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

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the present drought holds, through increased food prices due to the drought. bath in the Midwest and karts of the South. Unemployment wi.l remain at or slightly below the present levels and interest rates should stay at present levels with a possibility of a decrease during the last half of 1988. Nationally for 1989, however, is expected to be a different story. The forces of an inflation, import costs, drought and budget deficit, will put the national economy into a no growth to possibly a recessionary stance by mid year. As the nation enters a mild recessionary period it is anticipated that the inflationary pressures should lessen although interest rates may go up as the financial markets are readjusting in anticipation of how the Federal deficit will be dealt. With the recession will come an increase in unemployment. Although the Presidential elections will occur in the later part of 1988 with a new President in 1989, the impact of that President in relation to a significant departure from the current economic policies, will probably not be felt until late 1989 into 1990. In Minnesota, 1988 has been a "landmark year" at the Legislature. They have created complete property tax chaos through their substantial changes in the system. They have gone from a system that was comprehended by only a few in the State, to one that is not comprehended by anyone in the State. The ramifications are hard to predict at this point for 1989 and almost impossible for 1990. The only sure directions for the City of Orono in relation to the outcome is that the City is part of the "2% Local Government Aid Club". These privileged members will see a 28 increase in their total Government Aid for 1989 (28 Club are those that got the minimum increase in State aids while some communities will get upwards of 50-70% increases.) In addition, the City is faced with a restrictive 48 levy limit, which will translate into less than a 1/2 of 1% increase in total taxes (It should be noted that communities under 2,500 population had their levy limits removed.) Despite the 4% levy limit that the City is under, the change in classifications for 1990 to a proration of the tax plus the mandating of a 128 mill tax rate (up from the current Orono total of 115) will yield an anticipated property tax increases in the community of Orono of 11 to 16%, with little increase in actual spending by at least the City. An additional change will be the truth in taxation requirements subject for the 1990 budget which will substantially alter the process the City has gone under for the budget as far as timing is concerned. 2