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BACKGROUND The proposed budget is the City's comprehensive financial plan for all programs and services for FY 2021/22 and FY 2022/23. Staff is recommending that the Operating Budget be adopted as presented at the Council meeting on June 1, 2021. DISCUSSION The Operating Budget maintains core service levels and addresses new program and project initiatives prioritized by the City Council in the Two-year Work Plan. In addition, the Operating Budget' allocates a total of$18 million to the City's Capital Improvement Program (CIP) some of which funds projects included in the Two-year Work Plan. Pleasanton's economy faltered during the pandemic but is showing signs of improvement. The unemployment rate stood at 4.9 percent through March 2021, a decrease from April 2020 when it was 10.5 percent and the median home price is $1.3 million or 18 percent greater than the prior year. Fortunately, there are a few housing and commercial projects planned over the near future that will increase the City's property, sales, and transient occupancy tax revenues that will position the City to recover from the pandemic's effect on the City's revenues. The City is also receiving an $8.5 million allocation from the American Rescue Plan that will used to balance the FY 2021/22 and 2022/23 budgets. The City's FY 2021/22 General Fund revenues reflect a mixture of projected increases in property taxes, hotel taxes, business license taxes, recreation revenues and other revenues that results in an overall eight percent increase in General Fund revenues over the FY 2020/21 Mid-year Budget. Operating Budget Overview The Operating Budget as presented is balanced. In addition, the General Fund reserves will be $31 million by 6/30/2022 which is equal to 24.7 percent of operating expenses. The City's reserve policy requires reserves equal to a minimum of 20 percent of operating expenses with a target of 25 percent. Overall, the Operating Budget is projected to be $195.1 million in FY 2021/22 and $205.9 million in FY 2022/23 which represents a 3.4 percent increase from the FY 2020/21 Mid- year Budget and another 5.5 percent increase from the FY 2021/22 budget. There are several increases in the FY 2021/22 and FY 2022/23 operating budgets related to salary and fringe benefits pursuant to adopted labor agreements, increased temporary salary budget in the Library and Recreation Department related to reinstating programs paused during the pandemic, as well as increased PERS pension contribution rates. A more detailed discussion of the proposed two-year Operating Budget is contained in Exhibit A, Budget Summary. Includes transfers out from the General Fund, Sewer Fund, Storm Drain Fund and Water Fund operating budgets. Page 2 of 5