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					City of Mercer Island

          2011-2012
        Biennial Budget
                                                                              Reader’s Guide

Section Overview
The budget document serves two distinct purposes: 1) to present the City Council and public with a
clear picture of the services which the City provides, the cost of those services, and the policy decisions
underlying the financial decisions; and 2) to provide City management with a financial and operating plan
that conforms to the City's financial system. The sections below describe the various budget segments,
therefore providing a map for readers to locate information they are most interested in seeing. The
sections are listed in the order in which they are found in the budget. Following the Section Overview
is a brief description of fund accounting, the types of funds included in the budget, the basis of
accounting used, and the budget process.

B. Budget Message
The Budget Message provides an overview of the key policy issues facing the City as well as the City
Manager’s recommended operating and capital plan for the coming two years.

C. Budget Policies
The Budget Policies were developed to provide a clear foundation for a variety of funding and
management decisions. During the development of the biennial budget, the policies are formally
reviewed with Council to obtain approval, to ensure their relevance, and to determine what new
policies might need to be written. Some of the strictly financial policies change very little from year to
year, while some of the program-related policies are revised every two years to provide the most
current information.

D. Budget Summary
This section explains how the City is organized and staffed; includes citywide, summary level revenue
and expenditure information; provides an annual and biennial financial summary by fund; identifies the
types of property tax collected and where the monies go (i.e. by government jurisdiction); provides an
overview of utility (i.e. water, sewer, and storm water) rates; highlights the purpose and status of debt
issued by the City; identifies the change in and composition of the ending balance for each fund; and
identifies the City’s key performance measures (called “dashboard” indicators), which are organized
around the City’s six Priorities of Government.

E.    General Fund Summary
The General Fund is the general operating fund of the City and encompasses the major services
provided by the City, excluding utilities: police; fire; parks and recreation; street and right of way
maintenance; development services; legal, judicial, and financial services; and general administration. This
section is divided into two sub-sections. The revenue sub-section includes a description and an
historical comparison of each major revenue source in the General Fund. The expenditure sub-section
includes a budget analysis comparing the 2010 Approved Budget to the 2011-2012 Final Budget (broken
down by year) as well as a description and an historical comparison of each major expenditure category
in the General Fund.

F.    Utility Funds Summary
This section provides background information on the City’s three utility funds (i.e. Water Utility, Sewer
Utility, and Storm Water Utility), which are operated separately as “enterprises” in which the charges


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City of Mercer Island 2011-2012 Budget                                                                   A-1
Reader’s Guide
for service (i.e. utility rates) are set to cover the full cost (both operating and capital) of conducting
business. In addition, the proposed rate increases for each utility are described and income statements
for each utility are provided for a four year time period (2009-2012).

G. Operating Budget by Department
This section breaks down all of the City’s operations by department: City Attorney’s Office, City
Council, City Manager’s Office, Development Services Group, Finance, Fire, Human Resources,
Maintenance, Municipal Court, Parks & Recreation, Police, Youth & Family Services, and Non-
Departmental. Each department sub-section is organized as follows:

          Department Summary: Includes description, organization chart by function, staffing
           summary, resources and uses summary, expenditure summary by function, and budget analysis
           by fund or fund groups.

          Department Functions: Each department is further broken down into “functions,” which
           represent major services provided by the department. For each department function, the
           following is identified: description, priority of government, services & products, 2011-2012 key
           initiatives, and expenditure summary by category. It should be noted that the City’s Capital
           Improvement Program (CIP) is not included in this section, but rather is presented separately in
           Section H.

H. Capital Improvement Program
This section identifies all of the capital improvement projects planned for the following six years (2011-
2016), tying together the capital projects developed from the City's state mandated six-year plans, such
as the Transportation Improvement Plan (TIP). More specifically, information on the development and
financing of the six-year CIP is provided; the real estate excise tax (REET) forecast is included; significant
projects are highlighted and unfunded capital needs are identified; a project summary, broken down by
project category, and individual project sheets are included; and six-year fund statements are provided
for the Street, Capital Improvement, Technology & Equipment, Water Utility, Sewer Utility, and Storm
Water Utility Funds.

I.        Recap by Fund
The City accounts for all of its operating and capital activities within a number of “funds,” each of which
is considered a separate accounting entity with a distinct set of self-balancing accounts. This section
includes all of the City’s funds, providing a brief description of and identifying the resources and uses
associated with each fund. Also, summary level information is provided for all City funds at the end of
this section.

J.        Appendix
This section includes three sub-sections: 1) City Highlights, 2) Glossary of Terms, and 3) Staffing
Classifications. The City Highlights sub-section includes a description of the community; demographic
information about Mercer Island’s residents; statistical information about City services and assets;
listings of major employers and major taxpayers; historical development activity levels (in terms of
building permits issued and total valuations); and historical assessed valuation, levy rates, and property
tax levy amounts. The Glossary sub-section includes a listing of budgeting and accounting terms used in
the budget document. Finally, the Staffing Classifications sub-section identifies all job classifications
within each bargaining unit as well as the 2010 salary ranges for each position.


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A-2                                                                   City of Mercer Island 2011-2012 Budget
                                                                            Reader’s Guide
K. Service Requests & Reductions
A “service request” represents a new (or renewed) request for a temporary or ongoing position,
contracted services, and/or equipment costing at least $10,000. A “service reduction” represents a
temporary or ongoing proposal to reduce or eliminate one of the following: 1) a service, program, or
event provided/organized by City staff; 2) a contracted service; or 3) subsidized funding of a service,
program, or event by the General Fund. A Summary Listing by Department is provided along with a
Funding Summary. Individual service requests and reductions are also included and are organized by
department.




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City of Mercer Island 2011-2012 Budget                                                                A-3
Reader’s Guide

Explanation of Accounting Basis and Budgeting
Basis of Presentation - Fund Accounting
All City activities are organized on the basis of funds, each of which is considered a separate accounting
entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that
comprise its assets, liabilities, fund equity, revenues, and expenditures (or expenses, as appropriate).
The City has 20 separate funds, each of which is described in detail in Section I – Recap by Fund.

Government resources are allocated to and accounted for in individual funds based upon the purposes
for which they are to be spent. Each fund serves as an expenditure control mechanism. The various
funds are grouped into eight categories as follows:

         General Purpose Funds
          Revenue in this fund category is considered unrestricted and can be used for any City purpose,
          including operations and capital. This category consists of three funds: the General Fund, the
          Self-Insurance Fund, and the Youth Services Endowment Fund. The General Fund is
          the general operating fund of the City and is used to account for all activities not otherwise
          required to be accounted for in other funds. The major services accounted for in the General
          Fund encompass police; fire; parks and recreation; street and right of way
          maintenance; development services; legal, judicial, and financial services; and
          general administration. The Self-Insurance Fund is a “reserve” fund that pays for insurance
          losses not covered by the City’s $5,000 deductible or other insurance. The Youth Services
          Endowment Fund is a “permanent” fund in which the donated monies remain invested as
          principal and from which the earnings on the principal can be spent to support ongoing Youth &
          Family Services’ programs, which are accounted for in the Youth & Family Services Fund.

         Special Revenue Funds
          Special revenue funds group together any activities that are financed by restricted revenue
          sources (as opposed to general purpose revenues) but which are not required to be designated
          as enterprise activities. Funds included in this category are the Street Fund, Criminal
          Justice Fund, Beautification Fund, Youth & Family Services Fund, Municipal Arts
          Fund, and the Contingency Fund. The Contingency Fund is a reserve fund that is available
          to temporarily stabilize significant revenue shortages or to address unanticipated needs. Council
          policy has set the Contingency Fund at 10% of budgeted General Fund expenditures.

         Enterprise Funds
          Enterprise funds are used to account for activities that are financed and operated in a manner
          similar to private business enterprises. In enterprise funds, the intent of the governing body is
          to recover costs (i.e. expenses, including depreciation) of providing goods or services to the
          general public on a continuing basis primarily through user charges. Funds included in this
          category are the Water Fund, Sewer Fund and Storm Water Fund.

         Internal Service Funds
          Internal service funds are used to account for the financing of goods or services provided by one
          department to other departments of the City on a cost reimbursement basis. This fund
          category includes the Equipment Rental Fund and the Computer Equipment Fund. The
          Equipment Rental Fund accounts for the cost of maintaining and replacing all City vehicles, heavy


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A-4                                                                   City of Mercer Island 2011-2012 Budget
                                                                              Reader’s Guide
        equipment, and 800MHz radios. Each department is charged operating and maintenance rates as
        well as replacement rates for the use of these assets. The Computer Equipment Fund was
        created to protect the City’s current and future investment in computer equipment. Each
        department is charged a rate that covers the cost of repair and maintenance, replacement, and
        operation of the City’s wide area network. The rate is based on the number of computers
        actually owned by each department.

       Trust and Agency Funds
        These funds account for activities where the City acts as the fiscal agent. There is only one fund
        in this category—the Firemen's Pension Fund.

       Debt Service Funds
        Debt service funds are used to account for the accumulation of resources for the payment of
        general long-term debt principal and interest. The City of Mercer Island has two debt service
        funds: the Bond Redemption Fund–Voted Debt and the Bond Redemption Fund–Non-
        Voted Debt.

       Capital Projects Funds
        Capital projects funds are used to account for financial resources earmarked for the acquisition
        or construction of major capital facilities (other than those financed by proprietary funds, special
        assessment funds, and trust funds). These funds are not part of the operating budget, but are
        included in the City's six-year Capital Improvement Program. Current capital projects funds
        include the Capital Improvement Fund, the Technology and Equipment Fund, and the
        Capital Reserve Fund.

Basis of Accounting
The City's basic accounting structure, including its chart of accounts and account coding format, is
mandated by the Washington State Auditor's Budgeting, Accounting and Reporting System (BARS), and
is enforced by the Office of the State Auditor through annual audits. The basis of accounting refers to
when revenues and expenditures (or expenses) are recognized in the accounts and reported in the
financial statements.

       Accrual Basis of Accounting
        The accrual basis of accounting is followed in all of the City’s enterprise, internal service, and
        trust funds. Under this basis of accounting, revenues are recognized when earned, and expenses
        are recorded when incurred. As a result, revenues can be recognized even though no cash has
        been received yet, assuming that a good or service has been provided. Also, expenses can be
        recognized once a good or service has been received even though no payment has been made
        yet. This is the same basis of accounting that is used in the private sector. All assets and
        liabilities are recorded in the fund that owns them.

       Modified Accrual Basis of Accounting
        All of the remaining fund categories are reported under the modified accrual basis of accounting.
        Under this basis of accounting, revenues are recorded when they are both measurable and
        available. "Available" means collectible within the current period or soon enough thereafter to
        pay current liabilities. The major revenue sources that are accrued by the City are listed below.




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City of Mercer Island 2011-2012 Budget                                                                  A-5
Reader’s Guide
              Property Taxes – King County acts as the City's intermediary collection agency. The
              County remits to the City on a daily basis property taxes paid by Mercer Island property
              owners. Property taxes should be accrued only when due and expected to be collected
              within 60 days of the end of the fiscal period. The City accrues all property tax revenue
              received within 31 days of the end of the fiscal period.

              Utility Taxes – Utility taxes are considered both measurable and available if collected
              within 31 days of the close of the fiscal period.

              Business & Occupation Taxes – Primarily collected on an annual basis, revenue is
              considered measurable and available if received within 45 days of the close of the fiscal
              period.

              State Shared Revenues – Mainly State collected sales and excise taxes, these revenues are
              considered measurable and available if received within 31 days of the close of the fiscal
              period.

              Grant Revenues – When expenditures are the primary factor for determining eligibility, the
              grant revenue is considered measurable and available when the expenditure is made.

              Interfund and Intergovernmental Services – When goods and services have been
              provided, these are considered both measurable and available.

              Interest and Rental – When investment interest and rental income have been earned and
              are due they are considered measurable and available.

          Revenue sources that are not considered to meet the measurable and available criteria include
          licenses and permits, fines and forfeitures, and other miscellaneous revenues since their values
          are not known until received.

          Under the modified accrual basis, expenditures are recorded when the liability is incurred. An
          exception to this rule is the principal and interest on general long-term debt that is recognized
          as an expenditure when it is paid. Long-term liabilities are accounted for in the general long-
          term debt account group. Purchases of fixed assets are expensed during the year incurred, and
          are accounted for in a separate fixed asset system over their useful life.

         Budgetary Basis
          The budgets of general governmental type funds (for example, the General Fund and the Street
          Fund) are prepared on a modified accrual basis. The enterprise funds (i.e. Water, Sewer and
          Storm Water Utilities), on the other hand, are budgeted on a full accrual basis.

Budget Process
The City follows the below outlined procedures in establishing its budget every other year. These
procedures are in accordance with State law time limitations and are designed to allow the Council and
public ample opportunity to understand and have input on the budget direction of the City for the next
two years.




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A-6                                                                   City of Mercer Island 2011-2012 Budget
                                                                             Reader’s Guide
          Budget Process Steps                     Feb Mar Apr May   Jun   Jul   Aug Sep Oct Nov Dec

1.   6 year Capital Improvement Program (CIP)
     kick-off meetings with Council and staff
2.   Budget policies related to the CIP are
     reviewed by Council at three points during
     the budget process
3.   Operating Budget kick-off meetings with
     Council and staff
4.   Budget policies related to the Operating
     Budget are reviewed by Council at two
     points during the budget process
5.   Operating Budget revenue and expenditure
     estimates prepared by departments
6.   CIP Preview meeting with Council
7.   Departments submit Operating Budget
     requests, key initiatives, and other
     information related to the coming
     biennium
8.   Finance department prepares tax and other
     major revenue estimates
9.   Finance Department and City Manager
     review departmental Operating Budget
     requests and make changes as necessary
10. City Manager's Preliminary Budget
    prepared and filed with the City Clerk
11. City Clerk publishes notice of Preliminary
    Budget and public hearings
12. City Manager and Finance Director present
    Preliminary Budget to Council
13. Copies of Preliminary Budget made
    available to the public
14. Public hearings on Preliminary Budget held
15. City Clerk publishes notice of public
    hearing on Final Budget
16. Final hearing begins no later than the first
    Monday in December
17. Council adopts balanced Final Budget for
    coming biennium

The budget, as adopted, constitutes the legal authority for expenditures. The City’s budget is adopted
at the fund level so that expenditures may not legally exceed appropriations at that level of detail.
Transfers or revisions within funds are allowed; however, any revisions that alter the total expenditures
must be approved by the City Council. When the City Council determines that it is in the best interest
of the City to amend the budget appropriations, it may do so by ordinance approved by one more than
the majority at any regularly scheduled Council meeting.

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City of Mercer Island 2011-2012 Budget                                                                A-7
Reader’s Guide

The budget is formally monitored on a quarterly basis by the Finance Department, generating a quarterly
financial status report to the Council. Because the City prepares a two-year budget, a mid-biennial
budget review meeting is also held in November of the first year of the biennium. Amendments to the
adopted budget are typically approved by the Council at this meeting or when a quarterly financial status
report is presented to the Council.




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A-8                                                                City of Mercer Island 2011-2012 Budget
                                                                              Budget Message
Under Washington Law, the City Manager presents a balanced annual or biennial budget for the City’s
upcoming fiscal period for consideration and adoption by the City Council.

Mercer Island’s biennial budget serves a number of essential functions. The budget is more than a
“checkbook” posting of proposed revenues and expenditures. It is a financial plan that looks out over
two-year (operating budget) and six-year (Capital Improvement Program) horizons, balancing planned
income and expenses in a fiscally responsible manner. It is a policy plan, guiding and assuring the City’s
long-term financial health. And, most importantly, it is a detailed description of the goods and services
for which the City and its elected officials will be held accountable. It documents the “social contract”
between the citizens and their government.

The budget also serves in a broader policy context. It draws upon many City Council decisions and
discussions that precede it, and it will leave a legacy of policy influence for future budgets–helping to give
the City’s finances long-term stability and continuity.


How the Budget is Organized
The Reader’s Guide (Section A) at the beginning of the budget document provides a brief overview of
how the City’s budget is organized.

The budget covers two operating years for all City departments and functions. However, in order to
assess revenue and expenditure trends, most budget sections also show actual data for 2009 and
forecast data for 2010.

Service Packages
Reflecting the City Council’s desire to focus on significant changes in the proposed budget for the
coming biennium, City staff has prepared the following departmental “service packages” for 2011-2012:
1) Service Enhancement Requests, and 2) Service Reduction Proposals. Given the recent economic
recession and the dramatic decline in revenues over the last two years, the service packages described
in the budget are almost entirely related to service reductions.
This budgeting approach recognizes that most of the services provided by a city extend from one year
to the next, especially in a city that isn’t growing. Consequently, the scope of the budget review process
is narrowed to notable increases and decreases in each department’s operating budget. In addition, the
City Council will review the changes to each department’s “base” (i.e. ongoing) budget. These changes
are broken down into two major components: 1) general inflationary increases, and 2) other significant
changes. Within the latter component, “prior year one-time costs” are called out collectively as a
decrease, because they will not be re-budgeted in 2011-2012 within each department’s “base” budget. If
such a cost needs to be budgeted again in 2011-2012 and it is $10,000 or more, it will be proposed as a
service enhancement request.
Service package detail sheets are provided in Section K. They are summarized later in this Budget
Message.

Priorities of Government
Over the past two biennia, the City has shown how it spends its resources against the City Council’s
stated or implied priorities. The Council has sought this information so that it can better understand and
consider tradeoff decisions among and across services and cost centers.


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City of Mercer Island 2011-2012 Budget                                                                    B-1
Budget Message
In 2004, using a process loosely based on the State of Washington’s “Priorities of Government,” the
City Council adopted six City priorities to serve as a filter through which significant changes to City
services and programs could be evaluated:

      1. The community will be safe.
      2. The community will support effective, efficient and legal delivery of public services.
      3. The community will support reliable public infrastructure and protect its
         considerable public investments (e.g. water, sewer, storm water utilities, streets,
         parks, and buildings).
      4. The community will support attractive, high quality neighborhood and business
         environments.
      5. The community will support a broad range of recreational, cultural, health and
         educational opportunities.
      6. The community will support open and informed public involvement processes
         within the structure of representative, democratic decision making.

A complete listing of the priorities and their sub-priorities can be found in Appendix A at the end of
the Budget Message.

The proposed 2011-2012 Budget continues to confirm what was discovered back in 2004 with the
development of the 2004-2005 Budget, namely that:

      •   The City spends most of its resources on its highest priority services and projects.
      •   The City provides the highest General Fund tax support for its highest priority services – police;
          fire; infrastructure maintenance (streets and parks); and administrative services that ensure the
          legal and efficient running of the City like Finance, Human Resources, City Attorney’s Office, and
          City Manager’s Office.
      •   The services that are least tax-supported from the General Fund are those for which the City
          can “sell” the service through user fees and utility rates (recreation, youth and family counseling,
          development permits, and utility services).
      •   The services for which the City has some of its most accurate data on individuals served are
          those services most associated with user fees. Those services are also often associated with
          active and supportive constituencies (recreation programs, leagues, seniors, and schools-related
          groups).
      •   The City spends comparatively less in services aimed at public information and public
          involvement.

How Service Reductions were Selected
In considering service reductions, the City's Management Team remained mindful of five aspects of City
services:

      1. Focus primarily on General Fund services – those services primarily supported by taxes,
         particularly those tax revenues that have shown significant reductions.
      2. Avoid service reductions that already are associated with significant fee revenue or external
         grant support.

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B-2                                                                    City of Mercer Island 2011-2012 Budget
                                                                                Budget Message
    3. Council's adopted Priorities of Government
    4. The mandatory, essential or discretionary status of specific services.
    5. The community's satisfaction with City services as expressed in the biennial citizen survey.

While sorting through the over 140 individual City services for potential service reductions is difficult,
the Management Team was able to maintain basic health and safety functions of the City. In nearly every
case, services are reduced in quantity or quality but not completely eliminated. The areas for
recommended service reductions most often occur in discretionary municipal functions - neither
mandated by state law or essential to the proper, legal functioning of the City. The Management Team
focused on the “business case” for maintaining, reducing or eliminating specific programs. Although the
relative popularity of programs was not a significant factor in the staff’s analysis, it is assumed that it will
be a factor in the City Council’s review of the budget.

Performance Measures
This biennial budget will continue to identify key performance measures that can be tracked through the
budget period. Performance measures are linked to the City’s budgetary resources (inputs) and to the
City Council’s values (outputs and outcomes) as expressed in the City Priorities. By tracking
performance measures over time, the City hopes to create an ongoing link between its stated goals and
priorities and how resources are applied. Periodic reporting of performance objectives and results will
be presented to the City Council and community via the “MI Dashboard Report” compiled by the
Finance Department.


Financial Status
Due to a long history of constraining expenditure growth, conservatively estimating revenues, and
maintaining a sizeable debt capacity, the City’s financial condition remains solid. This statement is
validated by Moody’s Aa2 LTGO bond rating of the City in 2009. Nevertheless, the City’s finances have
become increasingly sensitive to fluctuations in the regional and national economy that are beyond its
control. The current economic recession coupled with the effects of taxpayer initiatives have had
significant impacts on some City revenue streams – most notably sales tax, real estate excise tax, utility
tax and property tax receipts. Reduced revenues and stagnate economic growth have produced
significant downward pressure on employee compensation and benefits. These expenditure and revenue
trends are discussed below.

Key Expenditure Trends
•   Employee Wages & Benefits – Over the last 18 months, the City has implemented a number of
    measures to slow and stop employee wage and benefit growth. Although the City is constrained by
    union contract terms, it has been successful in implementing the measures via voluntary agreements
    from each of its unions:
            0% cost-of-living adjustments (or equivalent reduction) for all union and non-union
             employees;
            Rolling hiring freezes on all vacancies,
            Discontinuance of market-based wage analyses and adjustments;
            Discontinuance of pay-for-performance program.

•   Health Care Costs – The City continues to benefit from long-standing practices of employees
    sharing in their health care costs. The City also strives to move all remaining employee groups

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City of Mercer Island 2011-2012 Budget                                                                       B-3
Budget Message
      toward lower-cost PPO health care plans.

•     Development Review Staffing – Development activity locally and regionally has slowed
      measurably from the record pace experienced over the middle part of the decade. In 2009-2010,
      residential development slowed down 33% from 2005-2006 levels (as measured by the number of
      building permits issued). Town Center and other commercial/multi-family development have slowed
      as well, reducing the need for development review personnel and contracted labor.

      Recognizing the development downturn, the City has reduced its contracted in-house staff by 3.0
      FTE's in the 2009-2010 biennium. Going forward, the City plans to further reduce its budget for
      contracted outside labor (planners, engineers and plans examiners) by about $290,000. It will also
      consolidate many of the reduced contracted services into one contracted in-house position in order
      to meet basic permit review obligations. Overall, the Development Services Department is
      committed to maintain permit review turnaround times targets albeit with substantially reduced
      resources.

Overall, the pace of expenditure growth in the City’s current and proposed General Fund has stalled to
a virtual no-growth position. 2011 and 2012 expenditures will be at or below actual expenditures in
2008 – the “peak” expenditure year. Adjusted for inflation, the City’s General Fund expenditures have
dropped to 2007 levels – this in spite of the run-up in development activity at the height of the “housing
bubble” and the Council’s interests in parks and open space maintenance. Up to the 2011-2012
biennium, the City has not reduced any services provided to the taxpayers/residents.

When looked at from a longer perspective, the City’s General Fund expenditure growth, adjusted for
inflation, has increased by an average of 1.5% per year over the last ten years and .7% per year over the
last six years.

                                             General Fund Expenditures 2001 – 2012
    $30

            $millions

    $25                                                                                       $23.98                                        $23.67
                                                                                                                  $23.46
                                                                                                       $22.78                  $22.96
                                                                                $21.74


    $20                                                    $19.11   $18.79
                                                $17.58                                        $19.70
                                     $16.61                                     $18.74                            $19.00                    $18.80
                        $16.34                                                                         $18.61                  $18.41
          $16.00
                                                           $17.68
                                                $16.73              $16.81
    $15   $16.00        $16.03       $16.02




    $10
           2001          2002         2003      2004       2005     2006         2007         2008     2009        2010         2011        2012

                  Expenditures ($mill.)         Proposed Budget       Infla. Adjustments ($mill.)       Proposed Budget (assumes 1.0% inflation)




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B-4                                                                                         City of Mercer Island 2011-2012 Budget
                                                                             Budget Message
Key Revenue Trends
Citizen Initiatives
    •    Initiative 695 - Motor Vehicle Excise Tax Repeal – With the Legislature’s 2000
         enactment of Initiative 695, the City experienced a loss of approximately $1.1 million per year
         in annual Motor Vehicle Excise Taxes (via sales tax equalization) – approximately 9% of General
         Fund revenues. The City continues to adjust to this loss of General Fund revenue through a
         mixture of constrained expenditures and growth in more volatile revenues such as sales taxes
         and permit fees.

    •    Initiative 747 - Property Tax Limitation – Further constraining revenues, the City’s single
         largest source, property taxes, saw relatively low growth during the early part of the decade.
         Since passage of Initiative 747 in 2001, the City has been limited to annual property tax
         increases of 1%. Throughout the past ten years, the cost of basic services has increased at an
         average of 5.0% per year. In three of the past seven years, the City Council increased the
         property tax 1% but refunded 1% back to taxpayers from year-end revenue surplus in the
         General Fund. In 2007, the City Council approved a slight increase in property taxes above the
         1% threshold using “banked capacity” to generate a long-term funding stream for fire apparatus
         replacement. In 2009, the City Council voted to maintain a 0% optional property tax increase
         as an alternative to a 1% property tax decrease.

    •    Initiatives 1100 & 1105 - Privatization of Liquor Sales – Initiatives 1100 & 1105 each
         propose to end the state’s monopoly on liquor sales and, instead, “privatize” the retail sales of
         spirits. Both Initiatives will be decided by Washington voters in the November, 2010 general
         election. Depending on which Initiative is approved, cities and counties will experience a
         significant reduction in liquor sales and profits tax revenues. In recognition of the policing costs
         associated with alcohol consumption, 40% of all liquor board profits tax revenues are
         distributed to cities based on population and 28 % of liquor excise taxes are distributed to
         cities. In the aggregate, $54.6 million will be distributed to cities in 2010. Mercer Island’s
         estimated share of 2010 liquor board profits and excise taxes is $301,000.

Sales Tax
The recession has generated a significant reduction in sales tax receipts, particularly in the area of
construction sales tax. Finance staff is estimating a cumulative reduction of $1.27 million in construction-
related sales tax in 2009-2010 compared to 2008. In 2011-2012, Finance staff is forecasting $1.14
million less than received in 2008. The projected declines can be attributed to the mid-2009 completion
of two major projects in the Town Center and a significant decline in residential construction.

The graph below displays actual and projected total sales tax revenues as well as construction-related
sales tax revenues for 2001-2012.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                    B-5
Budget Message
                                                         Sales Tax 2001-2012
        $millions
         $5.00
                    $4.36
         $4.50
                                                                              $3.95
         $4.00                                                                           $3.68

         $3.50               $3.13
         $3.00                         $2.68    $2.57      $2.64    $2.63                           $2.57                $2.60      $2.70
                                                                                                              $2.52
         $2.50
         $2.00
         $1.50
                                                                              $1.61      $1.62
         $1.00      $1.32                                  $1.30    $1.24
                             $1.03                                                                  $1.05                $1.00      $1.10
         $0.50                         $0.92    $0.91                                                         $0.93

         $0.00
                    2001    2002      2003      2004       2005     2006      2007      2008       2009       2010      2011        2012


                                     Total Sales Taxes                                           Construction Sales Tax

                                     Total Sales Tax-Budget                                      Total Construct Sales-Budget




Development Services (Permit Processing)
Between 1999 and 2007, the City saw a significant increase in single-family home development/
remodeling and commercial construction. In 2000, the Development Services Group (DSG) processed
a record 2,937 land use, single family, commercial, and over-the-counter permits. That pace increased
to 3,205 permits in 2005. In 2006, building construction valuation peaked at almost $96.0 million. In
what many economists have since labeled the "housing bubble", these increases were largely driven by
low cost financing for home remodels, new construction and the redevelopment of the Town Center.
To provide some additional context, key development statistics for 2001-2012 are presented below.


      Development
                            2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
       Statistics
Single Family
                              250      237       246       377       396      374       293        195        149       140        158        158
Residential Permits
Commercial/Multi-
                               50        47       63        89        58       80        56         46         49        40         40         40
Family Permits Issued
Over the Counter
                            2,319     2,143    1,896      2,465    2,656    2,589      2,572     2,000      1,028     1,100      1,000      1,000
Permits Issued
Total Building
                            $48.80   $47.70    $26.83    $93.53    $80.13   $95.91    $86.26     $40.11     $30.93    $75.00     $30.00     $30.00
Valuation ($mill.)
Total Development
                             $0.99    $1.09     $0.98     $1.38     $1.69    $1.62     $1.70      $1.45      $1.13     $1.00      $1.25      $1.25
Fees ($mill.)




                                                                                      _________________________________
B-6                                                                                      City of Mercer Island 2011-2012 Budget
                                                                                           Budget Message
                                                Building Permits 2001-2012

   450
                                                    396
   400                                    377                 374

   350
                                                                      293
   300
           250                246
                     237
   250
                                                                               195
   200                                                                                                         158      158
                                                                                           149       140
   150
                                           89                 80
   100                        63                     58               56
           50        47                                                         46          49       40         40      40
    50

     0
           2001      2002     2003        2004      2005      2006    2007     2008        2009     2010       2011    2012



                                     Single Family Permits                           Commercial Multi-family

                                     Single Family - Budget                          Commercial - Budget




                                       Total Development Fees 2001-2012
  $millions
   $1.80                                            $1.69             $1.70
                                                              $1.63
   $1.60
                                                                               $1.45
                                          $1.38
   $1.40
                                                                                                               $1.25   $1.25
   $1.20              $1.09                                                                $1.13
            $0.99              $0.98                                                                $1.00
   $1.00

   $0.80

   $0.60

   $0.40

   $0.20

   $0.00
              2001    2002     2003        2004      2005     2006    2007      2008       2009     2010       2011    2012



                                    Total Development Fees                    Total Development Fees- Budget




Compared to the 2005 peak year, 2009 single family residential permit activity decreased by over 60%,
and 2009 building valuations decreased by more than 60%. Given these decreases, the 2009-2010
budget included a number of staffing reductions to reset the “core staff” complement. DSG's
“contingent staff” (i.e. contract employees) were reduced by 3.0 FTE’s. In the proposed 2011-2012
budget, DSG will further reduce its contracted external labor by about $290,000. They will consolidate
much of the remaining work by retaining an existing contract Plans Examiner position.

_________________________________
City of Mercer Island 2011-2012 Budget                                                                                         B-7
Budget Message

See Development Review Fees policy in Section C (Budget Policies) for more details.


Budget Summary
At its highest level of generalization, this budget can best be summarized in the following ways. The
2011-2012 Budget:
      •   Reduces General Fund expenditures in light of reduced General Fund revenues. Relies on a mix
          of non-service budget reductions, selected service and staff reductions, targeted fee increases
          and the optional 1% property tax increase.
      •   Reduces services in selected areas while maintaining essential health and safety functions.
      •   Provides continued investments in basic infrastructure for Streets, Water, Sewer, and Storm
          Water facilities with associated utility rate increases.

General Fund – Revenue Sources
Reflecting the recent trends mentioned above, the General Fund continues to receive nearly all of its
operating revenues from the same tax sources in approximately the same proportions as previous years,
with the exception of property tax and sales tax. A breakdown of the budgeted major revenue sources
for 2011-2012 is provided below.


                                                        General Fund Revenues
                                                             2011-2012


                                          Recreation Programs      District Court Fines
                                                  6%                        2%


                               General Government                                       Interfund Transfers In
                                       2%                                                        2%

                   Licenses and Permits
                            8%

                   EMS Revenues
                        5%                                                                                       Property Tax
                                                                                                                     44%
                 Utility Overhead
                         3%



                State Shared Revenues
                          2%


                                        Business & Utility Taxes
                                                 15%                        Sales Tax
                                                                              11%




Total budgeted General Fund resources for 2011 and 2012 are $22,963,098 and $23,665,296
respectively.



                                                                                            _________________________________
B-8                                                                                            City of Mercer Island 2011-2012 Budget
                                                                             Budget Message
Department Operating Budgets
The City continues to dedicate the largest portions of its resources to Public Safety (police, fire, and
medical aid) and Maintenance. As shown below, the combined operating budgets for these areas
account for $48.6 million, or 63%, of total operating expenditures for the 2011-2012 biennium.



                           2011-2012 Operations by Department


                   30.00


                   20.00
        Millions




                   10.00


                    0.00




Staffing
Reflecting only the organization’s most pressing staffing needs given the current economic environment,
the City’s 2011-2012 staffing model will see a net 5.65 FTE decrease for ongoing “budgeted” positions
and a net 0.5 FTE decrease for “contract” positions (excluding CIP). Staffing changes are listed below:

Proposed Reductions in Regular “Budgeted” Employees:
    •   Reduce Right-of-Way Maintenance – 1.0 FTE
    •   Reduce Transportation Manager – 1.0 FTE
    •   Reduce Special Events/Recreation Programmer – 0.25 FTE
    •   Reduce Court Administrator – 0.5 FTE
    •   Reduce Police Records Clerk staffing – 0.5 FTE
    •   Reduce Patrol "Hire Ahead" position (when vacant) – 1.0 FTE
    •   Reduce Communications Coordinator – 0.4 FTE
    •   Reduce MIYFS Development Coordinator – 0.5 FTE
    •   Reduce MIYFS VOICE Coordinator – 0.5 FTE


_________________________________
City of Mercer Island 2011-2012 Budget                                                                     B-9
Budget Message
Proposed Reductions in Contract Employees (excluding CIP):
   •     Eliminate Planner (contract, vacant) – 1.0 FTE
   •     Eliminate ROW Arborist (contract) – 0.5 FTE
   •     Eliminate Recreation Coordinator (contract, vacant) – 1.0 FTE
   •     Reduce Fire Marshal (contract) – 0.25 FTE

Proposed Increases in Contract Employees (excluding CIP):
   •     Re-budget Plans Examiner – 1.0 FTE
   •     Re-budget Resource Conservation Manager – 0.25 FTE

Proposed Reductions in Contract Employees (CIP Only):
   •     Eliminate Facilities Project Manager (vacant) – 1.0 FTE
   •     Eliminate CIP Administrative Support (vacant) – 0.5 FTE
   •     Eliminate CIP Project Manager – 1.0 FTE
   •     Eliminate Records Management Coordinator – 1.0 FTE

The total number of regular (i.e. ongoing) and contract employees approved for the period 2003-2010
and proposed for 2011-2012 is displayed below.

