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10. (A) Consider a resolution accepting the 2014/15FY Mid-Term Operating Budget Finance Director Wagner presented the 2014/15FY Mid-Term Operating Budget, which begins July 1, 2014 and ends June 30, 2015. She provided a Powerpoint presentation on the revised budget and recommended adjustments as they relate to the General Fund, Enterprise Funds, Internal Services Funds and Special Revenue Funds. She reviewed General Fund revenues, which are projected to increase $2.6 million over the previous estimate of $94.4 million. The majority of increases are in the areas of property tax, sales tax, hotel/motel tax and business license revenues and relate largely to an improvement in the economy and upward trend in assessed values of both residential and commercial property. She presented a 10 year history of General Fund revenues, noting that both sales and property taxes have essentially returned to peak market levels. She then discussed General Fund expenditures, noting a budget increase here of $1.9 million to help offset the $2.6 million increase in revenues. Recommended adjustments include a net decrease in personnel costs due to a $1.4 million decrease in the annual required contribution for retiree medical, a decrease in projected medical premiums for next year, as well as increased management personnel, Pleasanton Police management and non-management personnel, and fire personnel. Additional personnel expenditure adjustments include an increase in the Police side fund payoff, which is currently down to about $5.4 million and is estimated to be paid off in the next four to five years. On the non personnel side, adjustments include increases in transportation and training related to annual repair and replacement, and an increase in contract service fees in a number of departments for ongoing services as well as several onetime studies. General Fund transfer adjustments account for the remaining offset of revenues and include the first repayment to internal services funds for the $6.8 million loan used to pay off the golf course certificates of participation. General Fund reserves, which started the year with a little over $13 million, are adjusted only to reflect a $270,000 increase in the 10% Reserve for Economic Uncertainties to reflect increased projects. This is taken from undesignated reserves, which will end the year at $3.3 million. Ms. Wagner reviewed the Water Operations and Maintenance Fund, which is now expected to experience a decrease in revenues related to the current drought and an offsetting decrease in expenditures. The fund balance is expected to close at $6.4 million and only slightly less than staff's goal of maintain a $6.5 million balance. In addition to a $2.9 million reduction in revenues and the offsetting decrease in purchases from Zone 7 staff anticipates a decrease in retiree medical contributions and medical premium costs, increased personnel costs for one new employee, and in increase in public relations advertising costs. This increases the net projected loss for the Water Fund from $42,000 to $125,000. The Sewer Fund remains fairly static with a beginning and ending balance of approximately $3.8 million. Adjustments include a decrease in revenues, which are a direct reflection of water conservation efforts, a decrease in retiree medical contributions and medical premiums, and the addition of one employee to be shared equally between the Sewer Fund and Storm Drain Fund. Net projected income to the fund decreases from $100,000 to $43,000. The Golf Course Operating Fund also remains relatively static, with no change to revenue projections. Expenditures are projected to increase slightly due to maintenance costs as well as a modest cost of living increase for managers. Net income to the fund is reduced from $369,000 to an anticipated $313,000, which will be transferred to the General Fund for loan repayment. Ms. Wagner stated that staff would return to the Council in November to report on actuals for the 2013/14FY, in February 2015 to review the auditor's report and then again in March 2015 with a midyear review of the Mid-Term Budget. City Council Minutes Page 6 of 14 June 17,2014