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Vice Mayor Brown asked about the cost of commercial haulers. Mr. Smith explained that it can vary considerably based on frequency and volume within each neighborhood but that he has heard prices ranging from $35 to $100 per month. Vice Mayor Brown requested an update on recycled water to Hacienda Business Park and the sports park. Mr. Smith said they are still waiting on the state. He explained that staff has been proactive and emailed the Historic Preservation Office as well as asked the head of the state program to step in on the city's behalf. Mayor Thorne noted there were no speakers to address the Council. MOTION: It was m/s by Pentin /Narum to continue the local Emergency Declaration and Stage 3 Mandatory Reductions of 25 %. Motion passed by the following vote: AYES: Councilmembers Brown, Narum, Olson, Pentin, Mayor Thome NOES: None ABSENT: None 26. Review of the Two -Year Operating Budget for Fiscal Years 2015 -16 and 2016 -17 and the Four Year Capital Improvement Program for Fiscal Years 2015 -16 through 2018 -19 City Manager Fialho introduced the item, calling the Council's attention to 2 points on which staff will be looking for feedback. He explained that one very prominent item in this budget message is the use of approximately $16.7 million in reserves that staff is recommending be put towards the city's unfunded liability which, in doing so, will reduce the city's obligation by 11% and result in approximately $1.5 million in savings annually. If adopted, the annual savings would be redirected to the Capital Improvement Program (CIP) to augment what is being projected over the next 4 years and retum that fund's contributions back to prerecession levels. The other issue reflected in the staff report relates to the allocation and use a portion of the approximately $4.5 million Auf der Mauer affordable housing mitigation payment. Several months prior the City Council allocated the minimum contribution of approximately $1 million into the Affordable Housing Fund and directed staff to reserve the remaining $3.4 million to either advance affordable housing or augment capital improvements at some point in the future. The condition is crafted such that the funds are not received from the development until occupancy is achieved, which staff now believes to be about 12 to 24 months out. Staff is requesting that the Council consider how those funds should be used or defer that action until the funds have actually been received. Director of Finance Olson presented the Two -Year Operating Budget for Fiscal Years 2015 -16 and 2016 -17. She provided an overview of the General Fund revenue trends, which have steadily increased following a significant dip in FY 2009 -10. Two -year revenue projections are $106.5 million in FY 2015- 16, up $6.1 million from the previous fiscal year, and $110.2 million in FY 2016 -17. 84.3% of General Fund revenues are comprised of taxes, predominately Sales Tax which is projected to increase by 8.3% in FY 2015 -16 and Property Tax which is projected to increase 6.7 %. A considerable portion of Property Tax revenue increases relate to the 2% increase from Proposition 8 reversals, which are expected to disappear in FY 2017 -18. General Fund expenditures are comprised of Police (27 %) and Fire (16 %), followed by General Government, Community Development and Community Services Expenditure categories include Personnel at 75% followed by Materials and Supplies which includes contractual services, Repairs and Maintenance, Transportation and Training. Personnel costs are dominated by salaries ($44.2 million) followed by CaIPERS, Other Postemployment Benefits (OPEB), other medical benefits and miscellaneous expenses. Total General Fund expenditures are projected to increase 4.8% in FY 2015- City Council Minutes Page 12 of 18 June 2, 2015