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24 <br /> Strategies for Cities <br /> For city officials who remember previous state budget shortfalls and subsequent city aid cuts, <br /> much of this situation and the strategies that follow may sound familiar. Below are several <br /> considerations that may help you weigh the pros and cons of revenue enhancements, expenditure <br /> reductions, and use of reserves as you consider setting a budget for 2003. Ultimately, you will <br /> have to make decisions that best reflect the needs of your community. <br /> L Consider increasing your property tax levy to cover or at least partially offset potential state <br /> aid reductions. If aid reductions do not materialize,you can adjust your 2004 property tax levy <br /> accordingly. <br /> A.)For cities over 2,500 population, levy limits are in place for taxes payable in 2003. Due to <br /> an extremely low inflation adjustment for this year's levy limits, cities affected by levy <br /> limits might not have sufficient levy authority to cover even normal budgetary pressures. <br /> Levy limits are due to expire,but they could certainly be extended by the 2003 <br /> legislature. <br /> B.)Increasing your property tax levy could potentially result in a larger state aid reduction. <br /> Last January, the Governor unveiled a new proposal that based a portion of each city's aid <br /> reduction on the size of each city's increase in property tax levy plus state aids. In other <br /> words, the larger the city's revenue, the greater the reduction in state aids. Although the <br /> Governor's concept was not adopted by the Legislature,this proposal could always <br /> resurface in the 2003 legislative session. <br /> C.)Although property tax increases could be implemented to offset potential budget cuts, the <br /> property tax increases of cities could be viewed as municipal preparation for state aid cuts <br /> and legislators could rationalize cuts because cities are financially"prepared" for the <br /> reduction. <br /> D.)Increasing property taxes to cover a speculative state aid cut could be criticized or <br /> misunderstood by your citizens and business owners. You may want to consider enhanced <br /> discussions with your citizens, businesses, and legislators_about the difficulties facing the <br /> city and setting a 2003 budget. <br /> E.) Consider the implications of tax reform on any tax increment financing (TIF) districts <br /> within your city. Past tax reform efforts, including the major changes enacted in 2001, <br /> may have severely impacted the revenue stream of TIF districts and the city may already <br /> be committed to property tax increases to cover TIF obligations. <br /> F.) Given the magnitude of the state budget deficit, other local units of government may also <br /> be considering increases in their property tax. With the new state property tax, legislators <br /> might be considering their own property tax increase to address the shortfall. You might <br /> want to consider the combined impact of these potential increases for your taxpayers. <br /> 4 <br />