                                        10 Year Staffing (FTE’s) History
                                                  2003-2012

           195.00



           190.00



           185.00



           180.00



           175.00



           170.00



           165.00



           160.00



           155.00
                      2003     2004      2005     2006     2007     2008        2009    2010     2011     2012
       Contract FTE   5.75     5.75      8.35     13.25    9.50     9.50        8.75    10.75    8.00     8.75
       Regular FTE    173.40   173.40    169.75   168.75   177.15   177.65     179.40   179.40   173.75   173.75




                                                                             _________________________________
B-10                                                                            City of Mercer Island 2011-2012 Budget
                                                                            Budget Message
To provide some perspective on how Mercer Island compares to six other full service cities on the
Eastside, two statistics are provided in Appendix B at the end of the Budget Message:
    •   2010 total number of employees per 1,000 population
    •   2009 General Fund expenditures per capita

For each measure, Mercer Island is at the bottom of the list, reflecting the City’s culture of leanness and
frugality.


Biennial Budget Issues & Initiatives
Entering the biennium, the City faces a nearly $2.9 million deficit. Driven by significantly lower revenues
from the previous two biennia, the City must significantly reduce expenditures, increase revenues or
both. Largely following the wishes of the City Council as voiced in the summer of 2010, the proposed
2011-2012 Budget relies most heavily on expenditure reductions, followed by selected fee increases and
the optional 1% property tax increase. The table below summarizes the balancing strategy proposed in
the General Fund Budget.

                                    Budget Balancing Strategy
                                         General Fund
                                                    2011               2012                 Total

  Projected Deficit                               ($2,893,099)        ($3,039,008)         ($5,932,107)

  2010 Service Packages & Other
    One-Time Costs                                    665,773             665,773             1,331,546
  Net Non-Service Level Reductions                    768,031             768,031             1,536,062
  Service Level Reductions                            740,789             756,011             1,496,800
  Revenue Loss from Service Reductions                  (6,000)                -                 (6,000)
  Service Enhancements                               (171,659)           (170,104)             (341,763)
  Fee Increases                                       439,500             568,000             1,007,500
  1% Optional Property Tax Increase                   103,165             104,797               207,962
  Grants                                                 7,000                 -                    7,000
  "Rainy Day" (Contingency) Fund                      346,500             346,500               693,000

  Balance                                                   $0                     $0                 $0


In all, General Fund reductions amount to $1.51 million in 2011 and $1.52 in 2012. This is in addition to
the $665,773 in one-time budget increases in 2010 that have been dropped from the upcoming
biennium. The reductions come from two categories: Non-Service Level Reductions and Service
Level Reductions. A detailed explanation of the proposed budget reductions follows.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                 B-11
Budget Message
Non-Service Level Reductions
Before seeking service reduction proposals from City departments, the Finance Director and City
Manager asked Department Directors and their staff members to identify reductions in the budgets that
would not reduce service to the public but would reduce reliance on cash-strapped General Funds. In
all, departments identified $864,985 in ongoing, non-service level reductions, which are listed below.

2010 Salary and Benefit Savings           $ 263,016 Move CBD Utility Costs to Beautification        $ 34,000
2011 COLA Savings                         $ 127,000 Advertising & Postage                           $ 32,691
Expiration of Yakima Jail Contract        $ 103,460 Misc Recreation Reductions                      $ 26,572
Technology CIP Funding                    $   75,000 Telephone Costs                                $ 25,025
NORCOM Fees (Police & Fire)               $   59,293 Annual General Fund Subsidy to YFS             $ 25,000
Travel & Training                         $   39,199 Issaquah Jail Bed Commitment                   $ 15,555
Marine Patrol Program                     $   39,174



Service Reduction Packages
Police
   •     Records Clerk (0.5 FTE) – Currently two full time Records Clerks maintain police records.
         The service reduction package proposes a .5 FTE reduction. Law enforcement personnel
         routinely access these records in order to learn of criminal backgrounds, outstanding warrants,
         contact information and physical characteristics. Reducing by .5 FTE will result in a reduction of
         hours the Records window is open to the public.

         This package reduces the General Fund budget by $38,755 in 2011 and $40,392 in 2012.

   •     Police “Hire Ahead” Position (1.0 FTE, Criminal Justice Fund) – The Department
         currently has two budgeted “hire ahead” positions. The reduction package proposes the
         elimination of 1.0 FTE for the 2011-2012 biennium only. The “hire ahead” positions are used to
         provide an “over-staffing” of qualified, trained police officers. Upon retirement, lateral transfers
         or disabilities of police officers, a fully functional officer can immediately be moved into the
         regular officer slot. In turn, the vacant “hire ahead” position is then used for recruitment and
         training of a new officer – a process which can take up to one year. Hire ahead positions are
         used chiefly as a tool for managing overtime. With the elimination of one hire ahead position,
         the Department will estimate and budget for additional overtime costs.

         This package reduces the Criminal Justice Fund budget by $89,614 in 2011 and $96,434 in 2012.

Fire
   •     Fire Marshal (0.25 FTE) – The Fire Department currently has a full time, contract Fire
         Marshal whose duties include plans review and permitting under the International Fire Code,
         inspections of businesses and public education. This reduction package contemplates a reduction
         in Fire Marshal hours of 25%. This reduction is consistent with the decline in permit activity
         over the last year and what is projected for the biennium.

         This package reduces the General Fund budget by $25,475 in 2011 and $26,450 in 2012.


                                                                   _________________________________
B-12                                                                  City of Mercer Island 2011-2012 Budget
                                                                          Budget Message
Court
    •   Court Administrator (0.5 FTE) – In 2009-2010 the City added a full-time clerk to assist
        in addressing the heavy caseload issue in the Mercer Island Municipal Court. That addition was
        successful in addressing the backlog of work and now allows for the half-time reduction of the
        Court Administrator position – a position fundamentally different than the Court Clerk. A
        half-time reduction of the Court Administrator position for the 2011-2012 budget will still
        allow for necessary reporting and accounting functions to continue with minimal change in the
        level of service.

        This package reduces the General Fund budget by $45,885 in 2011 and $47,747 in 2012.

Maintenance
    •   Facilities Maintenance Technician (0.5 FTE) – This position was originally budgeted and
        approved in the 2009-2010 budget. As originally intended, the position would have
        supplemented the 1.0 FTE Facilities Maintenance employee whose activities are largely focused
        on repair and maintenance contract management. As the City’s financial condition worsened in
        early 2009, the Finance Director and City Manager decided not to fill the position as a cost
        savings measure. This package would eliminate this vacant position from the budget. From the
        General Fund’s perspective, there is only a 0.5 FTE reduction, because the remaining Facilities
        position will be split 50/50 between the General Fund and the CIP in 2011-2012.

        This package reduces the General Fund budget by $42,866 in 2011 and $44,579 in 2012.

    •   ROW Arborist (0.5 FTE) – The existing contract Right of Way (ROW) Arborist would be
        eliminated. The primary impact will be a reduction in responses to citizen’s concerns regarding
        hazardous trees in the street right of way, reviewing applications for pruning, determining tree
        ownership within the ROW and managing tree maintenance contractors. Some amount of
        response can be made by the Development Services Arborist and Park Arborist on the most
        significant and/or emergent hazard tree cases.

        This package will reduce the Street Fund budget by $44,760 in 2011 and $46,515 in 2012.

    •   ROW/Trail Maintenance Reorganization (1.0 FTE) – One Right of Way (ROW) Team
        Member position would be eliminated. Currently, the ROW Team provides maintenance 3 to 6
        times per year on 38 trail segments totaling 4.7 miles. The maintenance of ROW trails would
        be shifted to Parks Maintenance, which already maintains trails in Parks and Open Spaces and is
        more efficient at performing this type of work. A small amount of budget ($20,000) allocated
        for operating supplies and specialized contractor services (such as the repair of concrete stairs
        on trails) would be shifted to the Parks Maintenance budget. It is anticipated that this
        consolidation of all trail maintenance within Park Maintenance would have no significant impact
        on the current of level of service. The impact on other Parks Maintenance work is expected to
        be modest.

        This package reduces the General Fund budget by $85,733 in 2011 and $89,156 in 2012.

    •   Right of Way (Casual Labor) – This package reduces seasonal (part-time) employees from 3
        to 2. This reduction was implemented in 2009-2010 and will continue into the next biennium.
        Historically, these seasonal workers perform trail maintenance, vegetation removal and flagging
        for full-time employees involved in street maintenance/construction work.

_________________________________
City of Mercer Island 2011-2012 Budget                                                               B-13
Budget Message

           This package will reduce the General Fund budget by $12,150 in 2011 and 2012.

       •   Tree Planting Program – In the 2010-2011 biennium, the City budgeted $10,000 each year
           for planting trees. During that time, over 300-350 trees were planted or planned to be planted
           in public and private spaces.

           This package would reduce the General Fund budget by $10,000 in 2011 and 2012.

Development Services
       •   Transportation Manager (1.0 FTE) – The existing Transportation Manager position would
           be eliminated. Some duties currently contained in the position would be transferred to other
           positions. Some functions would be reduced or eliminated as follows:
                 Evaluation of traffic impacts of development proposals and conformation of appropriate
                  mitigation measures would be reduced.
                 Response to citizen-initiated traffic engineering concerns, traffic and parking complaints,
                  signage modifications, pavement marking, traffic calming would be reduced and shifted to
                  engineers in the Maintenance Department.
                 Coordination of regional traffic issues, such as I-90 HOV project work, East Link light
                  rail, WSDOT, Eastside Transportation Partnership would be reduced and/or staffed by
                  non-engineers from the City Manager’s Office and DSG.
                 Annual updates of the Transportation Improvement Plan (TIP) would be shifted to the
                  City Engineer and Asst. City Engineer.
                 Oversight, design and construction management of the Pedestrian Bicycle Facility Plan
                  would be reduced and shifted to the street engineering staff in Maintenance and/or
                  outside consultants.
                 Coordination and management of Commute Trip Reduction, MI Permit Parking and
                  traffic collision database updates would be reduced.
                 Other areas affected will include: staffing of the MISD Master Planning effort, the City’s
                  Transportation Concurrency program, and remaining current on changes to national
                  traffic regulations and standards.

           This package will reduce the General Fund budget by $87,353 in 2011 and $90,538 in 2012, and it
           will reduce the Street Fund budget by $36,826 in 2011 and $38,191 in 2012.

Parks & Recreation
       •   Parks Maintenance LOS B to C – This reduction would re-designate certain parks from
           level-of-service “B” to level of service “C” maintenance thereby reducing the number of
           seasonal and full-time worker hours needed for overall park maintenance. The affected parks
           will be Groveland Beach, First Hill Park, Ellis Pond, Clarke Beach, Slater Park, Secret Park,
           Rotary Park, Roanoke Park and Pioneer Park. In general, maintenance will change from a
           regular scheduled mowing and turf maintenance to an as-needed basis. Each park will be visited
           once per week rather than 2 times per week for garbage/litter pick-up, restroom cleaning and
           playground checks.



                                                                   _________________________________
B-14                                                                  City of Mercer Island 2011-2012 Budget
                                                                         Budget Message
        This package will reduce the General Fund budget by $79,000 in 2011 and 2012.

    •   Summer Celebration Fireworks – Each year, Summer Celebration includes a fireworks
        display as part of a community picnic at Luther Burbank Park. The display and picnic cost
        $24,500 to produce, with an annual income of $5,000 in food vendor fees and donations. This
        reduction is made with the hopes that private fund raising can replace City General Fund
        support.

        This package will reduce the General Fund budget by a net amount of $19,500 in 2011 and 2012.

    •   Groveland Beach Lifeguard – The City provides lifeguards at Luther Burbank and
        Groveland Beach Parks. Seventeen lifeguards and one Beach Manager are hired as casual labor
        to staff the late June to late August beach program. Lifeguards were removed at Clarke Beach
        in 2003. This package would remove lifeguards at Groveland Beach but maintain them at Luther
        Burbank Park.

        This package will reduce the General Fund budget by $24,200 in 2011 and 2012.

    •   Recreation/Arts Programs/Special Events – This reduction includes the elimination of the
        following events, which are wholly funded by the General Fund and are discretionary programs
        that generate little or no fee revenue: Mostly Music in the Park, Shakespeare in the Park,
        Outdoor Summer Films, Spring Egg Hunt, Arts Council Winter Dance, Family Valentine Winter
        Dance and the Volunteer Recognition Party. The reduction package also includes the
        elimination of the Fun Mobile and the new Adventure Playground. With the reduction in these
        programs, a reduction of .25 FTE will occur from the Arts and Special Events Coordinator
        position.

        This package will reduce the General Fund budget by a net amount of $69,053 in 2011 and
        $69,095 in 2012.

Youth & Family Services
    •   General Fund Subsidy – The City’s adopted Management & Budget Policy for Youth &
        Family Services Financing stipulates that each year the General Fund will contribute $465,000 to
        departmental activities. All other financing must come from grants, fees, donations and MIYFS
        Thrift Shop revenues. The following three budget actions will reduce the General Fund subsidy:
              The financing policy is amended in this biennial budget to a reduced General Fund
               contribution of $440,000, a decrease of $25,000. This General Fund reduction is
               expected to continue indefinitely and is expected to be replaced by increased Thrift
               Shop revenues.
              For the 2011-2012 biennium, an additional $80,000 of General Fund subsidy will be
               reduced. This biennial reduction is expected to be replaced with increased Thrift Shop
               revenues on an ongoing basis.
              For each year in the biennium, $40,000 of the YFS Fund balance (and/or MIYFS
               Foundation grant funds) will be dedicated to department programs thereby further
               reducing the General Fund subsidy by $40,000. This is intended to be a temporary
               reduction for the 2011-2012 biennium only.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                B-15
Budget Message
           This package of budget actions will reduce the General Fund budget by $145,000 in 2011 and
           2012.

       •   Development Officer (0.5 FTE) – In 2007, MIYFS brought on a Development Officer on a
           full-time basis to generate additional donations and grants for the department and MIYFS
           Foundation. In early 2010, this position became vacant and was later re-filled on a half-time
           basis. This reduction will continue the .5 FTE reduction implemented in 2010. There is no
           expected reduction in donations and grants from this package.

           This package will reduce the YFS Fund budget by $42,398 in 2011 and $44,080 in 2012.

       •   VOICE Coordinator (0.5 FTE) – This package will reduce the Youth Development
           Coordinator position (VOICE). The reduction will result in the elimination of department-
           based VOICE programming during the school year. The popular summer VOICE program will
           be maintained. To further reduce costs, the .5 FTE Youth Development Coordinator will merge
           with the existing .5 FTE Islander Middle School Prevention and Intervention Specialist,
           commonly referred to as the “IMS Drug and Alcohol Counselor”, to create a 1.0 FTE Youth
           Development/School-Based Preventionist position. This merger will result in a reduction in
           capacity for school-based professional counseling/drug and alcohol assessment and intervention
           services at IMS. Instead, drug and alcohol prevention services (as opposed to intervention or
           counseling) will be offered.

           This package will reduce the YFS Fund budget by $32,872 in 2011 and $34,255 in 2012.

City Manager's Office
       •   Communication Coordinator (0.4 FTE) – The Communications Coordinator position was
           first funded as a full-time position in 2006 on a contractual basis and then converted to an
           ongoing budgeted position in 2007. In mid-2010, the position was reduced and re-filled on a .60
           FTE basis. The position is currently focused on maintaining basic community communication
           functions of weekly electronic newsletters, semi-annual mailed newsletters, website postings,
           press releases, managing media contacts and supervising contracted services for cable broadcast
           functions of City Council meetings.

           This package will reduce the General Fund budget by $50,319 in 2011 and $52,314 in 2012.

Non-Departmental
   •       Reinvesting in Youth – Reinvesting in Youth (RIY) is a county-wide multi-organization effort
           to find and implement best practices to reduce the youth school drop-out rate. Benefits from
           RIY go primarily to youth residing outside Mercer Island.

           This package will reduce the General Fund budget by $4,000 in 2011 and 2012.

   •       Outside Human Service Contracts – The City has support contracts with four regional
           human service agencies. Although available to Mercer Island citizens, each has low utilization
           from local residents. Local police and Mercer Island Youth & Family Services will continue to
           provide referrals and/or direct counseling for local residents needing assistance. The four
           agencies and their respective contract amounts subject to elimination are:



                                                                   _________________________________
B-16                                                                  City of Mercer Island 2011-2012 Budget
                                                                             Budget Message
               Eastside Domestic Violence Center – $10,000 (Criminal Justice Fund)
               Eastside Legal Aid Program – $3,500
               King County Sexual Assault Center – $2,500
               Children’s Response Center – $1,500

        This package will reduce the General Fund budget by $7,500 in 2011 and 2012 and the Criminal
        Justice Fund by $10,000 in 2011 and 2012.

Sustainability
Since the early 1990’s, the City has been a regional leader in resource conservation. The City has
experienced significant success in recycling and solid waste stream diversion, water conservation, storm
water quality improvements, building energy efficiencies, and invasive species removal.

The City will continue to be active in sustainable activities, particularly where the activity generates
savings in capital investment and operations costs. In the coming biennium, the City will continue its
activities in the following areas:

    •   Fleet Operations – Reduce green house emissions and fuel consumption through acquisition
        policies and operational best practices.
    •   Healthy Neighborhoods – Implement the Bicycle & Pedestrian Plan, facilitating greater
        reliance on human powered transportation.
    •   Water Quality – Identify and implement Low Impact Development projects through regional
        grant fund sources.
    •   Energy & Resource Conservation – Continue recycling goals, water conservation, and
        partnership with Puget Sound Energy for a Resource Conservation Manager to oversee energy
        conservation efforts by City staff.
    •   Grass Roots Efforts – Partner with the Green Ribbon Commission to advocate for voluntary
        energy savings and emissions reductions in local homes and businesses.

The costs for most of these activities will be covered by savings generated from higher resource
efficiencies and one-time funding, as needed. See Sustainability policy in Section C (Budget Policies) for
more details.

New/Enhanced Revenues
Property Tax – 1% Optional Increase
Mercer Island continues to be highly dependent upon the property tax for funding its basic services (44%
of total revenues in 2011-2012). Generally, Mercer Island and other “bedroom communities” have a
lower reliance on sales tax receipts and, consequently, a higher reliance on local property taxes. Given
the volatility of retail sales tax revenues, especially construction-related sales tax, and development fees,
the proposed 2011-2012 Budget assumes a 1% Council-approved property tax increase.

See Property Tax policy in Section C (Budget Policies) for more details.

Fee Increases
In order to balance the biennial budget without over-reliance on reserves or service reductions,
the following fee increases are proposed:

_________________________________
City of Mercer Island 2011-2012 Budget                                                                     B-17
Budget Message
   •   Ambulance Transport Fees – Private ambulance companies and Mercer Island Fire
       Department Aid Units transport approximately 900 patients to local hospitals on an annual
       basis. Currently, when transported by a private ambulance carrier, a charge is passed on to the
       patient’s insurance carrier. When transported by the Fire Department, the service is given for
       free. This proposal would seek authorization to charge citizens being transported to the local
       hospital at a flat rate of $500, which is approximately $300, or 37.5%, less than private
       ambulance carriers. This proposal would reduce the use of private carriers.

       This proposal is projected to generate new General Fund revenue, net of billing costs and uncollectible
       account write-offs, of $225,000 in 2011 (based on an April 1, 2011 implementation) and
       $300,000 in 2012.

   •   Development Services
              Building Valuation Table/Fees – The City has had a long-standing policy to move
               towards full cost recovery for building and land use permitting costs. In a 2009 analysis
               of DSG activities, staff concluded that 94% of costs eligible for recovery were received
               in permit fees. The 2009 analysis also concluded that the City should continue to refine
               eligible "indirect costs" for legal, facility and services provided by other departments.

               In a 2010 review of the permit fee calculation methodology, staff concluded that one
               aspect of the permit fee structure warranted updating. Currently, the value of new
               residential construction is set at $116 per square foot (SF). This rate is multiplied by the
               size a project and thereby sets the permit fee. This out-dated rate is very low for
               residential construction on Mercer Island. The King County Assessor has determined
               that the 2008 Mean Assessed Value per square foot (SF) for all newly built homes
               (2000-2007) is $258.20/SF. Many Mercer Island projects exceed $300/SF. Staff
               recommends a modest increase of $26.50/SF (from $116 to $142.50) to support
               building permit services.

               Based on 2010 construction activity, this change will generate new General Fund revenue of
               $135,000 in 2011 and 2012.

              Fire Marshal Fees – The Fire Marshal conducts plan review and permitting functions
               as they relate to the International Fire Code. The application of the Code is coordinated
               with local fire department equipment, operational practices and capabilities. The Fire
               Marshal works closely with DSG personnel to track Fire Code permit review costs so
               that they can be included in permit fees. Fire and DSG staff have reviewed current
               review practices and have concluded that an important amount of Fire Marshal permit
               review time has not been included in permit fee calculations.

               Based on 2010 construction activity, staff has conservatively estimated that this change will
               generate additional General Fund fee revenue of $45,000 in 2011 and 2012.

   •   Parks & Recreation
              "Ballfield User Groups" (BUG) Access Fee – Since the creation of the "Ballfield
               Users Group", members of the group pay no rental fees for the use of City's athletic
               fields. The largest BUG users include: Boys & Girls Club, the Youth Soccer
               Association, and both boys and girls Lacrosse. BUG users are currently paying for extra
               fees, which include field lighting and field preparations such dragging and lining. Mowing


                                                                    _________________________________
B-18                                                                   City of Mercer Island 2011-2012 Budget
                                                                             Budget Message
               and field maintenance is provided by the Department at no cost. Compared to most
               cities with athletic field complexes, this is an unusually high level of service. Beginning in
               2011, the Department proposes to charge a base rental fee of $11.00 per hour to BUG
               field users. The proposed rate is less than the rental rate currently charged to non-
               BUG users so they will continue to receive a discount as a result of BUG membership.

               Based on past utilization, this change will generate new General Fund revenue of $34,500 in
               2011 (assuming a July 1, 2011 implementation) and $ 69,000 in 2012.

              Community Center Rental Fees – Rental rates have been the focus of review by
               the City Council for several years, generally with the goal of maximizing local use of the
               facility while minimizing General Fund operational subsidies. Although these two goals
               sometimes conflict, staff has worked to balance realistic market-based rental rates with
               citizen expectations for reasonable access to the facility. Based on a recent review of
               rates, Park Department staff recommends rate increases in three areas: Rotary Club
               annual rental, MI Community Service Rates, and general room rental rates. In order to
               provide ample advance notice to tenants, these rental rate increases are proposed for a
               2012 implementation.

               These rental rate increases will generate new General Fund revenue of $25,000 beginning in
               2012.

   •   MIYFS Thrift Shop – The Mercer Island Youth & Family Services Thrift Shop was created to
       generate financial support for social service programs at MIYFS. Through the re-sale of donated
       household goods, the Thrift Shop continues to grow in activity and sales, with an estimated
       $900,000 in gross receipts projected in 2010. In order to decrease General Fund support to
       the YFS Fund, the Thrift Shop is expected to generate an additional $105,000 in revenue over
       and above 2010 budgeted amounts. See YFS Financing policy in Section C (Budget Policies).
       While Thrift Shop staff believe this is a realistic target, it should be noted that new grants,
       increased donations, fees or expenditure reductions will be required to maintain General Fund
       subsidies at targeted levels if sales do not generate the additional planned revenues.

       This increase in sales will generate new revenue to the YFS Fund of $105,000 in 2011 and 2012.

“Rainy Day” (Contingency) Fund
The City’s Contingency Fund Policy sets a reserve balance goal of 10% of General Fund expenditures.
As of January 2010, the Contingency Fund balance was $2,344,335. In November 2009, the City
Council approved the use of the $300,000 revenue stabilization reserve in the General Fund to address
the 2009 revenue shortfall. Later in 2010, the City Council modified the Contingency Fund Policy to
provide more specific direction for use of reserves to respond to major downturns in City revenues.
In March 2010, the Council appropriated $478,522 from the Contingency fund to address the 2010
revenue shortfall. In a June 2010 discussion about future budget balancing, the City Council again
indicated its willingness to allocate Contingency reserves to the 2011-2012 budget. The Council agreed
with the Finance Director’s recommendation to use no more than 50% of the Fund’s targeted policy
amount to balance the 2011-2012 budget, retaining the remaining 50% for an emergency (e.g. natural or
man-made disaster) or a significant unexpected expenditure. Accordingly, the proposed budget includes
an allocation of $346,500 in each year of the biennium to balance the General Fund budget.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                   B-19
Budget Message
Transportation Benefit District (TBD)
A TBD is a quasi-municipal corporation and independent taxing district created for the purpose of
acquiring, constructing, improving, providing, and funding transportation improvements. The
improvements can be for maintenance of City streets, investments in high capacity transportation, public
transportation, and transportation demand management. A TBD can also fund the operation,
maintenance, and preservation of existing streets and trails.

In Mercer Island's case, it would be created and governed by the City Council. While there are multiple
revenue options available, the most common is a $20 annual vehicle fee. This can be enacted by a vote
of the City Council. An amount above $20 would require voter approval. A $20 annual fee would
generate approximately $300,000 per year. Since rules allowing TBD's were amended in 2005, they
have been created in Bellingham, Burien, Des Moines, Edmonds, Lake Forest Park, Liberty Lake,
Olympia, Point Roberts, Prosser, Sequim, Snoqualmie and University Place.

Although allowed, the City Manager does not recommend using a Transportation Benefit District to
restore General Fund or Street Fund revenues. The proposed 2011-2012 Budget does not rely upon a
TBD to be balanced. Instead, the TBD is offered to the City Council as a tool to address financing
transportation projects that have challenged the Council in the last two biennia. Those project and
service areas include:
    •   Residential street overlay funding
    •   Transit services from south end to north end transit center (e.g. "Jitney" project)
    •   Traffic calming (planning and implementation)
    •   Implementation of Pedestrian & Bicycle Plan
    •   Commuter parking/transit oriented development planning

Additional Revenue Options
While not proposed in this biennial Budget, the following revenue tools are available to the City Council
and/or voters:
    •   "Banked Capacity" – The City Council has the authority to raise property taxes by $156,000
        by a vote of the Council. This authority derives from past property tax setting capacity granted
        by the state legislature, of which the City opted to take less than the maximum increase.
    •   Utility Tax – The City currently levies a 6% tax on private utilities, including electricity, natural
        gas and telephones, and a 7% tax on cable and garbage utilities. Up until 2010, the City did not
        levy a tax on its three public utilities (water, sewer, stormwater). Beginning January 1, 2010, a
        1.7% tax was instituted to pay for fire protection related costs, which were previously funded
        through water utility rates. A 1% tax on all three City utilities would generate $120,000 per
        year.
    •   Levy Lid Lift – With voter approval, the City could raise property taxes for operations and/or
        capital purposes. A 1% increase would generate approximately $100,000.

Utility Rates
The 2011-2012 utility rates discussed below are preliminary estimates.

•   Water Rates – In 2003, the City Council approved a new 60 year water supply agreement with
    Seattle Public Utilities (SPU). With Seattle’s new rate structure, wholesale rates rose in 2005-2010.
    For Mercer Island, SPU rates will remain flat in 2011. SPU sets rates in 3 year periods and has not
    yet forecast rates for 2012-2014, but anticipates a large increase (10%-20%) to wholesale water

                                                                  _________________________________
B-20                                                                 City of Mercer Island 2011-2012 Budget
                                                                            Budget Message
    rates in 2012, followed by more moderate increases of about 5% per year. The Utility Board
    recommends increasing the annual capital funding level to $1.6 million during the 6 year planning
    period, as recommended in the Water System Plan, to fund projected capital reinvestment projects
    for mains and hydrants. Staff recommends using debt financing for the First Hill Water
    Improvements project ($1.2M) planned for 2012, in order to bring rates below the 12% and 15%
    forecast increase for 2011 and 2012. To that end, staff recommends a 9.5% increase for a single
    family residential customer, which translates into a $3.51 increase in the average bi-monthly bill (15
    ccf bi-monthly usage). The Utility Board will make a recommendation on Water Rates at their
    October 12, 2010 meeting.

•   Sanitary Sewer Rates – For 2004-2010, the City Council approved significant annual increases in
    the “sewer line maintenance” rate in order to fund the repair and replacement of the lake line along
    the northwest shore of Mercer Island. This covers the City’s portion of operating and maintaining
    the sanitary sewer system and equals about 50% of the total bi-monthly sewer bill paid by the
    average single family residential customer. The other 50% is the Sewage Treatment charge
    (discussed below). The rate increase is largely driven by the capital reinvestment needs of the
    system, after being held to a minimum during construction of the Sewer Lake Line replacement
    project. After an initial review of rates based on the 2011-2016 CIP Preview presented to Council
    in June 2010, staff recommended adjusting the capital reinvestment plan for 2014 in order to bring
    rates below the 9.75% originally forecast for 2011 and to better balance the project workload on
    staff. The Utility Board unanimously recommends a 9.3% increase for 2011. This represents a $5.83
    increase to the average single family residential customer’s bi-monthly sewer bill, with a winter
    water use of 15 ccf per bi-monthly period .

•   Sewage Treatment Rates – Sewage Treatment rates charged by King County Wastewater
    Treatment, which represents a “pass through” charge, will increase by 13.2% in 2011, which
    represents an $8.40 increase in the bi-monthly bill for an average single family residential customer.

•   Storm Water Rates – The Utility Board unanimously recommends a 3.3% increase for 2011 and
    2012. This translates into an 87 cent increase in the 2011 bi-monthly bill of all single family
    residential customers.

•   Emergency Medical Service (EMS) Rates – Emergency Medical Service rates are adjusted
    annually for inflation based on the Seattle metro area’s CPI-W. City Finance staff recommend a rate
    increase of 0.85% for 2011, which corresponds to the First Half 2010 CPI-W. For 2011, rates will
    also be adjusted between customer classes based on EMS call history and actual costs of the four
    firefighter positions supported by this rate. As a result, an average single family residential
    customer’s bi-monthly bill will increase by $2.18 to $5.78 per bi-monthly bill. The Utility Board will
    make a recommendation on EMS Rates at their October 12, 2010 meeting.

Taken together, the total (i.e. water, sewer, storm water, and EMS) bi-monthly utility bill for the average
single family residential customer will go up by 9.7% in 2011 and 5.5% in 2012, which equates to a
$20.79 increase and a $12.91 increase respectively, as noted in the table below.

                          Description                 2010           2011          2012
              Bi-Monthly Bill                           $213.42        $234.21       $247.12
              Rate Increase over Prior Year                5.8%           9.7%          5.5%
              Dollar Increase over Prior Year            $11.66         $20.79        $12.91


_________________________________
City of Mercer Island 2011-2012 Budget                                                                 B-21
Budget Message
Every two years, the Association of Washington Cities conducts a Tax and User Fee Survey. That
survey was completed in 2010. A comparison is presented below of Mercer Island and the average of
the 20 King County cities who responded to the survey. The comparison assumes an average 15 ccf of
water usage per bi-monthly billing period.

                                                                                        Storm
                       Description                     Water            Sewer                           TOTAL
                                                                                        Water
           Mercer Island                                    $53.84          $63.22           $28.96         $146.02
           King County Average                              $69.21          $53.15           $21.76         $144.12

           Note: This does not include the $63.80 charged bi-monthly by King County for Sewage Treatment (all Cities in King County
           pay this same amount). It also does not include the $3.60 Emergency Medical Services (EMS) bi-monthly charge, which is
           unique to Mercer Island.

See Section F (Utility Funds Summary) for additional detail.

Capital Improvement Program
The 2011-2012 Capital Budget is part of the broader six-year Capital Improvement Program (CIP). The
policy basis for the CIP is explained in detail in Section C (Budget Policies). Actual project details and
financing strategies are also detailed in Section H (Capital Improvement Program). Listed below are the
key issues and initiatives associated with the proposed CIP.

Financing Strategies
The CIP continues to be largely a pay-as-you-go program. Utility rates cover all capital expenditures for
water, sewer, and storm water facilities. Public building, streets, trails, and parks capital maintenance are
supported in whole or in part by real estate excise tax receipts. Major technology system and public
safety equipment costs are funded by General Fund revenues. Finally, fleet and computer replacements
are funded by annual contributions to their respective sinking funds. In addition to REET revenues, the
Street Fund receives revenues from the local portion of the fuel tax.

Real Estate Excise Tax
The Real Estate Excise Tax (REET) is the main revenue source to the Street Fund and the CIP Fund.
REET revenues have been volatile over the last 10 years. During 2003-2007, the City experienced
unprecedented levels of REET revenue due to a boost in the number of home sales amidst a very low
interest rate environment.

In 2008, the nation and region experienced a major contraction in the housing market. As a result, the
number of home sales on Mercer Island dropped from 603 homes in 2004, which represented the peak
sales year, to 260 homes in 2008. Average home sales prices declined from a high of $1.24 million in
2008 to $854,000 a year later. Fortunately, projected home sales and sales prices have improved in
2010 to 300 sales and an average price of $1.0 million. In addition, the City will receive about $500,000
in REET in September 2010 from the sale of Shorewood Heights Apartments. The number of home
sales is forecast to reach 400 by 2012, with home prices expected to increase 5% by 2012. Actual and
forecasted REET revenues for the period of 2001-2012 are shown in the chart below.




                                                                              _________________________________
B-22                                                                             City of Mercer Island 2011-2012 Budget
                                                                                                  Budget Message
                                           Real Estate Excise Tax Revenues

$ Millions

    $4.00
                                                    $3.71
    $3.50
                                                                            $2.93
    $3.00
                                                                                      $2.35
    $2.50
                                                 $2.50             $2.77
                                  $1.82                                                                $1.98
                                                                                                                  $1.71
    $2.00
                          $1.51                                                                                           $2.18
    $1.50

    $1.00
                  $1.17                                                                       $1.26

    $0.50

    $0.00
               2001        2002   2003    2004              2005   2006    2007     2008      2009      2010      2011     2012
                                                                                                      Forecast   Budget   Budget




Project Management
The City's adopted CIP policy states, “whenever possible, capital projects will be scheduled and
completed in the same year [for which funding is approved]”. In addition, City staff have made it a
consistent practice to show how all CIP projects will account for their project management expenses in
their project budgets. Project management staffing will come from staff or otherwise be outsourced at
skill levels and quantities to design and construct CIP projects in the timeframes approved by the City
Council.

