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In October 1999, the City council adopted Ordinance No. NS-2408 which extended the PREP fee until December 31, 2003 based on a fee study. This 1999 fee study reported that funding the cost of the required staff and operational costs associated with the continuation of the Proactive Rental Enforcement Program would amount to an estimated $608,410. The 2003 fee study for PREP reports an increase in required staff and operational costs from $608,410 to $617,360. The extension of the $17.50 inspection surcharge fee would only amount to $498,750, thereby generating less than the amount necessary to continue funding the cost of the program. In 1999, business license records indicated an inventory of 28,500 rental units generating $498,750 in revenue. Business license records for calendar year 2003 now indicate an inventory of 27,231 rental units, 958 less than in 1999 which would, at $17.50 per unit, generate an annual revenue of $476,542. The decrease of 958 rental units since 1999 and increase in staffing and operational costs creates a further widening of the deficit between program costs and revenue generated by the Rental Inspection Fee. To offset a percentage of the revenue versus costs deficit in the 1999 program budget, and given that inspection emphasis for the extension was to be placed primarily on the exterior of the rental properties, PREP staffing was reduced form six to five inspectors. Staffing for the PREP program during th~ extension period of calendar years 2004 through 2007 will be reduced from five to four. In an effort to continue monitoring the results of the program, PREP will continue for another four-year period, commencing on January 1, 2004 and will sunset on December 31,2007, to allow for review of the program Section 2. The City Council has reviewed and consi, dered the information contained in the initial study and the negative declaration, ER 2003-077, prepared with respect to this Ordinance. The City Council has, as a result of its consideration and the evidence presented at the hearings on this matter, determined that, as required pursuant to the California Environmental Quality Act ("CEQA") and the State CEQA Guidelines, a Negative Declaration adequately addresses the expected environmental impacts of this Ordinance. On the basis of this review, the City Council finds that there is no evidence from which it can be faidy argued that the project will have a significant adverse effect on the environment. The City Council hereby certifies and approves the negative declaration and directs that the Notice of Determination be prepared and filed with the County Clerk of the County of Orange in the manner required by law. Ordinance No. NS-2527 Page 3 of 6