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,-A EN HILLS 1245 West Highway 96 Arden Hills, Minnesota 55112 2006 BUDGET MESSAGE December 8, 2005 Dear Residents of Arden Hills: We are pleased to present to you the City's 2006 Proposed Budget. The budget development process started in the third week of June, with both the City Council and staff working jointly. The Council provided staff with general guidelines to initiate work on the budget. Staff was requested to prepare a preliminary budget taking the usual conservative approach to budgeting and spending. The Council held three additional meetings on August 15th, September 19th, and November 21"to further review and discuss the proposed budget. During the first two meetings, there was considerable discussion about the setting of the levy amount. The 2005 Legislature did not establish a levy limit, similar to 2004. Faced with the dilemma of increased health and dental premiums, cost of living increases, increased contribution to PERA, and reduced permit revenue— about $130,000, the Council decided to establish a conservative preliminary tax levy increase of 4%. The Council established the preliminary levy increase of 4% in September with the understanding that the final levy can be adjusted downward at the time of final certification. This 4% increase translates into $97,067. The average tax levy increase for the surrounding 11 communities was over 7 percent. As part of this budgeting process, staff and the Council also discussed the next year's Capital Improvement Plan (CIP). The Council will discuss the 5 year CIP in greater detail early next year. Also, as part of the budgeting process, staff and Council discussed employee benefit insurance options, striking a balance between adequate coverage and cost containment. The proposed budget has costs budgeted accordingly. Also as part of this budgeting process, the City looked at the option of sharing the engineering position with another city. The outcome was to contract with the City of Roseville for the engineering services, while maintaining a presence of the engineer at the City Hall. This arrangement will allow Arden Hills the opportunity to tap into a broader scope of engineering services.