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There are several key factors that you should consider as you prepare your budget requests for fiscal year 2008-09. These include: • Continue to Hold the Line, with Exception -Holding-the-line is first priority in our current limited revenues environment. It is especially important that the City strives to achieve balance between the costs of current services and the revenues to support them. Departments are instructed to fully keep non-personnel cost increases to an absolute minimum. Therefore, department budgets for services (5000 accounts), .supplies (6000 accounts), and capital outlay (7000 accounts) should not exceed last year's budget totals, with exception to increases resulting from contractual commitments or general inflation. When submitting your budget, please make certain that details are provided to support these increases. Departments are free to reallocate money between accounts; however, the bottom line should not exceed last year's budget. Requests for additional personnel or part-time hours continue to be discouraged. ~ New Proposals -Fortunately, the City has been able to continue its policy of no layoffs of full-time employees as a result of the City's previous attrition planning program and drawdown on reserves. In the event that new funding is identified, new proposals will be categorized as requiring either "one-time funding" or an "ongoing commitment" of resources. Accepted proposals will be funded according to the type of resource available. New proposals will most likely be weighed for consideration according to the following City Council priorities: o Does the new proposal address critical and basic service? o Can the new proposal be supported from an independent funding source (i.e. grant)? o Is the new proposal cost recoverable from a revenue generating service? • Cost Recovery - I encourage you to review your program fees and charges for services and look for opportunities to recover a greater percentage of program/service costs. Be sure to survey surrounding cities before submitting requests for fee increases, so that our program fees and charges remain comparable. Requests for fee increases are due in the Finance Department on February 8, 2008. We have included the current fee schedule in your budget packets for reference. As we work together in the upcoming months, I ask that each of you remain mindful that San Leandro's economy is challenged, with a depressed real estate market and lower consumer spending. Property related revenues continue to decline and the impacts of the State budget deficit will become clearer over the next few months. Living within our means remains our best strategy. I expect that you will give serious consideration to our fiscal concerns as you prepare budget submittals for fiscal year 2008-09. I am confident that working together we will be successful in addressing the financial challenges facing the City. G:~BUDGEI12008-09~Budget Manual\Budget Preparation Guideline Memo 1-8-08.docx