CITY OF BELLEVUE CITY COUNCIL. Summary Minutes of Extended Study Session. 6:00 p.m. Bellevue, Washington

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1 CITY OF BELLEVUE CITY COUNCIL Summary Minutes of Extended Study Session October 23, 2006 Council Chamber 6:00 p.m. Bellevue, Washington PRESENT: ABSENT: Mayor Degginger, Deputy Mayor Chelminiak, and Councilmembers Balducci, Davidson, Lee and Noble Councilmember Marshall 1. Executive Session Deputy Mayor Chelminiak called the meeting to order at 6:00 p.m. and announced recess to Executive Session for approximately one hour to discuss two items of potential litigation, two items of property disposition, and one item of pending litigation. The meeting resumed at 7:08 p.m. with Mayor Degginger presiding. 2. Oral Communications (a) (b) (c) (d) (e) Kent Phillips, Bellevue Civic Theatre, expressed support for the Performing Arts Center Eastside (PACE). He noted the need for a larger performance space on the Eastside. Michael Monroe, Bellevue Arts Museum Executive Director, reported that 85,000 people have visited the museum during the past 16 months and 16 diverse exhibitions have been presented. He reviewed programs for children, teens, and adults at the museum. Angela Sutter spoke in support of the Bellevue Arts Museum and asked the City to provide financial support. Keith Baldwin, President of the Bellevue Arts Museum Board, noted the museum s many exhibitions, programs and public events, as well as the availability of meeting rooms for community groups. He requested financial support from the City. Gary Saaris expressed appreciation for the Council s work to make Bellevue a good place to live. He asked Councilmembers if they have reviewed the U.S. Mayors Climate Protection Agreement, which he supports. 1

2 Mayor Degginger said the Council has asked staff to provide information on the U.S. Mayors Climate Protection Agreement by the end of the year. (f) Leslie Lloyd, Bellevue Downtown Association (BDA), thanked Council and staff for their hard work to advance the NE 10 th Street half-interchange project. She noted 28 projects currently in downtown Bellevue, which will generate money for the City over the next 20 years. She encouraged Council to: 1) Preserve and foster the community s economic vitality, 2) Implement the full Downtown Implementation Plan, 3) Act on opportunities to acquire land for parks and open spaces, 4) Initiate needed projects as soon as possible to avoid inflationary costs, 5) Use bond financing as a strategy to leverage dollars to achieve projects faster, and 6) Maintain the vitality of the downtown. 3. Study Session (a) Council New Initiatives Mayor Degginger inquired about a parking lot filled with large commercial trucks in front of the Fox Sports building in the Eastgate area. City Manager Steve Sarkozy said staff will report back on the issue. (b) NE 10 th Street Extension Project Motion to award Bid No to Scarsella Brothers, Inc., as lowest responsible and responsive bidder, in the amount of $7,114, for construction of Stage 1 of the NE 10 th Street Extension (112 th Avenue NE to 116 th Avenue NE) project. (CIP Plan No. PW-R-149) [Discussed with Council on October 9, 2006.] David Berg, Assistant Director of Transportation, requested Council action to award Bid No to Scarsella Brothers, Inc., for Stage 1 improvements (From I-405 ROW, east to 116 th Avenue NE) of the NE 10 th Street Extension project. This will provide the primary access for Overlake Hospital Medical Center s new South Tower and the Group Health development underway. Mr. Berg commended staff in Planning and Community Development, the Utilities Department, and the Transportation Department including Rick Logwood, Project Manager, for accelerating this project. The low bidder for this project is Scarsella Brothers. They have not provided work for the City but have completed projects for the Washington State Department of Transportation (WSDOT) and King County. The bid was approximately 14 percent below the engineer s estimate. The project is scheduled for completion by the end of April Responding to Deputy Mayor Chelminiak, Mr. Berg said the engineer s estimate was developed jointly by the City and WSDOT. Responding to Councilmember Lee s inquiry about access impacts to the shopping center east of the hospital campus, Mr. Berg said there was little flexibility in addressing this situation. The alignment of NE 10 th Street was coordinated with both Overlake Hospital Medical Center and 2