Given the decline in REET revenues and, consequently the number of CIP projects, the 2011-2012
Budget assumes a reduction of 3.5 contract FTE’s: 2 Project Managers, a Records Management
Coordinator, and a half-time CIP Administrative Support position. One Project Manager and the
Administrative Support position (1.5 FTE’s) are currently vacant.

Parks and Open Spaces
No major park improvement projects will be undertaken during the biennium. Instead, efforts will be
focused on minor maintenance improvements in Luther Burbank Park, I-90 Lid Park, Homestead Field,
and Island Crest Park. Other minor improvements will be implemented in smaller neighborhood parks.

Streets, Pedestrian and Bicycle Facilities
The proposed 2011-2012 Transportation Improvement Program includes over $3.3 million in roads,
streets, and pedestrian/bicycle improvements. Among them are the following major projects:

    •        Arterial Streets – The primary project for the biennium is the re-surfacing of Island Crest
             Way (86th SE to SE 53rd). The project is scheduled for design in 2011 and construction in 2012.
             The City will also continue its modest arterial street preservation program.
    •        Residential Streets – Per Council direction, annual residential street overlays will be
             undertaken at an accelerated pace in the biennium. The biennial allocation for residential
             overlays is $951,000, which represents an increase of $231,000 over the average amount spent
             per biennium during the last two biennia.
    •        Roadside Shoulders – Shoulder improvements along East Mercer Way will continue in 2011
             with Phases 7 running from the 5600 block to the 7400 block.

_________________________________
City of Mercer Island 2011-2012 Budget                                                                                             B-23
Budget Message
   •   Pedestrian and Bicycle Facilities – Pedestrian improvements approved for Island Crest way
       and contained in the Pedestrian/Bicycle Plan will be implemented. In addition, the Safe Routes to
       School program will continue at $100,000 of funding, and other small PBF Plan projects will be
       implemented ($45,000).

Utilities
   •   Sewer – Shifting efforts from the Sewer Lakeline project, staff will focus on constructing
       cleanout access points, main repair and replacement, telemetry improvements, pump station
       repairs and emergency generator replacements.
   •   Storm Water – In 2011-2012, the City will construct improvements for Basin 6 (SE 40th to
       Shorewood Apts.) at the estimated cost of $995,000. In addition, the City will undertake design
       work for Sub-basins 4.2 and 23.2 and construction of conveyance systems in Sub-basins D15.4
       (SE 63rd) and D18c.1 (70th SE). Neighborhood drainage and small-to-medium drainage system
       improvements will also be undertaken in the biennium.

   •   Water – The City will continue with its annual water main upsizing, pressure reducing valve,
       meter and hydrant replacement programs. The primary project for the biennium will be
       completing the First Hill pressure zone improvements, including upsizing 4" mains and adding
       fire flow capacity. In addition, water system improvements along Island Crest Way will be
       implemented and coordinated with street overlay construction.

Other Projects
   •   Fleet Replacements – Fleet replacements will continue according to the vehicle replacement
       schedules in the Equipment Rental Fund. Vehicle replacements will be made in accordance with
       adopted acquisition and operating standards.
   •   Public Buildings – The City will make annual repair and maintenance investments in the
       following buildings: City Hall, North and South Fire Stations, Maintenance Center, Thrift Shop,
       Community Center, and Luther Burbank Administration. Consistent with Council direction,
       planned expenditures are based on specific repair and maintenance projects as identified in their
       respective CIP project sheets.

   •   Technology – Nearly all new Information Technology projects have been deferred. Activity in
       the biennium will focus on maintaining existing IT systems, including the City’s Financial System,
       PC network, server operating system, and database software.


Acknowledgements
Each budget development cycle represents a major planning, analysis and coordination effort by City
staff. The process begins in March and continues through September, concurrently with delivery of all
other public services to the City’s many customers.

Once again, we recognize the dedication and hard work that all staff put into the budget process. In
particular, Finance Director Chip Corder, Deputy Finance Director Francie Lake, and Accounting
Manager LaJuan Tuttle have all demonstrated the expertise and professionalism for which Mercer Island
has become known. Others involved in the writing, proof-reading and production of the budget
document include Ali Spietz, Stephanie Schwenger and James Mason. For all these fine efforts, the City
Manager expresses his sincerest thanks.

                                                                _________________________________
B-24                                                               City of Mercer Island 2011-2012 Budget
                                                                           Budget Message

Postscript
In October, November, and December 2010, the City Council reviewed the Preliminary 2011-2012
Budget proposed by the City Manager. After directing staff to make a number of changes, the City
Council adopted the Final 2011-2012 Budget on December 13, 2010. These changes, along with a few
adjustments made by staff, are summarized in the following two tables: 1) Revenue Adjustments, and 2)
Expenditure Adjustments.

Revenue Adjustments
                     Description                               Fund            2011          2012

 Revenue Adjustments by Council:

   Eliminate 1.0% property tax increase                  General              -$103,165     -$104,197

                                                         Equipment Rental       -$1,484       -$1,499

   Adjust BLS ambulance transport fee (bump up start     General                $37,500     -$273,750
   date to 2/1/11 and sunset on 1/31/12)

   Reduce 2011 EMS utility rates to partially mitigate   General               -$18,700      -$18,700
   impact of new BLS ambulance transport fee on EMS
   utility rate structure

   One-time transfer from 1% for the Arts Fund to        General                $30,600
   General Fund to restore Arts Council programs

   Increase sponsorships and donations to restore        General                $28,453       $28,237
   Parks & Recreation Special Events

   Use King Conservation District funding to restore     General                $10,000       $10,000
   Tree Planting program

   Adjust overall transfer needed from Contingency       General              -$215,672       $68,661
   Fund to re-balance General Fund

   One-time transfer from Beautification Fund to         Capital                $75,000       $75,000
   Capital Improvement Fund to increase funding for      Improvement
   Open Space Vegetation Management project

   Reduce transfer from General Fund to Technology       Technology &          -$25,000      -$25,000
   & Equipment Fund for technology CIP projects          Equipment

   One-time transfer from Capital Improvement Fund       Capital Reserve      $100,000
   to Capital Reserve Fund from reduction in Minor
   Park Improvements project (Clarke Beach)




_________________________________
City of Mercer Island 2011-2012 Budget                                                           B-25
Budget Message

                    Description                                Fund              2011          2012

 Revenue Adjustments by Staff:

   Adjust 2011 property tax levy for final new           General                 $39,010        $39,401
   construction and refund amounts per King County
   Assessor’s Office

   Increase Mostly Music in the Park sponsorship and     General                  $4,000
   donation estimates

   Eliminate EOC Incident Management System              Technology &           -$50,000
   Enhancements project and corresponding grant          Equipment
   funding

   Increase funding for Low Impact Development           Stormwater                            $225,000
   project per recently awarded Dept of Ecology grant



Expenditure Adjustments
                     Description                               Fund             2011           2012

 Expenditure Cuts Restored by Council:

  Restore human services contracts                       General                 $11,500        $11,500

  Restore Tree Planting program by using King            General                 $10,000        $10,000
  Conservation District funding

  Restore Parks & Recreation Arts Council programs       General                 $41,600

  Restore Parks & Recreation Special Events by           General                 $28,453        $28,237
  increasing sponsorships and donations

  Partially restore Parks Maintenance level of service   General                 $60,000        $60,000
  ($79,000 originally proposed reduction)

  One-time transfer from 1% for the Arts Fund to         1% for the Arts         $30,600
  General Fund to restore Arts Council programs
  ($41,600 total cost - $11,000 revenue)




                                                               _________________________________
B-26                                                              City of Mercer Island 2011-2012 Budget
                                                                          Budget Message

                     Description                               Fund          2011       2012

 Additional Expenditure Cuts by Council:

  Reduce transfer from General Fund to Technology        General             -$25,000   -$25,000
  & Equipment Fund for technology CIP projects

  Eliminate biennial citizen survey                      General                        -$20,000

  Eliminate Fire Marshal position and redistribute       General             -$55,000   -$55,000
  duties in DSG and Fire Dept

  Eliminate interlocal waterfowl management              General              -$3,000    -$3,090
  program

  Reduce City Council supplies and contracted            General              -$2,970    -$2,970
  services

  Reduce Maintenance Administration other services       General              -$1,650    -$1,650
  and charges

  Reduce Non-departmental miscellaneous                  General             -$50,000   -$50,000
  professional services

  Reduce Non-departmental revenue contingency            General             -$31,021   -$37,995

  Reduce Minor Park Improvements project (Clarke         Capital            -$100,000
  Beach)                                                 Improvement

  Reduce Luther Burbank Administration Building          Capital                         -$7,000
  repairs project                                        Improvement

  Adjust overall transfer needed from Contingency        Contingency        -$215,672    68,661
  Fund to re-balance General Fund

 Expenditure Enhancements by Council:

  Increase funding for Mary Wayte Pool operations        Beautification       $25,000   $25,000

  Increase Open Space Vegetation Management              Capital              $75,000   $75,000
  project budget via transfer from Beautification Fund   Improvement

  One-time transfer from Capital Improvement Fund        Capital             $100,000
  to Capital Reserve Fund from reduction in Minor        Improvement
  Park Improvements project (Clarke Beach)




_________________________________
City of Mercer Island 2011-2012 Budget                                                     B-27
Budget Message

                      Description                                  Fund             2011           2012

 Expenditure Adjustments by Staff:

   Leave vacant Parks Maintenance position unfilled       General                   -$90,352       -$93,744
   for 2 years

                                                          Beautification              -$3,771       -$3,923

   Miscellaneous corrections to departmental budgets      General                     -$7,000        $9,776

   Restored Eastside Domestic Violence program            Criminal Justice           $10,000        $10,000
   contribution (required by state law)

   Eliminate EOC Incident Management System               Technology &              -$50,000
   Enhancements project and corresponding grant           Equipment
   funding

   Increase funding for Low Impact Development            Stormwater                              $225,000
   project per recently awarded Dept of Ecology grant

   Adjusted budgeted employee health care costs to        General                   -$73,534       -$80,412
   actual rates per AWC

                                                          Street                       -$352          -$384

                                                          Criminal Justice            -$1,914       -$2,096

                                                          Beautification               -$969        -$1,059

                                                          YFS                         -$7,699       -$8,419

                                                          Water                       -$4,510       -$4,930

                                                          Sewer                       -$3,453       -$3,775

                                                          Stormwater                  -$2,288       -$2,502

                                                          Equipment Rental             -$528          -$578

                                                          Computer                    -$1,320       -$1,443
                                                          Equipment



Finally, where appropriate, beginning fund balance has been adjusted for each fund as well.

Because the General Fund is the primary focal point during the budget review process, a summarized
reconciliation between the Preliminary and the Final 2011-2012 Budget (expenditures only) is provided
on the following page.



                                                                   _________________________________
B-28                                                                  City of Mercer Island 2011-2012 Budget
                                                                         Budget Message

            General Fund Expenditures                      2011 Budget         2012 Budget

 Preliminary Budget                                          $22,963,098          $23,665,296

 Total Expenditure Cuts Restored by Council                        151,553              109,737

 Total Additional Expenditure Cuts by Council                     -168,641             -195,705

 Total Expenditure Adjustments by Staff                           -170,886             -164,380

 Final Budget                                                $22,775,124          $23,414,948

 % Change from Prior Year                                  8.8% decrease        2.8% increase



Relative to the adopted 2010 Budget of $24.98 million, the Final 2011 Budget for the General Fund is
$2.20 million, or 8.8 percent, less.




_________________________________
City of Mercer Island 2011-2012 Budget                                                             B-29
Budget Message

                                        Appendix A
                       Priorities – Mercer Island City Services

   1. The community will be safe.

                 Make timely and effective responses to crime.
       1.1
                 Make timely and effective responses to fire.
                 Make timely and effective responses to medical emergencies.
                 Crime is investigated and prosecuted.

               Buildings are safely built.
       1.2     The transportation system is safely built and operated.
               The City’s drinking water will be safe.

                 Crime is prevented.
                 Fires are prevented.
       1.3
                 Mental and physical health problems are prevented.
                 Emergency responses are planned for.


   2. The community will support effective, efficient and legal delivery of public services.

               The City Council will have the information and forums necessary for making well-
       2.1      considered and informed decisions.
               The decisions of the City Council will be implemented.

               The City will comply with and enforce all applicable laws and ordinances.
               The City will account for its expenditures and revenues and manage its finances
       2.2      according to all applicable laws and ordinances.
               The City will provide for judicial services.

               The City will continually evaluate and improve upon the effectiveness and efficiency of
       2.3
                its services.


   3. The community will support reliable public infrastructure and protect its
      considerable public investments (e.g. water, sewer, storm water utilities, streets, parks,
      buildings).

               The City will operate and maintain its infrastructure to assure continuous, reliable and
                safe service.
        3.1    The City will repair and replace its infrastructure before it fails.

               The City will maintain its infrastructure to prevent failure and extend its useful life.
        3.2




                                                                _________________________________
B-30                                                               City of Mercer Island 2011-2012 Budget
                                                                            Budget Message
   4. The community will support attractive, high quality neighborhood and business
      environments.

                Public and private physical features such as streams, shorelines, ponds, forests/trees,
                 lakes, parks, open spaces, trails and hillsides will be protected.
     4.1        Land development regulations are applied and enforced.
                Building design regulations are applied and enforced.

                Parks, trails and open spaces are provided and maintained.
     4.2
                Developed public rights of ways will be used and maintained.


   5. The community will support a broad range of recreational, cultural, health and
      educational opportunities.

     5.1
                The City will assist its least advantaged citizens with the basic necessities of food,
                 shelter and health care.

                The City will support mental and physical health services for all segments of the
     5.2
                 community.

     5.3        The City will support the education of all segments of the community.

                The City will provide recreational, cultural and community service programs for
                 children and teens.
                The City will provide recreational, cultural and social service programs for senior
     5.4         citizens.
                The City will provide recreational, cultural and social service programs for adults.


   6. Community will support open and informed public involvement processes within
      the structure of representative, democratic decision making.

     6.1        The City Council will make decisions on behalf of the community.

                The City will generate and disseminate public information to the community on the
                 issues that confront the community and about the services and programs it provides.
     6.2
                The City will receive information and opinions from citizens, businesses and other
     6.3         interested parties during the course of its policy making and delivery of its services.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                    B-31
Budget Message

                                         Appendix B
                 Comparing Mercer Island to Other Eastside Cities
                     Staffing & General Fund Expenditures


                            # of Employees in 2010              General Fund Expenditures
                             Per 1,000                           2009 Actual
         City               Population            Rank            Per Capita              Rank

Redmond                         12.4                 1             $1,253.55                 1

Bellevue                        10.7                 2             $1,240.51                 2
Issaquah1                        9.3                 3             $1,016.36                 5
Bothell                          8.9                 4             $1,013.10                 6
Kirkland                         8.8                 5             $1,172.41                 3
Renton                           8.2                 6             $1,092.79                 4
Mercer Island2                   7.8                 7              $910.13                  7


Notes
  1
      Issaquah doesn’t have a fire department. Instead, it contracts with Eastside Fire & Rescue
      for services.
  2
      Mercer Island has a Youth & Family Services Department consisting of 17.5 FTE's, which is
      unusual among Eastside cities.




                                                             _________________________________
B-32                                                            City of Mercer Island 2011-2012 Budget
                       Section C. Budget Policies

                                     Table of Contents
General Government
     Beautification Fund ........................................................................................... C-3
     Communications ............................................................................................... C-5
     Debt Financing ................................................................................................... C-7
     Investment Earnings ......................................................................................... C-9
     LEOFF I Retiree Costs .................................................................................... C-11
     Long Term Compensation Strategy ............................................................. C-15
     Property Tax ...................................................................................................... C-17
     Reserves – Capital Reserve Fund ................................................................. C-21
     Reserves – Contingency Fund ....................................................................... C-23
     Risk Management .............................................................................................. C-27
     Sustainability ....................................................................................................... C-29

Utility Funds
     Interfund Administrative Charges ................................................................. C-37
     Utility Maintenance and Construction......................................................... C-41
     Utility Fiscal Policies ......................................................................................... C-43

Capital Improvement Program
     Capital Improvement Program ...................................................................... C-49
     Street Maintenance and Construction......................................................... C-53
     Information Technology .................................................................................. C-55
     Vehicle & Equipment Replacement............................................................... C-57

Development Services Group
     Development Review Fees ............................................................................. C-63
     Transportation Management .......................................................................... C-67

Parks and Recreation
     I-90 Landscape Maintenance .......................................................................... C-73
     Luther Burbank Park ....................................................................................... C-77
     Parks and Recreation Financing ..................................................................... C-81
     Trees and Urban Forest Lands ...................................................................... C-85

Public Safety
     Criminal Justice Funds ..................................................................................... C-91
     Fire Apparatus Replacement .......................................................................... C-93
     Fire Prevention .................................................................................................. C-95
     Jail Services ......................................................................................................... C-97
     Municipal Court ................................................................................................ C-99
     Police and Fire Dispatching ............................................................................ C-101
     Public Safety Education / Emergency Management ................................... C-103

Youth and Family Services
     Youth and Family Services Financing ............................................................ C-107
BUDGET POLICES
General Government
                     This section includes
                     budget polices on the
                     following:
                       • Beautification Fund
                       • Communications
                       • Debt Financing
                       • Investment Earnings
                       • Long-Term
                          Compensation
                          Strategy
                       • Property Tax
                       • Capital Reserve Fund
                       • Contingency Fund
                       • Risk Management
                       • Sustainability
Budget Policies




                  _________________________________
C-2                  City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies

Beautification Fund
Background
The Beautification Fund was created in 1980 by Council ordinance. According to the ordinance, Business
and Occupation Tax (B&O) revenues are deposited into the Beautification Fund.

The stated purposes of the Beautification Fund are:
    •   Installation and maintenance of landscaping including plants and other landscaped materials on
        public property or easements;
    •   Acquisition and operation and maintenance of any building, facility, property, or easement for
        park, recreation, or open space purposes;
    •   Undergrounding of power lines and lighting facilities for the operation and maintenance thereof
        on public property or easements;
    •   Promotion and support of a Central Business District (CBD) revitalization program;
    •   The promotion, support, acquisition, and installation of public art on public property or
        easements;
    •   Acquisition or leasing of parking spaces for Mercer Island residents for the purpose of providing
        additional parking;
    •   Enforcement of parking restrictions, providing signage related to parking, providing permits, and
        any other expenses related to parking restrictions; and
    •   All expenses including, but not limited to, professional fees, printing and publishing, incurred in
        connection with the above-listed purposes.

Effective January 1, 2006, the Council simplified the B&O tax structure increasing annual exemptions
from $20,000 to $150,000, establishing a uniform tax rate of .10%, and changing the annual gross
receipts threshold for filing quarterly B&O tax returns from $100,000 to $1,000,000. In addition to
simplifying the tax structure for businesses, this action served to simplify the administrative process for
the City staff.

Historically, expenditures of the Beautification Fund included the operation and maintenance of the
medians and planters in the downtown, the holiday lighting program, support for the Chamber of
Commerce, maintenance of I-90 corridor landscaping, the restricted parking program, business licensing
and business and occupation tax administration, and City support for The Northwest Center’s
operation of the Mary Wayte Pool. Since creation of the Fund, a substantial sum has been spent on
other beautification projects and the broad language of the Code has been construed to permit a variety
of undertakings.

Budget Policies for 2011-2012
•   Move CBD utility costs from the General Fund to the Beautification Fund.
•   Continue support of ongoing Town Center beautification efforts, including Holiday lighting and
    maintenance of medians and planters.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                   C-3
Budget Policies


2011-2012 Budget Impact
                                             2009             2010                 2011                2012
            Description                      Actual       Forecast                Budget              Budget
RESOURCES
Budgeted
  Beginning Fund Balance                                  $    69,341         $    103,057        $    100,000
  Business and Occupation Tax                 361,739         325,000              335,000             348,000
  Permit Parking Program                        2,860           2,550                2,850               2,550
  Landscaping Services (WSDOT)                443,812         444,120              447,895             451,000
  Interfund Transfer - General Fund            70,000                -                        -               -
      Total Budgeted Resources           $ 878,411        $ 841,011           $ 888,802           $ 901,550
Not Budgeted
  Beginning Fund Balance (Reserved)           658,681         593,891              590,834             495,575
TOTAL RESOURCES                          $ 1,537,092      $ 1,434,902         $ 1,479,636         $ 1,397,125
USES
Budgeted
  Chamber of Commerce                    $     14,400     $    14,400         $     14,400        $     14,400
  Financial Services \ Parking Program         15,199          12,400               12,800              12,900
  Town Center Beautification                  139,845         170,000              166,453             166,948
  Mary Wayte Pool Operations                  100,000         100,000              125,000             125,000
  I-90 Landscape Maintenance                  521,482         442,171              490,408             497,626
  Town Center Plaza                            80,462           2,040                         -               -
  Farmers Market Grant                          2,472                    -                -                   -
  Interfund Transfer - CIP                            -                  -          75,000              75,000
  Total Budgeted Expenditures            $ 873,860        $ 741,011           $ 884,061           $ 891,874
Not Budgeted
  Ending Fund Balance                         663,232         693,891              595,575             505,251
TOTAL USES                               $ 1,537,092      $ 1,434,902         $ 1,479,636         $ 1,397,125




                                                                             _________________________________
C-4                                                                             City of Mercer Island 2011-2012 Budget
                                                                                  Budget Policies

Communications
Background
Establishing Communications as a Government Priority
Recognizing the importance of an informed and engaged citizenry to promoting the democratic decision
making process and to achieving the City’s service mission, the City of Mercer Island established public
communication and community involvement as government priority in 2004.

    “Community will support open and informed public involvement processes within the structure of
    representative, democratic decision making.”

In 2006 the City established public communication and community involvement as a government
priority, developed a plan to coordinate communication and civic engagement efforts and the City
Council authorized the City Manager to add a Communications Coordinator as a new full time position
on City staff.

The Roles and Responsibilities of the Full Time Communications Coordinator
The Communications Coordinator provided full time communications and public involvement
support to City departments from March 2006 to March 2010.

The primary roles and responsibilities of the full-time Communications Coordinator included:
    •   Serving as the primary media contact for the City of Mercer Island
    •   Managing targeted communications and outreach strategies for individual City
        departments,
    •   Producing City-wide communications materials
    •   Overseeing MI-TV broadcast production and programming.
    •   Managing the City’s public involvement efforts
    •   Training as a Public Information Officer (PIO) to support the Mercer Island Emergency
        Operations Center in the event of a natural disaster or other crisis.
    •   Assistance with the City’s sustainability efforts.

City Communications Today
The current Communications Coordinator works at 60% time, providing the minimum level of
communications services needed to keep Mercer Islanders informed about the City’s work.

Budget Policies for 2011-2012
Under this model, the Communications Coordinator will continue to work at 60% time, providing only
the essential level of communications services needed to keep Mercer Islanders informed.

The following outlines the proposed overarching goal for City communications in the 2011-2012
biennium under this model:

    Get back to basics. Excel at communicating with citizens via the obvious channels, especially through print
    media and the website (particularly through the news and events pages calendar). Inform citizens before
    things happen and as they happen instead of after they happen. Build collaborative relationships with


_________________________________
City of Mercer Island 2011-2012 Budget                                                                        C-5
Budget Policies
      individual departments to meet their communications needs and most importantly, the needs of Mercer
      Islanders.

Specific functions will include:
      •   Serving as the primary media contact for the City of Mercer Island.
      •   Managing targeted communications and outreach strategies for individual City
          departments, including the development and implementation of coordinated, relevant
          and timely print and web materials.
      •   Producing City-wide communications materials, including writing, editing, designing
          and/or distributing all print and web materials
      •   Training as a Public Information Officer in order to support the Mercer Island Emergency
          Operations Center in the event of a natural disaster or other crisis
      •   Reviewing and editing all web content prior to posting to help ensure City communications are
          accurate, consistent and accessible.
      •   Coordinating public involvement efforts with individual departments on major policy issues that
          affect the community.

2011-2012 Budget Impact
                                               2009             2010            2011            2012
Expenditures
   Salary and Benefits                     $      94,829    $   106,413     $     59,364    $   62,312
   MI-TV (services & supplies)                    17,562          38,200          27,000        27,000
   MI Quarterly (printing & postage)              11,083          21,000          11,700        11,700
   Other operating costs                           4,654           5,547           4,691          4,691
          Total Expenditure                $    128,128     $ 171,160       $   102,755     $ 105,703




                                                                    _________________________________
C-6                                                                    City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies

Debt Financing
Background
The City has prudently issued little debt over the years, maintaining a sizable debt capacity and
consistently following a conservative fiscal management policy as reflected in the excellent bond ratings
from Moody's rating service—Aa1 rating for its unlimited tax general obligation (UTGO), or voted,
bonds and a Aa2 rating on its limited tax general obligation (LTGO), or non-voted, bonds. Only four
cities have equivalent or higher UTGO bond ratings according to Moody’s: Seattle (Aaa), Bellevue
(Aaa), Redmond (Aa1), and Kirkland (Aa1). A high bond rating equates to lower interest costs and is
very desirable.

The total amount of debt obligations for cities is limited by state law. Mercer Island has significant legal
capacity for funding foreseeable debt issues. As of 12/31/2009, the available debt capacity margin was
$202,396,480 for general purposes (voted, non-voted and lease debt), $217,767,201 for utility purposes
(voted debt), and $217,767,201 for open space and parks facilities (voted debt).

The City annexed to the King County Library System district (KCLS) in 1994, and as part of the
annexation, KCLS agreed to buy the library from the City for a price equal to the remaining debt service
costs of the 1990 Library bond issue. A lease purchase agreement was signed, resulting in annual lease
payments to the City of $206,576 through December 2009 when the debt was retired.

In 1996, the City refinanced three bond issues to obtain interest savings for the taxpayers. The total
present value savings for these issues amounted to over $548,000.

In 2003, the City issued $2.29 million in Councilmanic bonds to acquire the property on which the
Community Center at Mercerview was sited. This was in preparation for building a new community
center. In 2004, after a year of study and design, the Council authorized the construction of a new
$12.4 million community center. Most of that project was paid with City reserves; however, $2,040,000
in Councilmanic bonds were issued to complete the financing package. Both of these bond issues are
being funded by real estate excise taxes in the Capital Improvement Fund.

In 2007, the City Council authorized two separate contracts with Pierce Manufacturing to purchase the
following through a lease purchase agreement with Municipal Asset Management: 1) two Velocity
pumper fire trucks ($1,035,026), and 2) one mini pumper fire truck ($251,982). The remaining principal
owed for each lease purchase as of December 31, 2010 is $758,561 and $166,336 respectively.

In 2009, the City issued $10.4 million in Councilmanic bonds to finance the remaining balance of the
Sewer Lake Line project ($9.25 million) and to finance improvements to the South Mercer Playfields
($990,000). The debt service on the Sewer Lake Line portion of the bonds is being funded by sewer
utility rates; whereas, the debt service on the South Mercer Playfields portion of the bonds is being
funded by general purpose revenues in the General Fund. By issuing GO bonds instead of revenue
bonds, the City was able to take advantage of its excellent bond rating, reducing the interest rate by
approximately 0.5%. In addition, the City issued a two year GO bond in 2009 to initially fund the
construction of an emergency water supply well. This was an interim financing strategy intended to buy
time for the real estate market to recover. Ultimately, the emergency water well project will be funded
by the sale of a water utility property in the First Hill neighborhood. Given the slow recovery in the
real estate market, the two year GO bond, which had a maturity date of June 1, 2011, was refinanced in
2010, with the due date extended to June 1, 2013.


_________________________________
City of Mercer Island 2011-2012 Budget                                                                   C-7
Budget Policies
Budget Policies for 2011-2012
•     The City will confine long-term borrowing to fund approved capital improvement projects that
      cannot be financed from current revenues.
•     The City will use debt financing only when the following conditions exist:
      - Object of the expenditure is a major new capital asset.
      - Object of the expenditure can be used by residents/taxpayers in the future.
      - There are insufficient existing capital revenues available.
      - All the revenue is needed at the same time (i.e. the project cannot be phased over time).
•     When the City finances capital projects by issuing bonds, it will pay back the bonds within a period
      not to exceed the expected useful life of the project.
•     The City will not use long-term debt for current operations.

2011-2012 Budget Impact
                                               2009           2010               2011            2012
               Description                    Actual      Forecast              Budget          Budget
Voted Debt:
    1996 Refunding Bonds                  $    199,880    $          -      $           -   $           -
    King County Library Payment               (206,576)              -                  -               -
Total Amount to be Levied in Taxes        $        -      $          -      $           -   $           -
Non-Voted Debt:
    2003 Mercerview Property              $    210,061    $   205,441       $    200,409    $    195,170
    2004 CCMV Construction                     149,760        152,210            149,285         151,135
    2009 LTGO Water Well                              -        23,923             25,430          26,593
    2009 LTGO South Mercer Playfields                 -        95,491             96,336          94,936
    2009 LTGO Sewer Lake Line                         -       677,923            677,113         679,713
    2011 LTGO First Hill Water System                 -              -                  -         92,251
Lease Obligations
    2007 Fire Velocity Pumpers                 128,023        128,023            128,023         128,023
    2007 Fire Mini Pumper                       37,721         37,721             37,721          37,721
Total General Obligation Debt             $ 525,565       $ 1,320,732       $ 1,314,317     $ 1,405,542

Public Works Trust Fund Loans
    Sewer Pump Rehab II                   $     17,727    $    17,727       $     17,727    $     17,727
    Sewer Lake Line                            177,479        408,202            411,353         409,449
Total Public Works Trust Fund             $ 195,206       $ 425,928         $    429,080    $    427,175




                                                                         _________________________________
C-8                                                                         City of Mercer Island 2011-2012 Budget
                                                                                Budget Policies

Investment Earnings
Background
The City pools its cash and invests it in certificates of deposit (CD's) and other investments authorized
by the Revised Code of Washington. To forecast interest earnings, the Finance Department estimates
the average cash balances for all funds as of year-end and then applies a projected rate of return to the
total cash balance.

By pooling and investing its cash, the City is able to obtain the best possible rate of return while still
preserving liquidity. City funds are always fully invested in a combination of timed deposits, money
market accounts, and an interest bearing checking account.

To maximize interest earnings, the City has all of our state revenues wired directly into a City account
with the State Investment Pool. The State Investment Pool has the advantage of paying excellent rates
while being completely liquid. All of the City's funds are currently invested in the State Investment Pool.

Interest earnings are allocated to the City’s funds monthly based on the following prioritized distribution
policy, which took effect on January 1, 2009:

    a. Water Utility Fund, Sewer Utility Fund, Storm Water Utility Fund, Firemen’s Pension, and Youth
       Services Endowment Fund based on cash balance;
    b. $325,000 annually to the General Fund (which is approximately 1.5% of General Fund budget);
    c. Fire apparatus replacement reserve, which resides in the Equipment Rental Fund, based on the
       difference between the annual sinking fund charge for fire apparatus replacement and the 1.65%
       property tax levy dedicated for this same purpose;
    d. LEOFF I long-term care reserve, which resides in the General Fund, based on cash balance;
    e. Contingency Fund based on cash balance;
    f.   Street Fund, Capital Improvement Fund, and Technology & Equipment Fund for those CIP
         projects that have investment interest as a budgeted revenue source;
    g. Any remaining balance would be allocated to the Capital Reserve Fund for unspecified CIP
       projects.

The City treasurer's primary objective in investing cash is to preserve the principal of the investment,
while striving to maximize investment returns.

Budget Policies for 2011-2012
•   For the 2011-2012 biennium, the following changes are being made to the distribution policy due to
    the current historic low rate of return, which is projected to continue for the coming biennium:

    -    There will be no allocation to the fire apparatus replacement reserve, the LEOFF I retiree long-
         term care reserve, or the Contingency Fund as long as the rate of return is under 1%.
    -    The General Fund annual distribution cap, which was $325,000 for the 2009-2010 biennium,
         excluding the LEOFF I long-term care reserve, is being reduced to $150,000.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                       C-9
Budget Policies

2011-2012 Budget Impact
                                                 2009           2010          2011          2012
                    Revenues                    Actual        Forecast       Budget        Budget
General Fund (for general operations)            $74,820         $24,600       $25,000       $35,000
LEOFF 1 Reserve (General Fund)                           0               0            0             0
Fire Apparatus Replacement Reserve (Equipment
                                                         0               0            0             0
Rental Fund)
All Other Funds                                  168,338          51,056        40,312        33,923
Total Revenues                                  $243,158        $75,656       $65,312       $68,923




                                                             _________________________________
C-10                                                            City of Mercer Island 2011-2012 Budget
                                                                                    Budget Policies

LEOFF I Retiree Costs
Background
Law Enforcement Officers and Fire Fighters (LEOFF) Retirement System membership is made up of all
full-time law enforcement officers and fire fighters in the State of Washington. This retirement system
was initiated in 1970, consolidating the several police pensions systems of First Class cities and the
municipal firemen’s pension systems. As of October 1, 1977, LEOFF was divided into a two-tier system.
All of those employed prior to October 1, 1977, became members of Plan I and those first employed on
or after October 1, 1977, became members of Plan II.

LEOFF Plan I provides the medical benefit of 100% reimbursement of all medically necessary expenses to
each LEOFF Plan I member (members are persons who terminate service with five years or more of
service but do not withdraw their contributions).

LEOFF Plan I membership consists of active and retired members who are relatively young in age. This
young age means the greatest impact of medical costs remains in the future.

LEOFF Plan I Medical Benefit
One of the major distinctions between LEOFF Plan I and Plan II is the LEOFF Plan I medical benefit. This
benefit is set forth as follows:
    “Whenever any active member, or any member retired… on account of… sickness… not caused
    or brought on by dissipation or abuse, of which the disability board shall be judge, is confined in any
    hospital or in home, and whether or not so confined, requires medical services, the employer shall
    pay… the necessary medical services not payable from some other source...” [RCW 41.26.150(1)]

In other words, the employer is required to pay all of the reasonable costs for medical services incurred
by active and retired members not paid by insurance obtained by either the employer or someone else.
These costs range from simple visits to a physician to major surgical procedures and placement in a
nursing home. The statutory definition clearly defines the minimum medical services covered. While
the minimum medical services are defined, it is possible that the scope of these enumerated medical
services may be increased by a separate entity known as the Disability Board.

Another important aspect of this medical benefit is the burden of payment. None of the cost is borne
by retirement funds. Moreover, the state is not liable for any cost of this benefit. These costs are the
complete responsibility of the individual LEOFF Plan I employer.

The Disability Board
The pivotal point in the extent of LEOFF Plan I medical cost is the local disability board. This board is
responsible for the determination of duty and non-duty disability and the approval of medical care costs
for LEOFF Plan I members within the jurisdiction.

