City Council Study Session Agenda and Packet 2009 08 11

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COUNCIL COMMUNICATION TO: MAYOR AND CITY COUNCIL FROM: MALCOLM FLEMING, CITY MANAGER DATE: AUGUST 11, 2009 SUBJECT: OPTIONS FOR REDUCING THE GAP BETWEEN GENERAL FUND REVENUES AND EXPENDITURES ORIGINATING DEPARTMENT: CITY MANAGER SUMMARY: Revenue Trends. Since February the City's sales tax revenues have been about 7% lower than the same period in 2008 and about 9% lower than budgeted for 2009. Other General Fund revenues, including Construction Permits, Lodging Tax and Building Use Tax are also trending much lower than 2008. Current trends suggest that even if the economy improves, it may take several years for the City's revenues to return to 2008 levels. Council Direction. To address this decline in revenue, during the City Council's June 23 Budget Retreat the Council agreed that it is appropriate to use some of the roughly $4 million General Fund reserve to ease the transition as we adjust to lower revenues. However, we should not draw down the reserve more than $400,000 to $600,000 in 2009. That means we need to implement actions to reduce 2009 General Fund expenditures by about $300,000 (the net between the revenue shortfall, year end "turnback" and the amount we can draw down the reserve). The Council also agreed that staff should prepare a list of specific actions to achieve this goal for Council consideration. During the budget retreat, the Council also agreed that the following principles should guide us as we amend the 2009 budget to address declining revenues and prepare the 2010 budget: Guiding Principles To Balance the Budget 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 SUBJECT AGENDA ITEM OPTIONS FOR REDUCING THE GAP BETWEEN GENERAL FUND REVENUES AND EXPENDITURES Iv