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sales tax, showing the total California State sales tax over a 32 -year period with data points on the year -to -year change, noting sales tax is very important to the operating budget. It is cyclical and follows the economy. Mr. Culver said further revenue declines are expected due to the economy, sales tax is estimated to decline 13% in addition to the 10.3% decrease budgeted, property tax shows a 0% change in addition to the 3.5% growth expected this year, hotel tax at 1.6% decrease in addition to the 3% reduction this year. The State budget deficit is estimated at $24.3 billion and further take away's are expected, with dynamics changing daily. He discussed ERAF (Educational Revenue Augmentation Fund) stating ERAF I occurred in the early 1990's and ERAF II was increased in the late 1990's, both are on- going, creating an over $90 million cumulative loss. The new proposed Prop 1A borrowing would be on top of the $90 million cumulative loss and ERAF I and II will continue regardless of the decision made in Sacramento this month. Councilmember Sullivan referred to recent State talks of taking away gas tax funds and confirmed with Mr. Culver that this would be in addition to the $24.3 billion. Mr. Fialho noted that Prop 42, Prop B and gas tax monies cumulatively equal about $2 million per year. Staff will need to review assumptions in the CIP this year and his sense is that the loss will be permanent with no provision to repay cities for the borrowing. Mr. Culver discussed State proposals to take local revenues which are new reductions in addition to the property tax taking and would affect 5 sources of City revenues that total about $6.5 million. He said these have either been included in the Governor's budget, included in the May revise or in new proposals recommended by the Legislative Analysts' office. New additional Prop 1A borrowing is estimated from between $4.3 to $4.7 million which is money used for the operating budget. Prop 1A allows the State to borrow up to 8% of property tax in any given year which can be done twice in any 10 -year period, but they must pay the first borrowing with interest prior to borrowing the second time. If this happens, it would represent the first time it occurred when Prop 1A was approved by voters in 2004 to give local government some protections. Mr. Culver presented Enterprise Fund highlights, said staff spent time reviewing operating costs to minimize any future rate adjustments; however, the normal transfer made to the water repair and replacement fund was reduced in both years to keep the water fund in balance, and rate studies are underway with results to be presented in January 2010. Regarding the operating transfer to the infrastructure replacement fund, the rate study will address what the adequate level of funding should be and will recommend a rate to allow this to occur. In conclusion, Mr. Culver referred to the Livermore Pleasanton Fire Department as a special revenue fund; costs are split with the City of Livermore, the budget includes funding for continued succession planning, and staff continues to review additional cost saving measures and grant opportunities. A recent grant opportunity is that the City would be the lead agency for the Assistance to Firefighters Grant which will cover 20% of the cost of the new mobile radios that will provide interoperability with the new East Bay Regional Communications project. Vice Mayor Cook Kallio opened the public hearing, noted there were no public speakers and she closed the public hearing. Vice Mayor Cook Kallio thanked staff for their insight and fiscal responsibility, said it is difficult to balance a budget and referred to www.nextl0.orq which she said allows users to provide ideas on balancing the State's budget. City Council Minutes Page 6 of 13 June 16, 2009