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City Staff will prepare a recommended Budget that provides the same funding for existing programs in 2007 as it does currently. In other words the existing budget will be frozen. City Staff will then make recommendations as to how to spend the additional monies that result from the increased tax levy and user charges, based on the Council priorities. Under this approach, all existing programs will continue to receive the same funding as they currently do, however, it will result in ��.�� real dollars due to inflationary impacts. This approach will also allow for incremental 'Budgeting for Outcomes' by allowing the Council to "freely" allocate the $335,000 (or some other amount). The Council would be free to allocate the entire sum to one program if they so choose. The advantage to this approach is that it gets the Council accustomed to aligning resources to desired outcomes. In addition, it relieves the Council and Staff from having to undertake a full evaluation of which programs are more highly valued than others. The disadvantage is that some programs have more discretionary budget dollars than others, and will be in a better position to succeed without an inflationary increase. Smaller funded programs and/or those programs that are labor-intensive will lil{ely be more adversely impacted. On a cautionary note, the lack of an inflationarv increase may render smaller pro�rams ineffective. and may require labor-intensive pro�rams to cut staff. Under this approach, service levels within existing programs will inevitably change; some for the better, and some for the worse. The intent and hope is that positive changes are made in those programs that matter the most. 2007 Recommended Budget Process — Option #3 First, Council would set a tentative price of government from two perspectives. One, Council would decide upon an acceptable adjustment in current taxes and current fees. Over the past five years, this amount has ranged from zero to 10% reflecting both a fiscally conservative sentiment and the need to offset the loss in State aid. Two, Council would work through a formula-based approach for determining the price of government based on Minnesota and national data. This would include a comparison of the amount of city taxes and fees spent on city government as a percentage of residents' income. Council would keep both price-of-government numbers in front of them throughout their budget process. Second, the Council would identify a tentative set of seven (7) outcomes that are most important to them. For 2007, the identification of desired Council outcomes would be done without the benefit of a community survey or full-blown community visioning process. Instead, Council members would arrive at these outcomes based upon meetings and conversations with residents, feedback from Town Hall Meetings, and their own personal and life experiences as citizens and elected representatives. The Council would use a discussion and ranl�ing process among themselves to identify the 7 outcomes they desire the most as a City Council. It is suggested that beginning in 2008, the Council could use the results of a community survey a�d/ar visioning process to help them identify community goals. Third, staff would determine the amount of city funds currently spent on the 7 most important Council outcomes. �