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revenue projections for the fiscal year totaled $89.7 million, balanced by $89.7 million in expenditures. At mid-term, staff is projecting an increase of almost $1.6 million in both revenues and expenditures for a total budget of $91.3 million. Additional revenue sources include an increase in Development Service Fees Hotel/Motel Tax revenues, Business License Fees, Recreation Fees, Document Transfer Tax revenues, franchise fees and $250,000 from a settlement with Caltrans, all of which is offset by decreased Sales Tax revenue projections amounting to nearly $500,000. Vice-Mayor Cook-Kallio asked what might explain a decrease in Sales Tax revenues when other revenues sources are on the rise. Ms. Wagner explained that it is largely due to the Vanstar settlement payments, which total nearly $450,000 for the fiscal year, as well as the permanent diversion of a good portion of "business to business" tax revenues to the County wide pool. Over the last 3-4 years, Pleasanton has lost nearly $2 million in Sales Tax revenues to the county pool and received only $160,000 back. Vice-Mayor Cook-Kallio asked and Ms. Wagner confirmed that it is not necessarily an indicator that people are not shopping in Pleasanton. Ms. Wagner reviewed adjusted expenditures, which include 646,000 previously approved by the Council for the East Pleasanton Specific Plan, increased non-personnel costs offset by a decrease in personnel costs, PG&E costs for building and streetlights, outside attorney fees for litigation, additional human resource costs, and an update to the Economic Development Strategic Plan that is already underway. The net result is an increase in available resources of $722,000 which staff is recommending be placed into contingency funds until year end. She presented a comparison of personnel and non-personnel expenditures, noting the fiscal policy adopted by the Council to reduce personnel costs to no more than 70% of the total operating budget. Over the 13 year history shown, personnel costs have ranged from a low of 63% to a high of almost 80% in 2010. Staff is projecting personnel costs to total 76% of the current operating budget. Current efforts to reduce personnel costs include the evaluation of every position as employees retire or are terminated, the two tier pension and retiring medical benefit program adopted in 2012, and ongoing negotiation of expiring labor agreements to include employee payment of the Employer Paid Member Contribution. Staff is currently negotiating with PCEA to have its members to pick up the remaining 4% of the EPMC, with the goal being that employees pay the full 8% EPMC by July 1, 2013. General Fund Reserves started the year at $25.3 million and are recommended to end at the same, with a slight adjustment in allocation to increase the 10% Reserve for Economic Uncertainties relative to increased revenues. Ms. Wagner reviewed the Water Maintenance and Operations Fund which is projected to end the year at $6.4 million, $400,000 higher than originally anticipated. Revenue increases include federal and state funding for the recycled water program and Castlewood Service Area fees. Expenditures include an offset to the Castlewood Service Area fees, increased personnel costs resulting from retiring medical contributions, increased non-personnel costs for the recycled water program and increased Zone 7 service rates. She noted that the City continues to pass through all Zone 7 increases to the ratepayer but explained that revenues were initially overestimated and expenditures underestimated. Revenues from the recycled water surcharge are also being transferred from the operating fund down to the Water Repair and Replacement Fund to support, capital improvements rather than operations. The Sewer Fund is looking at a $400,000 decrease in the projected ending balance, primarily due to a miscalculation of revenues and expenditures for the DSRSD pass through rates. Staff is proposing to increase revenues for the Castlewood Service Area contract but this is offset by increased personnel costs. City Council Minutes Page 3 of 13 March 19, 2013