The Disability Board is made up of two council members, one LEOFF Plan I active or retired police
officer, one LEOFF Plan I active or retired firefighter, and one citizen at large. The Disability Board has
the authority to decide the extent of what will actually be covered beyond the minimum LEOFF Plan I
medical services, as well as whether or not the expense is a reasonable medical necessity. A LEOFF Plan
I member may appeal disability board decisions directly to the state.


_________________________________
City of Mercer Island 2011-2012 Budget                                                                        C-11
Budget Policies
Insurance
The provisions of LEOFF Plan I make clear that the employer is expected to utilize insurance to reduce
the financial liability of the risks connected with the medical benefit. The City of Mercer Island insures
the LEOFF Plan I members through the Association of Washington Cities (AWC) Employees Benefits
Trust. The trust has entered into contracts with Regence Blue Shield to provide indemnity health care
coverage and with Group Health Cooperative to provide managed health care coverage. However,
these medical insurance plans do not cover expenses related to long-term care services.

The Association of Washington Cities, through its Employee Benefit Trust offers long-term care
insurance plans underwritten by UNUM Life Insurance Company of America. This Plan is structured to
primarily meet the LEOFF Plan I liability for nursing home and in-home expense. Both in 1996 and in
2002, the City of Mercer Island received quotes directly from UNUM Life Insurance Company of
America to cover the LEOFF Plan I members. In 1996, the annual cost to cover Mercer Island LEOFF
Plan I members was in excess of $64,000 per year and covered approximately 60 percent of the total
long-term care expenses. Additionally, several LEOFF Plan I members were not insurable based on their
health history. In 2002, the annual cost to cover the LEOFF Plan 1 members was in excess of $125,000.

Government entitlement programs don’t offer complete protection either. Medicare was designed to
help older people pay for the same kind of acute care as traditional health insurance, and it provides
only limited post-hospital care. In fact, Medicare pays for less than 5 percent of long-term care costs.
Medicaid, designed for low-income individuals, currently covers about half of the bills for nursing home
residents. But the program has strict eligibility requirements that force middle-income participants to
spend down their personal assets. The vast majority of Mercer Island’s LEOFF Plan I members would be
ineligible for Medicaid benefits.

Mercer Island Disability Board Long Term Care and Nursing Facility
Care Rule
The Disability Board approved long-term care and nursing facility care procedures in October 2002.
 These rules require the City to pay for long-term care expenses based upon the average cost of three
(3) nursing facilities or services in the member’s geographic locality for 24 hour-a-day care in a semi-
private room as private pay. The Disability Board Secretary will determine the three (3) nursing
facilities or services that will be used to average the cost.

To date, the City has experienced two (2) long-term care reimbursement claims. In February 2003, the
City paid a total of $58,146 to satisfy its first claim for long-term care expenses. The second claim
amounted to $99,011 paid out in 2004 and 2005.

There are thirty-six (36) remaining City of Mercer Island LEOFF I members. The potential for future
claims for long-term care expenses from a number of Mercer Island LEOFF Plan I members is probable.
Therefore, a source of funding must be considered and established.

Funding Source
The previous actuarial valuation of Long Term Care Benefits for LEOFF I members, completed in 2004,
estimated a $1.1 million target balance to fund the LEOFF I long term care obligation. The most recent
actuarial valuation of the City’s long-term care obligation, calculating the liability as of the year ending
December 2007, estimates that target balance to be $2.07 million. As of December 31, 2010, the City
has accumulated $913,108 toward funding this target balance. The LEOFF 1 members’ retiree medical
insurance premiums and direct medical costs are budgeted separately from regular employee costs.

                                                                  _________________________________
C-12                                                                 City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies
Budget Policies for 2011-2012
•   Schedule another actuarial study in 2011, which is included in the proposed budget. The last one
    was completed in 2008. A full pension actuarial valuation is required by GASB (for those cities
    preparing Comprehensive Annual Financial Reports) at least every two years and by the State
    Auditor’s Office every five years. Finance staff recommends updating the pension, long-term care,
    and medical cost valuation every three years.
•   Explore ICMA-RC’s Retirement Health Savings (RHS) Employer Investment Program for investing
    funds dedicated to LEOFF I long-term care and other medical costs.

2011-2012 Budget Impact
                                                                2010          2011         2012
              Description                2009    Actual        Forecast      Budget       Budget

Retiree Medical Premiums                  $      427,975   $      493,000   $ 503,300    $ 553,700
Retiree Direct Medial Reimbursements              30,771           25,200       34,570       36,295
Actuarial Study                                      -                -         25,000          -
Total General Fund Expenditures           $     458,745    $     518,200    $ 562,870    $ 589,995




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City of Mercer Island 2011-2012 Budget                                                                C-13
Budget Policies




                  _________________________________
C-14                 City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies

Long-Term Compensation Strategy
Background
This management and budget policy recognizes the significance of the fact that approximately 70% of the
City's operating expenditures are devoted to salary and benefits for employees. The City’s employees
are the means by which basic municipal services and Council policy directives are implemented.

The primary objectives of this compensation strategy are to build both flexibility and predictability into
our human resources systems. Forces such as the regional economy and labor market are outside of
local control. Nevertheless, it is in the City’s best interest to anticipate, when possible, factors that
drive compensation decisions.

This management and budget policy outlines the philosophy and assumptions underlying the City’s
compensation strategy. To implement it, specific actions will be taken during the next two years. These
are listed below in the section titled Budget Policy for 2011-2012.

Compensation Strategy
•   For all employee groups, total compensation includes base pay, performance pay, and other
    compensation.
•   Approved full and part-time positions represent valuable labor potential. Therefore, vacant
    positions must be carefully reviewed before they are filled.
•   When a healthy economic climate exists, our goal is to remain competitive at approximately the
    mid-point of the comparable market. We look at comparable positions in the public (and
    sometimes private) employment sectors for our labor market.
•   When identifying appropriate comparable cities for conducting market analysis, we choose
    organizations based on population (20,000-75,000), Puget Sound location (including King and
    Snohomish Counties and excluding Pierce, Thurston, and Kitsap Counties), sales tax per capita
    ($100-$400), number of employees (150-600), and number of job matches.
•   When possible, increases in pay will be tied to exceeding defined performance standards.
•   Employees must share in the cost of their health care benefits.
•   Compensation decisions (including labor negotiations) will be made using the best data available.

The City’s philosophy strives to create a balance between fair and equitable pay for employees, enabling
management to recognize and reward excellent performance while exercising fiscal prudence by keeping
the City's salary budget within its fiscal ability to pay.

As a general rule, the City’s policy is to make sure that every job is classified and employees are fairly
compensated when compared either internally or externally. It is also the policy of the City to ensure
that salaries do not exceed an amount equal to the 75th percentile of the defined market. An
employee’s salary may be fixed at 5% less than the midpoint of the market to allow for those who may
require extensive on-the-job training to be hired at entry level. In extraordinary circumstances, such as
to attract or retain valued employees, the City Manager has latitude to set salary outside the range.

Competitive Compensation for the Non-Union Workforce
Compensation recognition awards and/or increases may occur for one or more of the following
reasons:


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City of Mercer Island 2011-2012 Budget                                                                 C-15
Budget Policies
    1. Incentive to recognize work quality and/or quantity, either for exceptional performance,
       customer service, creating efficiencies, or team performance.
    2. The temporary addition of substantial responsibilities (such as temporary assignment or extra
       duty).
    3. Special achievement.

Salary increases may occur as a condition of satisfactory completion of a probationary period. Starting
salaries are set at an amount that does not exceed the midpoint of the defined market.

Salary adjustments resulting from performance and annual compensation guidelines must be approved by
the Human Resources Director, Finance Director and City Manager.

Performance Awards/Merit Pay
Funds are set aside for performance awards as part of the appropriation made by the City Council for
all non-represented employees. The Human Resources Director, Finance Director and City Manager
will approve performance awards to reward behaviors and performance consistent with the mission of
the department and the City’s vision. Performance awards will follow the guidelines set forth below:
    1. The budgeted funding for awards does not exceed 1.5% of the amount of salaries for all non-
       represented employees.
    2. Performance awards are considered on an annual basis.

Budget Policies for 2011-2012
•   Over the next two years, the economic climate requires that we attempt to negotiate collective
    bargaining agreements that reduce the fiscal strain on the City’s 2011-2012 and subsequent budgets.
    All bargaining groups (Police, Police Support, Fire and AFSCME) will negotiate new or successor
    agreements during the 2011-2012 biennium.
•   Review each position vacancy for the potential of attrition or work redesign.
•   Analyze personnel forecasting, benchmarking and reporting (e.g. indirect pay costs, employee
    demographics, tenure, turnover rate, salary spreads, total compensation reports for all employees,
    health benefit cost trends).
•   Maintain the City’s commitment to high standards of employee performance evaluation by
    continuing to track and report employee performance.
•   Freeze market based adjustments over the next two years for general employees and represented
    employees when possible.

2011-2012 Budget Impact
Collective bargaining ratified by the City Council will determine the budget impact.




                                                                _________________________________
C-16                                                               City of Mercer Island 2011-2012 Budget
                                                                             Budget Policies

Property Tax
Background
There are two types of property taxes collected by the City, levied (regular) and voter approved. The
levied portion may be used for any purpose that the City deems necessary. On Mercer Island, as in most
cities, the property tax levy supports the General Fund, which funds most of the general operations of
the City. Voter approved taxes are for specific purposes, such as the purchase of parks. These taxes
have been specifically identified in an ordinance and voted on by the residents.

The total property tax bill that a resident pays consists of not only the city levied and voter approved
portions but also the property taxes that other jurisdictions levy on the residents. The Mercer Island
portion of the property tax bill has decreased gradually as a percentage of the tax bill from 17.1% of the
total property tax bill in 2001 to 15.4% in 2010.

There are 9 jurisdictions that have taxing authority on Mercer Island. The largest two are taxes in
support of schools – amounting to 54.3% of the tax bill. In 2010, the State School Fund’s and the
Mercer Island School District’s collections amounted to 28.5% and 25.8% respectively. King County is
the next largest taxing jurisdiction, receiving 16.5% of the property tax bill. The King County Library
District, the Emergency Medical Services Levy, the Port of Seattle, and the Flood Zone and Ferry
Districts receive the remainder of the taxes, which collectively amount to 13.8% of the property tax bill.
Below is a table of the taxing jurisdictions and the percentage of each tax dollar that they received in
each year for the period 2001-2010.

  Taxing Jurisdiction    2001     2002    2003    2004     2005    2006     2007    2008    2009     2010
 State School Fund        32.9%   33.8%   32.5%    31.3%   31.2%    30.7%   30.9%   29.8%    28.6%   28.5%
 MI School District       24.1%   23.6%   25.9%    24.9%   24.6%    24.8%   23.1%   22.1%    26.3%   25.8%
 King County              17.1%   16.4%   15.1%    16.2%   16.1%    16.3%   17.2%   16.9%    15.9%   16.5%
 City of Mercer Island    17.1%   16.0%   15.3%    16.4%   16.8%    16.6%   16.7%   15.9%    14.6%   15.4%
 King County Library       5.0%    5.1%    5.6%     5.6%    5.6%     6.0%    6.2%    5.8%     5.7%    5.9%
 EMS (emergency svcs)      2.6%    2.8%    2.7%     2.7%    2.7%     2.7%    2.8%    4.2%     2.9%    3.8%
 Port of Seattle           2.0%    2.1%    2.9%     2.9%    2.9%     2.9%    3.1%    3.1%     4.0%    2.8%
 Flood Zone                0.0%    0.0%    0.0%     0.0%    0.0%     0.0%    0.0%    1.4%     1.3%    1.3%
 Ferry District            0.0%    0.0%    0.0%     0.0%    0.0%     0.0%    0.0%    0.8%     0.7%    0.0%
 Total                   100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Below is a breakdown of the 2010 levy rates and the corresponding dollar amounts due to each taxing
jurisdiction based on a $1.0 million Mercer Island home.




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City of Mercer Island 2011-2012 Budget                                                                C-17
Budget Policies
          Taxing             2010 Levy      2010 Levy     % of Total
        Jurisdiction           Rate          Amount        in 2010
State School Fund                $2.22253        $2,223          28.5%
MI School District               $2.01025        $2,010          25.8%
King County                      $1.28499        $1,285          16.5%
City of Mercer Island            $1.20135        $1,201          15.4%
King County Library               $.46088          $461           5.9%
EMS (emergency services)          $.30000          $300           3.8%
Port of Seattle                   $.21597          $216           2.8%
Flood Zone                        $.10514          $105           1.3%
Ferry District                    $.00348            $3           0.0%
Total                           $7.80459         $7,805        100.0%


Regular Levy and Referendums
Each November, as required by Washington State law, the City Council sets the property tax levy for
the coming year. Up until November 1997, this levy was restricted to a maximum of 106% of the
previous year's levy plus the full levy authority for new construction. However, in 1997, the
Washington State Legislature passed Referendum 47 on to the voters of the state who in turn approved
it by a 60% majority. This referendum set a limit on property tax increases to be the lesser of 106% or
the rate of inflation, whichever was less. In 2001, Initiative 747 passed in the State which further changed
the property tax law. Initiative 747 limits the property tax levy to a maximum of 101% of the previous
year’s levy, or the rate of inflation, whichever is less. Since the rate of inflation is normally above 1%,
the effective limit for property tax will normally be 1%. The initiative also allows higher property tax
increases if approved by the voters, a provision that was already in the statutes. The initiative’s
sponsors intended for voters to have a say in the size of tax increases.

Inflation, for the purposes of the referendum, is defined as the increase in the Implicit Price Deflator
(IPD) for the previous 12 months ending in July of each year by the Bureau of Economic Analysis. This is
not the same thing as the Consumer Price Index (CPI), which most cities, including Mercer Island, have
used for many years as the measure of inflation to increase employee wages. The wage contracts
specify the CPI to be used as the wage adjuster. The two indexes, IPD and CPI, track different items.

During 2006, I-747 was declared unconstitutional by a King County Superior Court judge. Attorney
General Rob McKenna appealed the ruling to the Washington State Supreme Court. Ultimately, the
Supreme Court upheld the ruling of the lower court. Then, in 2007, the state legislature re-instated I-
747, making it law.

Levy Policy
For many years, the Council policy was to raise the levy by the full amount allowed by law. However,
beginning in the 1995-1996 Budget, the City Council chose to provide property tax relief to Mercer
Island residents by “ramping down” the annual increase allowed by law, with the intent of targeting the
rate of inflation. Considering that the CPI for the Seattle metro area is used in the City’s labor
contracts and that the cost of salaries in the General Fund account for 52% of the General Fund budget,
the CPI is the most relevant measure of inflation. In addition, almost every city in the Puget Sound


                                                                  _________________________________
C-18                                                                 City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies
region uses the CPI in its labor contracts. The Council reached its “inflation” goal in 1999. Since 2001,
the Council has normally followed the State law and increased taxes by 1%. However, in 2002, 2005,
2006, and 2007, the Council decreased property taxes by paying for some voted debt out of reserves.
For the 2010 levy, the Council opted for a 0% increase due a negative IPD.

The current Council policy concerning the property tax levy stresses flexibility. The Council is
committed to fiscal responsibility as well as keeping this community affordable for its citizens. Thus,
each year, the Council reviews the regular property tax levy in light of:

    •   Current economic conditions;
    •   The fiscal health of the City (focusing on the City's largest revenue sources and personnel
        costs); and
    •   The six year financial forecast for the General Fund.

Property Tax Factors
The General Fund has always relied heavily on the property tax, which accounts for 42% of General
Fund budgeted revenues in 2010. Because Mercer Island is primarily a residential community with
modest business growth to support the City revenue base, the property tax is the most stable,
predictable, and largest of all City revenues. Mercer Island is unlike other Eastside cities that are
supported heavily by sales taxes. For example, in Redmond, Kirkland, and Bellevue, property tax
comprises less than 20% of the total revenue base.

Effect of Increases on Taxpayers and City
One of the questions that must be considered in any discussion of the property tax is the effect on both
the taxpayer and the City with a 1% tax increase. For example, a 1% increase in the City’s 2011
property tax levy, if approved, would generate $104,650 in total new revenue for the City, which
corresponds to a $12.00 annual increase on a $1.0 million home.

Regular Property Tax Annual Amount
Under normal circumstances, the City will plan to take the full 1% property tax increase to preserve the
financial well-being of the City and to protect the property tax base for the future. Given that the long-
term annual rate of inflation is 3.0-3.5% and that employee salaries and benefits (which make up 70% of
the General Fund budget) typically increase 5.0-6.0% annually, excluding the current recession, this
means that the City will become increasingly more reliant on other revenues—namely, sales tax, utility
tax, and charges for services—to make up the difference. If the cost of services can be financed without
an increase in property taxes, the Council will consider forestalling the annual 1% increase allowed
under state law.

Banked Capacity
The banked capacity provision allowed under RCW 84.55.092, Protection of Future Levy Capacity,
allows local taxing districts to calculate levies based on the maximum lawful levy since 1985. If a taxing
district voluntarily levies less than its maximum levy amount in a prior year, it will have some banked
capacity that it could use in the future. The King County Assessors Office keeps track of the banked
capacity for each jurisdiction. In 2008, the Council opted to use 0.65% banked capacity (or $57,900), in
addition to the 1% optional increase, to help fund the fire apparatus replacement reserve on an ongoing
basis. As of December 2010, Mercer Island’s banked capacity equals about $156,000.




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City of Mercer Island 2011-2012 Budget                                                                    C-19
Budget Policies
Voted Tax Increases for Maintenance and Operations
The Council will determine an appropriate level of service for the Island as part of the budget process.
The choice remains to balance the budget by raising taxes and/or increasing fees, by cutting services, or
both. If the cost of the services cannot be supported by the forecasted revenues with a 1% tax increase,
the Council may consider authorizing a ballot measure for a voter approved levy lid lift.

On November 4, 2008, Mercer Island voters approved a $900,000 Parks Maintenance and Operations
levy lid lift (for 15 years) but rejected the companion $12.0 million Parks Bond measure. As a result, the
City Council opted to levy only $772,000 of the $900,000 lid lift in 2009, backing out $128,000 in
maintenance and operations costs related to the parks capital projects in the bond measure that failed.
To avoid double collecting on two levy lid lifts with overlapping purposes, the City Council decided to
levy only $110,000 of the $499,349 allowable in 2009 for small capital projects under the Luther
Burbank Park lid lift, which ended on December 31, 2009. In 2010, the Council levied the same amount
that was levied in total in 2009 (i.e. $882,000).

King County Parks Levy
A portion of this six year levy, which voters passed in 2007, is remitted to each city in King County for
purposes of protecting and preserving open space and acquiring and developing regional trails. Mercer
Island has dedicated this funding source to trail development in its Capital Improvement Program.

Budget Policies for 2011-2012
•      Each year, the regular property tax levy is reviewed by the City Council to determine the
       appropriate level of funding given current economic conditions, the fiscal health of the City, and the
       six-year financial forecast for the General Fund. Due to the projected General Fund revenue
       shortfall in 2011-2012, the City Manager’s Preliminary 2011-2012 Budget included a 1% optional
       increase for 2011 and 2012. On December 6, 2010, the City Council opted to not take the 1%
       optional increase in 2011. Taken together, new construction and the refund levy, which aren’t
       subject to the 1% limitation, amount to $99,011 in 2011 and are estimated to be $100,000 in 2012.
•      The 2008 Parks Maintenance and Operations levy lid lift included a 1% optional increase for 2011
       and 2012 in the City Manager’s Preliminary 2011-2012 Budget. As noted above, the Council opted
       to not take the 1% optional increase in 2011. As a result, the budgeted levy lid lift amount in 2011
       and 2012 is $882,000 (same as 2010 levy) and $890,820 ($882,000 + 1%) respectively.
•      There is no excess levy (i.e. voter approved debt) in 2011-2012.
•      The City anticipates receiving $72,500 in 2011 and 2012 from the 2007 King County Parks levy.

2011-2012 Budget Impact
                                                        2009          2010          2011           2012
                       Revenues                        Actual       Forecast       Budget         Budget
    City’s Regular Levy (general purpose)              $9,199,225    $9,434,568     $9,533,579    $9,728,915
    City’s Regular Levy (fire truck replacement)         148,446        148,446        148,446       149,930
    2003 Luther Burbank M&O Levy Lid Lift                110,000               0             0             0
    2008 Parks M&O Levy Lid Lift                         760,163        882,000        882,000       890,820
    Total Levied by City                            $10,217,834 $10,465,014 $10,564,025 $10,769,665

    2007 King County Parks Levy                          $82,202        $72,500       $72,500        $72,500

    Total Revenues to City                          $10,300,036 $10,537,514 $10,636,525 $10,842,165

                                                                    _________________________________
C-20                                                                   City of Mercer Island 2011-2012 Budget
                                         Budget Policies




_________________________________
City of Mercer Island 2011-2012 Budget               C-21
                                                                                Budget Policies

Reserves – Capital Reserve Fund
Background
As part of the overall capital budget, the City’s Capital Facilities Plan (CFP) is a six-year plan to outline
proposed new capital projects. The CFP is divided into four component parts:

    •   Streets, including pedestrian and bicycle facilities;
    •   Parks, recreation, and open space;
    •   General government, including public buildings; and
    •   Utilities, including water, sewer and storm water.

As required by State law and our own City policies, the CFP serves the capital planning requirements for
six-year plans as outlined in the Comprehensive Plan and State Growth Management Act.

According to another budget policy for the Capital Improvement Program, funding for the CFP portion
of the capital budget will generally be decided simultaneously with the approval of the project. As
opposed to the Capital Reinvestment Plan, which is financed on a “pay-as-you-go” basis out of existing
revenue sources, the projects in the CFP have been financed through a bond issue, special grant, or a
source of revenue that is outside the cash resources of the City.

During past years, better than forecasted sales tax revenues have allowed the Council to establish a
Capital Reserve Fund where such revenues have been held for future projects and as a contingency
reserve to stabilize real estate excise tax receipts, if needed, or to cover unanticipated project cost
increases. This policy has allowed the Council to take advantage of the benefits of robust economic
times and over time accumulate funds for these purposes.

Budget Policies for 2011-2012
•   Maintain a Capital Reserve Fund to accumulate funds to finance eligible capital facilities projects
    consistent with the City’s overall Capital Improvement Plan. Such projects would include
    construction of new public buildings, major reconstruction of a public building or park, or acquisition
    of a new open space or park.
•   Per the Council’s direction, $100,000 will be transferred from the Capital Improvement Fund to the
    Capital Reserve Fund in 2011. This was made possible by the Council’s decision to reduce the
    proposed 2011 budget for the Minor Park Improvements project from $108,000 to $8,000.
•   The Council will have the opportunity to build the balance in the Capital Reserve Fund as part of the
    annual process for determining the disposition of the year-end surplus, if any, in the General Fund
    and the Capital Improvement Fund.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                    C-21
Budget Policies
2011-2012 Budget Impact
                                           2009              2010                2011                2012
           Description                    Actual          Forecast              Budget              Budget
RESOURCES
Budgeted
  Beginning Fund Balance              $               - $ 1,035,000         $               - $                 -
  Interfund Transfer                              -                 -             100,000                   -
   Total Budgeted Resources           $               -   $ 1,035,000       $ 100,000           $               -
Not Budgeted
  Beginning Fund Balance (Reserved)       1,579,380           34,999               34,999            134,999
TOTAL RESOURCES                       $ 1,579,380         $ 1,069,999       $ 134,999           $ 134,999
USES
Budgeted
  I-90 Lobbyist                       $               - $     35,000        $               - $                 -
  Boys & Girls Club                               -         1,000,000                   -                   -
  Interfund Transfer                       509,381                      -               -                   -
 Total Budgeted Expenditures          $ 509,381           $ 1,035,000       $               -   $               -
Not Budgeted
  Ending Fund Balance                     1,069,999           34,999              134,999            134,999
TOTAL USES                            $ 1,579,380         $ 1,069,999       $ 134,999           $ 134,999




                                                                                _________________________________
C-22                                                                               City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies

Reserves – Contingency Fund
Background
The Contingency Fund, which serves as the City’s “Rainy Day” reserve, was established to:

    •   Address an unanticipated, significant revenue shortfall in the General Fund or another general
        government operating fund on a temporary basis;
    •   Provide temporary funding for an unanticipated, non-recurring, significant expenditure that
        cannot be absorbed within the General Fund or another general government operating fund;
        and
    •   Provide temporary funding for an unanticipated, ongoing, significant increase in general
        governmental operating costs that cannot be absorbed within the General Fund or another
        general government operating fund.

According to Washington State law, the fund balance in the Contingency Fund is limited to 37.5 cents
per $1,000 assessed valuation. For 2011, the legal limit is $3,183,106. The funding goal is to maintain a
target balance of 10% of budgeted expenditures in the General Fund, which corresponds to $2,277,512
based on an authorized 2011 expenditure budget of $22,775,124. As of 12/31/10, the Contingency Fund
is projected to have a balance of $2,094,334, which equals 92% of the 2011 target balance.

In addition, there is a revenue stabilization reserve of $300,000 in the General Fund, which is intended
to address an unanticipated, significant revenue shortfall in the General Fund (most likely related to sales
tax) on a short-term (i.e. less than 1 year), temporary basis. The revenue stabilization reserve is an
extension of the Contingency Fund, representing a “first line of defense” against a revenue shortfall. In
2009, $285,000 was used to bridge the revenue shortfall in the General Fund. In 2010, the remaining
$15,000 was used for the same purpose.

In the past, the Contingency Fund has received revenues from two sources:

    1. Interest earnings based on the cash balance in the fund; and
    2. General Fund surplus from the prior year, which can be used to increase the Contingency Fund
       balance to the specified target level.

Recognizing that a number of different financial scenarios requiring the use of the Contingency Fund are
possible, the following guidance is provided regarding when to tap the Contingency Fund and when to
replenish it.

Use Guidance: Revenue Shortfall
1. When total revenues in the General Fund or another general government operating fund are
   projected to be at least 3% below budget, the Finance Director and City Manager will prepare a 12-
   24 month “Rainy Day” strategy utilizing the following prioritized funding sources:
    a) Prior year’s revenue surplus and/or expenditure savings in the General Fund, which haven’t been
       committed to a specific purpose or distributed yet;
    b) Expenditure savings in the current and coming fiscal years, including temporary employee layoffs
       but excluding regular employee layoffs (General Fund target: 3.0% of budgeted expenditures for
       a 12-24 month period); and
    c) Revenue stabilization reserve in the General Fund ($300,000).


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City of Mercer Island 2011-2012 Budget                                                                 C-23
Budget Policies
    d) Contingency Fund and/or temporary/regular employee layoffs, recognizing that the latter will be
       recommended when:
        −   The balance in the Contingency Fund is projected to last less than 24 months; or
        −   A significant portion of the revenue shortfall is deemed to be ongoing.

2. The Finance Director and City Manager will present their 12-24 month “Rainy Day” strategy to the
   Council and will seek an appropriation of all or a portion of the prior year’s revenue surplus and/or
   expenditure savings in the General Fund, which haven’t been committed to a specific purpose or
   distributed yet.

3. When it becomes evident that funding sources “a” and “b” are inadequate to address the projected
   revenue shortfall, the Finance Director and City Manager will seek Council approval to use the
   $300,000 revenue stabilization reserve in the General Fund.

4. When it becomes evident that funding sources “a,” “b,” and “c” are inadequate to address the
   projected revenue shortfall, the Finance Director and City Manager will amend their 12-24 month
   “Rainy Day” strategy, as deemed appropriate, and present options and make a recommendation to
   the Council regarding how much of the Contingency Fund to appropriate and the timing and
   number of temporary/regular employee layoffs.

Use Guidance: Unanticipated Expenditure or Operating Cost Increase
To address an unanticipated, non-recurring expenditure or an unanticipated, ongoing increase in general
governmental operating costs that cannot be absorbed within the General Fund or another general
government operating fund, the Finance Director and City Manager will seek an appropriation from one
or both of the following prioritized funding sources:
    a) Prior year’s revenue surplus and/or expenditure savings in the General Fund, which haven’t been
       committed or distributed yet; and
    b) Contingency Fund.

Replenishment Guidance
The funding source for replenishing the revenue stabilization reserve (in the General Fund) and the
Contingency Fund is the prior year’s revenue surplus and/or expenditure savings. Restoring the revenue
stabilization reserve and the Contingency Fund to their target levels will constitute the Council’s highest
funding priority following the final draw needed to address a revenue shortfall or an unanticipated
expenditure, absent a super majority vote (i.e. 5 vs. 2) to the contrary:
    •   For a revenue shortfall, the replenishment target period is 3 years.
    •   For an unanticipated, non-recurring expenditure or an unanticipated, ongoing increase in general
        governmental operating costs, the replenishment target period is 2 years.

Budget Policies for 2011-2012
•   Due to the current historic low rate of return, which is projected to continue for the coming
    biennium, there will be no distribution of investment earnings to Contingency Fund as long as the
    rate of return is under 1%.
•   The Finance Director recommends using no more than 50% of the 12/31/09 Contingency Fund
    balance to address the revenue shortfall projected through 2012, thereby leaving $1,172,167 to
    address any unanticipated, significant expenditures.

                                                                 _________________________________
C-24                                                                City of Mercer Island 2011-2012 Budget
                                                                                             Budget Policies
•    To address the projected 2011 and 2012 revenue shortfalls in the General Fund, $545,989 is
     budgeted to be transferred to the General Fund. This will leave an estimated balance of $1,548,346
     in the Contingency Fund at the end of 2012, which equals 68% of the 2011 target balance.
•    The Sewer Lake Line project, which received $1.8 million in prior year General Fund revenue
     surplus funding, is projected to be closed out at the end of 2011 under budget by $1.20 million.
     Staff will be recommending that the Council replenish the $300,000 revenue stabilization reserve (in
     the General Fund) used in 2009-2010 and the Contingency Fund balance used in 2010 (which was
     budgeted at $478,522, but only $250,000 is estimated to be needed). Otherwise, the City won’t be
     able to replenish the used balance until revenue surpluses are generated again in the General Fund.

2011-2012 Budget Impact
                                              2009                2010            2011            2012
             Description                     Actual          Forecast            Budget          Budget
RESOURCES
Budgeted
    Beginning Fund Balance               $               - $      478,522    $    130,828    $    415,161
    Interfund Transfers - General Fund        176,500
     Total Budgeted Resources            $ 176,500           $ 478,522       $ 130,828        $ 415,161
Not Budgeted
    Beginning Fund Balance (Reserved)        2,167,835           1,865,813       1,734,985       1,319,824
TOTAL RESOURCES                          $ 2,344,335         $ 2,344,335     $ 1,865,813      $ 1,734,985
USES
Budgeted
    Interfund Transfers - General Fund   $           -       $    477,038    $    130,828    $    415,161
    Interfund Transfers - Fleet Fund                 -              1,484                -               -
    Total Budgeted Expenditures          $               -   $ 478,522       $ 130,828        $ 415,161
Not Budgeted
    Ending Fund Balance                      2,344,335           1,865,813       1,734,985       1,319,824
TOTAL USES                               $ 2,344,335         $ 2,344,335     $ 1,865,813      $ 1,734,985




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City of Mercer Island 2011-2012 Budget                                                                       C-25
Budget Policies




                  _________________________________
C-26                 City of Mercer Island 2011-2012 Budget
                                                                               Budget Policies

Risk Management
Background
Mercer Island is one of the charter members of the municipal self-insured liability pool—Washington
Cities Insurance Authority (WCIA). Through WCIA and an interlocal agreement with approximately 80
other cities, the City of Mercer Island insures general liability, automobile liability, errors and omissions,
police enforcement, employee administration, and advertising liability.

Each member city is insured for $1.0 million per occurrence with no deductible and no limit in number
of claims. Each city also is covered by an additional $4 million per year for large claims. Participation in
WCIA's program has resulted in the City continuing to be covered on a per occurrence basis with tail
coverage back through 1981. The pool presently is self-insured and uses an annual actuarial study to
determine member "premiums" and reserve policies.

WCIA's long-term goals are to provide prudent planning and effective management to allow member
cities liability protection comparable to or better than that available in the private market. Loss control
procedures are reviewed with the cities to assist members to more effectively prevent, control, or
subrogate liability risks.

Other Insurance
The City purchases property insurance through a pooled arrangement with the other member cities of
WCIA. The City continues to retain the first $5,000 of property loss through its Self-Insurance Fund,
which maintains a balance of at least $100,000 to cover non-deductible losses.

Industrial insurance is provided by the state with premiums paid based on the number of hours worked.
The City's workforce is divided into four classes with different rates for each class. Volunteers are also
covered by industrial insurance.

Budget Policies for 2011-2012
•      Continue to participate in the Washington Cities Insurance Authority during the 2011-2012
       biennium.
•      Continue to review opportunities for efficiencies and reductions in risk-based insurance costs.

2011-2012 Budget Impact
                                                    2009           2010            2011            2012
                   Expenditures                    Actual        Forecast         Budget          Budget
    Liability Insurance-WCIA                        $516,446        $567,868       $ 688,324       $743,390
    Carrier Property                                   88,608         91,100          92,997          94,857
    Specialty Insurance                                 5,355          5,775           5,953             6,072
    Total Expenditures                              $610,409       $664,743        $787,274       $844,319




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City of Mercer Island 2011-2012 Budget                                                                    C-27
Budget Policies




                  _________________________________
C-28                 City of Mercer Island 2011-2012 Budget
                                                                             Budget Policies

Sustainability
Background
The 2011-2012 Budget reflects the Mercer Island City Council’s commitment to building a sustainable
community. This commitment is evident in the budget of each individual department, the capital
improvement program, and in the funding priorities of the City’s three utilities.

Sustainability is a Mercer Island value. It is a process of ensuring the wise use and management of all
resources within a framework in which environmental, social, cultural and economic well being are
integrated and balanced. It means meeting the needs of today without adversely impacting the needs of
future generations.

The first cornerstone of the City’s sustainability policy foundation was created in 2006 with the
adoption of a Comprehensive Plan amendment that expanded the City’s Vision Statement to include the
following statement:

     “Mercer Island strives to be a sustainable community: Meeting the needs of the present while
    preserving the ability of future generations to meet their own needs. We consider the relationship
    between the decisions we make as a community and their long-term impacts before committing to
    them. We understand that our strength is dependent on an open decision-making process that takes
    into account the economic, environmental and social well-being of our community.”

Accountability
The City of Mercer Island will work to:

    •   Optimize the efficient use of resources and minimize waste;
    •   Increase the use of renewable resources and reduce greenhouse gas emissions;
    •   Operate in ways that minimize any adverse impacts on the environment or the local community;
    •   Require employees to incorporate informed sustainability perspectives within their work;
    •   Encourage contractors, vendors and other community partners working within our community
        to adopt sustainable best practices; and
    •   Deliver an improved quality of life for the current and future residents of Mercer Island.

