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General Government, Community Development, Engineering and Transportation, and Organizational Services Costs — These departments serve the entire City and will be impacted by the Medical Center. For purposes of this analysis, the impacts on these department has been estimated based on the application of current budget resident equivalent cost factors to the Medical Center's projected resident equivalents. A portion of these departments' costs are fixed relative to population and have not been included in the calculation. (Table 6-A, 6-B). Variable versus Fixed Costs — For General Government, Community Development, Engineering and Transportation, and Organizational Services, a portion of the existing expenditures and budget are assumed to be the result of variable costs that increase with additional employment. The remaining expenditures are assumed to be fixed costs of operation that will not increase as a result of the Medical Center. The variable costs are estimated at 25% for General Government, Engineering/Transportation, and Organizational Services. For Community Development, it is estimated that 75% of the budget are variable costs. (Table 6-A). Inflation of Revenue and Expenses — The analysis reflects 2009 revenues and expenses. Continuity of Legal and Institutional Constraints — The cost and revenue experience of the City of San Leandro is based on the 2009-2010 Budget. The estimates of this Report assume that revenue sources will remain constant. Opportunity Cost Development Programs — KMA and City staff collaborated to formulate the retail and office opportunity cost scenarios as well as the retail development program for the northern parcel. The assumptions are provided in Appendix B-2 and C-1. Keyser Marston Associates, Inc. Page 19 \\Sf-fs1 \wp\19\19096\19096.036\003-001. doc; April 2009