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ON. EHLERS 8! ASSOCIATES INC ® 1 To: Mike Morrison — City Manager 2 From: Stacie Kvilvang & Elizabeth Diaz — Ehlers & Associates LU Date: May 17, 2007 211 Subject: Key Financial Strategies — 2007 Financial Management Plan On March 27, 2007 we met with the City Council at a work session to review the preliminary findings of the above referenced plan. Upon discussion with the Council, we have incorporated their comments into the Plan for their review, discussion and consideration. The main items incorporated for review and comment are: Provided three (3) options to increase the general fund balance from 35% (current policy) to 40% as follows: a. Option I shows the general levy and operations with no related levy changes for fund balance reserves (except for inclusion of Item #3 below). The outcome is the total levy for general fund, HRA and debt service increases by approximately 6 -7% per year. The General Fund balance does not reach its goal of 35% of expenditures (adjusted for police contracts). b. Option 2 shows a 1% incremental increase in the general levy in order to go from a fund balance of 35% of expenditures (adjusted for police contracts) to a 40% levy by 2012. The initial general fund levy would increase by 13% for payable 2008 and then an increase of approximately 6% per year thereafter c. Option 3 shows a transfer in from other fund of $350,000 in order to achieve the 40% fund balance goal in 2008 and then a levy to maintain the fund balance goal from 2009 forward. The general fund levy increases by 6% from payable 2011 and forward. Note: The options do not show a reduction in debt levy (item #S) as has been discussed and can be changed when Council decides1coull rMs if they would prefer to redirect any reduction in debt levy to a levy for capital improvements (fixture roads, equipment) or to assist will, other issues (item 91 or #3)e 2. Capital equipment needs have been assembled from the Department Heads after one -on -one discussions with the Council and have been included in the Plan. We will go over those items and options for the Council in more detail at the work session (increase transfer from Liquor revenues to general fund, etc). 3. Moved Salo Park maintenance fees (annual cost of $26,500) from HRA budget to City General Fund expenditure. This would require the City to increase the levy by this amount (if all things stayed equal) but due to item #5 below, there may be opportunity to absorb this within the current levy without any impact. Mike Morrison LEADERS IN PUBLIC FINANCE 1,. 3060 Centre Pointe Drive Phone: 651-697-8506 Fax: 651-697-8555 Rosevitte, MN 55113 -1105 skvilvang @ehlers- inc.com