Service Delivery
City departments will:

    •   Implement sustainable procurement procedures taking account of whole of life costs;
    •   Repair, reuse and recycle ahead of the responsible disposal of surplus materials, and minimize
        waste generation while taking into account the economics of the work;
    •   Take positive actions promoting continual improvement in sustainability performance;
    •   Set and achieve clearly defined sustainable development objectives and targets;
    •   Recognize, celebrate and reward achievement in order to promote the city as a sustainable
        organization; and
    •   Develop the capacity of staff to promote the principles and practice of sustainability.

In 2006, the City Council adopted a budget policy that directed the City’s staff to “undertake efforts to
curtail its consumption of scarce resources including electric energy, water, fossil fuels and land fill


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City of Mercer Island 2011-2012 Budget                                                                C-29
Budget Policies
space” and set new targets for the conservation of natural resources. The Council has been clear that
the most cost-effective efforts should come first and that the effectiveness of sustainability efforts should
be evaluated by their measurable impact on the carbon footprint of the Island.

The City Council’s Sustainability Work Program identifies several priorities areas that should be
addressed to meet the City’s overarching goal of reducing greenhouse gas emissions by 80% from 2007
levels by 2050. In early 2007, Governor Christine Gregoire signed Executive Order 07-02 and
established a similar statewide goal.

In the 2009-2010 biennium Council directed staff to pursue any federal, state, local or private grant
opportunities to help promote sustainable activities that will ensure long term economic, environmental
and social sustainability.

Grants
Over the past 18 months, staff has been awarded two sustainability grants funded through Federal
Stimulus resources which will be managed and implemented through 2012: 1) the Energy Efficiency
through Community Building grant (from the Federal Department of Energy and the Washington
Department of Commerce), and 2) the Clean Cities Grant (from the Department of Energy and the
Puget Sound Clean Air Agency). Both of these grants will help to fund sustainable city programs,
projects and equipment. Examples of grant funded projects include:

    •   CCMV gym lighting retrofit
    •   Development Services Department Green Building Tool Kit
    •   Community Partnership with PSE and Green Ribbon Commission to encourage energy efficiency
        in residential household energy consumption
    •   Electric Bicycles and Hybrid Vehicles for the Police Department
    •   Electric utility vehicles for parks maintenance
    •   Electric vehicle charging stations at several community sites

The City continues to pursue local, regional, state and federal grants that will provide opportunities to
support our sustainability efforts.

Fleet
Serious commitment to address global warming in the Puget Sound region must powerfully address
emissions from the transportation sector, which represents approximately 50 percent of all regional
greenhouse gas emissions. Public fleets in particular have a responsibility to take the lead, especially
those operating in cities and counties that have formally pledged or adopted resolutions to achieve
significant greenhouse gas reductions.

With this goal in mind, the City of Mercer Island, in partnership with numerous other local governments
in our region, the Puget Sound Clean Air Agency, and the Puget Sound Clean Cities Coalition launched
the Evergreen Fleets Initiative, an effort to engage public fleets in voluntary actions to reduce vehicle
emissions.

An Evergreen Fleets Advisory Committee identified the attributes that define a “green fleet” and
recommended a suite of policies and criteria that can be used to standardize these attributes and help
fleets achieve more environmentally friendly operations. Evergreen Fleets has developed a voluntary
program that is conceptually similar to the Leadership in Energy and Environmental Design (LEED)


                                                                  _________________________________
C-30                                                                 City of Mercer Island 2011-2012 Budget
                                                                             Budget Policies
standard for green buildings, requiring fleets to meet different levels of environmental performance to
become certified as a green – or Evergreen – fleet.

In 2009, the City achieved a one star certification through Evergreen Fleets and was one of the first four
fleets in the region to complete the certification process successfully. The City is committed to
completing annual reporting that evaluates pollutant emissions and implements increasingly effective
reduction strategies. The ultimate goal is to reduce air pollution in the region by meeting or exceeding
Evergreen Fleets performance standards.

Healthy Neighborhoods
The City of Mercer Island works to promote development that reduces environmental impacts by
following green building principles, using natural resources efficiently, and preserving the natural beauty
of Mercer Island. We will also take into account opportunities that will provide affordable development
within easy access of public transportation and regional amenities that decrease the need for
automobiles and encourage bicycling and walking.

Water Quality
The protection of Lake Washington has long been one of the City’s top priorities. The creation of the
City’s Stormwater Utility in the mid-1990s provided stable funding to effectively manage the Island’s
impact on the Lake.

Conserving Resources and Reducing Carbon Emissions
The wise use of resources, from electricity and natural gas to drinking water and urban forests, is a
fundamental requirement for creating sustainable communities. The City has a long history of effectively
promoting resource conservation, waste reduction and recycling, purchasing products made with
recycled content, and using alternatives to pesticides and other harmful chemicals. These efforts will
intensify and extend throughout City operations in the coming years. Partnerships continue to be
established with like-minded agencies for added motivation and mutual support.

Green Power
Moving toward cleaner and more reliable energy is a critical of part of the formula for slowing global
warming. Even at the local government level, it is possible to make significant and meaningful
contributions. The City is taking advantage of the regional momentum to develop an electric vehicle
infrastructure. Through the use of Federal and State grant opportunities as well as regional partnerships
the city is securing the resources to site electric vehicle charging stations in the community.

Budget Policies for 2011-2012
Grants
•   Continue to collect and report baseline and annual data required by Federal grant criteria.
•   Continue to develop partnerships that will be a catalyst to the success of future grant applications.
•   Continue to seek out grant opportunities that will develop sustainable projects and programs that
    will add value to our community, will enhance our service delivery and will not add long term fiscal
    demands through maintenance and operation.




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City of Mercer Island 2011-2012 Budget                                                                 C-31
Budget Policies
Fleet
•   Collect and report baseline and annual fuel use data and fleet utilization data (miles or hours).
•   Implement policies and procedures in the City’s Evergreen Fleet Work Plan.
•   Continue acquiring hybrid and electric vehicles when they pass the test for cost effectiveness.
•   Periodically evaluate opportunities for conversion to alternative fuels.
•   Evaluate and acquire new efficiency technology such as idle shutdown timers when it passes the test
    for cost-effectiveness.

Healthy Neighborhoods
•   Develop a green building tool kit in the Development Services Department that addresses policies,
    process and procedures that encourages customers to seek green building techniques and provides
    guidance.
•   Continue to work with regional transportation authorities—Washington Department of
    Transportation, King County metro and Sound Transit—to develop well integrated, multimodal
    transportation options for our community.
•   Continue to enforce land use codes that reduce sprawl by encouraging new housing in the Town
    Center and by creating a compact, walkable neighborhood in the Town Center.
•   Promote non-motorized transportation options through the implementation of the City’s updated
    Bicycle and Pedestrian Facilities Plan.
•   Collaborate with A regional Coalition for Housing to develop affordable housing within Mercer
    Island’s Town Center.
•   Collaborate with Island residents and organizations to raise the community’s awareness about the
    importance of employing sustainable practices, including reducing greenhouse gas emissions and the
    relationship to global warming.
•   Continue to support the Green Ribbon Commission efforts to motivate Mercer Island residents to
    engage in sustainable practices.

Water Quality
•   Continue to meet the requirements of the new federal stormwater regulations contained in the
    National Pollutant Discharge Elimination System (NPDES).
•   Work with state and federal regulatory agencies to minimize the impact of capital improvement
    projects in or near Lake Washington.
•   Continue to focus the Stormwater utilities capital program on projects that reduce the amount of
    sediment being deposited in Lake Washington while protecting private and public property from
    damaging erosion.
•   Continue to raise awareness for the Luther Burbank Park homeowner demonstration area and
    similar efforts to naturally stabilize eroding shoreline while maintaining shore access.
•   Identify opportunities to create Low Impact Development demonstration projects whose cost is
    covered or reduced by grant funding.

Conserving Resources and Reducing Carbon Emissions
•   Regularly tabulate carbon footprint of City operations and assure continuous reduction to meet 80%
    reduction goal by 2050.
•   Maintain record of City initiatives and new practices that effectively reduce energy consumption and
    carbon emissions, and share City experience with the community through public
    information/education efforts.



                                                               _________________________________
C-32                                                              City of Mercer Island 2011-2012 Budget
                                                                                  Budget Policies
•    Work with Island residents and City staff to meet the waste reduction and recycling goals
     established in the new Comprehensive Solid Waste Management Plan for King County.
•    Work with Allied Waste to achieve the sustainability objectives identified in the City’s new long-
     term contract with Allied, including the recycling of food waste along with yard waste and the
     replacement of the company’s fleet with trucks operating on alternative fuels.
•    Establish and maintain partnerships with the Mercer Island School District and energy-supplier Puget
     Sound Energy to set and reach aggressive resource conservation goals.
•    Continue efforts to promote water conservation by residents and at City facilities.
•    Identify and implement capital improvements to City facilities that offer positive resource
     conservation return on investment.
•    Maintain a healthy urban forest through effective vegetation management programs.
•    Implement a pilot project encouraging the planting of trees on private property to offset the impacts
     of development.
•    Encourage City staff to develop innovative approaches to making sustainability a part of each work
     day.
•    Develop a comprehensive Six Year Sustainability Plan for City Government that assigns resources to
     specific improvements through year 2015.

Green Power
•    Establish a percentage goal for the purchase of green power for the City’s electricity needs.
•    Through well-defined pilot projects, explore applications for the use of solar and other alternative
     energy sources in City operations.
•    Install charging stations at community facilities and continue to look for opportunities to expand the
     number of units and locations.

2011-2012 Budget Impact
                                                  2009            2010            2011            2012
                  Expenditure
                                                  Actual     Forecast            Budget          Budget
Base Budget (Operating):
    Recycling Services                        $     45,466   $     50,750    $     50,900    $      50,900
    Water Conservation                              21,774         30,000          30,000           30,000
    Storm Water Operations & Maintenance           859,495       1,036,815        913,372          942,279
    Urban Forest Management (Right of Way)          97,968        125,989          80,000           80,000
Service Packages (2009 - 2012)
    Digital Plan Review                             12,700          1,700                -               -
    Tree Planting Program                           10,000         10,000                -               -
    Resource Conservation Manager                    7,000          7,420           7,000                -
    Water Leak Detection Program                    25,000         25,000                -               -
Capital Improvement Program:
    Vegetation Management                          321,804        553,195         422,000          378,000
    Low Impact Development Study                         -         50,000          50,000          250,000
    Storm Water Capital Projects                   776,972        393,436        1,200,000       1,034,000
Total                                         $ 2,178,179    $ 2,284,305     $ 2,753,272     $ 2,765,179




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City of Mercer Island 2011-2012 Budget                                                                       C-33
Budget Policies




                  _________________________________
C-34                 City of Mercer Island 2011-2012 Budget
BUDGET POLICES
Utility Funds
                 This section includes
                 budget polices on the
                 following:
                   • Interfund
                      Administrative
                      Charges
                   • Utility Maintenance
                      and Construction
                   • Utility Fiscal Policies
Budget Policies




                  _________________________________
C-36                 City of Mercer Island 2011-2012 Budget
                                                                            Budget Policies

Interfund Administrative Charges
Background
The City-owned utilities are classified as Enterprise Funds. Various departments, which are accounted
for in the General Fund, provide administrative support to each of the City’s three utilities (water,
sewer, and stormwater). In addition, building maintenance costs related to City Hall and the
Maintenance Center and insurance costs (i.e. property and liability) are paid by the General Fund. In
order for the utility budgets to reflect the full costs of administration, building maintenance, and
insurance, an interfund transfer is made from each of the City’s three Utility Funds to the General Fund.
In effect, the General Fund charges each Utility Fund for costs that support the provision of utility
services.

Administrative Charges
There are five cost centers in the General Fund that benefit each of the City’s three utilities: City
Attorney’s Office, City Council, City Manager’s Office, Finance Department, and Human Resources
Department. The basis for the interfund administrative charge associated with each cost center is noted
below:

           General Fund Cost Center          Interfund Charges           2011           2012
         City Attorney's Office            15.0% of budget           $     72,747   $     74,913
         City Council                      15.0% of budget                  5,885          5,885
         City Manager's Office             15.0% of budget                113,218        117,866
         Finance Department                24.0% of budget                150,071        158,778
         Human Resources Department        11.0% of budget                 50,203         51,620
         Total                                                       $   392,124    $   409,062

The portion of the City Attorney’s Office, City Council, and City Manager’s Office budgets which can be
attributed to the Utilities is based on the proportion of agenda bills and contracts which are related to
each Utility.

The portion of the Finance Department budget which can be attributed to the Utilities is based on the
percentage of time spent by each position on a utility-related task. Three positions (Utility Billing
Supervisor, Customer Service Representative, and Meter Readers) are directly allocated to the Utilities
and the General Fund. The remaining four positions are allocated to the Utility Funds as follows:
Finance Director (15%), Deputy Finance Director (45%), Accounting Manager (15%), and Accounts
Payable Clerk (20%). The blended proportion of the Finance Department budget allocated to the
Utilities collectively is 24%.

The portion of the Human Resources Department budget which can be attributed to the Utilities is
based on the number of Utility employees relative to the total number of City employees.

These administrative costs are allocated to the Utilities as follows: Water (45%), Sewer (45%), and
Stormwater (10%).




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City of Mercer Island 2011-2012 Budget                                                                C-37
Budget Policies

Building Maintenance Charges
Maintenance costs for City Buildings are consolidated in one cost center within the General Fund.
Building maintenance charges include a 0.5 FTE, who oversees routine maintenance and repair projects,
utilities (power, gas, water and sewer) used by the buildings, as well as contracted repair and
maintenance services. Actual costs of utilities are available for each building. Other costs are allocated
to the Maintenance Center and City Hall based on the square footage of the buildings. These costs are
then charged back to the Utilities based on FTE’s within each building, as follows:

           Facility           Building Cost       Water               Sewer            Stormwater           General Fund
    Maintenance Center        $      91,887                32.8%            22.4%                12.0%              32.8%
    City Hall                 $     215,753                 3.5%                3.5%                 2.5%           90.5%


Insurance Charges
The City is insured by Washington Cities Insurance Authority for property and liability.

Property insurance is charged based on asset value. The value of water, sewer, and stormwater assets
covered under the City’s insurance policy is the basis for the property insurance cost allocation. The
interfund charges for 2011-2012 are as follows:


                Funding Sources          Asset Value         % Allocation       Insurance 2011 Insurance 2012
       Water Fund                       $     11,129,249              19.23% $            17,368 $              17,716
       Sewer Fund                              5,177,710                8.94%              8,080                 8,242
       Stormwater Fund                          336,515                 0.58%                  525                 536
       General Fund                           41,244,640              71.25%              64,367                65,653
        Total                           $ 57,888,114               100.00% $              90,340       $        92,147

Liability insurance was analyzed based on a 5 year rolling average of claims experience. Projected
liability premiums were allocated to the Utilities based on their portion of claims paid during the
preceding 5 year period (2005-2009). The charges for 2011-2012 are as follows:


                      Funding Sources             % Allocation        Insurance 2011 Insurance 2012
                 Water Fund                                   8.91% $            61,306 $              66,210
                 Sewer Fund                                  12.90%              88,779                95,881
                 Stormwater Fund                              6.91%              47,549                51,353
                 General Fund                                71.28%             490,690               529,946
                 Total                                     100.00% $          688,324      $         743,390


Budget Policies for 2011-2012
•   Ensure that the General Fund does not subsidize any of the City’s Utilities.
•   Assess interfund charges for administration, building maintenance, and insurance to each Utility in
    2011 and 2012 per the allocation factors and the Preliminary Budget amounts noted above.




                                                                           _________________________________
C-38                                                                          City of Mercer Island 2011-2012 Budget
                                                                         Budget Policies
•   Remove 2 Finance Department employees (Utility Billing Supervisor and Customer Service
    Representative) from the Administrative Charges and charge them directly to the Utility Funds.
    These positions were included in the Administrative Charges in prior years.
•   Continue to exclude one additional Finance Department employee (Meter Reader) from the
    Administrative Charge and charge it directly to the Utility Funds.

2011-2012 Budget Impact
                                                2009          2010         2011         2012
                   Charges                     Actual       Forecast      Budget       Budget
Water Utility Admin & Insurance Charges         $340,700      $363,400     $292,750     $306,262
Sewer Utility Admin & Insurance Charges         $340,700      $363,400     $301,430      $316,792
Storm Water Utility Admin & Insurance           $127,100      $137,000     $103,837      $109,629
Total                                           $808,500     $863,800      $698,017     $732,683




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City of Mercer Island 2011-2012 Budget                                                       C-39
Budget Policies




                  _________________________________
C-40                 City of Mercer Island 2011-2012 Budget
                                                                             Budget Policies

Utility Maintenance and Construction Policies
Background
As part of each biennial budget cycle, City staff identifies and prioritizes water, sewer and storm water
construction projects. The proposed projects are reviewed annually by the Utility Board and during
Capital Improvements Program (CIP) planning processes. The projects are included in six-year plans for
each of the utilities, which are much like the Transportation Improvement Plan (TIP). These six-year
plans provide a roadmap for development of the biennial budget, assist with strategic rate planning, and
allow for effective coordination among the utilities and streets projects.

Management Policies for 2011-2012
Sewer Utility
Reinvestment in the Sewer Utility is guided by the General Sewer System Plan adopted by Council in
2003. This plan provided detailed guidance on Capital Reinvestment through 2008. Staff has updated
the 6 year plan for Sewer to include more detail on Capital Reinvestment needs for 2011-2016.

With the completion of the Sewer Lake Line Replacement Project, the focus for capital improvements
will turn to repairs and replacements identified during the comprehensive video inspection of the
collection system that began in 2007. The installation of at least one new access point this biennium for
cleaning the Lake Line also has been ranked as a priority.

The prevention of back-ups in the sewer collection system will continue to be another top priority and
will be given both the financial and staff resources necessary for success. The ongoing cleaning and video
inspection of the system is critical to detecting and eliminating problems such as roots and grease that
can cause back-ups.

The implementation of recommendations contained in the final Sewer Lake Line Back-Up Action Plan (a
study conducted in 2010) will be a top priority for the Sewer Utility. These include both operational
efforts and capital improvements such as new access points to clean the Lake Line.

Water Utility
Reinvestment in the Water Utility is guided by the Water System Plan adopted by Council in 2008.

The replacement of substandard water mains, particularly those that are undersized and do not comply
with the City’s fire flow policy, will continue to be a primary focus of water system capital
improvements this biennium. At the current rate of funding, it is expected that it will take about 20
years to replace the substandard mains in the system.

The ability to distribute water from the Emergency Well into Island neighborhoods also will continue to
expand during 2011-2012, with additional Utility crew and volunteer training. Other new aspects of well
operations, such as periodic sampling and testing of the water produced by the well, will be
programmed.




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City of Mercer Island 2011-2012 Budget                                                                C-41
Budget Policies
Storm Water Utility
Reinvestment in the Storm Water Utility is guided by the Comprehensive Basin Plan adopted by Council
in 2006. In addition, period Basin Reviews are conducted to review the deterioration in the City’s
Storm Water basins. Timing of construction is adjusted as conditions change.

With the completion of the last identified major basin project expected in this biennium, planning for
future basin improvements will turn to multiple smaller projects and the early stages of replacing the
City’s piped drainage systems.

All Utilities
City utility improvements, particularly water system improvements that are to be completed in
conjunction or ahead of street projects will be identified earlier to better accommodate the priorities of
both the Transportation Improvement Plan for streets and the priorities of the utilities. When
necessary, preliminary design will be conducted to refine the scope of the improvements and provide a
more accurate estimate for design and construction costs.

Budget Policies for 2011-2012
•   Water: Continue to increase rates in order to meet the $1.7M rate funding target for Water set
    in the Water System Plan. [Note: The plan sets an annual capital reinvestment of target of $1.8M.
    The balance of the funding will come from connection charges, interest, and other non-rate
    revenues]
•   Water: Consider the use of debt financing in order to accelerate the construction of several high
    priority water projects.
•   Sewer: Increase rates in order to meet the $900K rate funding target of the 6 year capital plan for
    Sewer.
•   Storm water: Increase rates slowly in order to meet the $1.0M rate funding target of the 6 year
    capital plan for Storm water.




                                                                 _________________________________
C-42                                                                City of Mercer Island 2011-2012 Budget
                                                                               Budget Policies

Utility Fiscal Policies
Background
During 1993 the Utility Board and staff worked closely to establish financial policies to guide future rate
and budget decisions. During 2006 the Utility Board reviewed and modified the financial policies related
to the Water Utility. The financial policies analysis consisted of identifying, describing, and to the extent
possible, evaluating impacts of various elements of the policies. Elements discussed included types and
levels of utility reserves, methods of capital improvement funding, methods of capital replacement
funding, rate structure and equity, and related objectives such as water conservation.

The fiscal policies, which have been approved by the Utility Board, consist of four major categories that
are briefly described below. A complete copy of the policies is included on the following page.

A. Reserves
    This section sets the policy for the amount of operating reserves necessary. Sewer and Stormwater
    operating reserves are set at 30 days of operating expenses while water is set at 75 days (due to the
    greater seasonality of revenue). The need for a capital replacement reserve is also discussed and
    the format for establishing such a reserve is fixed.

B. Financing
    A policy is set that capital replacement projects will be financed from the replacement reserve
    established in the reserve section. It also discusses the concept of financing most improvements on
    a pay-as-you-go basis; however, consideration must always be given to the effect of the rate impacts
    on customers. It proposes that when projects are over $500,000 other financing alternatives should
    be considered.

C. Revenue Requirements
    This section summarizes and formalizes our policies to set rates sufficient to meet all utility cash
    requirements including operating expenses, debt service, and additions to reserves and capital costs.
    It also reflects the policy to set rates to meet any bond or other debt covenants.

D. Rates and User Charges
    There are two policies established in this section. The first policy concerns water conservation. It
    establishes that the City wishes to promote water conservation and will set water rates that reflect
    that policy. The second policy concerns the concept of a "lifeline rate" to provide basic water and
    sewer services at an affordable level. The lifeline rate works with the water conservation volume
    based structure to provide low levels of water usage at the lowest cost.

Budget Policies for 2011-2012
•   Propose rates for the Utilities that reflect the financial policies adopted by the Utility Board.
•   Perform annual rate studies for each of the utilities (Water, Sewer, and Storm water). For
    preparation of the biennial budget, rates are also forecast for the second year of the biennium.
•   Work with a financial consultant to review the water rate model developed in 2006. Review
    customer consumption patterns, customer class allocations, and the block structure for rates.
•   Work with a financial consultant to develop a new sewer rate model which will adjust for changes in
    customer consumption patterns.

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City of Mercer Island 2011-2012 Budget                                                                  C-43
Budget Policies
Fiscal Policies for Water and Sewer Enterprises
This document is to be read in conjunction with the Level of Service Standards established for the
Water and Sewer Systems. Together they form the basis for 1) the updating of the Comprehensive
Plans for both Water and Sewer through the end of the decade; 2) the Capital Facilities Plan prepared as
part of the City's Comprehensive Plan in response to the Growth Management Act; and 3) the biannual
operating plans for each utility. It is intended that these policies be reviewed periodically; at the
minimum each time either the Utility's Comprehensive Plan is updated or when the Capital Facilities
Plan is updated.

A. Revenue Requirements
    1. Cash Needs
        Each utility will establish rates sufficient on an annual basis to meet all utility cash requirements
        including operating expenses, debt service, additions to reserves and rate-funded capital costs.

    2. Coverage
        Each utility will establish rates sufficient to meet all security conditions of outstanding debt,
        including any bond coverage requirements. Typically bond covenants require a minimum
        coverage factor of 1.25, although the City may elect to establish a higher factor in order to
        enhance its potential bond rating. Should the coverage requirement result in a revenue
        requirement in excess of cash needs, the budget shall identify the use, transfer or addition to
        reserves intended for the surplus. Such cash surplus cannot be used to meet operating
        expenses.

        If debt is jointly issued, or issued under conditions pledging all utility revenue, the debt service
        will be allocated to the water or sewer utilities based on the use of bond proceeds, and the
        coverage requirement will be allocated to each utility based on their share of the debt service.

B. Rates and User Charges
    1. Rate Equity
        The City will establish rates and charges, which equitably recover the cost of service from each
        utility's customers. Changes in rate structure will be accompanied by a cost of service analysis
        justifying the equity of such changes. Rate structures considered will, to the extent practical and
        equitable; incorporate other rate objectives as defined in these policies.

    2. Conservation
        The City wishes to promote efficient and conservative use of water. Therefore, water and
        sewer rates will, to the extent practical, promote water conservation through an emphasis on
        volume-based charges and allocation of the cost of meeting peak demands to those users
        imposing the cost.

    3. Lifeline Rates
        The City wishes to provide water and sewer service to meet basic human needs at an affordable
        level. Therefore, rate structures should consider the opportunity to maintain reasonable water
        and sewer bills at lifeline usage levels. Features such as volume-based sewer charges, increasing
        block water rates, and low fixed service costs among others help to promote this objective.



                                                                   _________________________________
C-44                                                                  City of Mercer Island 2011-2012 Budget
                                                                             Budget Policies
C. Reserves
   1. Operating (Working Capital) Reserve
       It is appropriate to maintain sufficient cash reserves to accommodate routine fluctuations in
       revenues and expenses. The City therefore establishes operating reserves for the water and
       sewer utilities. Utility budgets will target ending cash balances sufficient to meet the reserve
       targets. The following operating reserves are established:
       • Sewer - 30 days of operating expenses (8.2% of annual operating budget)
       • Storm Water - 30 days of operating expenses (8.2% of annual operating budget)
       • Water - 75 days of operating expenses (20.5% of annual operating budget)

       In 2006, the Utility Board recommended that the Operating Reserve for the Water Utility be
       increased from 75 to 90 days. The increase is to be funded by excess revenue in high water use
       years, rather than by rate increases.

       The water reserve has been established at a higher level than sewer and storm water to reflect
       the greater seasonality of revenues and to protect against reduced water sales in wet years or
       during restrictions.

       Should the operating reserves for either utility fall below the target level, or should the target
       level be increased, additions to the reserve will be budgeted to reach and maintain that level
       within no more than two budget years.

   2. Capital Improvement Reserve
       It is considered that both the water and sewer utilities are completed to their capacity and that
       it is not required or prudent to establish a reserve for capital improvements.

       There are, however, water and sewer systems now existing on Mercer Island which are not part
       of the City Utilities. It is the Board's recommendation not to incorporate those other systems
       into the City Utilities unless those systems meet the performance standards established for the
       City's water and sewer utilities.

   3. Replacement Reserve
       It is prudent to protect the City's multi-million dollar investment in utility assets. The City
       therefore establishes a capital replacement reserve and funding strategy. These reserves should
       enable the City to support future replacement needs without extraordinary rate increases, while
       recognizing the responsibility of existing customers to fund both current and future replacement
       needs on a regular basis.

       It is intended that all replacement projects that are to be funded on a pay-as-you-go basis be
       funded from the appropriate replacement reserve. This requires that the City carefully plan and
       schedule replacement projects so that the integrity of the replacement reserve is maintained.

       The following annual contributions to reserves are established:

       Water       The minimum capital funding level will be based on the annual depreciation
                   expense for water plant-in-service, adjusted to reflect replacement costs.
                   (Replacement cost estimates are based on a "construction cost index"
                   published by the Engineering News Record.) The annual contributions can


_________________________________
City of Mercer Island 2011-2012 Budget                                                                 C-45
Budget Policies
                   be reduced or eliminated once the balance in the replacement reserve is
                   sufficient to meet the program set forth in the approved Capital Facilities
                   Plan.
       Sewer       Same formula

   4. Contingency (Emergency) Reserve
       It is not considered necessary to establish a separate reserve for the Sewer and Storm Water
       Funds to handle emergency situations in addition to the replacement reserve. It is considered
       prudent however that the replacement reserve not be scheduled to be less than $100,000.
       Should situations arise where the replacement reserve does drop below that level due to an
       emergency, the reserve level should be restored to at least the minimum level within the
       following budget year.

       In 2006, the Utility Board recommended that a new Contingency Reserve be established for the
       Water Utility. This reserve would be equal to 1% of the original asset value ($240,000 in 2006).
       The reserve is to be funded by excess revenue in high water use years, and not by raising rates.

   5. Bond Reserves
       It is an obligation of the City to meet reserve requirements of bonds and loans, which it uses for
       utility purposes. It is the policy of the City to fully fund such reserves as required by bond
       covenant or loan agreement.

D. Financing
   1. Capital Facilities Planning
       Due to the impact of capital costs on rates and charges and due to the variation in funding levels
       needed over time, each utility will establish and maintain a capital projects schedule of at least
       six years in duration. Said schedule will be consistent with the Utility's Comprehensive Plan.
       This schedule will include project description, scheduled year of construction and total
       estimated cost. Each project will be identified as an improvement project or a replacement
       project (including repair and rehabilitation). If projects provide both improvement and
       replacement benefits, then the schedule will include an appropriate allocation of project costs to
       the two categories and then use the criteria below for the allocated portions.

   2. Improvement Projects
       Improvements to the system shall be scheduled and budgeted with consideration of the rate
       impacts that may result. It is the City's intent to make such improvements without the issuance
       of new debt, except when opportunities for below market rate loans may arise. However, in
       the case of projects involving a capital outlay of $500,000 or more per year, the City will
       evaluate alternatives including phasing, deferral or debt financing as methods to mitigate rate
       impacts.

   3. Replacement Projects
       Replacement projects are normally to be funded from the replacement reserve. However, if the
       funding needs exceed $500,000 per year, the City will evaluate alternatives to total rate funding
       to mitigate rate impacts. Alternatives to be considered include phasing and/or deferral of
       projects or debt financing.



                                                                _________________________________
C-46                                                               City of Mercer Island 2011-2012 Budget
BUDGET POLICES
Capital Improvement Program
                     This section includes
                     budget polices on the
                     following:
                       • Capital Improvement
                          Program
                       • Street Maintenance
                          and Construction
                       • Information
                          Technology
                       • Vehicle & Equipment
                          Replacement
Budget Policies




                  _________________________________
C-48                 City of Mercer Island 2011-2012 Budget
                                                                             Budget Policies

Capital Improvement Program
Background
The City of Mercer Island separates the Capital Improvement Program (CIP) into two parts: the Capital
Reinvestment Plan (CRP) and the Capital Facilities Plan (CFP). The CRP contains all major maintenance
projects for existing public assets. The CFP consists of proposed new capital facilities.

Capital Reinvestment Program (CRP)
The CRP's purpose is to organize and schedule repair, replacement and refurbishment of public
improvements for the City of Mercer Island. The CRP is established as a six-year program setting forth
each of the proposed maintenance projects, including the cost and funding source. The individual six-
year plans for capital reinvestment serve as the City's capital planning documents as required by the
City's Comprehensive Plan (Capital Facilities Element) and the State Growth Management Act.

The program emphasis in a reinvestment plan is timely repair and maintenance of existing facilities. To
this effect, while new equipment and improvements are made to some older fixed assets, the intent is to
design a program, which will preserve and maintain the City's existing infrastructure. The maintenance
and enhancement of the taxpayer's investment in fixed assets remains the City's best defense against the
enormous cost of the replacement of older but still very valuable public improvements.

The CIP is intended to be a public document. For this purpose, it is organized by functional area.
Hence, any individual who wishes to gain knowledge about a project need not know the funding source
or any other technical information but only needs to know the general type of improvement in order to
find the relevant information. The Capital Reinvestment Program is divided into four functional
programmatic areas: streets (including pedestrian and bicycle facilities), park and recreational
facilities (including open space), general government (including building repairs, technology and
equipment), and utilities (water, sewer, and storm water).

CRP projects are typically "pay as you go", which means funded from the current operations of the
Street Fund, Capital Improvement Fund, Technology and Equipment Fund, and the Utility Funds (Water,
Sewer, and Storm water).

Capital Facilities Plan (CFP)
The CFP is also a six-year plan to outline proposed new capital projects. The CFP is divided into the
same four component parts as the CRP. Like the CRP, the CFP plan for new facilities is intended to
provide easy reading. Each project in the plan is described briefly, and the total cost and appropriation
for a six-year period is stated. Like the CRP, the CFP serves the capital planning requirements for six-
year plans as outlined in the Comprehensive Plan and State Growth Management Act.

As it is with the CRP, the CFP is organized by category of project.

Funding for CFP will generally be decided simultaneously with the approval of the project. This may
involve a bond issue, special grant or a source of revenue that is outside the available cash resources of
the City.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                 C-49
Budget Policies
Nomination Process
As a part of each biennial budget process, the CIP Committee receives proposals for needed capital
projects submitted by the affected department managers, team leaders, advisory bodies, City Council,
and others. The CIP Committee compiles and reviews the project proposals, their associated costs and
funding sources. Based upon Council priorities and staff-developed project evaluation criteria, the
Committee makes a recommendation on project funding priorities to the City Manager. Council-
appointed boards and commissions, such as the Utility Board, also provide input to project funding
requests.

Project Funding Status
In order to facilitate the review of proposed Capital Projects both during the CIP Preview and the
Preliminary Budget, projects have been categorized first by functional programmatic area and then by
project funding status. Projects have been sorted within functional area by one of the following four
funding status categories:

    1.   Funded – No changes (except for inflationary adjustments and revised cost estimates)
    2.   Funded – Modified (in terms of scope and/or timing)
    3.   Funded – New Project (project was not included in the 2009-2014 Capital Plan)
    4.   Unfunded or Partially Funded (Project still requires some or all funding before project can
         proceed).

Routinely CIP projects have been sorted and presented by category, year of construction and revenue
source. In the last budget (2009-2010) the categorization by project funding status was added.

Project Management
Project management costs are included in the budget of each capital project, with staff time being
charged directly to the appropriate project. The CIP Team in the Maintenance Department makes up
the project management staffing for Street and Utility projects. In addition, a small percentage of time is
spent by Parks staff (i.e. Parks Operations Superintendent, Parks Maintenance Manager, and the Parks
Arborist) and the Information and Geographic Services Team on capital project management.

CIP Administrative Overhead Charges
Indirect staffing support of capital projects is provided by the positions listed in the table below. With
the exception of the Maintenance Director, all of these positions are wholly budgeted in the General
Fund. An analysis of the percentage of time spent by each position supporting the City’s capital
improvement program is updated every two years by the Finance Department, resulting in a CIP
administrative overhead charge to the following funds: Street Fund, Capital Improvement Fund, Water
Fund, Sewer Fund, and Storm water Fund. This overhead charge enables the City to recognize the full
cost of the City’s capital improvement program by reimbursing the General Fund for the staff time spent
supporting capital projects.




