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11. Adopt a Resolution Accepting the 2008 -09 Year -End Financial Report for the Operating Budget and Amending the Fiscal Year 2008 -09 Operating Budget (unaudited) Mr. Fialho introduced the item, stating the City's books are reconciled at the conclusion of each fiscal year, compared to the projected budget, and decisions are made in terms of how to manage any surplus or deficits. He stated that staff would return in January or February with a mid -year update, at which point the current budget will be adjusted to reflect actual revenues and expenses from the previous year. Finance Director Dave Culver reviewed actual revenues and expenditures, noting that revenues were down only $143,000 less than projected while expenditures were nearly $3.5 million less than budgeted. He requested carryover of $699,000 of the resulting surplus for outstanding purchase orders and contracts, as well as another $205,000 in contingency for carried energy projects. The remaining $2.5 million in savings will remain in the fund balance carryover reserve for future allocation at the mid -year update. Mr. Culver noted that this savings is in addition to the $19.8 million in General Fund reserves which remain intact. Mr. Culver reviewed General Fund and tax revenues, noting that sales tax revenues were down 17% from the previous year. He further discussed the Sewer Enterprise Fund, golf operations revenues, and the Water Enterprise Fund which has a negative variance reflecting the need to discuss future rate adjustments. Councilmember Thorne said over the years he has discussed with staff the possibility of performing benchmarks outside of the realm of the City and questioned its status. Mr. Culver said staff is working to develop metrics within the forecasting model to include revenues per thousand in population, as well as the percent of total revenues held in reserves. Councilmember Thorne suggested that review of the three -year running average of various major expense buckets relative to the same three -year running average of revenue streams would identify trends and highlight which buckets are outgrowing the revenue stream. He stated that wages and salaries cannot increase forever and at some point will become unsustainable. The City has done a tremendous job of managing its finances but this analysis would be more useful than comparing the City to outside sources, and Mr. Fialho agreed. Councilmember Sullivan referred to the General Plan update, stating that the City committed to creating a long -term fiscal forecast. He acknowledged the difficulty of doing so in this turbulent economy and asked when that could be expected. Mr. Fialho confirmed that it is still a Council priority but it is parked for the time being because of the economy. Staff is focused on budgeting more on a quarterly basis as revenue assumptions have been changing so rapidly. He explained that it is also somewhat dependent upon the Housing Element that will be constructed over the next year, as this helps fuel long -term growth within the City. Councilmember Sullivan said the short-term focus is acceptable for now, but cautioned that the economy may never return to what it was and this should be accounted for. Mr. Fialho said fortunately, Pleasanton is one of the few cities that had not dipped into its reserves and it is very fortunate to have such reserves at all. He noted that it comes at an expense, however, and that at the end of this fiscal year, there will be 35 open positions within the City ranging from library clerk to clerical staff to police officers. He said staff has attempted to strike a balance between leaving those positions open for short-term gains without impacting service levels. He worried that if the economy does not turn around in the near future the City could be in a position like most others and have to discuss layoffs, service reductions, and the use of reserves. City Council Minutes Page 10 of 13 December 15, 2009