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AGENDA ITEM - 3B <br />lt <br />HILLS <br />MEMORANDUM <br />DATE: November 24, 2025 <br />TO: Honorable Mayor and City Councilmembers <br />Jessica Jagoe, City Administrator <br />FROM: Joua Yang, Finance Director <br />SUBJECT: 2025 Preliminary Financial Performance <br />2026 Proposed Budget and CIP <br />Budgeted Amount: Actual Amount: Funding Source: <br />N/A N/A N/A <br />Council Should Consider <br />Provide feedback and direction to staff on the proposed 2026 Budget and CIP based upon staff s <br />Preliminary 2025 General Fund Projection. The Truth -in -Taxation meeting is scheduled for December <br />8, 2025, where a final budget and tax levy will be adopted. <br />Background <br />Budget discussions were held with the Council in July, August, September, and on November 10. <br />Council adopted a maximum tax levy increase of 18.32% on September 29, 2025. The final levy and <br />budget adoption meeting is scheduled for December 8, 2025. <br />Discussion <br />The City's General Fund Balance policy specifies that the City will strive to maintain an unassigned <br />balance in the General Fund of 50% of next year's total annual operating budget. Since a significant <br />source of revenue in the General Fund comes from property taxes, maintaining a fund balance that is <br />equal to at least six months of operating expenditures ensures that sufficient resources are available to <br />fund basic City functions between property tax settlements. The City's 2024 unassigned balance was <br />45.4%, which was below the City's 50% target. <br />The 2025 adopted General Fund budget included a planned operating deficit of $122,009. Based on the <br />most recent Ramsey County Sheriff s reconciliation of the 2025 personnel costs, with the new collective <br />bargaining agreements and mid -year implementation, the Sheriff s department is anticipating a budget <br />shortfall of approximately $977,000, with the City's share being approximately $140,000. Contract <br />cities will be billed this portion in the first quarter of 2026. Based on this recent update, staff is projecting <br />that the 2025 General Fund will come in approximately $900,000 better than the budget and that the <br />General Fund unassigned balance is projected to be 55.8% or approximately 5.8% over the 50% target. <br />This assumes the 2026 levy is set to $6,990,400, an increase of $962,388 or 15.97% over 2025. The <br />2026 proposed levy includes the following changes since the November 10, 2025 Council Worksession <br />meeting: <br />Page 1 of 7 <br />