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raising existing City fees /taxes to market level and fighting the State. He further outlined the proposed calendar for addressing both the short term FY 02/03 deficit and the long term FY 03/04 and FY 04/05 deficits. City Manager explained that the State plans to take local revenues to balance the State budget. He delineated how the State has caused a normal difficult economic downturn to become a financial disaster. Firstly, when boom revenues occurred the State applied them as though they would be continuing revenues spending them on continuing and drastically increased State expenditures. Secondly, a tremendous amount of one time revenues consisting of capital gains and stock options that produced tax revenues represented 6% of the entire State budget, and approximately 25% during boom times. The Department of Finance was clearly aware of this phenomenon and the State continued to spend on ongoing recurring expenses and cut taxes with no plan. He further explained the proposed cut of the VLF that goes to cities and counties. He stressed the effects of such a cut and urged people to contact the Governor's office. Public Comment: Rudy Luca stated that he is concerned about the one subject of reducing expenditures. He stated that with as much as over two- thirds of the City's expenditures going to salaries and benefits, some salaries have been increased dramatically over the last 1 -1/2 months — City Clerk, City Manager and City Attorney. He asked which employees will be affected by any layoffs and what the loss of services will consist of. City Manager Everett invited Mr. Luca to attend the March 10 Council meeting where those specifics will be considered. Kate Eckhardt supported Mr. Luca's comments and requested a response to the roll back of salaries. Mayor Claire stated that the decision was made at a previous meeting, but that the policy is to pay employees at a median rate of surveyed cities. The salaries granted to the three City Council appointed employees were only at the median in the area. Council Members made various comments such as both increasing the revenues and future economic development in order to not be forced to cut services and that staff is taking a very prudent approach. Vice Mayor Ira gave more background on the VLF and encouraged that the City be proactive in communicating with the Governor's office. He stated that Senator Sher is being very strong advocate for the cities. REGULAR CITY COUNCIL MEETING FEBRUARY 3, 2003 PAGE 4 MINUTES MINUTES Book No. 59 Page No. 375