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ARDEN HILLS CITY COUNCIL WORK SESSION—NOVEMBER 21, 2011 6 Councilmember Holmes asked if any of the City programs would. be jeopardized by a levy increase lower than 3.0 percent. Director Iverson responded that it would depend on how much less the Council approves. She added that she thinks the City would still be alright with a 2.0 percent levy increase. Councilmember Holmes questioned whether the increases reflected on the tax impacts are based on a 3.0 percent levy increase. Director Iverson responded that those increases are based on the 3.0 percent increase. Councilmember Holmes stated that she believes the Council should approve the 3.0 percent levy increase mainly because of future TCAAP expenses. Director Iverson reminded the Council that if they are concerned about the 3.0 percent increase, they can reduce the levy after the Truth in Taxation hearing based on the feedback they receive. She offered to bring to that hearing figures based on a variety of levy increases; 2.25, 2.50, and 2.75. Council consensus was to proceed with the budget as presented and that Director Iverson be prepared to discuss the impact of lower levy increases; 2.25, 2.50, and 2.75 percent. D. Fund Balance and New GASB 54 Statement Director Iverson explained the GASB 54 separates fund balances into five new categories requiring that funds be referred to as Non-Spendable, Restricted, Committed, Assigned, or Unassigned. She stated this does not change how the City conducts business; all these changes are from a presentation standpoint in our financial statements and in our fund balance policy. This change will also affect how the budget is presented. Director Iverson stated that another change is how the City's Special Revenue Funds are classified. The most important change will be under Fund Balances. The only funds remaining Special Revenue Funds will be the Cable Fund and the Economic Development Authority Funds. The Community Service Fund and Parks Fund will be reclassified to Capital Funds and TCAAP will be moved to the General Fund because it has no restricted or committed revenue source. Also, she explained that Risk Management will be moved into an Internal Service Fund. Director Iverson stated that to meet the definition of a committed fund balance, Council has to adopt a resolution committing specific revenues prior to the end of the year. She stated she had to go back to the 2010 Audit and reclassify all governmental fund balances into the new classifications. The only fund balances she put in Committed is the Economic Development Authority Fund and the Risk Management Fund. By authorizing the City Administrator and Finance Director to assign fund balances, they can do so once they determine the final numbers by the end of the year. Director Iverson further explained that she will be presenting a formal resolution to commit fund balances and reclassify funds. She stated that at previous work sessions, Council has asked what