Public Hearing Informational Packet

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BASIC CONCEPTS OF CITY BUDGETING Role and Purpose of Budgeting Before the 1988 legislative session, state law did not require most cities to prepare an annual budget document. Most home rule chart cities, such as Ramsey, have a charter requiring various fmancial documents. The proposed property tax hearing and notification legislation in 1988, however, required that all cities prepare an annual budget. The fIrst objective of a budget is to have expenditures equal to revenues. As public entities, this means keeping expenditures at a minimum so that taxes paid by property owners can be kept at a minimum while providing the desired level of services to the public. A Minnesota municipal budget is a comprehensive financial plan for a fiscal year running from January 1 to the following December 31. It includes estimates of the level of services, necessary expenditures, and probable tax receipts and other income. It is a complete outline of city activities, containing estimates of probable costs and available revenues during the coming year. Budgeting is critical in both city fmance and administration. Proper budgeting can assist the Council in the performance of the following five vital functions: * Obtaining estimates of the expected revenues for the coming year and, with this information, planning city spending; Controlling expenditures once funding has been allocated to the various city services; Facilitating and coordinating decision making; Evaluating the level and quality of services the city provides; and Measuring efficiency by analyzing the level and quality of service citizens receive for each dollar the city spends. * * * * Before preparing the annual budget, the city reviews its total revenue picture and attempts to answer the following questions: Is the city making the best use of its taxing authority? Is the tax rate adequate to meet the revenue needs of the city? Is the tax rate at a level found acceptable by the taxpayer? Are tax revenues providing service levels desired by the citizens? Cities also review available intergovernmental grants and aids. They also review regularly the adequacy of other sources of city revenue. In particular, they review whether charges for unique services the city provides, which are not provided to the public as a whole, are adequate to cover the city's expenses for such services, whether the city should establish fees for other city service programs that are currently provided without charge; and whether the Council and other boards are managing the disposition of funds properly. Budget Responsibility Ultimately, budgeting responsibility resides with the Council. The Council must accept or amend the budget presented by staff and insist upon standards of budget enforcement. Although it must retain responsibility, the Ramsey Council delegates the tasks of budget preparation and administration to the City Administrator and Finance Department with oversight by the City Council Finance Committee. The budgeting process includes reports to the City Council that explain key fiscal developments and note significant deviations from the current budget. The Council is notified whenever changing operations or unexplained developments require budget revisions. Public Hearing - December 4, 1996 -1-