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Addressing Inflationarv Impacts The 2009 Sudget was frozen at ' 08 levels for most supplies, materials, vehicle and building repairs, etc. In many instances, the 2008 funding level did not adequately provide for inflationary impacts from the previous year. It is estimated that the City has absorbed in excess of $300,000 in inflationary costs over the past two years. This has resulted in reduced street and park maintenance efforts, delayed replacement of police and fire equipment, as well as other operational changes. Continuing to ignore these inflationary impacts will result in a permanent reduction in service levels. 2010 Property Tax Levy The 2009 property t� levy was $13,138,860. With regard to the items detailed above, the following are exempt from levy limits: Descri�tion Amount Debt service for the Arena refrigeration project $ 100,000 Fire Relief pension obligation 250,000 2008 and 2009 State aid 622,000 $ 972,000 In other words, the City could increase the property t� levy by $972,000 for these purposes without impacting our 2010 levy limit. With regard to the remaining items noted above, and based on preliminary estimates, it appears that the City has an additional $800,000 in available and unrestricted levy dollars that can be used for any lawful purpose; including new legal and contractual obligations, vehicle replacements, and inflationary-type costs. In total, the City could increase the levy by approximately $1.8 million subject to the restrictions noted above. The Council is reminded that the 2010 property t� levy will be reduced by that year's market value � homestead credit. For 2010 this is estimated to be $450,000. Therefore, in order to achieve fiscal � sustainability, the City needs to establish a levy that is $450,000 higher than the adopted budget. � City Staff will be available at the meeting to provide some general comments and address any Council � inquiries. ' POLICY OBJECTIVE Not applicable. FINANCIAL IMPACTS , Projected impacts on households based on varying property t� levy increases is attached. � STAFF RECOMMENDATION Not applicable. Page 3 of 4