3 Group Health Cooperative based on constraints related to the placement of buildings. Signalized access to the Design Market shopping center will be modified to allow protected movements of more cars at one time into the center. Councilmember Balducci moved to award Bid No to Scarsella Brothers Inc., and Deputy Mayor Chelminiak seconded the motion. Ms. Balducci noted that staff has been working closely with the owners of Design Market for approximately one year to address their concerns. She feels it is important, however, to move forward with the project as designed. The motion to award Bid No carried by a vote of 6-0, with Councilmember Marshall absent. Mayor Degginger noted an amendment of the agenda to take Item 3(f) next. (f) Updates to the Transportation Facilities Plan, Impact Fee Project List, and Impact Fee Schedule [Council action is scheduled for December 4, 2006.] Transportation Director Goran Sparrman opened discussion regarding the biennial update of the Transportation Facilities Plan (TFP). Kris Liljeblad, Assistant Director of Transportation, said the Draft Environmental Impact Statement (DEIS) on the proposed TFP was published on October 19 and is available for public review and comment. The comment period ends on November 18, The TFP is a 12-year, revenue constrained program that includes projects drawn from long-range plans such as the Downtown Implementation Plan (DIP) and Factoria Area Transportation Study (FATS). The impact fees are based on the TFP. According to Bellevue City Code and.080, the Transportation Commission is responsible for ensuring transportation infrastructure keeps pace with development by updating the TFP. Mr. Liljeblad said the impact fee program began in 1990 with adoption of the TFP. The program created a transparent mechanism to collect fees to provide a portion of funding for improvements necessary to mitigate the cumulative impacts of new development. The fee assessment was designed to be fast and predictable for developers, maintain neighborhood equity, and keep fees competitive with other jurisdictions. Council direction in 1989 encouraged an average impact fee rate not to exceed $3.00 per square foot (based on 1989 dollars). This equates to $5.35 per square foot in 2006 dollars. However, the City s impact fees have not reached that level. Uses exempt from impact fees include child care services, affordable housing, public transportation facilities, public parks and recreation facilities, privately operated nonprofit social service facilities, public libraries, public educational institutions, and nonprofit hospitals. 3

4 The current Impact Fee Schedule was adopted in November 2004, when impact fee areas were realigned with the City s Mobility Management Areas (MMAs). The current fees are the lowest in the history of the program at $1.14 per square foot. The historical average is $1.98 per square foot. Lower transportation capital spending in recent years has contributed to the lower impact fees. Mr. Liljeblad described options for handling impact fees going forward. One is to modify the cost of projects included on the Impact Fee Project List by including costs funded by non-local sources (e.g., state and federal grants) and/or by including total project costs in impact fee calculations. Another approach is to maintain recently completed projects on the Impact Fee Project List because they continue to benefit development in the areas they serve. Examples include Access Downtown and the NE 29 th Place Connection. Mr. Liljeblad reviewed three possible scenarios for updating the Impact Fee Project List, resulting in impact fees ranging from $1.76 to $4.21 per square foot. Total project costs in the existing TFP are $174.2 million. Capacity projects represent approximately 66 percent of the total amount, and non-capacity projects represent 34 percent. The proposed TFP reflects 60 percent of funds to capacity projects. Mr. Liljeblad reviewed charts comparing impact fees for different uses (i.e., retail, office, singlefamily, multifamily) with other cities under the three alternative scenarios. Bellevue s impact fee rates for the three scenarios fall within the low to middle range of fees for the cities compared. The Transportation Commission approved a motion on October 12 supporting Scenario 3. The Commission has offered to host a public hearing, on November 9 at the earliest, pending Council direction. Mr. Liljeblad reviewed the following proposed schedule to continue review of impact fees: October 30 City Council Study Session PCD to present updates to Development Services Fees and Rates. November Transportation Commission to hold public hearing. November Transportation Commission finalizes fee update recommendation. December Council adopts the TFP, Impact Fee Project List, and Fee Schedule. Responding to Dr. Davidson, Mr. Sparrman said impact fees collected must be spent on a TFP project within six years, or the money is refunded to the developer. Responding to Councilmember Lee, Mr. Liljeblad said past practice is to remove a project from the TFP after it is completed. However, the project continues to provide the benefit of enhanced capacity. Under Scenario 3, completed projects would remain in the TFP for up to one full TFP cycle (12 years) after completion. Councilmember Balducci observe that the recommended approach for future impact fees is outcome based, rather than based on principles established to better match the impact of 4

