We started our biennial City budget process this week with the City Council with a focus on budget and financial philosophy. At our Council Workshop this week City Finance Manager Sue Kotchevar facilitated a presentation for the Council concerning the City’s current budget and finance philosophy.
We started our 2006-2007 City budget preparation process with a discussion about philosophy because, at least in my personal experience, if we can reach consensus on the Council on the broad philosophical issues that run through the budget, the many decisions and compromises on operational issues (i.e. How many Park Maintenance Workers do we need? Should we start a new rental housing inspection program? How many miles of street shall we replace this year?) we need to make in order to finalize the budget are much easier to resolve.
So what is our budget and finance philosophy at the City of Eden Prairie? Here are some examples:
1. The City will use one-time revenues to cover one-time expenses. The City experiences one-time revenue gains from time to time. We might sell a piece of City-owned property or get an unexpected tax settlement or something like that. It doesn’t happen often, but it does happen. This principle says that we will not use the proceeds from such a one-time revenue to start a new City program with on-going operational costs or that we will not use the proceeds to give everyone a temporary tax break. We do not want to build expectations for new City services based on an unsustainable revenue source for the future. We also don’t want to jerk our taxpayers around each year by dropping their taxes one year only to increase them sharply in the next.
2. The City will maintain its Aaa bond rating. The City received the Aaa bond rating from Moody’s Investor Services in 2003. The Aaa bond rating is the highest bond rating offered by Moody’s. It is an external stamp of approval for the City. It means that City government is well managed; that City finances are strong; and that the City’s private sector business economy is healthy and vibrant. We want to do what it takes to keep this bond rating. We want to avoid actions that would cause Moody’s to reevaluate us.
3. The City’s operational revenues will meet or exceed its operational expenses. I know that sounds common-sense and ordinary, but it can be a rather powerful principle when it gets down to crunch time. This principle means that we will not subsidize our general operations. This means that our general operations will be financed without smoke & mirrors; without paying for this year’s expenses in next year’s budgets; and without unsustainable short-term borrowing to avoid paying for today’s expenses with today’s dollars. At crunch-time, it means that we will not spend what we cannot justify asking taxpayers to pay for. If we can’t justify the amount of taxes we need to fund general City operations, then we will decrease the size of gerneal City operations. There’s no gain without pain. We can’t provide more without asking for more from our taxpayers. There’s also no loss without pain. We can’t decrease our tax asking without causing some sort of pain for somebody. It might not be you, but it might be your neighbor. In other words, not funny business with our tax levy.
This is just a piece of the City’s overall budget and finance philosophy. I’ll share more elements of our philosophy as we continue on with our budget preparation activities.
