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Prioritv 2: Compliance with Citv Code or Contractual Obligations _ Expenditures $ 3,933,515 . Less Program Revenues 622 400 . Net Tax Levy Obligation $ 3,311,515 . Prioritv 3: Discretionarv Spending . Expenditures $ 11,682,005 . Less Program Revenues 3 326 935 . Net Tax Levy Obligation $ 8,355,070 � As noted above, the expenditures for the property t�-supported programs are $17,973,195. Of this � amount, only $11.7 million, or 65% can be considered discretionary spending. $6.3 million is needed just � to satisfy all mandates. � This is an important distinction because the City must adhere to established service standards for mandated � or required services. Attempting to reduce costs or ignoring inflationary impacts could result in the City � failing to meet its statutory or legal obligations. As a result, the City must continue to allocate additional � (i.e. inflationary) dollars in subsequent fiscal years to ensure that it meets these obligations. Absent an � increase in non-t� revenues, these additional dollars must come in the form of new property t�es, or from � monies that are reallocated from discretionary programs. � 2010 Tax Levy Needs � The City lost $200,000 and $422,000 in market value homestead credit (MVHC) aid in 2008 and 2009 � respectively. This resulted in the draw down of General Fund reserves, reduced staffing, and delayed � replacement of equipment. For 2010, the City expects to lose $450,000 in MVHC. The mechanics by � which this occurs is straightforward: Once the City sets its 2010 Levy, the State of MN will reduce that � levy by $450,000. Therefore, in order to achieve a balanced budget, the City needs to establish a levy that � is $450,000 higher than the adopted budget. � Staff Recommendation #1: For 2010, it is recommended that the Council set the 2010 Levy $450,000 f higher than what is needed to balance the budget. f For 2010, it is projected that the City will require $453,000 in new monies just to continue meeting all f federal and state mandates and contractual obligations (priority categories #1 and 2). This includes the f following: f Debt service for the Arena refrigeration project f Fire Relief pension obligation f Elections f Police and Fire dispatching � Janitorial, legal, and auditing contracts ; Police, Fire, and Finance software maintenance $ 100,000 250,000 50,000 30,000 13,000 10,000 $ 453,000 Staff Recommendation #2: For 2010, it is recommended that the Council set aside $453,000 in new ; monies to ensure the City meets all statutory and contractual obligations. Page 2 of 10