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~ ~HILLS MEMORANDUM DATE: May 13, 2008 TO: Honorable Mayor and City Council Sue Iverson, Finance Director ~ 2009 Preliminary Budget Discussion FROM: SUBJECT: BACKGROUND: The City staff is in the process of developing a Preliminary 2009 Budget. As we progress forward and take the necessary steps, staff needs general direction and guidance from the Council with regards to changes for the coming year, As of this time, there are no levy limits for 2009, but they are being discussed as part of the tax bill. The City is not under any legislatiye restrictions with regards to establishing a levy. As you may recall, there were no leyy limits for 2005,2006,2007 and 2008. A number of Ramsey County cities opted for double digit increases. A number of cities took advantage of the "no levy limit" to make up for the loss ofLGA and to undertake new projects. The Arden Hills City Council was prudent and limited the levy increase to 4% from prior years as they established levies for 2005,2006, and 2007. The City Council set a 4.6% levy increase in 2008 which resulted in a 3.5% decrease in the local tax rate. This allowed for some contingency reserves to be budgeted in 2008. In 2006 during the legislative session, there was discussion about "Turbo Tax" that would have restricted the cities from increasing the levy amount from prior year. Ifthis was to become law, cities would not have been able to increase the levy, unless a vote was taken, Fortunately, this discussion did not re-appear this year. Levy limits are again being talked about and current proposals haye them impacting cities with populations over 2,500 and beginning with the year 2010. There are stipulations in the House bill which would trigger leyy limits. Under these provisions, if leyy limits are triggered, levy limits would be calculated in a manner similar to previous levy limits. Levy limits are dependent on your previous year's levy, so in being prudent and conservative with setting your levy limit, you may limit yourself in subsequent years. The Council might want to consider looking at stabilizing the tax rate instead of levy limits for 2009.