5 development to the cost of the transportation system. She would like to better understand the rationale behind the recommendation for increasing impact fees. Responding to Deputy Mayor Chelminiak, Mr. Liljeblad said the current TFP was adopted in The final EIS for the NE 10 th Street Extension project was not completed until February 2005 and is now eligible for inclusion in the TFP. Mr. Chelminiak spoke in favor of the Transportation Commission holding a public hearing on impact fees. Mr. Noble supports holding a public hearing as well but questioned whether the intent is to take comment only on Scenario 3. He echoed Ms. Balducci s interest in the rationale for changing impact fees. Mayor Degginger concurs with holding a public hearing. He questioned the reason for raising impact fees. Is it a cost recovery goal for the TFP? He asked whether other cities include the costs of grant funding in their TFPs, and if so, why. Mr. Degginger questioned the length of time that other cities keep projects in their TFPs. With more residential development in the downtown, would it make sense to make non-motorized projects subject to impact fees? Mr. Liljeblad said staff has conducted extensive research on other cities, and the recommendation of staff and the Transportation Commission is largely based on practices in other cities. NE 4 th Street is on the proposed TFP list. Non-motorized facilities are a separate issue because impact fees have historically been tied to capacity projects. Mr. Lee expressed an interest in exploring whether non-capacity projects should be included in the TFP. He concurs with Ms. Balducci s question about whether a cost recovery objective is reflected in impact fee principles. Ms. Balducci questioned the potential for including projects such as the requested sidewalk project in the Somerset area in the TFP. Mr. Sparrman confirmed that staff will arrange for a public hearing before the Transportation Commission and return to Council in December for continued discussion. (c) Regional Issues Diane Carlson, Director of Intergovernmental Relations, recalled that the Regional Transportation Investment District (RTID) was directed by the state legislature to establish a ballot package with Sound Transit to be presented for a vote in Last January, RTID staff presented to Council a Blueprint for Progress plan, which was originally intended for a 2006 ballot measure. The total for the roads component of the package was $7.2 billion, including $4.5 billion for projects in King County. Project cost estimates have increased since earlier this year including costs for the Alaskan Way Viaduct and SR 520, as released recently by WSDOT. The RTID Board is currently seeking input on the package and will continue to work with Sound Transit over the next few months to develop a final package for voters. 5

6 Ms. Carlson noted the draft letter to the RTID Board in Council s desk packet articulating Bellevue s interests and priorities. Mr. Sparrman reviewed I-405 improvements funded with a total of $1.5 billion in the RTID package, including projects under the Nickel (gas tax) Program and the Transportation Partnership Act. Additional project funds are allocated to the I-90 Two-way Transit/HOV project, SR 520 Bridge Replacement, and the Alaskan Way Viaduct. Bellevue RTID priorities include: I-90 Two-way Transit/HOV project, Widening of I-405 from SR 169 to I-90 to create a six-lane facility, Increasing I-405 capacity through downtown Bellevue (NE 10 th Street Extension and Braided Ramps, added capacity between I-90 and SR 520, and NE 2 nd Street Interchange and Braids). Ms. Carlson clarified that the two I-405 projects currently in the Blueprint for Progress are the southbound braided ramp (SR 520 to NE 10 th Street) and two additional I-405 lanes south of I-90 to SR 169. These priorities are all addressed in the draft letter to RTID. Additional funding is needed for the I-90 project. Dr. Davidson expressed concern that the legislature requires a joint RTID-Sound Transit ballot measure, and voters must agree with both packages for approval. He feels Sound Transit should be a separate measure. Deputy Mayor Chelminiak feels the important message is to express support for a 2007 ballot measure, without necessarily explicitly stating support for a joint ballot measure. Ms. Balducci concurred. Mayor Degginger noted consensus that the letter articulate Council s commitment to a vote in 2007 without mentioning the specific nature of the ballot measure. Ms. Balducci suggested emphasizing the importance of the I-90 project. Councilmember Noble feels there is a danger that the RTID Board will reallocate I-405 funds to the SR 520 Bridge Replacement project. For that reason, he said it is particularly important that Bellevue emphasize its support for I-405 projects. The Eastside Transportation Partnership (ETP) sent a similar letter to the RTID Board, with the addition of encouraging the State to take a bigger role in providing funding to increase capacity throughout the SR 520 corridor. The State has committed to rebuilding the Alaskan Way Viaduct, and ETP s position is that the State should make the 520 bridge an equal priority. RTID should then provide any remaining funds needed. ETP also expressed strong support for increased capacity to I-405 to address safety and traffic congestion. Mayor Degginger noted consensus with revisions to the letter as discussed. 6

