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ll�.p�ri ir,�i l F'��pr�}��l � � � � REQUEST FOR COUNCIL ACTION ��ar��,r .�p,�� o��d � Item Description: Adopt the 2007 Preliminary Ta� Levy and Budget Date: 9/11 /200� Item No: g, :��'�fkL�'3 t�i�ti�7�175: Staf�` R=�rL� Introduction State Statute requires all cities in excess of 2,500 in population, to adopt a preliminary tax levy and budget by September 1 S�� for the upcoming fiscal year. The preliminary levy is certified to the County, whom in turn uses the information to prepare truth-in-taxation notices which are mailed to individual property owners. Once the preliminary levy is adopted it can be lowered, but not increased. The Final 2007 levy and budget are scheduled to be adopted in December. In July of this year, Staff submitted a proposed budget for Council review, along with a separate memo from the City Manager which outlined the proposed budget. An initial presentation on the proposed budget was made on July 17,2006, followed by budget worksessions in August. The 2007 Budget culminates several months' worth of work by City Staff researching and evaluating all of the City's programs and services. To the greatest extent possible, new technologies and efficiencies have been incorporated into our service delivery process. However, several challenges remain that will have a significant impact on the 2007 Budget. First, in 2006, the City relied on the use of $128,000 of reserves to plug the budget gap. As we've stated on many occasions, the use of reserves is not sustainable. And we know from the recent study performed by an outside consultant, our reserve levels in our key operating funds, especially the General Fund, have dropped below both industry-recommended levels, as well as our own Cash Reserve Policy. In addition, many of the City's largest service inputs - such as £ue� and energy related costs are outpacing inflation at a substantial rate. Finally, based on national and local measures, as well as collective bargaining contracts that have already been settled, we are forecasting a need for a COLA of 3% or more. 2007 Budget Funding Sources For the City's fee-based programs such as water, sewer, and some of our parks and recreation programs, we project that an acceptable increase in user fees will be sufficient to offset the higher costs of providing these services. Instead, our primary challenge is with the City's property tax-supported programs. These programs include Police, Fire, Street Maintenance, Park Maintenance, Legal, Elections, General Administration, and Finance. As was noted above, the City Council has asked for a budget that can be funded with a 3.5% increase in the property tax levy. The 2006 overall tax levy was $11,169,865. Therefore, a 3.5% increase would equate to an additional $390,945 in available funding.