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3) Interest earnings have continued to be constrained by historically low interest rates. <br />The Federal Reserve did increase rates at the end of 2015, however this increase did <br />not significantly change the City's projected interest earnings. There is talk of <br />another rate increase as early as next month. They also anticipate increasing rates <br />through 2018. Any adjustment to interest earnings will be made based on the Federal <br />Reserve's actions, not on speculation. <br />4) The Mound service contract includes an inflator of 2.5% and will increase by $41,595 <br />for 2017. Any changes in the Spring Park and Minnetonka Beach amounts will <br />depend on the final police budget and any changes to the formula that are currently <br />being discussed. <br />The revenue sources identified above represent 90% of the General Fund revenue budget. The <br />remaining revenue sources will likely be flat and are unlikely to significantly impact the overall <br />revenue budget. <br />Expenditures: <br />1. 2016 is the final year of the labor contracts with both the Patrol and Sergeant unions. <br />Because wages represent 60% of the police budget, the contract negotiations will play <br />an important role in the 2017 police budget. Each 1% increase in union wages <br />represents a $36,000 increase in the budget. <br />2. Workers' Compensation Insurance is increasing by $28,691 in the General Fund. <br />This is the result of an increase in our experience modification factor from .76 to 1.0. <br />3. The council will need to provide direction on non-union wages. Each 1% increase in <br />non-union compensation amounts to a budget increase of $18,000. <br />4. 2017 is not an election year. The budget will be decreased by $16,000 to reflect the <br />savings of not holding an election. <br />The expenditure changes listed above are the increases that are known at this point in time. As <br />the budget process progresses, additional increases or decreases may be identified. <br />Issues for discussion: <br />Tax Levy <br />Staff is requesting guidance on the amount that the Council is comfortable with for a tax levy. <br />At the April 25th work session, there was an indication that the council may be comfortable with <br />an increase in taxes as long as the rate did not increase. Since 2011 the only General Fund levy <br />has only increased by 2.1% ($84,240). Inflation has increased by 6.0% over the same time <br />period. <br />2017 Budget —Page 2 <br />