7 Damon Diessner, Assistant Director of Utilities, provided an update on the WRIA 8 (Lake Washington/Cedar/Sammamish Watershed) interlocal agreement, which will lay the foundation for negotiating for federal assurances for permitting, liability protections, and funding toward salmon recovery strategies. The draft agreement was discussed with Council in June and then reviewed by the WRIA 8 Forum. The Forum has approved the agreement and it is out for ratification by the jurisdictions. Eleven jurisdictions have ratified the interlocal agreement to date. Staff will present the agreement for Council action on the October 30 Consent Calendar. Councilmember Davidson noted that the new interlocal agreement reduces watershed staffing from 4.5 full-time equivalent (FTE) staff to 3.5 FTEs. Mayor Degginger noted Council consensus in support of the interlocal agreement. Ms. Carlson referred Council to page 3-57 of the meeting packet for materials regarding the interlocal agreement for District Court services. She introduced Presiding Judge Harn and Judge Garrow from King County Courts as well as Michael Gideon, who represented the King County Executive s Office and was the lead staff person in establishing the agreement. Staff is seeking preliminary approval of the Municipal Court Services interlocal agreement with King County. Council was last updated on this issue in February. The current agreement for court services ends at the end of this year. Throughout 2005, contracting cities negotiated with King County a five-year agreement renewable for two additional five-year periods. The agreement includes a special provision for the City of Bellevue to terminate its contract obligations at the end of two years if agreement on a future facility is not reached with King County. The King County Council and several cities have approved the agreement. Two cities (North Bend and Snoqualmie) have chosen to contract with the Issaquah court. Ms. Carlson noted staff s analysis in the meeting packet [Page 3-69] reviewing two municipal court alternatives. Staff concluded that starting a new, separate municipal court would incur start-up costs for staff and equipment. Additionally, there is a lag in revenues during the first year of operation. Bellevue currently has a lease with King County for the use of the Surrey Downs court property, which also expires at the end of this year. Staff is working with King County to extend the agreement with timeframes that match the new interlocal agreement. The agreement obligates Bellevue to talk to King County about the future facility. King County is conducting its own facility analysis but has not worked on the Surrey Downs facility other than providing a broad estimate of costs for building a new court facility. There must be an 18-month notice to terminate the facility provision, and the earliest date the City could give notice is July 1, Ms. Carlson said the agreement was delayed due to the redistricting process over the spring and summer. A decision was made to remove a judge position from the East district. The current judge with the Bellevue District Court, Judge Yates, is retiring this year. The workload warrants two judges. 7

