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Page 3 of 4 The 2013 City Manager Recommended Budget for the tax-supported programs is $21,832,042, an increase 47 of $2,363,482 or 12.1%. The majority of this increase ($1,650,000) is for added debt payments related to 48 the 2011 and 2012 Bonds issued for the new fire station and Park Renewal Program. 49 50 The City Manager Recommended Budget for the non tax-supported programs is $23,653,968, an increase 51 of $1,621,774 or 7.4%. The increase is due to added cost of wholesale water purchase from the City of St. 52 Paul and wastewater treatment charge s from the Met Council, as well as general inflationary increases. It 53 also includes an additional staff position for the Li cense Center and Information Technology divisions. 54 Both of these positions are funded by non-tax revenue sources. 55 56 2013 Preliminary Capital Improvement Plan (CIP) Budget 57 Under separate action, the City Council will be aske d to formally accept the reports and recommendations 58 submitted by the Capital Improvement Plan (CIP) Subcommittee at the November 19, 2012 City Council 59 meeting. In accordance with those recommenda tions, the 2013 Preliminary Budget includes an 60 appropriation in the budget for the 2013 scheduled items listed in the CIP. 61 62 A listing of the 2013 CIP scheduled for purchase is included in Attachment A . It should be noted, that the 63 items listed in the CIP will not equate to the fundi ng amount included in the annual Budget. The annual 64 Budget represents the amount set aside each and every year to provide for capital replacements over the 65 long-term. In contrast, the CIP represents that actual schedule of capital purchases. 66 67 Using Cash Reserves 68 On several previous occasions there has been discussion on the merits of using cash reserves to provide for 69 capital replacements or other purposes. The memo re ferenced above and included in the Council’s 9/10/12 70 packet addresses the role and relationships these reserv es have with the City’s long-term financial success. 71 72 There has also been discussion about the merits of using operational savings from the 2012 fiscal year and 73 applying it to 2013 thereby allowing for a reduction in the 2013 Preliminary Tax Levy. However, this is 74 problematic for a couple of reasons. First, while th e accuracy of projected operational savings improves as 75 the City nears its fiscal year-end, unforeseen events can take place in the final weeks and months that can 76 erode or significantly diminish those projections. This may include snow or ice-re lated events that require 77 additional supplies, materials, and overtime. Or hi gher-than-expected police and fire calls which also 78 require additional supplies and personnel-related costs. It also might include reductions from the City’s 79 property tax collections due to delinquencies or valua tion appeals which aren’t fu lly known until January of 80 the following year. 81 82 A second consideration stems from the commitment th e City Council made when it instituted a 2-year 83 budget process. At the time, it was assumed that any operational savings in year 1 (2012) would be 84 available for year 2 (2013). This allowed City Staff the added flexibility to respond to unforeseen 85 circumstances and take advantage of pricing disc ounts and other opportunities by moving a portion of the 86 money from one year to the next. In some cases, departments have already taken measures to create 87 operational savings in 2012 with the knowledge that th ese monies will be needed to offset higher-than-88 expected increases in 2013. 89 90 The 2013 City Manager Recommended Budget reflected this reality, by removing nearly $100,000 in 91 additional funding requests that had been submitted by De partment Heads – in exchange for the ability to 92 retain and use 2012 operational savings. 93 A summary of the projected cash reserves for December 31, 2012 is included in Attachment B. 94