminary Guidelines Attachment: A. City of Orono Statistical Estimate - 6/88 Update (To be sent week of 7/11) ISSUE - Presentation for Council policy comment, the preliminary guidelines for the 1989 budget together with the expectations on which those guidelines are based. INTRODUCTION - In the past the Counri 1 has been presented with the budget for its consideration in late August or early September reacting to it within a short period of time. This year a different approach is tried with the anticipated projections together with the preliminary guidelines are presented to Council for their review and comment. This will allow the Council early input to the process together with the opportunity to think about the issues substantially in advance of the budget being presented for Council review and adoption. DISCUSSION - ECONOMIC OUTLOOK On a nati )nal basis the economy has continued through the first half of 1988 to be much stronger tnan anticiptated and this economic strength despite the financial crash in October of 1987, is expected to continue through 1988. There has been a continued weakness in the financial sector. This is in part due to substantial pressure from bailouts of Banks and Savings and Loans together with the ongoing Federal budget deficit which will continue to cause recessionary concern. The trade deficit has shown a significant change but perhaps not enough to stabilize financial markets or continue to keep the dollar which has been steadily strenghtening the last few months, at its present levels or higher. Inflationary pressure during '88 will continue, but should not push the overall inflation for 1988 above 4 1/2t. (The 1988 budget was based on a 3% anticipated inflation.) Continued inflationary pressure will come particularly from imports and if 1