Memorandum

City of Lawrence

TO:	Commissioner Mike Amyx Mayor and City Commissioners
FROM:	City Manager David L. Corliss
CC:	Debbie Van Saun, Assistant City Manager
Date:	August 6, 2007
RE:	Commissioner Amyx – 2008 Budget Options

Commissioner Amyx,

You requested review of the following possible budget option:

Continue the full funding of the current level of service for the transit system.  Do not increase the mill levy for transit.  There would be no mill levy increase for the 2008 budget.  Provide the necessary funding to maintain the current level of service for the transit system by spending general fund resources for the transit system, specifically spending the necessary resources from the planned street maintenance expenditures, approximately $ 584,000.

Concurrent with this proposal, is the submission to the voters of the following City sales tax referendum question:   a 0.5% City sales tax limited to five years.  Based on the current annual sales tax receipts of approximately $12 million per year for the City’s 1.0% sales tax, a 0.5% sales tax would generate approximately $6 million.  The sales tax revenues would be pledged for $ 5million to street and sidewalk maintenance annually, and $1 million to be retained by the City split evenly between City directed economic development efforts (including infrastructure support) and City acquisition of open space.

Staff Comments

You further requested staff comments and possible alternatives.  Staff remains concerned that a proposal to reduce street maintenance will place the City further behind in this important infrastructure responsibility.  We do acknowledge that this proposal, if approved by voters, provides substantial additional resources for street maintenance.  We also acknowledge that it is difficult to request voter approval of a property tax increase along with a sales tax increase.

An alternative to reducing street maintenance expenditures, is to remove $584,000 from the $800,000 in the equipment reserve fund which has been allocated for future bus replacement.  These funds would be used to fund the transit system at status quo levels in 2008.  This “one-time” money can not be sustained in future years, however, the transit system will face a significant policy crossroads in early 2008 when we make crucial decisions about possible KU/City merger options and selection of a vendor for future years.   This will greatly reduce, if not eliminate, our ability to fund bus acquisition from cash in 2007-2008 (we still have the authority to issue debt and increase property taxes to support this increased obligation).  These funds were placed in the equipment reserve fund when the transit fund had revenues in excess of expenditures in the early years of operation.

Both the street maintenance option and the bus equipment reserve option place the burden on replacing either these funds or deferred maintenance on to future years.  A successful sales tax referendum would provide additional needed resources for Commission and community priorities.