2009 Budget Strategy

1. 2009 Budget Strategy Presented by Mayor Don Ness To the Duluth City Council March 23, 2009

2. Today’s Presentation • Overview of 2008 Strategies • Issues from 2008 Year End • Current budget picture • Impact of State budget deficit • Revenue issues in 2009 • Financial trends for 2010 and beyond • Budget Repair Strategies

3. Position Changes Laid off 24 FTE’s and eliminated 12 seasonal, and over 150 part-time and temporary positions Left 33 vacant positions open Eliminated 29 net FTE positions Cost Savings Reduced director & manager positions Eliminated police officer at the police desk – staff with clerical position Police investigators no longer take home city vehicles Eliminated site visits for Planning Commission Shut down fire rig 3 to reduce overtime Reduced staff support to Environmental Advisory Council and Heritage Preservation Commission Eliminated utility pay boxes Implemented no idling of city vehicles policy Closed Washington Pool Adult Leagues no longer managed by city Eliminate staffing of Duluth Housing Commission Office of Sustainability duties reassigned Zoo Society takeover of Zoo operations Eliminated Senior Nutrition as a city function Closed recreation sites Eliminated athletic field maintenance at many sites Decreased number of pleasure rinks Chester Park Improvement Club took over management of ski hill Eliminated Fun Wagon Terminated agreement with the Jewish Education Center Eliminated monthly mailing of Senior Programs newsletter Eliminated lifeguards at Park Point beach area Eliminated daily van/bus service for seniors Decreased frequency of emptying trash cans at city parks Parks, trails and open spaces in various locations taken out of service – moved to passive park status Overview of 2008 Strategies

4. Cost savings continued… Eliminated staff service to neighborhood districts including web and support staff Eliminated free GIS maps for citizens Retained local private fee appraiser to represent city in negotiations and tax court Moved bid advertising and RFP’s from newspaper to online Increased usage of shared bids with State, County and schools Human Rights Office reorganized Reduced Library hours from 49.5 hours per week to 40.5 hours Library reference service reduced Programs and workshops for adults have been eliminated or reduced including the Library Lecture series and “One Book, One Community” project. Book Time with Your Baby no longer does outreach to teen parent programs, ECFE and other sites. Home Library service was eliminated Library no longer participates in school resource fairs and other family events. Library Youth Services no longer does rotating classroom collections for teachers and has severely curtailed visits by school groups. Children and teen programs at the Library have been eliminated or reduced as well including Teen Reading Month; Teen Tech Week; Winter Family Read-Aloud program; and baby and toddler storytime. Park maintenance service reductions include less mowing, delayed response to graffiti and vandalism, fewer hours for public bathrooms, deferred maintenance in tree care, trails, gardens and athletic fields. Street maintenance will continue to provide services but will take longer to complete. Will no longer sweep for small community events. Eliminated or Reduced Subsidies to the following Organizations: Grandma’s Marathon, John Beargrease, Inline Marathon; Public Arts; Sister Cities; Great Lakes Aquarium; and the Historic Union Depot 2008 Strategies continued

5. Issues from 2008 Year End • Sale of Steam District II boilers not yet complete – waiting for PUC action • Governor’s unallotment of 2008 LGA of $1.7 million • Park Point Land Sale Completed • Sales Tax – collections had been holding steady until year end creating 2.5% or $300,000 budget shortfall • State amortization aid shortfall of $2.5 million • Recognition of Mainsail investment losses

6. Current Budget Picture • Impact of State Budget on 2009 • Governor’s budget proposal includes reductions in Local Government Aid in 2009 and in 2010 and beyond. • Governor proposed supplemental budget March 17 with adjustments for updated state budget forecast. No change in LGA reductions proposed. • Legislature is creating its own budget proposal.

7. Current Budget Picture • 2009 Revenue Trends • Payment in Lieu of Tax from Gas Utility • $650,000 short due to moderating gas prices in year end 2008 • Earnings on Investments • $785,000 short due to reduced portfolio size and decreasing interest rates • Impact of Recession on other Revenues • Combined, may reach $1 million in sales tax, building permits, fees and charges, parking revenues etc.

8. Financial Trends for 2010 and beyond • Local Government Aid • Governor’s budget proposal would reduce LGA in 2010 by $4.869 million over 2009 certified LGA • Police and Fire pension liability • Contract negotiations • All union contracts expire at year end 2009 • Health insurance issues • Active premiums have stabilized while retiree expenses continue to rise • Continuing revenue problems from economy • Will be closely monitoring sales tax, tourism taxes, earnings on investments, building permits etc. • Retiring 2010 TIF districts valued at $1.2 million

9. 2008 LGA unallotment $1,736,000 Current 2009 Budget Issues Governor’s proposed LGA reduction $2,332,000 Payment in Lieu of Tax $ 650,000 Earnings on Investments $ 785,000 Impact of Recession on other Revenues $1,000,000 TOTAL CURRENT CHALLENGE$6,503,000 Our Challenge

10. Goals of 2009 Budget • Avoid fee and tax increases • Avoid layoffs • Reduce future deficits • Ensure budget stability in 2010 and beyond

11. Budget Strategies Position Vacancies $ 1,000,000 Union Challenge Savings $ 550,000 Administrative Strategies $ 550,000 Street Debt Reduction Strategy $ 2,672,000 Total Strategies $ 4,772,000 Remaining Budget Gap $ 1,731,000