Agenda - Council Work Session - 04/29/2003

Home

CITY COUNCIL WORK SESSION Topic Report: State Budget Deficit Implications By: James E. Norman, City Administrator & Diana Lund Finance Officer Background: With the budget crisis that now confronts the State, further review by the Legislature and possible changes to the Municipal Finance System appear likely. This could ultimately translate into further reductions in State Aid to cities. Staff has been working on a response to both the 2003 loss in Local Government Aid (LGA) and has begun preparing for the eventual impact of the 2004 loss in LGA. Staff will not make a comlSlete recommendation on the 2004 budget until after the legislative session as the State Legislature has yet to make a decision on extension of levy limits. Complicating the problem of LGA reductions are the immediate needs of the City. Staff is utilizing its full resources to meet the challenge of the exciting Town Center project. It has become increasingly evident that significant problems will be encountered if the City does not have an adequate staffing ~level. Administration was preparing to make a proposal to create two new positions in the City staff; an Associate Planner in Community Development and an Engineer in the Engineering Division of Public Works. Since the addition of two new positions would have financial implications, staff will include the budget impact in the 2003 discussion. 2003 Budget Reduction. The current Governor's proposal, which has been introduced in the House of Representatives, includes a reduction in State Aids in the amount of $477,968. Staff would propose addressing the 2003 budget reduction utilizing 2002 year-end revenues over expenditures; 2003 expenditure line-item reductions, and consideration of revenue generating resources. A summary of the recommendations are attached to this Topic Report. Two of the most significant factors in the proposed budget adjustments are the redirection of the 2002 year-end revenues over expenditures and the creation of a franchise fee. The City appears to have a total of $274,307 remaining from the year-end of budget 2002 that can be utilized to address the current budget crisis rather than following the policy that redirects the year-end monies to three separate funds. Creation of a franchise fee appears to be the course many cities throughout the Metropolitan Area and throughout the State are considering as a tool to assist in addressing the current State Aid reductions. Creation of the franchise fee this year will not only play a much larger