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ARDEN HILLS CITY COUNCIL WORK SESSION—NOVEMBER 21, 2011 5 Councilmember Holmes stated that she does not agree with giving a refund. She questioned if an outside company could be hired to do the rate study as the Council would like to see it done before June. City Administrator Klaers recommended the Council approve the 2012 Fee Schedule as presented at their next regular meeting, and staff will give the Council a timetable for the completion of the rate study. C. Proposed Final Budget and Tax Levy Director Iverson stated there are no changes in the budget since the Council discussed this topic at a previous work session, except an adjustment for a 3.6 percent increase in medical premiums and a 3.5 percent dental increase. Staff is proposing the $17.21 per month increase be covered by dividend reserves. It does not impact the budget. She then stated that staff had originally proposed a zero percent increase and Council directed staff to put in a 3.0 percent levy increase. Director Iverson explained that the TCAAP Fund has been reclassified into a department in the General Fund. This will eliminate the need for transfers from the General Fund to cover TCAAP activity. The GASB 54 legislation would not have allowed the City to continue using a Special Revenue Fund for TCAAP expenses. Director Iverson stated that staff will be asking Council to eliminate the TCAAP Special Revenue Fund and make it part of the General Fund. Staff is proposing to establish Internal Service Funds for technology, risk management, central garage equipment, and engineering. The Internal Service Funds will function the same way that Enterprise Funds work except that they will be utilized by internal customers, such as various City departments, and will also allow for charging back to individual departments. Establishing these funds has no effect on our budget because the City is already incurring these costs. Director Iverson then pointed out that the 3.0 percent levy will not allow the City to build reserves in their Capital funds. She added that the discussion at this time is whether or not the Council wants to leave the levy at a 3.0 percent increase. Councilmember Holden stated that she is not in favor of the 3.0 levy increase. Councilmember Holmes asked what will happen if the Council chooses not to go with the 3.0 percent levy. Director Iverson explained that she believes the Council wanted the 3.0 percent because they were concerned about unknown or unanticipated expenses such as Other Professional Services for TCAAP. Councilmember Holmes asked if we are continuing to deplete our reserve funds. Director Iverson responded that as of this point, the City has not used any of its reserve funds yet this year.