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�f1 NASA 0 To: Mayor and Council, Deal Beets, City Manager From: Chris Miller, Finance Director Date: October 27, 2003 Re: Response to Inquiries on the 2004 Proposed Budget Background At the 10/13/03 Council Meeting, a brief discussion was held regarding potential reductions to the 2004 Proposed Budget. During the discussion, a number of inquiries were made regarding the costs associated with various programs and services, and how reductions might affect programs and services. At the conclusion of the discussion, Council directed Staff to compile the suggested budget cuts submitted by individual Council Members to identify common ground, and to Bier evaluate the impacts. The Council should be aware that a number of the suggested budget cuts do not affect the tax- supported funds, and therefore do not present an opportunity to reduce the tax levy or reduce the financing gap due to the loss of State aid. In some instances, there may be an opportunity to reallocate non -tax funding sourccs to various programs and services; however, in doing so the Council should be prepared to demonstrate the specific authority to do so, or provide some justification based upon a relationship between the two. To explain further, a couple of examples are provided below. Example #1 State Statute provides cities the authority to create a water utility and charge customers a fee for using city water. The fees collected are used to cover the City's cost of providing water service. The City cannot arbitrarily tape those ironies and divert them to support other unrelated programs and services. Example #2: The City charges liquor license fees to various establishments to offset the added public safety and administrative oversight costs that result from the sale of liquor. It would be highly unusual (not to mention open the City to criticism) if the City were to instead use these fees to support other city operations. In short, the only significant funding source in which the City has broad discretionary powers is the property tax levy itself Attachment A