75A - BUDGET FY 2010- 2011 - EXHIBIT

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In December of 2008 the City's Executive Management Team deferred salary increases and performance -based merit pay equating to 10% of their compensation. In July 2009, the majority of the bargaining groups (POA, PMA, FBA, FMA, SAMA, UC), with the exception of SEIU, deferred their negotiated 4% salary increase and then deferred a 2.5% increase in January of 2010 for the period of one year. These same bargaining groups made several other salary and benefit related concessions to reduce city costs and help preserve front -line services at their current levels. Over the last six months, several meetings have been held with the City's various bargaining groups to discuss opportunities to permanently and systematically reduce the City's salary and benefit costs on an on -going basis thereby reducing the need for further layoffs and helping the City's cash position. In spite of these efforts, the City has been forced to once again reduce the number of employees, by issuing an additional 40+ layoff notices in May 2010. While the first and second rounds of layoffs did not have a discernable impact on the front -line services provided to the public, the third and fourth rounds necessitated changes in how we provide certain services. Care has been taken to minimize the impacts of these reductions on public safety, which remains the City's most important priority. None of the layoffs have included sworn personnel in our police or fire departments. For 2010 -2011, every department has reduced their ongoing operational budgets. Reductions range from 8% to 12% for public safety departments and 7% to 17% for non - safety departments. Departmental budgets incorporate various assumptions which include bargaining group concessions. The City is optimistic that we will reach consensus over the next following months. As far as the proposed departmental reductions, the majority are being accomplished through the elimination of funded positions that have been vacant for some time, as well as vacancies that have been created due to retirements and layoffs. In order to more accurately reflect actual staffing, the proposed budget also eliminates unfunded positions that have been vacant for more than two years. The proposed budget decreases full -time employee count by 123 positions for a total workforce allocation of 1512. This workforce figure equates to a ratio of 4.22 employees per 1,000 residents and demonstrates a significant improvement in operational efficiencies over the past several years. For example, in FY 1986 -87, the ratio was 7.5 employees per 1,000 residents. Through a combination of reductions in our workforce, keeping a number of positions vacant and generating savings through systems improvements resulting from our continuous improvement efforts, the City continues to maintain its position of being the most efficient at providing services when compared to the 11 largest cities in California and the 100 largest cities in the country. Fiscal stability strategies incorporated into the proposed General Fund Budget include reorganization of some departments and functions, elimination of service redundancies, shifting of legitimate expenses to non - General Fund sources, and contracting out services when the private sector can provide comparable or better quality service for less cost. For example, the retirement of the City's Library Director in 2009 has provided an opportunity to merge the Library into the Parks, Recreation and Community Services Agency, generating savings through consolidation of administrative functions that can be used to maintain existing programs and services. Several years ago the City contracted out park maintenance services to all but 13 park -5-