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• Comments on the proposed 2003 Budget cuts from Governor Pawlenty's plan: Falcon Heights receives a total of $279,363 in Local Government Aid and Market Value Homestead Credit. The city is facing a cut of $103,306 in the first year of the biennium, 2003. In the 2004-OS year, the city would be cut $246,466 in aid. At the end of the biennium, the city would be left with $32,897 in aid. The city has a contingency budget that planned fora 100% cut in Local Government Aid (which would be $213,738) for 2003. Staff is currently working on several proposals for the city council's discussion and review at next week's workshop. The contingency budget has balanced cuts in capital and general fund spending, and we will be prioritizing our spending accordingly. The Governor's plan also calls for levy limits to remain in place through 2005. Cities would be allowed to levy the amount they levied for 2003, with some minor adjustments for inflation. All cities will be subject to levy limits under the proposal. After the levy limits are lifted, the Governor is proposing a reverse referendum, which would allow a certain percentage of the voters in a city to sign a petition, thereby triggering a special election to review the city's proposed levy, and vote on whether or not the levy should be approved. If the votes overturned the levy, the city would only be able to levy at the • amount of the previous year. The number used to calculate Falcon Heights levy for the purposes of the Governor's proposal was our preliminary levy number, which changed when the final levy was declared-it went down; as a result, the state will be recalculating the proposed cuts with the final levy. The Office of the State Auditor requires cities to submit a report of expenses each year, listing the revenues the city took in, and the overall expenditures. The most current report is from 2000 for cities over 1,000 in population. City revenues will rise and fall with capital spending, one-time payments in the form of grants and aids for specific projects, or with special projects, such as street reconstruction. We are examining the information in the Governor's proposal, and will present a report to the Council next week on the information and the assumptions presented in the Governor's proposal. At this point, we are being told that the Governor's proposal will be updated with the 2001 OSA Report numbers as soon as they are available. The city's tax levy is already set for 2003, so we cannot make changes to your property tax for 2003. We will be working hard to ensure that the proposed 2004 cuts do not adversely impact city service provision, or unfairly penalize property taxpayers. Heather Worthington City Administrator 2/26/03 •