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<br />Cities should also review their total revenue picture. Is the city making the best <br />use of its taxing powers? Is the city tax rate adequate to meet the revenue needs <br />of the city? Are the tax assessments distributed equitably among local <br />taxpayers? <br /> <br />Additionally, cities should review available intergovernmental grants and aids. <br />Will the grants and aids used in prior years be available this year? Will there be <br />any cuts that could impact the amounts the city might get? Will there be any new <br />programs that might make the city eligible for additional amounts? <br /> <br />Finally, cities must study the adequacy of other sources of city revenue. In <br />particular, they should review whether license fees and charges for city services <br />adequately cover the costs and expenses. Cities should also consider whether <br />they should establish fees for other city service programs currently provided <br />without charge, and whether the council and other boards are properly managing <br />the disposition of reserve funds. <br /> <br />The total estimated costs minus the anticipated revenues equals the amount that <br />will need to be raised from the property tax levy. If the levy is too high, the city <br />council will need to consider reducing expected costs (such as by eliminating <br />programs or cutting services), increasing revenues (such as by raising license <br />fees and service charges), or both. if the revenues are higher than the total <br />estimated costs, a city may be able to reduce the amount of the property tax levy. <br /> <br />City fund balances <br />Despite a record-high budget surplus, the state is increasingly interested in the <br />fund balances of local governments. The state annually debates whether to use <br />any of its budget reserve, often called the "rainy day fund." The Department of <br />Finance provides a complete explanation of the state's need for cash flow funds <br />and a reserve for emergencies. State lawmakers are increasingly interested in <br />getting accurate statistics on local balances and requiring cities to spend their <br />fund balances. The need for cities to have adequate revenue to provide for <br />emergencies or contingencies receives little credence, as was made apparent by <br />the recent extension of levy limits. <br /> <br />Cities' annual reports are likely to show high year-end balances because of the <br />end-of the-year influx of revenues from property taxes and state aid. But these <br />reports do not explain these funds need to cover nearly all operating expenses of <br />a city for the first five to six months of the next calendar year. The year-end <br />balance needs to carry most cities until they receive property tax revenues an <br />state aid in May and June. In reporting fund balance data, the state auditor has <br />acknowledged there is no single standard for figuring out what is an adequate <br />fund balance. <br /> <br />The League strongly urges cities to use the financial strategy of designating fund <br />balances. When cities are saving for a large future purchase, they should <br />document their specific intentions and the uses of these funds. Many have <br />