8 Staff recommends the City accept the interlocal agreement, which allows the municipal court to continue functioning. If a city wishes to starts its own municipal court, it typically takes approximately one year to get one up and going. Responding to Dr. Davidson, Ms. Carlson said Bellevue and other cities continue to seek authority to form their own court. The issue has been taken up by the Supreme Court but no decision has been reached. Dr. Davidson expressed support for staff s recommendation. Mayor Degginger feels the Council should seriously consider leaving the King County court system. He is disappointed in the County s lack of commitment to providing good service to the East district when 60 percent of the District Court caseload is in the East district. The proposed interlocal agreement does not give Bellevue much influence in selecting judges, which could result in judges who are not familiar with the City s probation and related services. Mr. Degginger agrees with renewing the contract now but planning for an exit strategy in the budget process. Deputy Mayor Chelminiak said the Probation Board is also concerned about current judges and their lack of familiarity with Bellevue s probation system, electronic home detention program, and overall approach to the justice system. He agrees with fellow Councilmembers, however, that the City should approve the interlocal agreement at this time. Councilmember Balducci noted the urgency of initiating planning for creating a separate municipal court, if that is what Council chooses. Mayor Degginger advocates moving in that direction and feels service levels with King County District Courts will continue to decline. Ms. Carlson said staff will return for further discussion with Council in November. Moving on, Ms. Carlson referred Council to page 3-79 of the meeting packet to discuss appointments to regional and countywide committees and forums. A list of committees is provided on page 3-82 of the packet. Bellevue has autonomous seats of most of the committees with the exception of the King County Charter committees (Regional Policy Committee, Regional Transit Committee, Regional Water Quality Committee); the Regional Law, Safety, and Justice Committee; and the King County Board of Health. Ms. Carlson noted page 3-86 providing the Suburban Cities Association Board s policies regarding appointments to regional committees and boards. The SCA is requesting nominations for appointments by the end of October. Ms. Carlson noted that the Regional Law, Safety, and Justice Committee is currently reviewing its purpose and mission. Police Chief Jim Montgomery periodically attends the meetings. Responding to Mayor Degginger, Dr. Davidson indicated his interest in remaining liaison to the Regional Water Quality Committee, and Mr. Noble would like to continue his involvement with the Regional Policy Committee. Councilmember Lee will remain liaison to the Regional Transit Committee. 8

9 Responding to Deputy Mayor Chelminiak, Ms. Carlson said there are representatives from Issaquah and Lake Forest Park, as well as an alternate, on the Board of Health. Ms. Carlson noted the state legislative update on page 3-87 of packet. She invited continued input from Councilmembers, and noted staff will return in late November with a final draft of the 2007 State Legislative Agenda and Statement of Policy for Council approval. At 9:04 p.m., Mayor Degginger declared a brief break. The meeting resumed at 9:09 p.m. (d) Human Services General Fund and 2007 Community Development Block Grant (CDBG) Recommendations [Council action on the CDBG application is scheduled for November 6, Action on general Human Services funding is scheduled for December 4, 2006.] Parks and Community Services Director Patrick Foran opened discussion regarding the Human Services Commission s recommendations for Human Services General Fund and 2007 Community Development Block Grant (CDBG) funds. He noted the challenges of the instability of regional funding and Bellevue s changing demographics. Cameron Parker, Human Services Grant Coordinator, explained that Bellevue s human services are funded in part through the federal CDBG program. He reviewed funding trends from both the CDBG program and U.S. Housing and Urban Development since 1997, which reflect significant decreases in revenue since Mr. Parker said the City s buying power in 2007 will be less than it was in 1993 based on inflation. Despite CDBG revenue decreases in 2006, the City was able to maintain funding for core ongoing programs. Funding for nonprofit facility acquisition, construction, and rehabilitation was discontinued, however. For 2007, the Human Services Commission is recommending reduced funding for ARCH (A Regional Coalition for Housing) and the City s Home Repair Program. It further recommends utilizing $20,000 in the Human Services General Fund to backfill two human services programs previously supported by CDBG funds. The other revenue source is the Human Services General Fund, which consistently receives requests exceeding available funding requests exceed base funding by 30 percent. Redmond s Human Services Fund has requests exceeding funding by 44 percent, and Kirkland s requests exceed funding by 62 percent. The human services funding formula includes a base, inflation adjustment, and population increase adjustment. The population increase (0.6%) adds $11,000 to the Fund. Mr. Parker reviewed key trends in the community: Living wage jobs are harder to find. Access to affordable health care and health insurance is a challenge. The needs of older adults continue to increase. Bellevue is experiencing greater diversity. 9