                                                                 _________________________________
C-50                                                                City of Mercer Island 2011-2012 Budget
                                                                            Budget Policies
                           Position                Interfund Charges       2011      2012
            Finance Director                    10% of position             18,490     19,129
            Deputy Finance Director             45% of position             61,960     64,218
            City Attorney                       5% of position               9,079      9,393
            Assistant City Attorney             5% of position               6,167      6,396
            Public Information Coordinator      5% of position               5,058      5,252
            Maintenance Director                10% of position             18,539     19,180
            Parks and Recreation Director       15% of position             26,486     27,405
            City Manager                        2.5% of position             5,453      5,645
            Deputy City Manager                 10% of position             18,880     19,532
            Total                                                          170,112   176,150



Management Policies for 2011-2012
•   Increase public involvement in the planning and design of capital projects.
•   Improve public information about pending construction projects and their impacts (detours, delays,
    and effects on neighborhoods).
•   Use signage, the City’s website, and the MI Weekly to highlight certain projects.

Budget Policies for 2011-2012
•   CRP projects take priority over CFP projects in recognition of the desire to maintain and improve
    existing assets before acquiring new assets. Acquisition of major new capital assets should generally
    be funded with new revenues.
•   For “macro-financial” issues, staff should use at least a 10-year time frame and extend the financing
    period out to as much as 20 years for some capital items.
•   Use debt financing only when the following conditions exist:
        1. Object of the expenditure is a major new capital asset.
        2. Object of expenditure can be used by residents/taxpayers in the future.
        3. There are insufficient existing capital revenues available.
        4. All the revenue is needed at the same time (i.e. the project cannot be phased over time.)
•   Major impacts on the City’s operating funds will be identified and budgeted before projects are
    approved.
•   The CIP is a dynamic plan subject to changes in City Council policy, financial environment, design
    information, emergencies, and unique opportunities that can arise over a multi-year planning period.
•   The CIP will be developed in accordance with requirements of the State Growth Management Act
    and will be consistent with Capital Facilities Element of the City's Comprehensive Plan.
•   Within the context of a biennial budget, the City will develop a six-year plan for capital
    improvements. The six-year plans contained in the CIP fulfill the City's six-year planning
    requirements outlined in the Growth Management Act and Comprehensive Plan.
•   The City will enact a two-year capital budget based on the Capital Improvement Program.
•   The City will attempt to maintain its assets at a level adequate to protect capital investment and
    minimize future maintenance and replacement costs.
•   The City will identify the estimated costs and potential funding sources for each capital project
    proposal before it is submitted to the City Council for approval.
•   Capital projects are budgeted and funds allocated in the year that the project is acquired or
    constructed.


_________________________________
City of Mercer Island 2011-2012 Budget                                                               C-51
Budget Policies
•   Whenever possible, capital improvements will be scheduled and completed in the same year.
•   Prior to City Council funding commitments on major capital projects, the City will conduct detailed
    and professional cost estimating analyses.
•   In general, the City will plan and implement capital improvement projects so that the spring-
    summer-fall construction season is used to the community's greatest advantage.
•   Technology projects will be budgeted and accounted for in the Technology Fund.
•   When the City receives unanticipated or extraordinary capital revenue, the City Council will
    consider transferring it to the Capital Reserve Fund, or:
        1. Complete a previously identified, unfunded project;
        2. Add funds to a capital program category (such as parks) for a specific desired project;
        3. Advance an already programmed and budgeted capital project (such as pedestrian and
            bicycle facilities); or
        4. Complete a project that will decrease maintenance and operating costs.
•   Overhead charges associated with the City Manager’s Office, City Attorney’s Office, and Finance
    Department will be charged to the Capital Project Funds and credited to the General Fund.




                                                               _________________________________
C-52                                                              City of Mercer Island 2011-2012 Budget
                                                                               Budget Policies

Street Maintenance and Construction
Background
As part of each biennial budget cycle, City staff develops and prioritizes street, pedestrian and bicycle
facilities maintenance and construction projects. The proposed projects are reviewed annually during
the Six-Year Transportation Improvement Program (TIP) and biennially during the Capital
Improvements Program (CIP) planning processes. Both the TIP and the CIP plans are submitted to and
ultimately approved by the City Council.

As prescribed by state law, the City Council adopts a "Six-Year Transportation Improvement Program"
as part of the budget process. The Six-Year Plan covering the 2011-2012 biennium was adopted by City
Council on June 7, 2010 and is included in the proposed Capital Improvement Program (see Section H
of the budget). Adoption of the program also serves to implement portions of the City Comprehensive
Plan (Transportation and Capital Facilities Elements).

Streets are regularly evaluated and prioritized for improvement based on a formal Pavement Condition
Rating and other criteria (review of safety, maintenance and implementation). The criteria are not
weighted in order to maintain flexibility needed to accommodate unexpected needs or opportunities.
However, the results provide predictability for when particular streets are expected to be improved. In
addition, the City periodically analyzes intersections to measure the traffic impacts associated with
development proposals to maintain the City’s adopted traffic level of service standard. Project impacts
determined by this analysis will be mitigated through the SEPA process. Whenever possible, staff plans
utility projects to precede street construction and plans construction of pedestrian and bicycle facilities
with nearby arterial and residential street projects.

In 2011 and 2012, the City anticipates revenues of $1.4M and $1.6M respectively. This level of
reinvestment in the City's streets and pedestrian and bicycle facilities systems will ensure that the City's
arterial and residential streets will be maintained at safe and efficient levels within 20 or 35 year life
cycles.

Assuming implementation of the following budget policies, this level of funding will support completion
of the highest priority transportation projects in the upcoming biennium, including implementation of
projects identified in the Pedestrian and Bicycle Facilities Plan. The PBF Plan was reviewed and updated
during the 2009-2010 biennium. The updated Plan was adopted by the City Council in June 2010.

Budget Policies for 2011-2012
•   100% of annual fuel tax revenues will be used for pavement marking, patching, street overlays and
    substandard residential street upgrades.
•   An annual average of $300,000 in Real Estate Excise Tax revenue (2nd quarter-cent) is dedicated to
    pedestrian and bicycle facility maintenance and construction projects in 2011-2012.
•   The remaining balance ($554,000 in 2011) of annual Real Estate Excise Tax revenue, along with any
    available fund balance, is dedicated to major street construction projects and other transportation
    projects and activities.
•   The Storm Water Utility will absorb an appropriate share of the costs of adding drainage systems to
    some residential streets. The Water Utility will help fund the replacement of services and hydrants
    in neighborhoods where it is determined to be appropriate. This will allow certain residential
    streets in need of repair to move up on the priority list for the residential street repair program.


_________________________________
City of Mercer Island 2011-2012 Budget                                                                  C-53
Budget Policies
•    The policy of maintaining street funding on an inflation adjusted basis will continue to be on hold for
     the 2011-2012 biennium. Funding for street maintenance and construction had been maintained on
     an inflation adjusted basis since 2002. Using 2002 as the revenue benchmark, funding has been
     benchmarked to an annual factor of inflation (the WSDOT Construction Cost Index) plus one
     percent. Due to the economic slowdown which started in 2007 and which is forecast to continue
     through 2013, Real Estate Excise Tax revenue will be split evenly between the Street Fund and the
     CIP Fund for the 2011-2012 biennium, as it was in the prior 2009-2010 biennium, in order to
     maintain reasonable levels of reinvestment in all REET funded assets (streets, parks, and buildings).


2011-2012 Budget Impact
                                             2009          2010                2011                2012
              Description                   Actual       Forecast             Budget              Budget
RESOURCES
Budgeted
    Beginning Fund Balance              $            - $ 1,741,839        $               - $      426,502
    Real Estate Excise Tax                   628,940       992,500             854,375            1,089,500
    Fuel Tax - City Streets                  492,732       502,587             509,623             519,815
    General Govt / Grants / Fines            917,848          9,143                   -                   -
    Interfund Transfers In                   147,897                  -               -                   -
      Total Budgeted Resources          $ 2,187,417     $ 3,246,069        $ 1,363,998        $ 2,035,817
Not Budgeted
    Beginning Fund Balance (Reserved)       3,405,383     1,905,461           1,905,461           1,487,999
TOTAL RESOURCES                         $ 5,592,800     $ 5,151,530        $ 3,269,459        $ 3,523,816
USES
Budgeted
    Residential Street Preservation     $      1,462    $ 1,121,484       $    480,000        $    471,000
    Town Center Street Reconstruction         45,319      1,186,020                       -                   -
    Arterial Street Improvements            1,069,437      208,166             170,000            1,115,000
    Pedestrian & Bicycle Facilities          433,351       339,749             450,000             165,000
    Other Transportation Projects            135,148       190,032             115,000             140,000
    Other Transportation Activities          250,782       200,618             139,957             144,817
    Interfund Transfer                        10,000              -                       -               -
    Total Budgeted Expenditures         $ 1,945,499     $ 3,246,069        $ 1,354,957        $ 2,035,817
Not Budgeted
    Ending Fund Balance                     3,647,300     1,905,461           1,914,501           1,487,999
TOTAL USES                              $ 5,592,799     $ 5,151,530        $ 3,269,459        $ 3,523,816




                                                                          _________________________________
C-54                                                                         City of Mercer Island 2011-2012 Budget
                                                                                 Budget Policies

Information and Geographic Services
Background
Local governments, like Mercer Island, are increasingly expected to provide accurate, timely and
comprehensive information on services and initiatives impacting the businesses and lifestyles of their
citizens. These City services and initiatives increasingly rely on technology. The City is also required to
streamline business practices while adhering to complex and rapidly changing regulatory requirements.
Citizens expect the City to collect and process their input and comments as well as interpret and
convey information about programs, services, regulatory impacts, geographic/land features, emergency
alerts and more. To do so, City staff must efficiently utilize and maintain available technologies as well as
prepare for and implement new technologies.

A primary and significant City business function is communicating information—creating, disseminating,
and archiving diverse and rapidly changing information and data for staff and citizens. To do so efficiently
and effectively within the City, Information and Geographic services support:

    •   250 telephone handsets, extensions and business lines
    •   33 physical/virtual network servers
    •   192 workstations servicing over 230 users
    •   9 major business-specific applications as well as over 75 productivity applications
    •   7 independent City facilities and associated infrastructure
    •   Remote network access and wireless network applications
    •   Over 200 Layers of Spatial Information related to City Infrastructure and Assets
    •   Several Websites for Public Use

This infrastructure services financial, payroll, utility billing, public safety, geographical mapping services,
citizen and customer maintenance requests, internal and external websites, electronic newsletters and
ListServes, security systems, maintenance management tools, building permit systems, water and waste
water monitoring, facility scheduling and recreational activity registration, irrigation and ballfield lighting
controls and more.

Wise City investment in technology tools (hardware, software, networks, phone systems, etc.), regional
technology partnerships, and strategic innovation enables the City to maximize its limited human and
financial resources. In addition, as one of the nine regional founding partners in the eCityGov Alliance,
now a consortium of 29 member agencies, the City can capitalize on the pooling of resources and
leadership skills to provide more seamless and easy to use on-line services for citizens and businesses
through one website portal.

The City will continue to replace and upgrade its Information and Geographic Systems, support business
specific applications, and pursue pilot projects where innovations may improve service delivery or
provide services more efficiently.

The Information and Geographic Services (IGS) Team is dedicated to:
    •   Insuring 24/7 reliability of the City’s core business systems through timely upgrades, patches and
        redundant infrastructure configuration as well as prompt vendor and IT support response;
    •   Pursuing reputable and reliable off-the-shelf software systems and standardizing custom
        development whenever possible;


_________________________________
City of Mercer Island 2011-2012 Budget                                                                     C-55
Budget Policies
    •   Focusing Information and Geographic Services investments on core business needs and pursuing
        inexpensive solutions; and
    •   Supporting further low-cost/high benefit development of eCityGov Alliance products and
        services.

Budget Policies for 2011-2012
•   Maintain City’s investment in computers, servers, and printers by replacing equipment on a planned
    schedule. For example, most computers have reached their useful life and are scheduled to be
    replaced on a 4 year cycle.
•   Maintain City’s investment in major systems and databases through periodic software and hardware
    updates.
•   Increase response for public disclosure/public information through a web-based searchable public
    document management system for citizens and staff;
•   Enhance user functionality, navigability and search capabilities by upgrading and enhancing the City’s
    website;
•   Consolidate physical server systems into virtual systems to maximize utilization of server hardware.
•   Investigate methods to more efficiently disseminate critical incident and emergency information to
    citizens and emergency workers using the City’s website and Geographic Information Systems (GIS);
•   Replace antiquated computer equipment and database systems to better support rapidly changing
    business systems and their operating requirements;
•   Conduct more accurate analysis and management of roadways and shoulders, utilities, residential
    and business building footprints, utilities, trees and vegetation and property line delineations by
    periodically updating the aerial mapping data with high accuracy (within 1 foot) color aerial photos of
    the Island; and
•   Facilitate production of the City’s budget process by updating the City’s financial system to allow
    web-based budgeting and capital project management.

2011-2012 Budget Impact
                                                     2009          2010           2011          2012
                  Charges                           Actual       Forecast        Budget        Budget
Computer and Printer Replacements                    $203,326      $102,000       $120,000       $70,000
Capital Reinvestment – Technology                     263,122        355,013        75,000        135,000
NORCOM Startup Fees                                   186,230         46,170             0              0
Total                                               $652,678      $503,183       $195,000       $205,000




                                                                 _________________________________
C-56                                                                City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies

Vehicle and Equipment Replacement
Background
The individual units of the City's fleet of vehicles and equipment are assigned to the various
departments, but are accounted for in the City's Equipment Rental Fund. Based on historical, actual
expenses plus overhead, operating and maintenance rates are developed biennially for each vehicle class
and assessed to each department. In addition, replacement rates are developed biennially for each
vehicle and piece of equipment in the fund. Separate replacement reserves have been established for
the accumulation of funds to replace vehicles/equipment, fire apparatus, and emergency radios. The
current fleet of vehicles and equipment stands at 150 units and has an estimated asset value of
approximately $6.7 million (based on purchase cost).

Beginning in 2009, Finance staff created a fleet replacement rate model based on cash flows,
incorporating the estimated salvage or trade-in values, inflationary factors, and useful life assumptions for
each individual vehicle. Inflated replacement cost estimates were then used to determine the cash
outflows for the fund as a whole over a 30 year period. The cash inflow required to cover the
replacement cost cash outflows became the basis for setting the annual replacement charge to the
departments. The annual cash inflow (contribution) amount was allocated to the departments based on
their present value percentage ownership of the fleet vehicles and equipment.

The vehicle replacement reserve currently is maintained to allow for future inflation costs at a rate of
1.5% to 3.5%. For specialized equipment, the rate may exceed this range. Vehicle replacements
amounted to $189,371 in 2009 and $444,489 in 2010. Vehicle replacements for 2011 and 2012 are
budgeted at $912,712 and $615,925 respectively.

A separate replacement reserve for fire apparatus was established in the Equipment Rental Fund in
2007. Beginning in 2008, a 1.65% property tax levy was approved (1.0% optional plus 0.65% banked
capacity) as a dedicated funding source for this purpose. In addition, the difference between the
required annual apparatus sinking fund charge and the property tax levy is funded by interest earnings on
the City’s invested cash. See the Fire Apparatus Replacement Policy for more information.

Budget Policies for 2011-2012
•     The useful life of each vehicle and piece of equipment was evaluated, focusing on those that are due
      for replacement in 2011-2012, and extended when it was deemed prudent (i.e. low mileage or
      equipment hours, good condition, and low maintenance costs).

2011-2012 Budget Impact
                                               2009            2010             2011             2012
              Expenditures                    Actual         Forecast          Budget           Budget
    Vehicle Replacements                        $189,371        $444,489         $912,712         $615,925
    Fire Apparatus Replacements                  120,421           99,580                0                 0
    Radio Replacements                           221,032           79,968                0                 0
    Total                                      $530,824        $624,037         $912,712         $615,925



_________________________________
City of Mercer Island 2011-2012 Budget                                                                  C-57
Budget Policies




                  _________________________________
C-58                 City of Mercer Island 2011-2012 Budget
BUDGET POLICES
Development Services
                       This section includes
                       budget polices on the
                       following:
                         • Development Review
                            Fees
                         • Transportation
                            Management
Budget Policies




                  _________________________________
C-62                 City of Mercer Island 2011-2012 Budget
                                                                               Budget Policies
Development Review Fees
Background
The authority for cities in Washington to impose fees for development review and permitting is
established and limited by RCW 82.02.020, which allows for “collecting reasonable fees from an
applicant for a permit or other government approval to cover the cost to the city…of processing
applications, inspecting and reviewing plans, or preparing (SEPA documents).”

The ongoing policy of the City regarding building and land use permit fees has been to move towards
recovering the full cost of permitting services, establishing a goal of full cost recovery by 2011-2012. In
a 2009 analysis of DSG activities, staff concluded that 63% of the entire 2008 DSG budget was covered
by revenue from fees and that the rate of recovery was 94.1% for those activities clearly eligible for cost
recovery.

DSG provides a number of services which are either not related to permit review or are indirectly
related. Those services include code enforcement (for activities not directly related to a permit),
mediation and/or resolution of neighborhood disputes and impact mitigation, permit appeals, public
information, and the development and implementation of special projects and programs such as
affordable housing, shoreline planning, Town Center planning, transportation planning, sustainable
development efforts, Mercer Island School District planning, emergency planning and disaster response,
and activities required by the State’s Growth Management Act (GMA). These tasks are generally
considered to be costs associated with the general purpose of government. The use of permit fees to
pay for general purpose government costs has been successfully challenged at other jurisdictions within
the state. The 2011-2012 budget assumes at least 65% of the DSG budget is eligible for cost recovery,
with no more than 35% related to the general purpose of government.

The 2009 analysis resulted in small adjustments to the DSG fee schedule and also acknowledged that
continuing efforts should be made to more clearly refine costs eligible for recovery, especially for the
“indirect costs” for legal, facility and financial services provided by other city departments which directly
support the permitting function.

Development is cyclical in nature. Development activities, fees and the sales and real estate taxes
generated by those activities, change from year to year with the ups and downs of the economy. In
addition, many development projects are not completed within a single year, with some taking many
years to complete. Staffing and outside consultant resource levels must be carefully increased or
decreased to respond to these swings in activity if expected levels of customer service and fiscal
responsibility are to be maintained. When the workload exceeds resource capacity, customer service
may suffer. Applicants may experience delays in permit times which can add significantly to the cost of
development. When the workload is lower than resource capacity, customer services may improve in
the short term, but the revenues anticipated for funding the budgeted capacity may be less than
expected, and resource reductions may be required.

Following the 2004-2007 boom years, aggressive real estate activity came quickly to an end during the
later part of 2008 and throughout 2009, with both workload and revenues in decline. DSG responded
to this slowdown by reducing staff and nearly eliminating outside consultant plan review. In 2010, there
are some signs for optimism. During the first half of 2010, the number of permits and the fees
generated by those permits improved relative to 2009. DSG now faces the challenge of scaled back
resources (workforce and outside consultants) with an increasing workload at the same time that the
City’s General Fund is lagging. It is essential to maintain adequate resources to handle a forecasted

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City of Mercer Island 2011-2012 Budget                                                                  C-63
Budget Policies
increase in permit activity during 2011-2012. When permit approvals are delayed as a result of longer
processing times, there is a corresponding impact on the collection of sales tax on a development
project and the addition of “new construction” to the property tax rolls.

In mid-2010, staff conducted a cursory review of the building permit fee methodology. Staff concluded
that one aspect of the building permit fee structure warranted immediate attention. The current fee
methodology assumes that the value of new residential construction is $116 per square foot (SF). This
value is then applied to the total square footage of the construction project, resulting in the calculation
of the building permit fee. The value of $116/SF is very low for residential construction on Mercer
Island. The King County Assessor has declared that the 2008 Mean Assessed Value per SF for all newly
built homes (built between 2000 and 2007) is $258.20/SF. It is not uncommon for actual construction
costs for new residential construction to greatly exceed $300/SF. Staff has concluded that a modest
increase of $26.50/SF (from $116 to $142.50) is justified to support the current level of building permit
customer service. Assuming building permit activity does not increase or decrease significantly from the
first half of 2010, this increase in value/SF should yield about $135,000 in new annual revenue in 2011-
2012.

Development Revenues & Activity
                                         2003         2004         2005          2006         2007
          Selected Revenues
                                        Actual       Actual       Actual        Actual       Actual
   Single Family – New/ Remodel          $659,912  $902,426   $927,267   $947,764 $1,009,500
   Multi-Family / Commercial               54,512    196,012    376,088    433,000    344,100
   Land Use                               181,423    162,340    254,029    167,000    231,600
   Street Use                              58,888     69,915     88,384     51,000     71,000
   Storm Drainage                          25,990     46,073     45,029     27,450     41,400
            Total Revenues              $980,725 $1,376,766 $1,690,797 $1,626,214 $1,697,600



                                         2008         2009         2010          2011         2012
          Selected Revenues
                                        Actual       Actual      Forecast       Budget       Budget
   Single Family – New/ Remodel           729,699  $581,792         $698,000  $730,000   $730,000
   Multi-Family / Commercial              344,006    270,447         110,000    195,000    195,000
   Land Use                               132,222    122,487         111,000    116,000    116,000
   Street Use                              56,940     56,567          50,000     50,000     50,000
   Storm Drainage                          33,300     19,954          30,000     20,000     20,000
            Total Revenues            $1,296,167 $1,004,847        $999,000 $1,111,000 $1,111,000




                                                                 _________________________________
C-64                                                                City of Mercer Island 2011-2012 Budget
                                                                                  Budget Policies

                                 2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
        Type of Work
                                 Act     Act     Act     Act     Act     Act     Act      Est     Est     Est
    Conditional Use Permits       2       2       6       1       3       2       0       0       0       1
    Design Review-Major           11      7       5       5       9       7       9       2       3       5
    Design Review-Minor           23      24      29      34      15      5       17      12      10      10
    Deviations                    34      43      57      42      50      27      29      30      25      28
    Variances                     11      14      18      5        6      2        0      1        1      1
    Subdivisions / Short Plats     3      3        9      5        6      6        5      3        5      5
    Lot Line Revisions             4      5        8      2        2      4        4      4        4      4
    Pre-Application Meetings     109     143     149     146     146     115      91     100     100     100
    New - Single Family
                                  31      57      66      58      56      33      12      15      18      18
    Dwelling
    Remodels - Single Family
                                 197     279     285     157     191     137     123     125     140     140
    Dwelling
    Demolitions - Single
                                  18      41      45      49      46      25      14      18      20      20
    Family Dwelling
    Commercial / Multi-
                                  63      89      58      13      75      40      54      40      40      40
    Family / Other
    Total Valuations (in
                                 26.7    93.5    80.1    95.9    86.3    40.2    30.9     75      30      30
    millions)
    Over-the-Counter             1,896   2,465   2,656   2,609   2,572   2,000   1,028   1,100   1,000   1,000
    Code Enforcement Cases        138     144     191     174     173     147     110     120     130     140
    Accessory Dwellings             7      6        8      7        6      3        5      3        2      2
    Shoreline Permits-Other        23      18      18      23      50      31      29      25      25      25
    Shoreline Substantial
                                  15      9       16      10      21      6       1       5       1       1
    Development Permits
    Total SEPA Reviews            41      26      39      34      43      23      24      16      16      16

Budget Policies for 2011-2012
•     Increase basis for residential permit fees from $116/SF to $142.50/SF.
•     Growth should pay for growth. The City will seek full cost recovery for all direct permitting activity
      and for all appropriate indirect costs.
•     DSG should carefully balance resources with workload and maintain sufficient staff (and if needed
      outside consultant) resources to maintain the high level of customer service for permit and plan
      review. It is especially important to maintain quick permit turnaround times to facilitate
      construction which then generates sales tax and property tax revenue.
•     DSG’s workload and resources should be carefully monitored to identify any significant changes in
      budget assumptions and to take prompt action during the 2011-2012 biennium if warranted.
•     A careful analysis of eligible costs and fees should be conducted in 2011 to assure that the City’s
      goal of full cost recovery for all eligible permit activities is implemented.

2011-2012 Budget Impact
Noted above in “Selected Revenues” tables.



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City of Mercer Island 2011-2012 Budget                                                                     C-65
Budget Policies




                  _________________________________
C-66                 City of Mercer Island 2011-2012 Budget
                                                                                 Budget Policies
Transportation Management
Background
Recent Transportation Issues
Over the last three biennia, the City Council has increasingly struggled to find policy directions and
financing for a number of local transportation issues. Among recent issues are:
    •   Residential Street Overlays
    •   Arterial Street Improvements
    •   Bike & Pedestrian Plan Implementation
    •   Shoulder Improvements along the Mercer Ways
    •   Transit Services north-south (“Jitney” project)
    •   Traffic Calming – Planning & Implementation
    •   Transit Oriented Development Planning in the Town Center (i.e. parking)
    •   Island Crest Way Configuration
    •   Parking Along the Mercer Ways

Historical & Future Organization of Function
In terms of managing transportation issues, Mercer Island is rather unique in that it does not have a
single “transportation department.” Instead, the City maintains a de-centralized “matrix” organizational
style by spreading and coordinating transportation activities throughout various parts of the
organization, including the Development Services Group (DSG), the Maintenance Department and the
City Manager’s Office. In the 2009-2010 Budget, the City created a Transportation Manager position to
consolidate a number of the transportation-related functions. While this consolidation had some
advantages, it carried a relatively large price tag, funded mostly by the General Fund.

In the 2011-2012 Budget, the General Fund revenue contractions will require significant changes in the
transportation services historically provided by the City. These changes will require that some duties
and tasks be transferred and absorbed by existing City staff, and other tasks and activities will be
deferred until at least the 2013-2014 Budget. There are also resource gaps that may create the need for
some outside professional transportation engineering services for technical review of some large or
complex development proposals.

Funding Trends & Opportunities
The preservation, maintenance and improvement of Mercer Island’s local transportation infrastructure
are core functions of city government. Equally important are the planning, coordination and
collaboration activities with Washington State Department of Transportation, Sound Transit and King
County Metro regarding transportation operations, improvements and investments of regional
transportation operations and investments, especially those within the I-90 corridor. With passage of
Initiative 695 in 1999 and Initiative 776 in 2002, the city’s ability to fund local transportation activities has
been severely constrained. The City experienced the loss of $1.1 million in Motor Vehicle Excise Taxes
and $200,000 in King County Local Vehicle License fees as a result of the two initiatives. The loss of
these dedicated sources of transportation revenue has constrained the ability of the City to fund local
transportation maintenance and improvements and to provide staff to coordinate regional
transportation operations and investments. This has placed greater pressure on the use of limited real
estate excise taxes and gas taxes to support transportation related activities on Mercer Island.
Consequently, the Council has been unable to secure funding for its various transportation priorities.


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City of Mercer Island 2011-2012 Budget                                                                      C-67
Budget Policies
Transportation Benefit Districts
Many cities and counties across the state have been struggling with the same kinds of issues. In
response, the Legislature amended state law in 2005 (RCW 36.73) to allow cities to create a
“Transportation Benefit District” (TBD). This tool authorizes cities and counties to establish a district
with authority to impose new fees and taxes to fund transportation improvements such as maintenance
of and improvements to local transportation infrastructure. A TBD may raise revenue in two ways.
Without voter approval, a TBD may establish an annual vehicle fee of up to $20 per vehicle and impose
transportation impact fees on commercial and industrial buildings. With voter approval, a TBD may
impose increases in property taxes, sales taxes, an annual fee of up to $100 per vehicle and vehicle tolls.
The governing board of a TBD may be a City Council. Cities who have established a TBD include
Shoreline, Lake Forest Park, Olympia, Des Moines and Edmonds. There are 15,000 registered vehicles
in the City of Mercer Island. A $20 vehicle fee would yield about $300,000 in annual revenue for the
maintenance and improvement of Mercer Island’s transportation infrastructure.

Budget Policies for 2011-2012
•   Eliminate the Transportation Manager position, and reassign the duties as follows:
    o Neighborhood Traffic Customer Service, including traffic engineering, traffic and parking
        complaints, traffic counts, signal modifications, pavement markings and implementation of
        neighborhood traffic calming would be transferred to and absorbed by the Assistant City
        Engineer, Street Engineer and Streets Maintenance Manager in the Maintenance Department.
    o The design and implementation of the Pedestrian Bicycle Facilities Plan would be transferred
        from DSG and absorbed by the Assistant City Engineer in the Maintenance Department.
    o Annual TIP/CIP development would be absorbed by the City Engineer in the DSG.
    o Support for the Mercer Island School District Master Planning transportation element would be
        absorbed by the City Engineer in the DSG.
    o I-90 (R-8A/HOV and Eastlink) would be absorbed by the City Manager’s Office, with technical
        and policy support by the DSG.
    o Commute Trip Reduction would be absorbed by the Human Resources Department.
    o MISD/PEAK Transportation Demand Management Plan Implementation would be absorbed by
        the City Engineer in the DSG.

•   Activities which would be deferred or managed on an ad hoc basis:
    o Development of a Traffic Calming Toolkit.
    o Development and implementation of the demonstration project for a Mercer Island Shuttle.
    o Pursuit of highly competitive transportation grants.

•   Activities which would likely require some outside professional services:
    o Detailed evaluation of traffic studies and transportation impacts of large or complex
        development proposals to determine appropriate mitigation. This fiscal need may be filled by a
        more aggressive use of SEPA authority. This alternative would require developers to assist in
        the funding of the SEPA project analysis.
    o Management of the City Transportation Concurrency Program.
    o Any new City Council transportation initiative.



                                                                 _________________________________
C-68                                                                City of Mercer Island 2011-2012 Budget
                                                                                 Budget Policies
•    Consider creation of a Transportation Benefit District to create a new funding source for
     transportation-related improvements and/or services. A $20 per vehicle fee would generate
     approximately $300,000 per year.

2011-2012 Budget Impact
                                          2009            2010            2011            2012
                                          Actual         Forecast        Budget          Budget
Revenue
    Transportation Benefit District   $          -   $           -   $           -   $           -
             Total Revenue            $          -   $           -   $           -   $           -
Expenditures
    Transportation Manager            $    122,144   $     127,919   $           -   $           -
           Total Expenditure          $    122,144   $     127,919   $           -   $           -




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City of Mercer Island 2011-2012 Budget                                                               C-69
Budget Policies




                  _________________________________
C-70                 City of Mercer Island 2011-2012 Budget
BUDGET POLICES
Parks and Recreation
                       This section includes
                       budget polices on the
                       following:
                         • I-90 Landscape
                            Maintenance
                         • Luther Burbank Park
                         • Parks and Recreation
                            Financing
                         • Trees and Urban
                            Forest Lands
Budget Policies




                  _________________________________
C-72                 City of Mercer Island 2009-2010 Budget
                                                                                  Budget Policies

I-90 Landscape Maintenance
Background
In 1992, Washington State Department of Transportation (WSDOT) completed construction of the I-
90 roadway on Mercer Island. By 1994, the Park-on-the-Lid and other landscaped areas were
completed and incrementally returned to the City for community use and maintenance. By 1998, all the
agreed-upon property landscaped by WSDOT, totaling 80 acres, had been turned back to the City. The
following chart illustrates the transition:

                          City           WSDOT             Total
         Year                                                               Revenue           Expenses
                         Owned           Owned             Owned
         1992              0               8.6              8.6                  $41,323     Not Tracked
         1993               0                8.6              8.6                $51,372           $43,507
         1994              11.3             15.7             27.0                $52,117           $86,934
         1995              11.3             15.7             27.0              $101,348           $151,868
         1996              25.6             52.4             78.0              $136,816           $175,000
         1997              25.6             52.4             78.0              $343,159           $295,322
         1998              25.6             53.9             79.5              $331,234           $334,396
         1999              25.6             53.9             79.5              $331,387           $324,331
         2000              25.6             53.9             79.5              $341,200           $342,485
         2001              25.6             53.9             79.5              $353,894           $328,201
         2002              25.6             53.9             79.5              $366,802           $356,356
         2003              25.6             53.9             79.5              $373,932           $413,081
         2004              25.6             53.9             79.5              $386,052           $421,755
         2005              25.6             53.9             79.5              $384,700           $407,189
         2006              25.6            53.15*            79.5              $391,322           $455,987
         2007              25.6            53.15*            79.5              $405,790           $464,380
         2008              25.6            53.15*            79.5              $423,112           $483,412
         2009              25.6             53.9             79.5              $443,812           $521,482
         2010              25.6             53.9             79.5              $441,860           $442,171

     * In Q3 and Q4 of 2006 and throughout all of 2007 and 2008, approximately .75 acres were removed from
     WSDOT acreage reimbursement schedule due to Era Care’s Aljoya House development and construction
     staging.

The WSDOT owns 53.9 of those 79.5 acres and has agreed to compensate the City for maintenance
costs of those 53.9 acres only. The State-owned properties are managed by the City under a lease
agreement that will expire in 2034. The remaining 25.6 acres are owned by the City and were
landscaped and improved by WSDOT during construction of I-90. The City receives no compensation
from WSDOT for maintenance of those 25.6 acres.


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City of Mercer Island 2011-2012 Budget                                                                       C-73
Budget Policies
Early in the negotiations, the City set the goal of maintaining all 79.5 acres of the I-90 property with the
reimbursement funds for 53.9 acres from WSDOT. This goal was based on estimated cost data
available at the time. Revenue from WSDOT will continue throughout the lease period and will be
adjusted for inflation annually with a formula driven by the Consumer Price Index. The revenues are
projected to grow at an average rate of approximately 3% annually.

In 2006, there was a reduction in the reimbursement by WSDOT for a modification to the lease
agreement to account for reduced City maintenance costs associated with the construction of ERA
Care Communities’ Aljoya House, a senior retirement facility at 2430 76th Avenue SE and adjacent to
the I-90 Park on the Lid trail. ERA Care made significant landscape improvements to a small portion of
the I-90 Lid Park adjacent to the project location in the City’s Town Center. WSDOT negotiated a
reduction of 2.8% to one of the three maintenance agreements included in the total reimbursement to
reflect the reduced maintenance burden on the City. The financial impact of this amendment to the
lease agreement was a temporary reduction in payment to the City by WSDOT of approximately
$4,000 per year.

