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City of Roseville — 2005 Budget Letter of Transmittal December 27, 2004 To the Mayor and City Council, Enclosed is the 2005 City Budget as prepared by City Staff, in accordance with City Council actions. The 2005 Budget culminates several months' worth of planning, evaluation, and input from the City Council and citizens. Great effort has been taken to ensure that the City's core services are funded in a manner that preserves the greatest value to the community. In addition, steps have been taken to account for the changing trends and impacts that will affect both next year's and future year's budgets. Preparing the 2005 Budget remained challenging on many fronts. In response to their own budget crisis, the State of Minnesota rescinded Roseville's annual general - purpose state -aid apportionment of $700,000 beginning in 2003 and continuing thereafter. Although the City made some budgetary cuts in 2004, the City's ongoing operations required the use of $500,000 in cash reserves. The use of these reserves, while providing a temporary measure to continue operations at current levels, cannot be sustained. The 2005 Proposed Budget eliminates the use of any reserves to sustain on -going operations. Similar to many local governments, the City is faced with a number of events that will have a significant impact on the 2005 Budget. They include: a) A cost -of- living increase of 2.0 %. In order to attract and retain highly qualified employees, the City must remain competitive with the marketplace. Based on a review of the 2004 and 2005 salaries for peer cities, it has been determined that a 2.0% increase is needed to remain near the average. The cost -of- living increase amounts to approximately $200,000 citywide, three - fourths of which is accounted for in the tax - supported funds. b) The City is facing a 6% increase in health and dental costs. The healthcare cost increases amount to approximately $50,000 citywide, three - fourths of which is accounted for in the tax - supported funds. c) The City needs to address the $500,000 structural deficit for fiscal 2005. d) The City's depreciation charges need to be adjusted in 2005 to reflect the rising costs of replacing vehicles and equipment. The additional charges amount to $125,000. These impacts will affect multiple programs and services citywide.