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" . -, projections. He said the projected surpluses for the out years are within 1 % of General Fund revenues, "so if we hit a rough spot. .. if we have a decline in our major General Fund revenues, just a 1 % drop in overall revenues and these surpluses would be cut in - half." City Manager Everett said that finance directors do not like to project surpluses. If deficits are projected and the city ends up with a surplus, everyone is happy. But if surpluses are projected and the economy takes a turn for the worse and a deficit ensues, everyone is quite unhappy. He said "there is something in the genes of a finance director, not to show you pluses, because (they worry) 'what if they spend it and I was wrong!"'. Everett said that in the past when deficits were projected, "everyone said you are crying wolf, you are crying wolf... but we stood behind those figures and said 'That is the best we can do.' Now the best we can do is, we are showing pluses, and we are going to stand behind them." Everett said that if the courts rule against NPDES funding through a parcel tax, "it would take out $300,000" ITom the General Fund and that would have a major impact on the proposed budget. He added that it was important to look carefully at all the assumptions and think about what the courts might do when considering the proposed budget. Finance Director Ponty said that "the sales tax (projection) assumes that the $1 million increase... in the Business to Business section... we are assuming that we will keep that, and it won't go away.... We really can't say with real certainty whether that will or will not be here, or whether it will increase or decrease.... We are also assuming a sales tax 3.5% growth." - The next overhead showed General Fund - 5 Year Projections - Changes ITom June 1996 to January 1997 which listed the category changes resulting in a proposed $59,000 deficit in FY 1997/98, a surplus of $868,000 in FY 1998/99, a surplus of $476,000 in 1999/2000, and a surplus of $501,000 in FY 2000/01. Finance Director Ponty detailed the changes in expected revenues. The last overhead showed Projections as of February 1997 which demonstrated the effect of lower inflation and expenditures increase at different rates. It listed the impacts a 2.5%, 2.75% and 3.00% annual increase in expenditures would have on the projected balances. City Manager Everett suggested Council refer to these projections when balancing pay increases "with your desire to do other things in terms of staffing. You can see very clearly what your options are." He said that new data with the 1996 4th quarter information would be provided in May. He added that at this time, staff considers the FY 1997/98 budget as balanced. Councilman Claire asked staff to provide an updated list of these impacts when Council begins consideration of staffing levels. MEMO 2/8/97 - ADJOURNED REGULAR COUNCIL MEETING FEBRUARY 8,1997 MINUTES MINUTE BOOK NO. 55 PAGE 5 Page No. l35