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Mayor Strommen stated the Finance Committee discussed that there had been just under a 1% decrease in residential home values. Finance Director Lund completed presentation of the budget information relating to personnel and road reconstruction funding. She indicated the Council will need to focus on road reconstruction funding since the general fund does not have capacity to cover that cost due to levy limits. She stated prior to adoption in September, staff needs to look at balancing the budget to the levy, and the Council needs to consider whether to use Anoka County HRA funds of $220,000, and whether to merge the EDA/HRA account. In addition, staff will prepare a five- year budget projection for the Council's review. City Administrator Ulrich stated the five-year projection was a request from the Finance Committee to see what is happening to tax revenue and expenditures. On the EDA/HRA, it may not be good year to eliminate the HRA during a year of levy limits but the option is available to utilize Anoka County HRA funding to substitute that levy. Or, the HRA's activity can be scaled back and those duties transferred to the EDA through the HRA levy; however, that may result in concerns with transparency. With regard to funding road reconstruction' costs, there has been discussion of a franchise fee and a Council decision needs to be reached in the next month or so in order to have a road reconstruction project in 2014. He stated the assessment option also needs to be considered so if approved, it could go into place in 2014. City Administrator Ulrich stated staff will consider cuts that can be made to reach a balanced budget and that recommendation will be made for the Council's consideration. Councilmember Riley stated the Finance Committee discussed the Comprehensive Annual Financial Report and staff had a call with S&P who indicated the General Fund reserves are the most important thing they look at. He noted there are two main changes: the difference in funding roads in 2013 (combination of debt savings and one-time monies) versus 2014; and, now we have to pay the debt, making a $600,000 difference. That is the difference between 2013 and 2014. Finance Director Lund stated there are also personnel changes. Mayor Strommen noted this presentation has laid out the issues. The Council will be working on the budget over the next few months, receive the five-year projections, and need to make a decision on funding sources for road reconstruction. City Administrator Ulrich stated he would like to test the assumption if the Council wants to levy to the maximum or if the budget should be scaled back even more, and whether to keep the HRA levy in place or cover that $200,000 with cuts. He asked if there is support to cut back on the levy or staffing to balance the 2014 budget. Councilmember Tossey stated one TIF district is coming off line and even with a levy increase and lower home values, it will lower the tax capacity, proving TIF is more destructive than good. He asked about the assumption of a 2.5% wage increase for non -union when union got 2%. City Council Work Session / July 23, 2013 Page 2 of 7