10 Additional data indicates that: 8.4 percent of Bellevue households have incomes below the federal poverty level ($16,600 per year for a family of three). 31 percent of Bellevue households are foreign born, which adds complexity and costs to providing services. The 2006 annual cost of child care on the Eastside is $10,464, which is twice the cost of University of Washington undergraduate tuition. Emily Leslie, Human Services Manager, said total funding recommended by the Human Services Commission is $2.863 million ($1.9 million from General Fund and an estimated $935,000 from CDBG funds, the latter being a reduction of 12 percent from the previous allocation). Federal funds include program income generated by the repayment of loans from prior years and loan repayment income anticipated in Attachment A [Page of packet] summarizes human services funding recommendations. The 2008 amounts reflect adjustments for inflation over 2007 amounts. Recommendations for the use of CDBG funding are listed beginning on page of the packet and are divided into three categories: 1) Capital Projects, 2) Planning and Administration, and 3) Public Services. Attachment C [Page 3-163] provides details on additional investments requested by the Human Services Commission for 19 programs. This includes an expansion of nine currently funded programs and funding for 10 new programs. Total additional funds requested are $255,039 for 2007 and $263,200 for Attachment D [Page 3-171] lists the criteria used by the Commission to evaluate all 77 service applications received. Doug Hoople, Human Services Commission Chair, thanked Council for its ongoing commitment to the Human Services Fund and for providing adjustments related to both inflation and population growth. The Commission recommends continuing funding reflecting a three percent cost-of-living adjustment or in some cases less if that was what the agency requested. Increases above inflation are recommended for six ongoing programs including those providing housing stability, intervention and assistance to child care centers serving special needs children, affordable civil legal assistance, one-on-one mentoring for at-risk youth, dental services for lowincome Bellevue residents, and case management services for severely emotionally disturbed youth and their families. Partial funding is recommended for one new program, which is a homeless women s shelter in downtown Bellevue. Mr. Hoople noted the difficulty in developing recommendations for Community Development Block Grant (CDBG) funds, and they are based only on estimates of what the federal government will make available. A contingency plan for addressing potential increased or decreased funding is included with Attachment B in the meeting packet. Mr. Hoople reviewed Attachment C [Page of packet] describing requests for additional funding based on the Human Services Needs Update. An additional $255,030 is requested in 2007 for 10 programs not previously funded and for nine currently funded programs. The programs cover four service areas: 1) Immigrant and refugee assistance, 10

11 2) Homelessness, 3) Early childhood education and support for at-risk youth, and 4) Maintaining a safety net through critical programs. As liaison to the Human Services Commission, Councilmember Noble commended the Commission s hard work over many months. He noted they held public hearings to enable the Commission to thoroughly question applicants. Mayor Degginger thanked the Commission for its review of 77 funding applications this year. Councilmember Lee thanked the Commission for its work and for recognizing the growing need to address immigrant and refugee populations. He encouraged a continued emphasis on identifying and meeting the needs of these groups. Deputy Mayor Chelminiak questioned how the new King County human services levy fits in with serving Bellevue residents needs. Mr. Hoople said the service plan for the levy, which is now under consideration by the King County Council, is in part targeted for capital projects related to homelessness and transitional housing in the first year. Mayor Degginger questioned how many people are served by ESL (English as a second language) programs and services. Mr. Hoople said ESL programs range from those serving clients through Hopelink, for instance, to those at Bellevue Community College that also offer resume writing and job search skills. Mr. Hoople added that increased funding is recommended for the Head Start program because 37 percent of children who qualify are on a waiting list. In further response to Mr. Degginger, Mr. Parker said agencies providing ESL programs administer both pre-tests and post-tests to students to determine the effectiveness of the classes. Mr. Foran provided written information on the number of citizens served. Staff responded to additional brief questions of clarification. Councilmember Balducci thanked staff and the Commission for the extensive amount of information provided to Council to support and recommendations and guide the Council through the process. She commended the Commission for its disciplined review of applications based on established criteria. (e) Budget Overview of the Preliminary Budget and CIP Plan Mr. Sarkozy opened the presentation of an overview of the Preliminary Budget and the CIP Plan. Deputy Mayor Chelminiak moved to extend the meeting to 10:15 p.m., and Ms. Balducci seconded the motion. The motion to extend the meeting to 10:15 p.m. carried by a vote of 6-0, with Councilmember Marshall absent. 11

