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Ms. McGovern questioned the projections and asked if the City was balancing its budget based on projected income and revenue. Ms. Rossi responded by stating that the City has projected an increase in revenues and staff feels these projections are not aggressive or conservative. Most of the City's revenue is derived from property taxes and with property taxes staff has a better handle on the growth rates then other revenues. Staff believes the ,~% projection is not out of line and it is probably a little conservative. The City has in place measures should revenues not meet expectations. The budget is reviewed every quarter and staff returns with updates. Staff will return next spring with an update on the second year of the two-year budget that is being presented tonight and that will eventually be adopted. Ms. McGovern asked what pement of the overall budget are actual projections? Mr. Fialho said that for every revenue source, the City is expecting a projected increase. Beyond that, everything in the operating budget is a projection. It is a projection from the standpoint that staff cannot anticipate what will happen next year. History shows that the City expects to receive a certain amount, and drawing that baseline on history and going forward, staff expects a marginal increase between 5-9% on the general fund side. Ms. McGovern asked if the City has the necessary money set aside to cover the costs of PERS if it continues in the pattern it is in now? Ms. Rossi said staff is recommending that the City put its normal cost in every year, and what is reflected in the budget is far more than normal costs. Ms. McGovern wanted to know if it meant that no matter what the PERS costs would increase in the next two years the City would have the money to cover it. Ms. Rossi stated that is not the recommendation, for example in years where PERS rates were less than normal, the City would budget the normal rate and set the excess aside, but the City took those dollars and used them for other purposes. The suggestion for the future is to not only budget the normal rate, but to set those funds aside so in years where the PERS rate exceeds normal, the City has those dollars to fund it. She said the City is already in a situation where the PERS rate exceeds the normal. Ms. McGovern wanted to know what the City calls normal costs? Mr. Fialho said normal costs for miscellaneous is 91~%, which is 9Y2% of payroll on the miscellaneous side. For pubic safety it is about 15-16%. Currently the City's current rates exceed the normal costs and in good times if the rates ever dip below normal costs, the Economic Vitality Committee is suggesting that the City always budget the normal costs and set aside savings into a special reserve to offset years in which years rates exceed the normal costs, such as the next two years. Ms. McGovern questioned the $9.6 million salary increases of PERS and benefits costs over the next two years. City Council Workshop 8 06/08/05