Over time maintenance costs have increased and the WSDOT lease payment is no longer enough to
cover the costs for maintaining both the States and the City’s portion of the I-90 corridor. As a result,
Parks staff were forced to look at alternative funding sources to supplement the reimbursement the City
received from the State to maintain the current level of service. The City Council ultimately directed
staff to balance expenditures against revenues from WSDOT reimbursement for as long as possible and
then to use the City’s Beautification Fund revenues to cover the shortfall. As the facility ages, Parks staff
anticipate this financial trend to continue, where the costs to maintain the facility at its current level will
exceed the revenue from WSDOT. It will become increasingly necessary to explore options such as
recovering some maintenance costs by increasing I-90 facility user fees (such as boat launch, picnic
shelter, and ball field use fees), finding efficiencies in water and power consumption, or lowering the
level of maintenance to meet WSDOT revenue projections.

Lowering the level of maintenance is a less desirable alternative since public feedback favors the high
standard of appearance for the landscaped areas, and the continued heavy use of the athletic facilities
requires high maintenance to keep them safe and playable. Experience with other Mercer Island parks
suggests that deferring maintenance in the short term will result in expensive restoration costs in the
future.

The current maintenance program and budget are designed to meet or exceed the level of care
standards agreed to with WSDOT. These standards are similar to the standards the City adheres to in
its other major park facilities, and are consistent with the expectations of the Island’s park users.
During a detailed level of service presentation in 2000, the City Council agreed that the City’s
presentation standard for I-90 is correct. The presentation goal for the formal landscaped areas is “as
new” condition. As these facilities gain in popularity and use, there will be increased costs for turf
restoration, litter control, graffiti removal, plant and tree replacement, pathway overlays, etc. Any
further development, such as additional restrooms and ballfields will require additional funding in order
to provide adequate maintenance service and to provide the current presentation standard. As the
facility ages, it will be necessary to address the issues of restoration of the restroom and the picnic
shelter, turf renovations, irrigation infrastructure, major tree pruning, fertilizing and replacement, and
pruning or removal of other vegetation that becomes overgrown.

The maintenance management strategy for the I-90 facility includes a combination of seasonal and full-
time staff labor. Full time Park Maintenance staff is used for mowing, trimming, pruning, edging, and
chemical applications. Seasonals are used for weeding, shrub pruning, and leaf removal. Seasonal and


                                                                   _________________________________
C-74                                                                  City of Mercer Island 2011-2012 Budget
                                                                                  Budget Policies
full-time City staff operate and repair the irrigation system, inspect the facility, maintain ballfields and
shelters for use, and provide other basic maintenance at a heightened level of supervision.

Budget Policies for 2011-2012
•   Limit the growth in expenses to operate the facility relative to the reimbursement from the State.
•   Seek additional efficiencies in water and power consumption.
•   Consider lowering the level of maintenance in some the I-90 facility areas only where little or no
    public reaction will be anticipated.

2011-2012 Budget Impact
                                                       2009           2010           2011           2012
                                                      Actual        Forecast        Budget         Budget
Revenues
WSDOT Revenues                                           443,812        444,120        447,895        451,000
Business & Occupation Taxes                               77,670         98,051         42,513         46,626
                Total Revenue                         $521,482       $542,171       $490,408        $497,626
Expenditures
I-90 Landscape Maintenance                               521,482        542,171        490,408        497,626
Total I-90 Landscape Expenditures                     $521,482       $542,171       $ 490,408      $ 497,626




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City of Mercer Island 2011-2012 Budget                                                                     C-75
Budget Policies




                  _________________________________
C-76                 City of Mercer Island 2011-2012 Budget
                                                                            Budget Policies

Luther Burbank Park
Operation, Maintenance and Park Master Planning
Transition and Start-Up Under City Ownership
Control of Luther Burbank Park passed to the City on January 1, 2003. Initial City operation mirrored
the final years of King County operation. The City’s intention was to protect public safety and maintain
general security.

During the initial period of transition and start up, covering 2003, $240,000 in maintenance and
operation (M&O) costs were funded from the Capital Reserve Fund, a “one-time” revenue source. The
City tightly controlled costs and resisted expanding programs or maintenance until capital reserves
could be replaced by a stable and ongoing revenue source. Through the first year of City operation
management options and operating costs were carefully assessed under different level-of-service
scenarios.

Direct experience during the first year of City operation enabled staff to more accurately estimate the
costs of improvements and ongoing maintenance. Certain areas of the park required a higher level of
maintenance than others and use patterns varied throughout the facility. Based on this information,
Council selected modes of operation and levels of service considering Island residents’ interests, the
City’s Park Management and Budget Policies, and other opportunities and demands on the City budget.

Upon receiving direction from Council, staff prepared a multi-year capital improvement plan and an
estimate of annual operating costs. These budget projections were used to prepare proposals for
funding ongoing Luther Burbank costs into the long term future – a property tax levy proposition. Past
guidance and policy action embraces the notion that when the City has taken on a major new asset,
stable ongoing revenue sources are needed to support them. Staff estimated ongoing operations and
maintenance at $300,000 with an additional $100,000 needed each year in minor capital repairs and
replacements. Upon further discussion, an additional $15,000 per year for Upper Luther Burbank Park
was added for operations and maintenance. In September 2003, the City Council directed that the
question of new revenue in the annual amount of $415,000 for the specific purpose of paying for existing
and future expenses for a period of six years to maintain and operate upper and lower Luther Burbank
Park at prescribed levels of service be placed before Mercer Island voters. In November 2003, voters
approved this property tax levy increase and in 2004 staff increased their maintenance frequencies to
high impact areas of the park and pursued the implementation of the capital maintenance and repair
plan.

Public Involvement Planning
In addressing the long-term plan for the park, Council directed that a sequential and thoughtful process
be undertaken. Future funding for substantial capital investment in new facilities and the question of
generating ongoing revenue for park maintenance and operations was to be sought only after a thorough
review of private and public funding alternatives and only after Mercer Island citizens have had an
opportunity to comment on a vision for the future of the park.

During its 2004 Retreat, Council considered how best to undertake planning for the future of Luther
Burbank Park. Council agreed to employ the services of an outside expert to design and implement a
thorough public involvement process. The goal was to engage a public involvement expert in 2004 and
conduct the public process before 2006. These accomplishments would then allow the subsequent
“master planning” of any desired improvements to the park to be completed in time to design, permit

_________________________________
City of Mercer Island 2011-2012 Budget                                                              C-77
Budget Policies
and potentially construct by 2009 (when the current Luther Burbank Operations and Maintenance Levy
expires).

Planning for Luther Burbank Park began in November 2004 with a Community Visioning Process which
was used to gather input on the public’s visions and priorities for Luther Burbank Park. To set the stage
for this community effort, the City Council established a number of planning parameters that served as
firm guidelines throughout the process.

Public Involvement
A public involvement plan was developed to serve as a road map for how the Mercer Island community
would be involved in the visioning process. The public involvement goals, included:

    •     Provide a wide range of opportunities for diverse interests to be informed about and involved in
          the development of community design guidelines for Luther Burbank Park.
    •     Provide the Mercer Island City Council with a comprehensive understanding of the community’s
          visions, values and priorities for Luther Burbank Park.
    •     Create a sense of community cohesiveness and ownership in Luther Burbank Park, making the
          transition from a County Park that just happens to be located on Mercer Island to a park that all
          Mercer Island residents can feel truly proud of.

The result of the community visioning process was the development of a set of 15 community design
guidelines that were then used to set the stage for the longer-term master plan process:

    1)      Preserve the existing serenity of the park.
    2)      Protect and enhance the shoreline experience.
    3)      Protect and enhance wetland areas.
    4)      Preserve existing historical and cultural resources.
    5)      Rehabilitate the swimming beach.
    6)      Expand court usage.
    7)      Maintain and improve the existing meadow.
    8)      Provide for an off-leash dog area.
    9)      Revitalize the dock area.
    10)     Expand and enhance activities for children.
    11)     Consider new picnic facilities.
    12)     Explore opportunities for new seasonal food vendors and special events.
    13)     Create a greater ease of connection with Upper Luther Burbank.
    14)     Create a greater ease of connection with the new community center.

These guidelines were developed over a three month period from November 2004 through January
2005 and included three public workshops as well as numerous written and emailed responses. The
City Council approved the Guidelines on February 7, 2005.

Park Master Planning
The City Council then initiated a Master Planning Process for Luther Burbank Park on September 6,
2005. Guided by the results of the Community Visioning Process, three discrete planning phases were
developed: 1) Information Gathering/Concept Design Development; 2) Review of Concept Designs; and,
3) Review of Preferred Concept Design.



                                                                  _________________________________
C-78                                                                 City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies
A public involvement program was developed to provide for multiple and varied opportunities for public
involvement and input. The eight-month long master planning process included 15 opportunities for
public involvement including one in-park public workshop, seven small group work sessions, two town
hall-style meetings and five City Council meetings (four of which had public hearings). Throughout the
entire process, citizens were also encouraged to submit their comments by mail, email or fax.

The first phase, an inventory and analysis, assessed physical conditions of the site, as well as existing and
future program opportunities. A kick-off to the master planning process occurred with a public
workshop in the park where participants were asked to provide input on how the community design
guidelines might be implemented. Information gathering included first hand observation, input from Park
representatives, and site review with shoreline and wetlands ecologists. Included in this phase were a
wetland reconnaissance, shoreline assessment, and permitting review. A series of five small group
sessions were conducted regarding the Off-Leash Dog area; the Dock Area/Small Boat Facility; Shoreline
Restoration; Connections to Upper Luther Burbank and Children’s Opportunities in the Park. Based on
this inventory and analysis, three preliminary master plan concepts were developed for the site and
presented at a City Council meeting and community Town Hall for review and comment. Two
additional meetings with Mercer Island teens were conducted to seek greater involvement from youth.

In the next phase, these plans were consolidated into a preferred Master Plan concept based on
feedback received during the initial presentation. This preferred plan was again presented in a second
Town Hall meeting and presentation to the City Council. The design was honed again to reflect these
comments, resulting in a final master plan design. This master plan report includes plan graphics,
description of the design elements and cost allowances for its implementation.

The master plan design has been completed to an adequate level of detail to identify proposed
improvements and assign costs and priorities. More specific design remains as elements of the master
plan are pursued, during which more cost details can be generated.

Master Plan Implementation- Preliminary Projects and Programs
A more significant and high priority project identified in the Master Plan was the restoration of the
shoreline. As part of its Six Year Parks Capital Improvement Program, the City completed a $1.3
million shoreline and off-leash area renovation project in December 2009. The Shoreline project added
woody debris and spawning gravel along the shoreline for bank stabilization, removed non-native plants,
planted native trees and shrubs, and installed a split rail fence. New designated shoreline access points
have been created.

Improvements to the Off Leash Area were also conducted that included non-native plant and vegetation
removal, surface grading, new under drainage, added sand surfacing, wetland enhancements, landscaping
improvements, new gravel and asphalt pathways, new fencing and gates, and added park furniture.

In addition to the shoreline and off leash area improvements, the Boiler Building and dock facility was
transformed into a boating, sailing and kayaking instructional area focused on orienting youth, adults and
families to water based recreation activities. New windows and doors were installed on the Boiler
Building, in addition to new coats of interior paint, and the installation of new colorful interior banners.
The restrooms in the dock area, previously shuttered, were re-opened in Spring 2010. A low elevation
floating dock was constructed to support the water based recreation programming.




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City of Mercer Island 2011-2012 Budget                                                                  C-79
Budget Policies
Funding Ongoing Operations and Maintenance
Mercer Island City Council approved ordinances which placed two parks measures on the November 4,
2008 ballot. Mercer Island voters approved a $900,000 per year park operations and maintenance levy,
but rejected a $12.0 million capital levy to fund park capital improvements such as continued Luther
Burbank shoreline restoration and ballfield improvements.

The failed Parks Bond included funding for shoreline restoration and other improvements at Luther
Burbank Park, ballfield improvements, trail development, development of a small dog off-leash area,
swim beach improvements, and Mary Wayte Pool improvements.

The Parks Operations & Maintenance Levy for $900,000 per year includes funding for open space and
forest restoration and school related park and recreation activities. The 15-year Parks Operations &
Maintenance Levy replaces the previous 6-year Luther Burbank Park levy approved by voters in
November 2003.

Budget Polices for 2011-2012
•   For 2011-2012, Luther Burbank Park maintenance and operations will be funded by the 2008 Parks
    M&O levy lid lift. Of the total levy amount in 2011 and 2012, $366,287 and $373,631 respectively is
    dedicated to Luther Burbank Park maintenance and operations. Minor capital projects at Luther
    Burbank Park are also funded at $110,000 per year.
•   Pursue approved Capital Improvement Plan projects for Luther Burbank Park.
•   Continue routine, preventative, special response and capital maintenance activities to ensure
    grounds, buildings and infrastructure will remain serviceable, functional, and safe for park users and
    neighbors.
•   Pursue vegetation management activities, including wetlands restoration, invasive plant species
    removal, and re-vegetation and re-planting activities.
•   Prevent and mitigate hazards to public safety and security through active and passive measures such
    as improved lighting, routine inspections, police vehicle, bike, boat and foot patrols and park checks.
•   Park grounds will remain available to individual and group users at a scope and scale similar to that
    under County management in 2000-2002.
•   Insure the public’s life safety by providing beach lifeguards through the summer swim season.
•   Continue to support boating, sailing (the “handkerchief fleet”) and kayaking programs and other
    aquatic recreation activities at Luther Burbank Park.

2011-2012 Budget Impact
                                                     2009          2010           2011          2012
      Operations and Maintenance                    Actual       Forecast        Budget        Budget
Revenues
Property Tax levy                                  $370,000       $370,000      $370,000       $378,820
            Total Revenue                          $370,000      $370,000       $370,000      $378,820
Expenditures
M&O Luther Burbank                                 $398,632       $374,720      $366,287       $373,631
             Total Expenditures                    $398,632      $374,720       $366,287      $373,631




                                                                 _________________________________
C-80                                                                City of Mercer Island 2011-2012 Budget
                                                                               Budget Policies

Parks and Recreation Financing
Department Financing
The Park and Recreation Department’s operations have historically been funded from a variety of
sources, including user, program and special event fees, grants and sponsorships, rental and lease fees, as
well as a number of independent Funds including General, Beautification, I-90 Landscape Maintenance,
and the Luther Burbank Park Levy. Financing of administration and recreation services has relied on a
balance between user fees/charges and contributions from the General Fund (46%-50% cost recovery),
while park maintenance services have relied on contributions from all of these Funds. This financing
strategy continues to guide the Department’s budget development.

With an anticipated Council adoption of a revised Parks and Recreation Plan in late 2006, the
Department will become eligible for State and recreation matching grants to assist in the acquisition and
development of parks and facilities. When obtained, such grants will relieve the Capital Improvement
Program and leverage Real Estate Excise Tax (REET) funds to a greater degree. As the City celebrates
significant milestones in opening the new Community Center at Mercer View, new open space and trail
improvements and adoption of a Luther Burbank Park Master Plan, attention shifts to maintaining and
preserving these assets in an economically feasible manner that can be financially and operationally
sustained over time. Staff also continues to be mindful of changing community trends, with calls for
more programs and services to meet preschool and senior needs, expanded beach/aquatic
opportunities, acquisition and preservation of open spaces as well as more access and use of the
community’s ballfields and athletic venues.

As part of the Capital Improvement Program (CIP), staff has identified and budgeted project
management costs in each Parks project. Administrative and operations staff will be relied on to manage
park planning, improvement and construction projects.

Ballfield Use and Scheduling
A policy review committee, comprised of Ballfield User Group members and Parks staff, analyzed issues
such as residency, field maintenance services, and seasons of play. This process resulted in a greater
understanding between users and a field use policy that reflects the current culture of Mercer Island
sports. Implementation of policy revisions began in 2008, with additional elements implemented in 2009.
A proposed field rental fee structure will be implemented in 2010 for all ballfield user groups to help
maintain and replace field turf.

The renovation of the South Mercer All Weather Field to an artificial field turf surface with upgraded
lighting in 2007 has resulted in an increase in use and user fees at that facility. In 2010, the South
Mercer Playfields were renovated to artificial turf infields that will result in more play without the
possibilities of rain-out cancellations. Fees for the newly renovated artificial turf fields at South Mercer
are set and monitored in order to recover the cost of field replacement at the end of its useful life
(estimated at 12 years).

Community Center Operations
The Community Center at Mercer View has been embraced by the community and customers and has
also established itself as the center of indoor recreational and meeting activity on Mercer Island. The
primary function of the center is still to provide a wide range of options for the community. These
options include unstructured drop-in opportunities (open gym, drop-in sports, games, library services,


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City of Mercer Island 2011-2012 Budget                                                                   C-81
Budget Policies
fitness room/equipment, internet computer stations, game room, and lounges), meeting room availability
to rent for special events and business meetings (business and community meetings, weddings,
receptions, etc.), structured recreation programs and services (preschool, youth, adult, senior, arts,
fitness, enrichment, social services, sports, etc.) and a host-site to numerous community events (Rotary
Run, MI garage sale, Leap for Green, etc.).

During the original planning process for the new CCMV, a commitment was made to operate the new
expanded facility with no more General Fund tax support than what was realized in the past—namely,
$150,000 per year adjusted annually for inflation as measured by the CPI-W for the Seattle metro area.
Since then, changes to the authorized subsidy level have been driven by revenue policy decisions by the
Council (e.g. establishing a reduced “Community Service” rental fee), by the expansion of operating
hours, and by the need to enhance staffing to address the higher than expected facility usage. During
the 2009-2010 Budget process, the authorized General Fund subsidy level was recalculated based on a
Council approved level of service, resulting in an approved subsidy of $308,000 in 2009 and $321,600 in
2010. Adjusting for inflation, the approved subsidy for 2011 and 2012 are $324,000 and $329,000
respectively.

Since January 1, 2008, the CCMV has generated significant annual revenue increases with 2010 year-end
projections showing a 3-year increase of 65% (or $205,000). The 2011 and 2012 revenues are
projected to be $540,194 and $574,694 respectively. It should be noted that due to the significant
revenue growth (relative to budgeted amounts) the CCMV has consistently operated below the
authorized General Fund subsidy level in 2007, 2008, and 2009, with 2010 projections on target to be
below the authorized level as well. While the CCMV’s overall expenditure line is projected to increase
for the 2011-2012 biennium, the revenue projections for the 2011-2012 biennium are projected to also
increase at a rate to cover these increases, thereby allowing the CCMV to once again operate within the
authorized General Fund Subsidy level for the 2011-2012 biennium.

With the completion of building construction in December 2005 and five (5) years of operations, staff
now has a more accurate assessment of the usage and rental patterns for the Community Center at
Mercer View (CCMV). The customer service, administrative and custodial staffing requirements of the
Community Center to support 7 day/week operations at a level the community expects is significantly
greater than originally anticipated. Staff has proposed a level of operational support that is consistent
with our understanding of the community’s expectations for cost, access, convenience, cleanliness and
service while complying with City business and policy requirements. Accordingly, to properly clean and
maintain the CCMV within the current operating hours and at the current level of customer usage,
custodial budgets need to be increased by $32,100 in 2011 and $34,300 in 2012. These expenditures
will be fully offset by increased revenues, thereby having no impact on the authorized subsidy level.
Also, as the CCMV enters its 6th year of operation, a sinking fund needs to be established to fund the
replacement of CCMV furnishings and equipment. To this end, an annual contribution of $31,000 will
be made from the CCMV’s operating budget in the General Fund to the Technology & Equipment Fund
in 2011 and 2012. Again, these expenditures will be fully offset by increased revenues.

Department Fees and Cost Recovery
The Parks and Recreation Department collects a variety of fees and charges for its services to reduce its
reliance on subsidies from the General Fund. A cost of service and fee analysis was conducted in 2007
to determine the current cost recovery of its recreation programs, ballfield and picnic rentals, special
event permit fees, and community center operations and to identify potential fee adjustments to reflect
its cost recovery goals and policies. The full recreation, administration, forestry, ballfield and community
center user fee cost recovery is 50%, a level consistent over the past 5 biennia.


                                                                  _________________________________
C-82                                                                 City of Mercer Island 2011-2012 Budget
                                                                               Budget Policies
In addition, a comparison of select recreation fees and community center rates was conducted to learn
the current fees charged for an equal level of service. The comparison helps to reflect the “market” for
these fees and assists in assessing the reasonableness of the current Mercer Island fees. The comparison
also serves as a benchmark for how cost effectively the city provides its services. The cities of Issaquah,
Kirkland, Bellevue and Renton were analyzed and the findings include:

    1) Average fees from the four cities tend to be lower than the charges set by Mercer Island.
    2) Kirkland and Bellevue fees are most comparable to those charged by Mercer Island.

The Fee Study confirmed the Department has been recovering costs consistent with past management
and budget policies, namely that cost recovery levels for:

    •   Adults shall be greater than youth and seniors;
    •   Youth programs shall be greater than senior programs; and
    •   Adult sports leagues shall be greater than youth sports leagues.

Increases in labor, utilities and re-allocation of information technology costs have created significant
challenges in controlling Department expenditure growth. In addition, the customer service,
administrative and custodial staffing requirements of the Community Center to support 7 day/week
operations at a level the community expects is significantly greater than originally anticipated. Staff has
proposed a level of operational support that is consistent with our understanding of the community’s
expectations for cost, access, convenience, cleanliness and service while complying with City business
and policy requirements.

Cost recovery continues to be a top priority, and as a result of the recently completed fee study, fees
and charges are budgeted to rise in 2011. Selected highlights of fee increases and operational
adjustments that are anticipated to generate additional revenues include:

    •   CCMV: In 2010, staff has continued to adjust rental rates and fees to attain consistency and
        parity among all rental rates, adjusted room usage scheduling to create more efficient usage of
        existing rental inventory, and withheld deposits when rentals exceed contracted times and/or
        create additional hard costs for the CCMV operating budget. Also, a successful focus has been
        placed on marketing the CCMV to minimize the net subsidy needed as evidenced by current
        revenue trends. Another rate analysis will be performed internally to ensure current rates are
        at or near fair market value and are consistently applied within each category. Several rate
        adjustments are anticipated in the new biennium.
    •   Facility scheduling: A $4 surcharge will be applied to all facility and ballfield bookings to
        recover more of the costs associated with scheduling District and City facilities, including the
        Community Center at Mercer View.
    •   Ballfields: A proposal to introduce field rental fees for Ballfield User Group members that will
        help maintain ballfields.
    •   I-90 Boat Launch: A proposal to increase parking fees from $9 to $11.
    •   Special Event Permits: Adjusted fee allocation and structure for non-City sponsored special
        events in parks (picnics, weddings, rally’s, demonstrations, athletic competitions, etc.), increased
        extra charges for after hours staffing, and streamlined minimum rental periods.

These and other collective efforts will assist the Department in more efficiently performing core
functions and recover a greater percentage of costs.



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City of Mercer Island 2011-2012 Budget                                                                  C-83
Budget Policies
Budget Policies for 2011-2012
Addressing Council initiatives, enhancing revenues and meeting public service demands will be
accomplished through the following:

•   Continue to provide basic service levels for existing programs and develop appropriate charges and
    cost recovery goals for enhanced levels of service while considering community wide vs. special
    benefit, effects of pricing on service demand and feasibility of collection and recovery.
•   Cost recovery levels for adults shall be greater than youth and seniors, and youth programs shall
    recover more than senior programs and Adult sports leagues shall recover a higher level of costs
    than youth sports leagues.
•   Implement a non-resident fee for recreation classes and programs which will be higher than the
    resident fee.
•   Continue to refine the existing rental fee pricing for residents and non-residents, island based
    community groups, off-island community groups, and at the Community Center at Mercer View.
•   Pursue greater parity regarding cost recovery within each rentals fee categories.
•   Meet Community Center facility rental revenue projections of $540,194 in 2011 and $574,694 in
    2012.
•   Operate the CCMV within the General Fund subsidy of $324,000 and $329,000 in 2011 and 2012
    respectively.
•   Maintain consistent Community Center staff coverage (2 customer service staff per shift) for
    established operating hours of 106 per week, as well as adequate back office staffing levels to
    efficiently and effectively manage the CCMV’s overall business and operational needs.

2011-2012 Budget Impact
                                                2009           2010           2011               2012
Expenditures                                   Actual        Forecast        Budget             Budget
Parks Administration, Recreation & Special
                                              $2,407,078      $2,680,101     $2,471,843     $2,503,873
Programs, CCMV, Arts and Special Events

                                                2009           2010           2011           2012
Revenues                                       Actual        Forecast        Budget         Budget
User Fees                                     $1,131,816     $1,085,315      $1,198,167     $1,226,951
User Fee Cost Recovery                             47.0%          40.5%           48.5%           49.0%




                                                               _________________________________
C-84                                                              City of Mercer Island 2011-2012 Budget
                                                                                 Budget Policies

Trees and Urban Forest Lands
Comprehensive Planning
“Open space (trees and green spaces) preservation continues to be a primary activity for attaining the
community's quality-of-life vision. The search for effective new tools and standards to protect and enhance the
environment will be an ongoing focus of City leaders. The community, through its ongoing consideration of public
and private projects, will continue to seek ways of enhancing the Island's quality of life through open space
preservation, pedestrian trails and well-designed and functional public and semi-public facilities.”
                                                              Excerpts from the City Council Vision Statement.

As a mature community, Mercer Island has made substantial investments in public infrastructure over
the last 30 years. Given proposed service levels and regulatory controls, additional investments may be
required for open space acquisition, vegetation management and trail development.

Mercer Island has approximately 470 acres of City and State-owned parks and open space lands. This
acreage comprises about 12% of the Island. Eight City parks are equal to or larger than 10 acres. Two
parks exceed 70 acres (Luther Burbank Park and Pioneer Park). On a per capita basis, Islanders enjoy
21 acres of publicly owned park and open space land per 1,000 population. This compares with
neighboring jurisdictions as follows: Bellevue - 20.6 acres/1,000 pop.; Kent - 16.8 acres/1,000 pop.;
Redmond, - 22 acres/1,000 pop.; Kirkland - 11.1 acres/1,000 pop. In addition to City park lands,
approximately two-thirds of the Mercer Island School District grounds are available to Island residents.
And, an additional 40 acres of private open space tracts are available for residents of many subdivisions
on the Island. The Island’s public right of way (ROW) supports a large number of trails and substantial
amount of tree canopy. Nearly 20% of the Island is ROW.

The 2007 Mercer Island Parks and Recreation Plan identifies several objectives that pertain to trees and
open space. These objectives are:

Goal 2: Provide a system of attractive, safe, and functional parks, and park facilities
        (partial list).
          b) Develop park planning tools and implement long term park/open space management and
             park master plans;
          c) Retain publicly owned parks and open spaces in perpetuity;
          f) Encourage private sector participation in preserving open space and providing facilities for
             recreational and community enjoyment;
          i) Pursue improvements to developed and undeveloped street ends where appropriate and
             where public demand supports new access.

Goal 3: Preserve natural and developed open space environments and trails for the
        benefit of all existing and future generations.
          a) Promptly investigate open space acquisition opportunities as they become available;
          b) Pursue fee simple purchase, transfer of development rights, conservation easements or
             other preservation and land use mechanisms that would:
             a. enable acquisition of properties where development would create severe hazards to
                 public health/safety;
             b. provide a buffer between incompatible land uses
             c. protect ravines and watercourse corridors
             d. preserve lands adjacent to or visually accessible from arterials
             e. expand existing parks and open spaces or add to an activity node

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City of Mercer Island 2011-2012 Budget                                                                     D-85
Budget Policies
             f. parcel size should be one acre or larger
          c) Open space land should offer identifiable benefits to the community that extend beyond
             adjacent private properties;
          d) Property should not present conspicuous liability risk unless appropriate mitigation can be
             pursued;
          e) Provide trails that are safe and attractive for pedestrians, bicycles and equestrians and
             a. complete and expand the pedestrian, equestrian and bicycle circulation system by
                 acquiring rights-of-way as necessary and appropriate for trails;
             b. Increase the visibility and accessibility of the bicycle, pedestrian and equestrian
                 circulation system;
             c. Develop trail systems within existing open space properties to provide maintenance
                 and recreational access;
             d. enable continuous linkages between employment, transit, schools, parks,
                 neighborhoods, churches/synagogues and community facilities;

Goal 5: Secure maintenance funding at a level necessary to sustain and enhance parks,
        trails and open space.
          a) Develop and update long term plans for maintaining parks, trails and open space;
          b) Seek City funding appropriations, including Capital Improvement funds, external grants
             and gifts to support the City’s adopted Level of Service Standards for parks and to
             implement approved park and forest management plans;

Goal 7: Pursue state and federal grant funding for parks and open space improvements.
          a) Seek operations, maintenance and capital improvement grant funds to enhance parks,
             trails and open space areas.

Background
The citizens of Mercer Island have long regarded trees and the wooded setting of the Island an
important aspect of our community. The City has encouraged preservation and protection of steep
slopes, watercourses, ravines and other environmentally sensitive areas on private and public lands.
These areas help define the sylvan character of the Island.

For open spaces (defined here as all publicly owned open space, including street rights-of-way) to remain
healthy and viable, programs must be developed and funded that ensure trees and other vegetation are
preserved, invasive plants removed, re-vegetation of plants encouraged and when necessary, trees
removed and replaced. In 2001-2002, the City began an active approach toward open space
management. In Pioneer Park, a coordinated capital program of forest management and user
improvements was undertaken. In November 2003, the City Council adopted the Pioneer Park Forest
Management Plan, detailing how the forest can best be managed over time to reach identifiable goals and
outcomes. In October 2004, the City Council adopted the Open Space Vegetation Plan to address the
issues of invasive plants and canopy condition on other public open space properties. This plan has been
implemented as a capital program in 2005 -2006 biennial budgets and has continued through the current,
2009-2010 biennial budget.

Conflicts have arisen for decades over tree cutting, property development and preservation of trees and
vegetation. As economic forces push the Island toward final build out and redevelopment of smaller
homes, the pressure is on the City to effectively define policies and procedures to manage all aspects of
natural resources on the Island. A new tree ordinance adopted by the City Council in early 2002



                                                                _________________________________
D-86                                                               City of Mercer Island 2011-2012 Budget
                                                                             Budget Policies
provides clear direction for the preservation and management of trees on both private and public
property in the future.

Budget Polices for 2011-2012
•     Continue to implement Option 2 in the Open Space Vegetation Plan which provides Level B service
      (maintain existing functional value) for vegetation management on 15 open space sites. This would
      also continue funding implementation of projects contained in the Pioneer Park Forest Management
      Plan.
•     Continue to fund a half-time Arborist position for 2009–2010 to support Development Services land
      use and regulatory functions. Also continue the half-time Parks Natural Resources Coordinator and
      Parks Natural Resources Specialist positions that provides staff support to the Open Space
      Conservancy Trust and supports tree and urban forest management in public open spaces and parks.
      Fund arborist services and related work for trees in the public right of way through the Maintenance
      Department budget.
•     Continue tree care and management in rights of way, parks, open spaces and the Town Center at
      2007-2008 levels. Fund contractual services for removal of identified tree liabilities in parks and
      other open spaces.
•     Maintain heightened park maintenance service levels of master planned capital improvements to
      Pioneer Park, including trail grooming, brushing, invasive plant removal, re-vegetation, vegetation
      control, and park furniture maintenance.
•     Continue tree care and vegetation improvement projects in Luther Burbank Park consistent with
      ongoing levy and CIP funding support.
•     Expand availability of current public education programs (Basin 29 workshops, WSU training
      opportunities, EarthCorps/Mountains to Sound Greenway volunteer service learning) to enable
      property owners to implement best environmental practices on private open space properties.
•     Seek grant funding opportunities to further refine the Urban Tree Canopy Assessment that was
      completed in early 2010. This Assessment is the first phase of what is envisioned to be a long-term
      effort.

2011-2012 Budget Impact
                                                           2009         2010       2011        2012
                Expenditures ($1,000’s)                   Actual      Forecast    Budget      Budget
    General Fund
      Arborist – plan review and permitting                    $ 47        $ 51         $50         $51
      Parks Natural Resources Coordinator                        44          45          48          50
             Total General Fund                                $91         $96          $98        $101
      Right-of-Way tree program                                  98         126          80          80
             Total Street Fund                                 $98        $126          $80         $80
    Capital Improvement Fund
      Parks Open Space and Vegetation Management               322         553         422          378
             Total Capital Improvement Fund                   $322        $553        $422         $378
    Total Expenditures                                        $511        $775        $600         $559




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City of Mercer Island 2011-2012 Budget                                                               D-87
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                  _________________________________
D-88                 City of Mercer Island 2011-2012 Budget
BUDGET POLICES
Public Safety
                 This section includes
                 budget polices on the
                 following:
                   • Criminal Justice Fund
                   • Fire Apparatus
                      Replacement
                   • Fire Prevention
                   • Jail Services
                   • Municipal Court
                   • Police and Fire
                      Dispatching
                   • Public Safety
                      Education /
                      Emergency
                      Management
Budget Policies




                  _________________________________
C-90                 City of Mercer Island 2011-2012 Budget
                                                                            Budget Policies

Criminal Justice Fund
Background
The Washington State Legislature authorized criminal justice funds to improve the criminal justice
system. In 1990, the City created the Criminal Justice fund to account for this funding allocated to the
Police Department. These funds must be used for criminal justice purposes only and cannot supplant
General Fund expenditures.

The Criminal Justice Fund was originally funded from two different sources. The first was from the
State’s Motor Vehicle Excise Tax (MVET). A total of 2% of the market value of a vehicle was collected
by the state. Of the total collected, the cities received 8.83%, allocated on a per capita basis. However,
with the passage of Initiative 695 in 1999, the Criminal Justice fund no longer receives monies from this
source. The Criminal Justice Fund now relies mainly on the second source of funding which comes from
a percentage of the City’s sales tax (1/10th of 1%). This sales tax revenue was approved by the voters in
King County in 1992. The fund also receives an annual reimbursement from the Mercer Island School
District to help fund the School Resource Officer.

In recent years Mercer Island has received approximately $500,000 per year from this sales tax source.
However, given the current economic recession, sales tax revenues have been lower than anticipated.
This has resulted in a reduction of approximately $100,000 in revenue for the Criminal Justice fund.

The fund continues to sustain some very important programs within the Police Department. The fund
will continue to support the “Hire Ahead” program, which has historically funded two officers (we will
freeze one of these positions for this biennium). It will also support the School Resource Officer who
works very closely with the School District, Youth and Family Services, and the Juvenile Court system.
The Police Support Officer is also supported by this fund, and this program addresses parking
enforcement, leash law enforcement /education, and prisoner transportation. The fund also sustains our
Department’s Bike Patrol Team, Special Operations Team, our training program, computer
replacements, and capital equipment purchases.

