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Councilmember Elvig stated he has been opposed to raising the tax capacity rate. He has been of the opinion that if the City is going to grow there is a time to do it and a time not to. He expressed concern in the City and staff growing at a time of a shrinking economy and of revenue projections being made with the current trends in valuations. Councilmember Elvig stated he would like to be proactive about putting some costs into contingency or actually decreasing the budget expenditures now. If revenues come in higher than projected it would truly be due to growth; at that point he is not opposed to adding expense that would truly be due to growth and not paid for by the taxpayers. Councilmember Jeffrey stated he was generally in favor of the 39.94% tax capacity rate when it was discussed at work session. However, he has given a lot of thought to a statement that was made about the City's debt service doubling in two years. He is of the opinion that now is the time to hold everything close to the vest. His concern is not only about growth, but that when the change of leadership happens and the City is in search of a new administrator, the growth will not likely be as quick as they would like. He is concerned about the coming years; they need to be sure the City is covered going forward and they are not putting themselves in a hole. Chairperson Strommen stated in addition to Councilmembers Elvig and Jeffrey's comments, she is concerned with the issue of the number of foreclosures and the possibility of not having the valuation to sustain the budget in the future, resulting in the need to shrink the City or go back to the taxpayers. She expressed concern in getting into a worse situation later and needing to make very tough decisions because they did not make the decisions now. Councilmember Elvig stated currently it appears as though even the County. is vacillating on where they want to take the values on properties. If the County places another 5% increase on the value of homes next year it is just not there; the value will have to stay constant or decrease. The City has been prudent in moving into the new municipal center, but it is not the time to expand. He expressed concern with each department budgeting a contingency amount, as opposed to the collective buying power of the Finance Officer determining the overall amount of contingency for the budget. Councilmember Elvig stated he has found $265,000 in cuts to the proposed budget, which would bring the tax capacity rate to 38.7%. He proposed the following line item cuts to the budget: · Line item 623l: reduction of $22,000 · Line item 6249: reduction of$30,000 · Line item 6281: reduction of $20,000 · Line item 6315: Reduction of $150,000 · Line item 6335: Reduction of$15,000 · Line item 6405: $28,000 Finance Officer Lund asked if the recommendation would be to cut the entire $120,000 of contingencies that are included in line item 6315. The majority of this $120,000 is for the Engineering and Community Development Departments. She advised the Highway lO grant match is the large funding amount included for Engineering under this line item. Councilmember Elvig stated looking at past years and the trends, it seems a lot of the increases in the budget are due to anticipated growth, which he does not believe is necessary for 2007. Finance Committee I December 12, 2006 Page 2 of5