TO: The Honorable Mayor and City Council Members

THROUGH: Robert S. LaSala, City Manager

FROM: Mary J. Bradley, Director of Finance

SUBJECT: Council Member Fowler's Proposals for Budget Action

Council Member Fowler’s memorandum regarding proposals for budget action dated June 12, 2003 contained two items to which I would like to respond. The first is the recommendation regarding "set aside" amounts and the second is the proposed service restorations.

Council Member Fowler has proposed that the two set asides for City Space Issues and Fiscal Uncertainties be converted from ongoing expenses to reserves. He is suggesting that we establish each reserve at $1 million. Ongoing funds beyond this level would be available as savings to substitute for budget reductions. Council Member Fowler has estimated that this action would equate to about $555,000 a year in savings.

After discussions with Council Member Fowler, staff has analyzed the effects of this proposal on the General Fund Long Term Financial Plan and calculated an annualized amount that would grow with inflation. This is the method that was used to value the capital project reduction package in the 6-Point Action Plan. This annualized amount begins at about $357,000 and grows at 3% throughout the 20-year plan.

The City Manager and I have discussed Council Member Fowler’s proposal and, while it is a legitimate policy choice, the City Manager believes that the change would leave the Council without a modest amount of funds to address unforeseen necessities and/or unanticipated and necessary policy issues.

Council Member Fowler’s memorandum proposes that the funding reductions he has identified be used to restore services in the Departments of Public Safety, Public Works, and Parks and Recreation. Staff has updated the restoration amount on Table 2 and included a status of the reduction where applicable.

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