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Guiding Principles In June of 2009, the Council agreed on the following guiding principles for budget development: 1. Provide high quality core services; do it well or don't do it 2. Talented, motivated, well-trained employees are the City's most important asset 3. Maintain our investments 4. Don't expect short-term actions to resolve long-term problems 5. Consider unintended consequences 6. Share information and ask employees, residents and businesses for their input and remember that Leadership is what they expect from us We have kept these principles in mind as we prepared the 2012 budget. As you know, the City's budget is the most significant policy considered by the Louisville City Council each year; it establishes the City's priorities and provides funding to achieve those priorities. The budget process, including the formal public hearing, provide the public with many opportunities to comment on and advise the City Council about those priorities and levels of funding. In addition to the public hearing, we solicit and receive input from numerous sources, including public involvement at regular City Council meetings and study sessions, feedback from the City's various Boards and Commissions and information from surveys. We also provided information, addressed questions, and asked for ideas and suggestions about budget issues during special presentations on the City's budget, during Ward meetings, the Mayor's "Chat with Chuck", and other City events. By considering citizens' comments in all of these forums and making changes as necessary, the City Council ensures that the final 2012 budget truly reflects the interests of the community. Financial Overview The 2012 budget includes a total revenue projection (excluding interfund transfers) of $31.2 million for all funds, an increase of 2.5% over the estimated revenue for 2011. Net property tax revenue is projected to decline by approximately 2% due to a decline in the City's assessed valuation. Even though Downtown Louisville is thriving and several large employers have expanded operations or moved to Louisville in the past year, as a result of the broader slow economic recovery and the continued vacancies at the former Sam's Club and Safeway buildings, City staff expects sales and use tax revenue to increase by only 1')/0 over 2011. The 2012 budget includes a 6% increase in water rates and a 4% increase in wastewater rates, but no increase in storm water rates. These projected changes in revenue will be discussed in more detail below. The 2012 budget includes total expenditures (excluding interfund transfers) of $33.5 million. Included in this amount is $22.8 million for operations, $2.5 million for debt service, and $7.8 million for capital outlay. Total appropriations for all funds, including interfund transfers, are $37.0 million. 2