12 Finance Director Jan Hawn recalled that two public hearings, two Council workshops, and a series of departmental presentations related to the budget have been held to date. She thanked budget staff for all of their hard work. Ms. Hawn reviewed that the results of a budget survey were presented to Council in April. Actions required by Council on December 4 include: Budget adoption, 2007 Pay Plans, 2007 Property Tax Levy, Utility fees, and Other fees (e.g., false alarms, fire inspection). Ms. Hawn said the City s financial position is strong and office vacancy rates have dropped significantly. Future fiscal pressures, however, include the impact of B&O (business and occupation) tax apportionment, which goes into effect in 2008 and will eliminate $2.4 million annually from the City s budget. An increase in state pension rates and higher utility costs are anticipated as well. The proposed budget contains no tax rate increases, a continuation of high quality services expected by residents, and the addition of new positions and funding to address public safety needs, invest in best management practices, and provide necessary support services. Jonathan Swift, Budget Manager, referred Council to Chapter 5 of their budget binders for information on the financial forecast. The full forecast projects revenues and expenditures six years into the future. It is anticipated the economy will slow somewhat, with growth projected at a modest pace through The General Fund remains balanced for the next couple of years, falls out of balance beginning in 2009 (Deficit of $1.2 million projected), and slowly returns to balance with a deficit of $300,000 in The discrepancy in resources and expenditures is related primarily to the loss of B&O tax collections. Watch areas within the General Fund are new development and population growth, inflation and increasing energy costs, federal telecommunications legislation, the impact of initiatives, and a slowing housing market. The Utilities forecast reflects the impact of pass-through increases in wholesale costs for sewer and water utilities, inflationary increases in salaries and maintenance and operating costs, and additional capital needs. Mr. Swift briefly reviewed the major drivers of the General Fund budget: General salary adjustments, State pension cost increases, Utility and fuel cost increases, Capital reserve contributions, New investments, and 12

13 New CIP (Capital Investment Program) maintenance and operations expenses. Contingencies within the General Fund budget include: $2 million in sales tax collections, Rainy Day Reserve, to which staff is recommending no contribution, Contribution to the LEOFF I Medical reserve fund, General Fund contingency of $1.7 million. Mr. Swift said staff will return for a separate discussion of the capital budget. Approximately three-quarters of the general CIP goes toward: 1) Maintenance/replacement projects to sustain infrastructure, 2) Ongoing maintenance and operations costs, and 3) City Hall debt service. Mr. Sarkozy summarized that the budget is an extension of previous budgets. Development has brought significant new revenue to the City. However, decisions beyond the City s control have captured much of that new revenue and force it to be distributed outside of the City. They include legislative changes related to B&O tax apportionment and the change in pension calculations for current employees and retirees. The budget has been prepared based on policies previously set by Council, with no new tax increases, limited staffing increases, and no new programs. Mr. Sarkozy noted unfunded capital needs in the areas of transportation, parks, Downtown Implementation Plan projects, and arts and culture initiatives including PACE (Performing Arts Center Eastside) and BAM (Bellevue Arts Museum). On the operating side of the budget, unfunded items are the additional requests for human services funding, demands related to anticipated growth, and cultural and arts requests. Mr. Sarkozy noted upcoming budget discussions with the Council including a final public hearing on November 13. Budget adoption is scheduled for December 4. Councilmember Balducci asked the City Manager and staff to develop alternative scenarios for funding the unmet needs. At 10:17 p.m., Mayor Degginger declared the meeting adjourned. Myrna L. Basich City Clerk kaw 13