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Department Approval <br />�� ,�: �� <br />Item Description <br />l�'�, <br />Jy <br />REQUEST FOR COUNCIL ACTION <br />Consider Adjustments to the 2009 Sudget <br />Date: 3/30/09 <br />Item No.: 13.b <br />City Manager Approval <br />� / <br />BACKGROUND <br />On December 15, 2008, the City Council adopted the Final 2009 Sudget. As with previous year's budgets, <br />the 2009 Sudget carried a number of revenue and expenditure assumptions which are based on prior years' <br />results, expected trends, and projections based on inputs from a variety of sources. Among the assumptions <br />made was that the City would receive from the State of Minnesota, approximately $400,000 in Market <br />Value Homestead Credit (MVHC) in 2009. These monies are used to support police, fire, streets, parks & <br />recreation, and administrative and finance functions. <br />At the time the 2009 Sudget was adopted, it was acknowledged that the State of Minnesota was facing a <br />projected budget shortfall but the magnitude of that shortfall and its impact on MVHC was unknown. The <br />fate of the City's MVHC aid is still unknown, but all indications suggest that the City will lose its allotment <br />for 2009 and possibly beyond. <br />In recognition of the expected loss of MVHC, it is prudent for the City to publicly acknowledge the impact <br />and to make budget adjustment as necessary. While the Council can choose to take any number of actions <br />in response to this, it is suggested that the Council first give consideration to the following options in <br />offsetting the loss: <br />1) Use cash reserves <br />2) Make temporary or short-term budget cuts <br />3) Make structural or long-term budget cuts <br />Each of these options is discussed further below. <br />Cash Reserves <br />MVHC revenues are deposited into the t�-supported programs; primarily the General and Parks & <br />Recreation Funds. For 2009, the City could choose to offset the loss in MVHC by using reserves from <br />these funds. However, both of these funds have cash reserves that are already below industry- <br />recommended levels, as well as the amounts prescribed in the Council-adopted Cash Reserve Policy. In <br />total, the General and Parks & Recreation Funds are approximately $3 million below recommended levels. <br />Using reserves further will only weaken these Funds' ability to generate interest earnings and respond to <br />contingencies and unforeseen circumstances. <br />Page 1 of 4 <br />