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March 21. 2006 The condition of our stormwater collection and conveyance system mirrors that of our water and sewer system. In addition, many of the stormwater system components are inadequate to meet present day demands. Repair and upgrading of the existing system and the funding of a "Lake and Pond Management Program" requires us to steadily and gradually increase our stormwater fees. This budget recommends that we increase the Equivalent Residential Unit (ERU) by $0.50 per month. The impact on a residential homeowner is an additional payment of $6.00 per year. We are recommending an increase in the residential solid waste fee from $19 to $22 per month, an increase of $3 per month. This increase is necessary to cover the cost of operations so that the Waste Management Fund is not subsidized by the General Fund. The total impact of these rate and fee changes on the average residential homeowner is $5.80 a month. Lowering Real Estate Tax Rate Last year, at the request of the City Council, the City Assessor undertook a citywide reassessment of all real estate with the assistance of a national assessment firm. The resulting reassessment showed an average increase of 24.93 percent in commercial and residential property assessments across the City. As such, Portsmouth's tax base increased in value at a rate approximately equal to that of our neighboring cities. As with all reassessments, there were significant variations from the average throughout the City, with some properties showing declines in valuation rather than increases. We took all of these factors into consideration in our budget calculations, in which one cent ($0.01) on the real estate tax rate equates to about $500,000 of revenue. In the face of the significant increases in real property values, our goal was to implement City Council's mandate to reduce the real estate tax rate as much as possible. Therefore, we are recommending a six-cent ($0.06) reduction in the tax rate, from $1.44 to $1.38. Please keep in mind that we are including two cents ($0.02) in the recommended $1.38 tax rate to support the courthouse development project. Because of the variations in values - from "declines" to "increases" - with the implementation of this budget proposal, some taxpayers will pay less in taxes and some will pay more. Under the proposed tax rate reduction, the theoretical average Portsmouth homeowner - whose home increased 24.93 percent in value to $132,000 - will pay $24.98 a month more in real estate taxes in FY07 than in the current fiscal year. Fiscal Discipline Portsmouth cannot afford to undertake everything that we would like to include in this budget. Consequently, we have made some conscious choices in developing this budget proposal. For example, although we have some departments requesting new positions, we continue to keep our work force small while enhancing our overall compensation package. Although we are making strides to catch-up with funding for our employees, schools, and capital projects, we do so while continuing to focus on our financial health. This budget proposal continues specific financial policies and objectives that are outlined in the city's Comprehensive Annual Financial Report, dated October 18, 2005. . Elimination of reliance on Revenue Anticipation Notes (RAN's) used as short- term borrowing to meet current operating cash requirements . Increase annual funding from the General Fund to eliminate cash flow deficits in the Risk Management and Insurance fund