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n EN HILLS MEMORANDUM DATE: November 16, 2005 Agenda Item 2.B TO: Honorable Mayor and City Council FROM: Murtuza Siddiqui,Finance Director/Treasurer --,qs SUBJECT: Preliminary 2006 Budget Discussion - Continued BACKGROUND: At the June 20, 2005, August 15, 2005, and September 19, 2005 Work Sessions, the Council provided staff with guidelines to initiate work and to prepare a Preliminary 2006 Budget. At these meetings,the Council provided staff with general guidelines and based on these guidelines, a draft preliminary budget was presented at the September 19`h Work Session for discussion. The current version of the budget reflects discussion items from the September 19th meeting, including changes to the City's Health Plan. On September 12, 2005, the Council adopted a preliminary Tax Levy in the amount of $2,523,737. The County has received the certification notice. DISCUSSION: The attached 2006 Preliminary Budget has projected expenditures of$8,180,661. This represents an overall reduction of 8.6%over the original adopted 2005 Budget. The General Fund budget is proposed at $3,190,800—a reduction of about 1.5%over the 2005 adopted budget. It should be noted that general fund expenditures include a transfer out of funds to the Public Safety and Capital Funds for future improvement needs in the amount of$73,755. It should also be noted the City is experiencing a significant reduction of revenue in the area of building permits which is primarily due to reduced construction activity at Guidant and other businesses. We anticipated a reduction of at least $125,000 over the budgeted 2005 revenue estimates. The impact will be on the general fund. The following are the key highlights of the Proposed Preliminary 2006 Budget: • Tax Levy—a 4%increase was adopted at the September 12,2005 Council meeting. This translated into a$97,067 increase from 2005. The City certified this preliminary levy to Ramsey County on September 14, 2005. A final levy is established and certified in