MEMORANDUM 07-121

TO: Mayor Hornaday and Homer City Council

FROM: Walt Wrede

DATE: July 3, 2007

SUBJECT: Fiscal Year 2008 Budget Priorities

As you know, it is that time of year again. Yes, we have to start talking about the FY 2008 Operating Budget. The internal process of developing a budget has already begun. At the last meeting ( July 23) the Council had a public hearing to see if Homer residents had any preliminary comments regarding what the City's budget priorities should be. The Council was scheduled to discuss its own budget priorities at the Committee of the Whole but discussion of other items used up all of the time available. Council decided to schedule the discussion for the Committee of the Whole meeting on August 13.

This is something we do every year. As you know, the budget development process starts with the Administration. Each Department submits its preliminary budget request for the coming year to the Finance Director and the City Manager. These requests include the recommended funding for operating expenses, personnel, equipment, and capital projects. We go through a series of meetings and evaluate these requests based upon an established set of criteria and other factors. We also take projected revenues, fund balances, and other factors into consideration. In the end, the Manager must bring the Council a balanced budget which serves as the starting point for Council deliberations. It then becomes the Council's budget and it may amend it as needed.

It is always helpful for me to know going into the budget process what the Council's priorities are. If I believe that the City really needs to emphasize one area or the other, I will do my best to make that case to the Council. However, it is not very helpful process- wise for me to submit a budget to Council that contains priorities which are far out of line with where the Council wants

to go.

For example, going into the process this year, absent any discussion, I would assume based upon prior conversations, that Council would prefer to not raise property taxes, not raise fees unless we must, maintain existing operations, minimize the addition of new personnel, increase the City's competitive position in terms of attracting and retaining qualified employees, and emphasize contributions to depreciation and fund balances. I would take all of that into consideration when developing a budget.

This is a good opportunity for Council members to discuss budget priorities for next year and to give me some initial feedback on what they might be. I hope you take advantage of it.