08-22-2007 Council Agenda - Laserfiche WebLink

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515 Little Canada Road, Little Canada, MN 551 17 -1 600 (651) 766 -4029 / FAX: (651) 766-4048 www.ci.little-canada.mn.us MEMORANDUM TO: Mayor Blesener, Members of the City Council FROM: Joel R. Hanson, City Administrator DATE: August 17, 2007 RE: 2008 Budget & LGA Impacts MAYOR Bill Blesener COUNCIL Rick Montour Barbara Allan John Keis Michael McGraw ADMINISTRATOR Joel R. Hanson An interesting development has occurred relative to our preparation of the 2008 Budget. We learned last week that we will be receiving $225,168 of Local Government Aid (LGA). As you may know, we last received LGA in 2002. We received just under $78,000 at that time What is surprising about this development is that in all of the projections I had reviewed, including those with fol,uula changes, Little Canada would not receive LGA unless there was a major infusion of dollars into the program by the State of Minnesota. (That did not occur during this past legislative session.) We checked with the State to make sure their calculations were accurate and they assured us that was the case. What seems to have happened is our "revenue need" has increased relative to other jurisdictions and that triggered our receipt of the money. While this makes the budget process much easier for 2008, I believe we need to give some serious consideration as to how to handle this newfound revenue source. Here are some comments /issues for you to think about: • We could simply reduce our levy needs from the excess amount of LGA remaining above our 2008 expenditures less revenues other than property taxes. The concern I have in this regard is the tax impact to individual property owners will not be that great when considered in the scope of all property taxes levied. Also, if we do this, we are once again dependent on this less than stable revenue source. Should it be reduced or eliminated in the future, we would either have a dramatic levy increase or face some serious expenditure reductions. (Please keep in mind that I feel this is a big revenue increase for the city, but when spread over all taxpayers, it will lose its significance.) • We could go for a zero percent levy increase with the idea that we will generate some surplus dollars that would likely roll into the capital improvement fund. While this option does create some dependency on LGA, it would be less difficult to address if we were to lose LGA than had we applied the entire amount to a levy reduction. Also, as we become more confident that this aid will stay in place, we could continue to use it to minimize levy impacts for the next few years. However, this will create an LGA dependency over time.