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��'� �t � �`- � Memo To: Mayor and City Council Neal Beets, City Manager , From: Chris Miller, Finance Director� Date: Apri110,2006 Re: Continue Discussions on the 2007 Budget Process Date: 04110106 Item: 10. Council Budget Process Introduction At the March 20, 2006 City Council meeting, a presentation was made by Staff regarding the budget process for 2007. The City's historical budgeting process was compared and contrasted to an alternative approach of outcome-based budgeting. During the subsequent discussion, the Council expressed some support in attempting a new budget process, but was concerned on the timing in conjunction with the proposed visioning process. The Council was more agreeable to a hybrid approach that would primarily follow the historical budgeting process, with a smaller emphasis on 'Budgeting for Outcomes.' This was suggested with the understanding that a larger emphasis on outcome-based budgeting would be made beginning with the 2008 budget process. The remainder of this memo details three proposed plans and ti�e�i�e for either of these hybrid approaches. 2007 Recommended Budget Process — Option #i The first option is to simply follow the historical budget approach as we have in the past. We will not put forth any new priority-setting effort deferring instead to the visioning process that will be undertaken later this year. Under this approach we will begin to look at outcome-based budgeting beginning with the 2008 Budget. Clearly this option represents the easiest path to tal{e, both from the Council and Staffs perspective. The downside is that it delays by at least one year, any deliberate effort to try and align spending with desired outcomes. It also preserves the status quo on all programs and services however good or bad you may perceive them to be. 2007 Recommended Budget Process — Option #� First, the Council should hold a discussion on the acceptable level of increase to the property tax levy and user charges. This may be an inflationary type increase (3.0 — 3.5%), or some other amount that is tied to specific service levels. As an example, an inflationary increase of 3% in the property tax levy will generate an additional $335,000. Increases in user charges such as water and sewer fees will also generate additional monies. Second, the Council should hold a discussion on whether existing programs and service levels should remain intact or modified by some measure. For example, the Council could recommend that we allocate more monies for snow plowing or park improvements. Obviously, this would necessitate less funding for some other �ragram(s).