2r. Request to Reallocate the 1994 Contingency Fund ($33,000) to Fund Reduced Revenuesi
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CITY OF a a'
C8AN8ASSEN
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937 -1900 • FAX (612) 937 -5739
TO: Mayor and City Council
FROM: Don Ashworth, City Manager
DATE: January 3, 1994
SUBJ: Request to Reallocate the 1994 Contingency Fund ($33,000) to Fund Reduced
Revenues
The ink is barely dry on the 1994 Budget and
$72,000. As can be seen from the attached con
Government Aid Trust Fund" is projected to h
end of 1994. In creating the trust fund, the;
formula which would be put into place if
Chanhassen, that will amount to an approxitn
payments from the state. The real tragedy has;
already facing a deficit of approximately
:nce from the League of Cities, the "Local
.ficit of approximately $44 million by the
are also incorporated into it a reduction
revenue was less than budgeted. For
000 reduction in our HACA distribution
nth this woeful saga is the fact that the
state transferred approximately $136 million in general state expenses out of the state's budget
and into the trust fund. Accordingly ne of the reasons that the state budget is currently
showing a surplus of $400+ million is the fact that they shifted $140 million into the trust fund.
I have already met with all of our` department heads relaying the bad news and the necessity for
each of them to go back and -rework their budgets. Assuming the city council approves this
request to use the cont,ingency funds to help reduce part of the anticipated revenue losses, I will
send out the attached memorandum =officially requesting that our departments help in fording
$40,000 from then aggregate bndgets. anticipate that one Qf, the first "reworked" budgets
that the council will see will be in the motor vehicle area when the request is made to start the
specification process for lesffor 1994 (probably our second meeting *'lanuary).
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I would justify the usage of the $33,000
following bases:
our $72,000 problem on the
Park and Recreation Obiectives The origins for the $33,000 was from park and
recreation to ensure that the city could slowly wean itself from using $100,000 per year
from the Park Acquisition and Development Fund. The Park Commission's point was
that we are currently spending acquisition dollars to refurbish existing buildings and
equipment. The Park and Recreation Commission felt that it was important that the
MEMORANDUM
r Mayor and City Council
January 3, 1994
Page 2
original purpose for this fund be re- established, i.e. that monies derived from new home
' construction would be used for land acquisition and park improvements in the vicinity of
those new homes. By doing such we would also be keeping pace with development and
ensuring that new residents would not crowd out existing residents or overburden existing
' systems. To the extent that we were able to allocate $33,000 in the 1994 budget, albeit
not directly for park and recreation, we have now included that in our base level of
revenue /expense as we approach the 1995 budgetary process. That means that if we
' could find an additional $33,000 in 1995 we will be one step closer to the Park and
Recreation Commission's original objective of $100,000 per year;
' - Practicality Assuming that the Park and Recreation Commission was given the
opportunity to try to move the $33,000 from contingency to specific park improvements,
such would likely not occur until late in 1994. As a practical matter, although the dollars
' would then be available for that purpose, they could not be spent recognizing the
prioritization, specification, bidding process.
' RECOMMENDATION
' This office would recommend that the City Council approve a resolution amending the 1994
budget to show the $33,000 currently being held in contingency as a means to help reduce the
$72,000 revenue shortfall anticipated in 1994. Further, I would recommend that staff be charged
' with the responsibility of finding a means to reduce or otherwise modify the 1994 budget so as
to find an additional $40,000 to correct the remainder of the revenue shortfall problem. I had
considered including in my recommendation preparation of a letter to our senator and
' representative stating our concerns about the trust fund and the action that the legislature took
this past year. However, a better approach may be the one being suggested by the AMM which
is to invite our legislators to the legislative reception being hosted by AMM during February.
' Typically, the legislators are then invited to have dinner with the cities represented by those
legislators. It's much easier to verbally communicate your concerns if legislators can see cities
are united on certain positions, i.e. raiding of the trust fund. [Note: You should be receiving an
' invitation to the reception/dinner in the near future.]
I found it ironic that shortly before writing this memorandum I came across the following
I parable, "In times like these it helps to remember that there have always been times like these."
See you Monday evening.
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AD06b
CITY OF
CH ANHASSEN
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937 -1900 • FAX (612) 937 -5739
MEMORANDUM
TO: All Department Heads
FROM: Don Ashworth, City Manager
DATE: January 3, 1994
SUBJ: Reductions in State Aid -- Necessity to Modify the 1994 Budget
Attached you will find the notice that we received -from the League of Cities that our state aid
payments for 1994 will be reduced by $72,000: On January 10, 1994, the city council will be
making a decision as to whether the $33,000 contingency fund can be used to help lessen the
anticipated shortfall. Assuming that the council did approve that recommendation, I would ask
each of you begin the process of reworking your 1994 budget so as to see how you may be able
to help us solve the remaining $40,000 problem. As Torn and Jean were vitally involved in the
detail associated with your budget, I have asked them td ,visit with you in an effort to identify
areas where cuts might occur. As we are probably to the point of reconsidering programs, cuts
will probably not be "across the board."
Thanking you in advance for "your continued cooperation.
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League of Minnesota Cities
3490 Lexington Avenue North
St. Paul, MN 55126
(612) 490 -5600
/ 14l�
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MEMORANDUM I/ .,ke,,"
TO: City Clerks and Managers nnnn •
FROM: Tim Miller
Executive Sector
DATE: November 24, 1993
RE: Potential 1994 state aid cuts
Although the November 23 state budget forecast projected a $414 million surplus for the state's
general fund, the Local Government Trust Fund did not fare as well. In fact, the new forecast projects
that the LGTF will face a $44.3 million shortfall by the end of the biennium. Under current law, local
government aid and homestead and agricultural credit aid payments scheduled for July and December
of 1994 will be cut if the LGTF deficit is realized.
' According to State Revenue Commissioner Morrie Anderson, any necessary cuts will not be
based on the November 1993 forecast. The final determination for cuts will be based on the March
1994 state budget forecast and on any legislative actions that might modify the status of the LGTF. He
' also specified that these potential cuts will not affect the December 1993 aid distributions.
The LGTF shortfall is due to two developments. First, the expectations for sales tax revenue
' growth for the current biennium have been substantially lowered. The second, and more significant
development is related to recent legislative actions. Beginning this biennium, the legislature added the
property tax targeting program and the homeowner's circuit breaker to the LGTF. These transfers will
' cost the LGTF at least $126 million, which will significantly reduce the money available for city
programs. At the same time, these transfers have effectively added at least $126 million to the state's
general fund surplus. Although cities generally agreed to live with the fluctuations in the LGTF, we
' have strongly opposed legislative actions that have increased the number of non -city programs funded
by the LGTF.
' According to our best estimates, the $44.3 million LGTF shortfall would result in 1994 aid
reductions equal to approximately 2 percent of each city's 1993 certified levy plus 1993 LOA and 1993
taconite aid, for taconite cities.. Therefore, do not use the 1994 certified levy to estimate the impact of
' these cuts. Any reduction could not exceed the amount of LGA and HACA your city is scheduled to ;
receive in 1994.
The current LGTF forecast does not paint an optimistic picture for the remainder of the
biennium. We encourage you to consider the impact of potential cuts before you set your final 1994
levies and discuss this issue with your taxpaKers at your truth in taxation hearing. If you have any
questions, please contact Gary Carlson at the League offices. RECEIVED
NOV 2 91993
CITY OF CHANHASSEN