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Item No. Staff Report No. Meeting Date: September 29, 1997 • Type of Business: WK WK: Work Session;PH:Public Hearing; CA: Consent Agenda;CB:Council Business City of Mounds View Staff Report To: - Honorable Mayor and members of the City Council From: Bruce A. Kessel, Finance Director Item Title/Subject: 1998 Budget options Date of Report: September 26, 1997 During the past several months, the Council has expressed its desire to consider alternatives for eliminating the City's franchise fee on electric and natural gas sales in Mounds View. Over the past five years, the City has came to rely on this revenue source to support ongoing operating activities, therefore the eliminate of this revenue source presents some serious problems. The following is a listing of some of the options available to the Council: • Increase other revenues. The ability to increase other revenues are somewhat restricted. Attached is a listing by department of some of the revenues and fees received for the department. Some of the revenues are fixed by outside forces such as the State of Minnesota for police aid and street aid. For other charges, we can only charge our costs for administering such services. While we should pursue recovering our total costs for providing services whenever possible, the total increase in revenues would be estimated in the $15,000 to $30,000 range. • Spend down reserves. The City has an adequate level of reserves at the present time. If we spend down reserves without making other changes, we will be faced with a serious situation in several years. If operating outlays are not reduced, outlays will continue to rise, reserves would continue to fall, and within several years, the City would be faced with a drastic cut in services, large increases in property taxes (this option may not be available), or finding alternative revenue sources such as the franchise fee. Interest earning available will decrease or be eliminated; the 1998 budget has $65,000 in such earnings, which compound the problem. • Increase property taxes. For the next several years, the City is faced with levy limits established by the state which restrict our ability to raise property taxes above the preestablished amount. For 1998, our allowed increase is approximately 6%. The City may have an option to increase the levy above this level by passing a voter approved referendum. The ability to obtain such approval is questionable. • Sell City owned real estate. This should result in small decreases in operating outlays and should result in an overall lower property tax burden for all property tax owners. The sale of any real estate, however, could reduce our ability to perform some services such as recreation programs, could lower property tax values within the community if it was deemed that we did not have sufficient green space or recreational opportunities, etc. • Sell City owned property. The City could sell some of its vehicles and equipment and • then either rent the needed items, enter joint powers agreements with other jurisdictions to perform the needed services, or contract with outside parties for such services. The