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City Manager Everett said the worst case scenario would be a loss of $400,000 to $550,000 to the proposed budgets if cities lose several court rulings. He said cities will know more in 9 to 12 months. In response to Council questions, Everett advised that the federally mandated NPDES storm water program will cost the City a total of $469,000 with $300,000 ITom the General Fund. City Attorney Schricker said "there will be impacts. The problem is knowing when, how and how much. We have to take it on an incremental basis as each revenue source is looked at to determine what the effect will be. The NPDES matter is probably the most immediate one, and essentially that has been set up as a charge which would be subject to a vote under Prop 218 on an ownership-wide basis. Whether you style it as an assessment or a charge, we had set it up as a charge to be collected on tax rolls, the City has an ordinance which is in effect, nevertheless Proposition 218 does appear to have an affect on it.... One of the unknowns is, is storm water the same as sewer, and could it be construed as sewerage service. And is sewerage service exempt under Prop 218. One school of thought says it is. I take a less liberal view in that regard because of some other provisions of Prop 218 that say that.... it does affect sewerage charges. I'm willing to go so far as to say '{ think that storm water and sewerage can be combined in the definition of sewerage service' .." This is all interpretation.... as there has been no judicial help yet." The fourth overhead showed Five Year Financial Projection, Specific Assumptions. Finance Director Ponty advised there have been no major changes since the budget presentation last year, except that expenditures would increase 2.75% per year instead of2.5%. The CPI was 2.3 % last Spring and in November it was 3%. In response to Council questions, Finance Director Ponty said the 2.75% is due to inflation. City Manager Everett said the proposed figures "assume you hold pay increases, which are 60% of that, to approximately 2.75% as well. That's not a policy. We had to make some assumptions" which can be changed by Council. In response to Vice Mayor Howard's concern regarding the assumption that there will be no staff increases, City Manager Everett explained that these assumptions were merely used as a base for the proposed budget, and are subject to the Council's policy decisions. The next two overheads showed Projections as of June 1996 and the current Five Year Projection. Finance Director Ponty described the changes ITom last year's projected deficits beginning 1997/98 through 2000/2001, and the current projected net increases ITom 1998/99 through 2000/2001. Ponty said increased building fees impacted the projections in the budget. Director Ponty said that "each 1 % of General Fund revenue is equal to about $400,000." He advised that although the deficit/surplus figures appear quite dramatic, they are based on very small percentage changes in revenue and expenditure ADJOURNED REGULAR COUNCIL MEETING MINUTE BonK NO. 55 FEBRUARY 8,1997 MINUTES PAGE 4 Page No. 134