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Factors that improved the City's overall finances: a) Overall, revenues projected are 2.9% above budget and expenditure savings of approximately $900k. b) The City received $1.38 million in 2003-04 vehicle license fee money (VLF), which the State borrowed and repaid a year in advance. c) LAIF's investment yield as of March 31, 2006 was at 4.03%, which is 1.65% higher than a year ago. d) Property assessed valuation increased 6.9% as compared to the 5.5% growth estimated a year ago. e) Additional sales tax of 1.3% is anticipated by year-end. f) One time transfer tax revenue of $575k from the sale of Albertsons property to Kaiser Permanente Hospital. The following will impact the City's structural shortfall going into 2006-07: a) Ongoing revenue growth compared to the increase of ongoing expenditures. b) Outcome of the business license tax ballot measure. c) Current negotiations with employee unions. d) Postponed maintenance needs, and ongoing deferrals. e) Success of future proposed revenue enhancements. Starosciak questioned the projected $213k shortfall for Fire Fees and Permit Revenues. Hollister responded that the Fire Marshal used erroneous data, for which their revenues were based, and was not able to come through on their estimates. Baloca also highlighted that Marina berthing revenues are projected to fall by approximately $114k. The Mayor suggested that staff meets with the Marina Ad Hoc Committee regarding the Marina's future. 3. Discussion Regarding FY 2006-07 Budget Planning and Discussion Baloca gave an overview of the proposed balanced budget for FY 2006-07. The proposed budget projects an operating shortfall of $755k, with the projected revenue of $73.6 million and projected expenditure of $74.3 million. The shortfall is balanced with loan repayments from RDA Joint Project, and other loans/advance payments. The City continues to struggle with a structural deficit that could range from $755k to $2.7 million if the Business License Tax increase does not pass. Starosciak stated her recollection that there were 85 police officers in FY04-05 and requested staff to account for the additional 5 police officers for FY06-07. Starosciak clarified that City would purchase/lease the new fire trucks and that the equipment becomes an asset of the City. Starosciak also expressed concerns over the increase to the proposed County fire contract and requested that the City investigate further into the cost and benefits of the City having its own Fire Department. Starosciak further shared that the budget continues the elimination of the Cherry Festival and no Sunday Library service hours, which cost about $200,000. She expressed her concerns over the elimination of these community services and how the current Fire contract does not have a "not to exceed" clause or a cap on spending. Stephens would also like to review the contractual agreement with the ALCO Fire Department. G:ADEPnCommittees\FinanceAHighlights\CITY COUNCIL FINANCE COMMITTEE 05-03-06 FINALAOC