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City of Roseville — 2006 Budget Discussion Items During the period 2002 -2006, overall funding sources for the City's General fund operations increased at an average of 4% annually. The City's tax levy increased substantially in 2002, to offset the loss in homestead credit state -aid (shown as Intergovernmental revenue). This was an intended effect resulting from the State Legislature's decision to remove the homestead credit reimbursement to help finance the State's takeover of the general education (per pupil) funding. In 2004, the tax levy was increased to accommodate new debt service on voter - approved bonds issued the previous year. The City's reliance on property taxes has increased in recent years as a result of lost state -aid and stagnant non -tax revenues. Beyond 2006, it is expected that the City's tax levy will need to increase at levels that are slightly higher than expected inflation. This will be necessary to offset new obligations that will come on -line in the future and to replace non - recurring revenues that were used to fund 2006 operations. Interest earnings and other non -tax revenues are expected to remain fairly unchanged from '06 levels. As noted above, despite a relatively strong economy, long -term interest rates remain far below what was realized in previous years. However, most economic forecasts suggest that while long -term interest rates have remained low, they are not expected to decline further. As a result, the City does not expect significant increases or decreases in investment income. Licenses and permits revenue is also expected to remain at current levels for the foreseeable future. The City is not anticipating any significant changes in the issuance of business licenses and permits, nor do we project that the regulatory costs incurred by the City will change in any significant manner. As such, overall revenues should remain largely unchanged. As noted earlier, from 2002 -2006, the City continued to emphasize its core functions of public safety and public works. In 2006, a substantial investment will be in police and fire information systems including a new records management system and conversion to the 800mhz radio system. Higher dispatching costs are also expected to be realized in 2006. Also, the public works area is realizing higher operating costs due to higher energy costs and service input costs such as fuel. In addition, added pedestrian safety measures will require additional funds in 2006. It is expected that these higher costs will continue in future budget years in order to maintain service levels. Higher public safety and public works - related costs have been somewhat offset by lower general administrative costs. From 2002 -2006, general administrative costs actually declined by 11 %. Since 2002, the General Fund balance has declined by $840,000 or 17 %. This was mostly due to the mid -year loss of state aid, but it nonetheless presents a concern for on -going fiscal stability. During 2006, the City expects to conduct a broad discussion on overall reserve levels to ensure that are adequate and sufficient to meet the City's long -term needs. WE