Budget Policies for 2011-2012
•   Continually monitor the expenditures and revenues in this fund to help assure that the fund
    maintains a positive balance.
•   Temporarily freeze one “Hire Ahead” officer. This program typically provides two officers for
    Patrol, and assists in mitigating some of the staffing shortages and overtime.
•   Charge police equipment to a restricted funding source within the Criminal Justice fund.
•   Continue to support the School Resource Officer program with additional funding from the Mercer
    Island School District.
•   Continue to support the Police Support Officer program.
•   Continue to support the regional radio system costs which cannot be charged to the levy, such as
    radio maintenance and replacement costs.
•   Continue to support funding for enhanced police training and equipment.




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City of Mercer Island 2011-2012 Budget                                                               C-91
Budget Policies
2011-2012 Budget Impact
                                            2009            2010               2011                2012
           Description                      Actual         Forecast           Budget              Budget
RESOURCES
Budgeted
  Beginning Fund Balance                $            - $     269,187      $     63,562        $     63,916
  Washington State Sales Tax                 448,547         425,000           438,000             456,000
  State Shared Revenues                       31,266          28,160            27,750              27,750
  Intergovernmental - School Dist             18,054          18,000            18,000              18,000
  Grants & Donations                         215,282           9,999                      -                   -
  Federal Equitable Share of Seizures         13,985                  -                   -                   -
   Total Budgeted Resources             $ 727,134      $ 750,346          $ 547,312           $ 565,666
Not Budgeted
  Beginning Fund Balance (Reserved)          756,202         548,270           484,708             420,792
TOTAL RESOURCES                         $ 1,483,336    $ 1,298,616        $ 1,032,020         $ 986,458
USES
Budgeted
  Administration                        $     22,731   $       9,999      $           -       $           -
  Police Support Officer                      83,691          85,478            90,488              92,607
  Computer Replacements                       85,717          85,717           109,854             109,854
  Regional Radio & Replacements               52,862          38,587            32,729              33,766
  Special Operations/Bike Patrol              14,465          16,400            16,400              16,400
  Hire Ahead Positions                        54,467         188,368            91,313              97,773
  School Resource Officer                    108,475         120,396           107,336             115,866
  Police Training                             48,252          67,680            60,192              60,400
  Domestic Violence                           10,000          10,000            10,000              10,000
  Police Equipment                            29,000          29,000            29,000              29,000
  Interfund Transfer                         156,220          98,721                      -               -
  Total Budgeted Expenditures           $ 665,879      $ 750,346          $ 547,312           $ 565,666
Not Budgeted
  Ending Fund Balance                        817,457         548,270           484,708             420,792
TOTAL USES                              $ 1,483,336    $ 1,298,616        $ 1,032,020         $ 986,458




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C-92                                                                         City of Mercer Island 2011-2012 Budget
                                                                               Budget Policies

Fire Apparatus Replacement
Background
In 2007, the City Council authorized the implementation of a fire apparatus replacement plan, which
included some upfront capital replacement funding and an ongoing 1.65% dedicated property tax levy
(1.0% optional plus 0.65% banked capacity), supplemented by interest earnings as needed to cover the
difference between the required annual apparatus sinking fund charge and the property tax levy.

In 2007-2008, Phase 1 of the apparatus replacement program was completed. This included the sale of
the Fire Department’s Aerial Ladder Truck, the acquisition of two new Pierce Velocity Pumpers, the
acquisition of one new Pierce Mini Pumper, the sale of two of the existing Emergency One Pumpers, and
the purchase of one Ford Pick-up truck.

In 2009-2010, Phase 2 of the apparatus replacement program will be completed. This includes the
acquisition of one used Maxi Pumper, the sale of the remaining two Emergency One pumpers, and
entering into an interlocal agreement with Eastside Fire & Rescue to share a fourth Maxi Pumper.
Regarding the latter item, the Fire Department has been actively engaged with Eastside Fire & Rescue in
the development of a shared reserve apparatus program. This program is based on the apparatus
rotation cycle adopted by Council. The objective of the shared apparatus program is to reduce Mercer
Island Fire Department’s fleet of four maxi engines to three. This agreement should be in place before
the end of 2010. The Fire Department will also explore the opportunity to share other similar
apparatus such as command units and aid units with the goal of reducing our self reliance on a reserve
pool.

Budget Policies for 2011- 2012
•   No apparatus replacements are scheduled in 2011-2012.
•   Apparatus design committees will conduct analysis and design processes in 2012 for the scheduled
    replacement of a maxi engine and a rescue vehicle in 2013 (i.e. place manufacturing order in 2012
    and take delivery in 2013).
•   Continue apparatus fleet analysis, looking for opportunities to economize fleet size, such as forming
    partnerships with other fire agencies to share reserve pumpers.
•   Continue to monitor technology development relative to sustainability.

2011-2012 Budget Impact
                                                     2009          2010          2011          2012
                   Description                      Actual       Forecast       Budget        Budget
Revenues:
  Property Tax                                       $148,446       $148,446      $148,446      $149,930
  Interest Earnings                                        46              0             0             0
  Proceeds From Sale of Apparatus                       5,580              0             0             0
Total Revenues                                      $154,072       $148,446      $148,446      $149,930
Expenditures:
  Capital Purchase                                   $150,555             $0            $0            $0
  Capital Lease (Principal & Interest)               $165,745        165,745       165,745       165,745
Total Expenditures                                  $316,300       $165,745      $165,745      $165,745



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City of Mercer Island 2011-2012 Budget                                                               C-93
Budget Policies




                  _________________________________
C-94                 City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies

Fire Prevention & Code Enforcement
Background
The Mercer Island Fire Department has the legal responsibility to provide fire, medical, prevention, and
educational services to the Mercer Island community, as defined by the Mercer Island City Council
through City Ordinance. Historically, Mercer Island has delivered Fire Prevention, Education & Code
Enforcement services through the Fire Department and specifically the Fire Marshal position.
Since 1962 Mercer Island’s Fire Marshal has been a 1.0 FTE. However, after the retirement of Fire
Marshal Ed McKinney in 1995, the duties and responsibilities of this position were carried out by part-
time employees. The position was subsequently reaffirmed as an FTE, though the position was modified
to be a contracted position instead of a permanent position. This has been the model that has been in
place since 1997.

At the direction of the City Manager and as part of the budget development process, an assessment of
the duties, responsibilities, and authorities of the Fire Marshal position was completed. The fundamental
question that was asked was: could these responsibilities and duties be delegated to other existing
positions within the City, thereby helping to reduce the City’s financial liability? The assessment
concluded that they could not, because there was no additional capacity in Development Services.
What was recommended and incorporated into the 2011-2012 Preliminary Budget was a 0.25 FTE
reduction in contracted hours (reducing the position to a 0.75 FTE).

During its 2011-2012 Budget deliberations, the Council directed staff to make additional staffing
reductions beyond what had been proposed in the Preliminary Budget. As a result, the City Manager
recommended eliminating the Fire Marshal position, with the plan review responsibilities being shifted to
Development Services staff. The Council approved this staffing reduction.

Budget Policies for 2011-2012
•   Eliminate contract Fire Marshal position (1.0 FTE) beginning in 2011.
•   Shift Fire Code plan review responsibilities to the Building Code plan reviewers in Development
    Services beginning in 2011. Fire Department staff will assist Development Services with operational-
    related issues.
•   Contract out specialized Fire Code technical issues.
•   If development activity increases significantly beyond what is forecast for 2011-2012, staff will return
    to Council asking that the position be re-instated, with the funding source being development-
    related revenues.




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City of Mercer Island 2011-2012 Budget                                                                 C-95
Budget Policies
2011-2012 Budget Impact
                                   2009             2010             2011            2012
                Description       Actual           Estimate         Budget          Budget
Revenues
  Permit Fees                 $      28,389    $       34,000   $      57,050   $      57,050
            Total Revenue     $     28,389     $      34,000    $     57,050    $     57,050
Expenditures
  Salary and Benefits         $     112,799    $      115,317   $      13,576   $      15,500
  Contract Services                        -               -           18,000          19,000
  Other operating costs               8,652             5,900           2,350           4,050
          Total Expenditure   $    121,451     $     121,217    $     33,926    $     38,550




                                                        _________________________________
C-96                                                       City of Mercer Island 2011-2012 Budget
                                                                                Budget Policies

Jail Services
Background
Under state law, the City of Mercer Island is responsible for paying all costs associated with
incarcerating offenders for violations of misdemeanor crimes. The City currently has three separate
contracts for jail services which include the Yakima County jail, the Issaquah city jail, and the King
County jail. The contract with the Yakima County jail is for four beds and is set to expire at the end of
2010 (we do not plan on renewing this contract). The contract with the Issaquah city jail is for two
beds, which we will reduce to 1 bed beginning in 2011. We use the Issaquah jail for the majority of our
misdemeanor bookings. The contract with King County does not include a bed commitment, and is for
all felony bookings and for those misdemeanants who have significant medical issues that preclude them
from being accepted at the Issaquah City Jail. The state pays for all felony bookings, while we pay for
our misdemeanor bookings.

Budget Policies for 2011-2012
During the 2011-2012 biennium, the City will take the following actions to best manage the City's jail
costs and jail populations:

•    We will not renew our contract with Yakima County for jail services.
•    We will reduce our contract with Issaquah city jail from two beds to one.
•    We will no longer book into jail many of our low level, low risk misdemeanant offenders.
•    The City will continue to explore options for alternatives to incarceration for eligible offenders.
     We currently contract with the Renton Electronic Home Detention Program.

2011-2012 Budget Impact
                                                         2009          2010         2011          2012
                     Description
                                                        Actual       Forecast      Budget        Budget
    Revenues:
      General Fund                                        $155,849     $174,000       $54,985      $57,695
    Total Revenues                                       $155,849     $174,000       $54,985       $57,695
    Expenditures:
      Jail Costs                                          $155,849     $174,000       $54,985      $57,695
    Total Expenditures                                 $155,849       $174,000       $54,985       $57,695




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City of Mercer Island 2011-2012 Budget                                                                     C-97
Budget Policies




                  _________________________________
C-98                 City of Mercer Island 2011-2012 Budget
                                                                                                 Budget Policies

Municipal Court
Pursuant to state law, Mercer Island is required to provide court services by (1) forming its own
municipal court; (2) forming a municipal department within the King County court system; or (3)
contracting with King County for delivery of court services. After considering a proposed new King
County court contract, the City Council directed staff to proceed with formation of a Mercer Island
Municipal Court to be operational on January 1, 2005. The City Council also approved an interlocal
agreement with Newcastle for the delivery of court services commencing January 1, 2005.

It is important to note that the court’s responsibility does not end with the caseload filed in that
calendar year. In most cases, the court has jurisdiction over criminal cases for two years. For DUI
matters, jurisdiction continues for five years. The Court continues to manage court cases, hold court
hearings, and monitor cases for compliance with conditions until the end of the jurisdictional period.

In 2008, the Court’s caseload has increased significantly to the point where staff was unable to take
adequate breaks during the work day, to attend needed training, and to stay current in submitting unpaid
tickets and probation fees to collections. This conclusion was independently confirmed by Prothman
and Company, which compared Mercer Island to three other jurisdictions (Bothell, Des Moines, and
Issaquah) in terms of 2007 new case filings and authorized FTE’s, as noted in the table below.

                      Traffic      Non-Traffic                            Traffic    Non-Traffic      Total                   Cases Per
       City                                        Parking    DUI                                                   FTE’s
                    Infraction      Infraction                           Criminal     Criminal        Cases                     FTE

 Mercer Island            2,592            166          709         48         185              82       3,782

 Newcastle                  448              0           10          8          81              26        573

   Total                  3,040            166          719      56            266           108        4,355          2.0       2,177.5

 Bothell                  3,227             41          300      145           657           418         4,788         3.5           1,368.0

 Des Moines               3,293            166          377         44         447           425         4,752         4.0           1,188.0

 Issaquah                 2,730              7          414         89         358           374         3,972         4.5            882.7


As a result, the Council approved the addition of a temporary, full-time Court Clerk in September 2008,
which was converted to a regular, full-time position beginning in 2009. Through 2009, the fines and
forfeits generated by the court have been more than sufficient to cover the ongoing cost of Court
operations, including the addition of another Court Clerk. In 2010, however, it is projected that the
Court’s expenditures will exceed its revenues by about $63,000. This is wholly due to a significant drop
in the number of case filings, which are down 3.1% in 2010 compared to 2009.

Below are the total actual new case filings for Mercer Island and Newcastle for 2008-2010.

                        Traffic      Non-Traffic                                      Traffic      Non-Traffic        Total
             Year                                      Parking           DUI
                      Infraction      Infraction                                     Criminal       Criminal          Cases
             2008           3,134                110          542              64          324                168            4,342

             2009           2,691                161          363              49          360                171            3,795

             2010           2,798                115          268              58          313                127            3,679




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                               C-99
Budget Policies
Budget Policies for 2011-2012
•      The addition of a full-time Court Clerk in 2009 helped address the heavy caseload issue and court
       fine collection backlog which plagued the Municipal Court in 2007-2008.
•      With the reduction in caseload in 2009-2010 relative to 2008 and with court revenues projected to
       significantly trail court expenditures in 2010 for the first time since its inception in 2005, it was
       determined that the Court Administrator position could be reduced to half-time in 2011-2012 with
       no impact on necessary reporting and accounting functions and no visible change to the public in the
       level of service. The Court Clerks will backfill for Court Administrator functions as needed.
•      It is expected that court revenues will cover all court costs on an annual basis, which was the
       assumption on which the City opened its Municipal Court in January 2005.
•      Continue to provide municipal court services to the City of Newcastle via the current interlocal
       agreement.

2011-2012 Budget Impact
                                                            2009         2010         2011        2012
                        Description                        Actual      Forecast      Budget      Budget
    Fines & Forfeiture Revenues                             $390,425     $370,000     $394,000     $394,000
    Total Court Operating Costs                             $387,813     $433,134     $355,073     $367,157
    Net Revenues (Costs)                                      $2,612     ($63,134)     $38,927      $26,843




                                                                    _________________________________
C-100                                                                  City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies

Police and Fire Dispatching
Background
From 1960 to 2004 Mercer Island operated its own Police/Fire dispatch center. Beginning in 2004
through 2009 Mercer Island received Police and Fire dispatching services from the cities of Kirkland and
Bellevue respectively. In July 2009, the new North East King County Regional Public Safety
Communication Agency (NORCOM) became our service provider for both Police and Fire dispatch
services. Costs are shared by the stakeholders based on call volume, with Mercer Island’s share being
5.8% of the total costs.

NORCOM provides dispatching services for 5 Police Departments and 14 Fire Departments. They
answer approximately 174,000 calls for service each year (114,000 police calls and 60,000 fire / EMS
calls). Mercer Island is responsible for approximately 12,000 of the police calls, and 2,400 of the Fire /
EMS calls each year.

Budget Policies for 2011-2012
•    Continue to work with NORCOM to ensure our citizens and public safety employees are receiving
     a high level of service.
•    Work with Records personnel to ensure they provide the appropriate level of service to our
     citizens.
•    Continue to ensure that our Mobile Computer systems in our emergency vehicles are well
     maintained.
•    Continue our active participation in NORCOM committees, with a particular focus on ensuring
     efficiencies are maximized.

2011-2012 Budget Impact
                                                          2009         2010         2011         2012
                    Expenditures
                                                         Actual      Forecast      Budget       Budget
    NORCOM Police Dispatch Operating                     $357,974     $487,578      $407,427     $419,650
    NORCOM Fire Dispatch Operating                       $114,443     $117,604      $138,462     $142,616
    Total Expenditures                                  $472,417      $605,182     $545,889     $562,266




_________________________________
City of Mercer Island 2011-2012 Budget                                                                C-101
Budget Policies




                  _________________________________
C-102                City of Mercer Island 2009-2010 Budget
                                                                            Budget Policies

Public Safety Education/Emergency Management
Background
Mercer Island has had a very strong Emergency Management program, which began in 1991. The
program’s objective has been to help make Mercer Island a disaster resistant community. City staff,
Mercer Island School District staff, and private businesses work together with volunteers from the
community toward the programs objectives.

In 1995, the City hired its first full-time Emergency Preparedness Coordinator. Over the span of the
next 11 years, the City employed a full-time employee to fill the role of Emergency Preparedness
Coordinator. In 2006, the Fire Department assumed responsibility for the Emergency Management
program, and staffed the position with a half-time Emergency Preparedness Coordinator, who was
assisted by the Deputy Fire Chief. In December of 2007, the half-time Emergency Preparedness
Coordinator left the City for a full-time Emergency Management position with another city. In January
of 2008, responsibility for the Emergency Management program was reassigned to the Police
Department, and is now staffed with a full time police officer.

Since 2008, the Emergency Preparedness Officer has completed a variety of projects and tasks to
include:

    •   Integrating the Mercer Island Business Neighborhood Alliance (MIBNA) into the Emergency
        Preparedness program
    •   Conducting the Sound Shake ‘08 exercise, as well as conducting a comprehensive City staff
        practical exercise in 2009
    •   Completing necessary Emergency Operations Center (EOC) improvements
    •   Providing public education at such events as Summer Celebration and through community
        classes
    •   Recruiting and training community volunteers and forming action teams
    •   Updating Emergency Preparedness brochures and the City’s Emergency Preparedness website
    •   Improving communication strategies with the Ham radio operators (MIRO)
    •   Updating the shelter program

The new 2011-2012 work plan includes four broad themes/goals which include:

    1. City staff will be prepared to activate EOC and shelter facilities for any type of
       emergency/disaster.
    2. Residents / businesses will be prepared to shelter themselves for 7-10 days.
    3. Volunteers will be prepared to assist during serious incidents.
    4. An effective communication model will be established between City staff and the community.

Each element of the work plan includes many projects that support the overall goal of having Mercer
Island be self-sufficient during a disaster for up to 7 days. These projects include organizing and
providing continual training for the Mercer Island volunteer response teams, securing generator power
at the Shell gas station, purchasing new shelter containers and necessary supplies, identifying regional
emergency resources, and conducting training sessions/exercises for key stakeholders.




_________________________________
City of Mercer Island 2011-2012 Budget                                                              C-103
Budget Policies
Budget Policies for 2011-2012
•    Continue efforts with the community and businesses to be prepared for 7-10 days.
•    Continue support training for City staff and community members.
•    Continue to develop and support the citizen volunteer groups, the faith community and business
     community involvement.
•    Designate and supply a south end shelter location.
•    Select EOC tracking software and train City staff.
•    Continue to focus on preparedness for all hazards.

2011-2012 Budget Impact
                                                    2009            2010         2011         2012
                          Description
                                                   Actual         Forecast      Budget       Budget
    Revenues:
      General Fund                                  $146,625        $160,882     $162,604     $166,780
    Total Revenues                                  $146,625       $160,882     $162,604     $166,780
    Expenditures:
      Salary & Benefits                             $115,331        $120,048     $122,036     $126,082
      Equipment/Supplies/Community Education           31,294         40,834       40,568        40,698
    Total Expenditures                            $146,625         $160,882     $162,604     $166,780




                                                                _________________________________
C-104                                                              City of Mercer Island 2011-2012 Budget
BUDGET POLICES
Youth and Family Services
                      This section includes
                      budget polices on the
                      following:
                        • Youth and Family
                           Services Financing
Budget Policies




                  _________________________________
C-106                City of Mercer Island 2011-2012 Budget
                                                                             Budget Policies

Youth and Family Services Financing
Background
Youth and Family Services (YFS) was created in 1973 as a private and public partnership. Public and
private sources of revenue have always been integral to the funding base for the department. In addition
to the City’s General Fund, YFS is currently financed through a variety of other sources. These include
donations from community organizations, individual contributions, Thrift Shop proceeds, grants, MIYFS
Foundation fundraising efforts and contributions, client fees, interest from the Endowment Fund, and an
Interlocal Agreement for Services with Mercer Island School District.

This policy is intended to provide additional detail about these funding sources and provide background
for the proposed 2011-2012 biennial funding changes. The department core staffing pattern will
decrease by 1.0 FTE; comprise of 0.5 FTE Development Officer and 0.5 FTE VOICE Coordinator. A
contract staff position continues to coordinate the Communities that Care Coalition focusing specifically
on reducing underage drinking and prevention of youth at risk behavior. There are no proposed
increases in the Department’s level of services.

Youth and Family Services Fund
Accounting for YFS Revenues and Expenditures are accounted for in a Special Revenue Fund “The YFS
Fund (160)”. The fund was created when cash balances from past donations held in Trust Funds were
transferred to the new fund, providing the beginning cash balance. All revenues, including program fees,
grants, donations, thrift shop sales, general fund support, MIYFS Foundation support, and all YFS
program expenditures are now accounted for within the same fund. Any year end surplus generated is
retained in the fund for future appropriation in support of ongoing YFS department programs.

YFS Permanent Endowment Fund
In 1986, upon the recommendation of the Youth and Family Services staff and Advisory Board, the City
Council adopted Ordinance A-45 defining the “Youth Services Program Enhancement Trust Fund” and
the “Youth Services Endowment Fund”. The ordinance formally established procedures and guidelines
for the expenditure of funds donated to Youth and Family Services.

Direct donations to these funds are tax deductible under the provisions of Section 170 of the IRS Code,
specifically due to meeting the definition of sub-section 115(a) that describes governmental subdivisions.
The YFS Permanent Endowment Fund (061) is comprised of contributions donated primarily by
individuals. Ordinance A-45 established that the principal remains invested, and only the income earned
from the investment of funds is available for expenditure. Interest from the Permanent Endowment
Funds is transferred annually to the YFS Fund to support ongoing programs. For the 2010-12 biennium,
$3,500 is budgeted for 2011 and $3,500 for 2012; these estimates are down considerably from several
years prior.

Thrift Shop Revenue
Thrift Shop (TS) revenue increased significantly in the past biennium. TS staff have increased store
hours and improved store appearance, product selection and regular, early stocking. The Thrift Shop
depends upon an enormous commitment of hours from volunteers. That commitment stems from the
mission focus of raising revenues to pay for programs operated by YFS. The volunteer hours of
community members has remained consistent. This is a change from the preceding nine or so years
when the Thrift Shop experienced a decrease in the amount of volunteer hours donated by the same


_________________________________
City of Mercer Island 2011-2012 Budget                                                              C-107
Budget Policies

number of volunteers. At that time staff hours were increased to maintain the same levels of customer
service and increase the hours of operation. With the current consistent configuration of staffing, the
TS increased days of operation to include Monday beginning in February of 2010. These changes, along
with a focus on store improvements and the implementation updated thrift business practices saw the
last two years finishing with increased revenues. The Thrift Shop brought in net revenues just over
$800,000 in 2009 and is estimated to net over 850,000 in 2010.

The proposed 2011-2012 budget for the Thrift Shop reflects a consistent use of contract and casual
labor hours which allows for the hiring of skilled staff to complement and enhance the work of the
volunteers. The net result has been the execution of many changes at the Thrift Shop and a marked
increase in revenues.

Thrift Shop revenue supports the following priorities of the Youth and Family Services Department:
•   Reimbursement of Thrift Shop expenses. This is defined as direct costs that the City would not be
    incurring if the Thrift Shop were not in existence.
•   Thrift Shop building facility maintenance, operations, and capital improvements.
•   Support of YFS programs; for the upcoming biennium the increased TS revenue will compensate for
    the decrease in funds from the MI School District for school based mental health services.

MIYFS Foundation
The MIYFS Foundation was created in 1989 to support and expand the human services offered by the
City’s Youth and Family Services Department. It is an independent, private, non-profit legal entity
separate from the City of Mercer Island with its own Board of Directors. The Foundation is eligible for
tax deductible donations, under the provisions of Section 170 of the IRS Code, specifically due to
meeting the definition of Section 501(c)(3), defining private non-profit organizations. It was originally
created in order to be eligible for workplace giving programs and other corporate and foundation funds
that require a 501(c)(3) tax-exempt status for eligibility. The nature of the relationship between the
Foundation and MIYFS is similar to that of a schools foundation and a school district.

The MIYFS Foundation 501(c)(3) raises revenues through a variety of fund raising activities conducted
annually by the board:
    •   all island fund drive (conducted in the fall)
    •   school fund drive (conducted in the spring)
    •   Giving from the Heart breakfast, the Foundation’s signature event, and
    •   various other smaller community based fundraising endeavors.

In 2009 the Foundation was awarded $75,000 to establish a Youth Endowment Fund to support the
work of the VOICE and SVP community service programs. The Foundation has two other Endowment
Funds that receive donations for Senior Outreach and general funding. Foundation Board members
manage all grant and fund drive solicitation for the MIYFS Foundation.

On-going funding: Each year the Foundation commits to raising a specified amount of funds for annual
YFS general operating expenses. For 2009 and 2010 the Foundation was unable to meet its pledge by
approximately $40,000 as the recession severally affected the Foundation’s ability to raise funds. The
Foundation has established a budgeting process that will provide an estimate of financial commitment to
the YFS department prior to the biennial budgeting process.




                                                                _________________________________
C-108                                                              City of Mercer Island 2011-2012 Budget
                                                                              Budget Policies

Program Donations
The YFS Fund (160) also receives donations toward programs. Examples include donations for
emergency assistance, scholarships, and donations to the Voice program. General donations to YFS
programs are directed to the MIYFS Foundation. Careful accounting with sub-accounts assures that
funds will be spent according to the donor’s wishes. Funds are used for general operational costs of
existing YFS priority programs; program enhancements, equipment purchases, and miscellaneous service
related expenses.

Budget Policies for 2011-2012
•   Funding Basis
    Department positions are funded by a funding matrix that includes the City’s General Fund and
    several other sources that include the Mercer Island School District, county contracts,
    contributions, Thrift Shop revenues, and MIYFS Foundation support. There are no base positions or
    privately funded positions except in the case of contracts, grants, or specifically designated donations
    or bequests. The YFS Department service configuration is determined by professional protocols for
    Human Service planning: regular community needs assessment, best practice research and client and
    professional input. The Department director presents to the City Council, through the budget
    approval process, the mix of services that would best serve the children, youth, families, adults and
    seniors of the community. The department staff and the Advisory Board will provide input to the
    Council through YFS Planning processes, the Council Liaison, and direct presentations to the
    Council.

•   Responsibility to Donors and Volunteers
    Contributions from donors shall be used to the maximum extent possible to provide human
    services for the people of Mercer Island according to the expressed wishes of the donors. Since the
    1970s a unique partnership with community volunteers a revenue stream that allows the City to
    fund many YFS programs. The City committed to designate revenue raised by these volunteers
    (including Thrift Shop proceeds and fundraising efforts) to be used to pay for programs operated by
    YFS.

•   Funding Streams 2011-2012
    General Fund Contribution: The annual General Fund contribution for the 2011-2012 biennium
    will be $320,000 per year. This represents a decrease of $145,000 from the capped amount of
    $465,000 established in 2004. In 2009, as part of the City and Department efforts to reduce
    General Fund expenses, the cap of $465,000 was permanently lowered by $25,000 to $440,000. To
    further help the General Fund in 2011-2012, the General Fund subsidy will be permanently lowered
    by another $80,000, which will be replaced by increased Thrift Shop sales activity, and will be
    temporarily (for 2011-2012 only) lowered by yet another $40,000, which will be funded by
    accumulated cash in the YFS Fund. During the 2013-2014 biennial budget process, the General Fund
    subsidy policy will be reviewed again when City revenues are expected to be more stable.

    Mercer Island School District: During the 2009-10 academic year the Mercer Island School
    District reduced its commitment to the YFS department by approximately $130,000. The current
    annual pledged amount of $60,000 no longer pays for half of the cost for six of the seven school
    based counselors.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                C-109
Budget Policies

    King County Community Services Division (potential delay of a three year phase out):
    The KC Community Services Division has been the primary supporter of the Youth and Family
    Service Association agencies since it’s inception in 1973. From 2000 through the current year
    (2010) the Department has received approximately $36,000 per year for general operating
    expenses. These funds have been designated to support a portion of the department’s work in the
    schools. Over the past five years, King County has been re-evaluating the YFS designation of general
    fund use for human services. During the last budget cycle, YFS organizations were informed that
    this designated funding would be phased out sometime in the near future. At the time of the 2011-
    12 budget development there is no final word on a specific cut to this fund though it is assumed that
    these funds will eventually not be available to the YFS entities.

    Diversion: This funding of $3,400 is slated to remain steady for the coming biennium though there
    will be no increase to cover any increases associated with the salary.

    Drug Free Communities Grant (DFC): Communities That Care is a grant funded community
    mobilization endeavor that seeks to reduce the level of underage drinking and drug use. YFS
    received a five year federal grant from Drug Free Communities that began in January 2008. The
    associated staff and expenses for this endeavor are considered short term (through the life of the
    grant) and the development officer and the MIYFS Foundation have taken on the responsibility for
    developing the funding configuration to sustain this effort. DFC will contribute $76,003 in funding in
    2011 and $74,794 in 2012.

•   Fundraising and MIYFS Foundation
    Since 2007 the Foundation has increased the variety of fundraising activities conducted on behalf of
    the department and the amount of money these events raise. In general the Foundation revenues
    have increased as have the variety of fundraising endeavors. During the first year of the recession
    the Foundation, like most entities requesting money from grant making organizations, was not
    invited to write grants for capital funding. At this same time, corporate sponsorship for the
    Foundation’s signature event, the “Giving from the Heart” breakfast took a strong dip. After this
    initial year of the recession, the Foundation focused its ‘asks’ more on the local community and the
    actual number of donors increased though the funds remained flat.

    Growth in the Foundation fund raising:
     2005
       All Island Fund Drive
       School Fund Drive
       Giving From The Heart Breakfast
       Annual Report –enclosed envelop, vehicle donations
     Present
       All Island Fund Drive
       School Fund Drive
       Giving from the Heart Breakfast (100% growth in size and revenues)
       Annual Report –enclosed envelop, vehicle donations
       Turn-key community events
       A Taste of Yoga, Holiday Bazaar, the Pumpkin Patch, Glass Heart sales,
       Youth Development Endowment
       Endowment established 2009
       Annual summer letter campaign following summer VOICE and SVP
       Local Dollars, Local Youth – Part of an initiative to increase the shopping of MI residents in the
       downtown area.

                                                                  _________________________________
C-110                                                                City of Mercer Island 2011-2012 Budget
                                                                             Budget Policies

      Developed Capacity
       Web Site – on-line donations
       Donor Appreciation Event – September/October
       Raiser’s Edge / Data Management
       Cultivation
       Planned Giving
       Board Development
       Developed Community-Partnership fundraising events that are executed by local community
       groups with proceeds going to YFS;
       Enhanced the existing fundraising activities – each year’s funds drive increased over the levels of
       the past years;
       Increased the pre-breakfast sponsorships;
       Developed a planned giving program; and
       Brought in additional grants: Rotary Foundation, Community Fund, Women’s Club.

    The Foundation’s 2009-2010 actual funding of $156,000 per year represents an increase over the
    past biennial commitment of $120,300 per year. The 2011-12 pledge will remain at approximately at
    this level ($183,500 for 2011 and $157,500 for 2012). Funds will be raised through grant writing in
    addition to current and new fundraising efforts.

•   YFS Fund Balance
    The YFS Fund developed a fund balance over a period of years when the Thrift Shop revenues
    exceeded what was needed to fund services. This fund balance is being spent down with a
    projected end date for use at the end of the 20111-2012 biennium.

    Prior to 2004, the City’s General Fund contributed 40% of the YFS department’s budget with
    donations, contracts and Thrift Shop revenue making up the remaining 60%. This historical funding
    pattern for the department ended in 2004 when the General Fund contribution was capped at
    $465,000. This was done so with the recognition that the amount and configuration of services in
    2004 reflected the needs appropriate to the community. At that time the Thrift Shop revenues had
    been exceeding what was needed to fund up to 60% and the YFS Fund had accumulated some
    excess fund balance.

    In 2004, to assess the expenses and revenues trends, and most importantly, to determine the year in
    which the revenue and expense lines would intersect, a ten year revenue-to-expense projection was
    developed. This would be the point at which the YFS operating fund balance would begin to be
    drawn down. It was projected that the fund balance would be used in the 07-08 biennium and in the
    09-10 biennium.

    The City’s General Fund contribution had been the department’s single largest portion of funding.
    While this contribution remained fixed, expenses in the following two biennium (in particular health
    care and IT) grew at an increasing rate. Additionally other funders reduced their funding to the
    department. As a result, expenses grew much faster than revenues and the projections of spending
    down of the reserve indicated this would occur within six to eight years.

    In actuality, the reserve draw down has been slower than expected due to better than projected
    Thrift Shop growth and an effective effort to reduce general expenses. Fund balance use to meet
    budgeted expenditures in the 2011-2012 biennium will be $103,414 in 2011 and $150,316 in 2012.



_________________________________
City of Mercer Island 2011-2012 Budget                                                               C-111
Budget Policies

   Since 2004 the Foundation donations, Thrift Shop revenues and general donations increased steadily.
   Even so, these revenue sources represent only about 70% of the overall department budget. The
   contribution from the City’s General Fund has not been adjusted since 2004. In order to keep pace
   with the cost of living in the coming biennia, the department and the city will eventually need to
   reevaluate and adjust proportionately the whole department’s funding formula in order to continue
   to provide the full range of services to Island residents.

   Current projections of fund balance use indicate that regular ongoing operations will be maintained
   in this biennium with a December 2012 ending fund balance of $173,154.

Developing and Expanding Funding Streams
Addressing emergent needs and serving the future community
Given the recent shifts in funding commitments and the decreasing city general fund revenues the YFS
department is exploring options for increasing future revenues to meet the on-going need for funding to
local human services. To this end, two ideas will be piloted in the coming biennium and one additional
funding option is in the exploration process.

   1. Beginning this November the Foundation is stepping up its fundraising activities to include a
      month long Local Dollars, Local Youth campaign. This campaign is a collaborative project in
      partnership with local businesses to raise funds for the four largest youth serving entities on the
      Island: Youth and Family Services, Mercer Island Schools Foundation, Youth Theatre Northwest
      and the Boys and Girls Club. Shoppers at Island businesses during the month of November will
      be given the opportunity to add a dollar onto their bill or tab to support these four
      organizations that together touch the lives of every Island youth. It is too early to estimate how
      much money this campaign will raise. These four organizations, in conjunction with the
      Chamber of Commerce, are planning to have this campaign conducted each November and to
      grow community participation.

   2. Currently the Thrift Shop is limited in its ability to raise revenue by the limitation of floor space.
      Projected estimates indicate that there is untapped revenue capacity with increased floor space.
      This autumn the Thrift Shop will explore a community partnership with a group of citizens to
      develop the site formerly used for recycling into a Center for Community Sustainability. The
      Center would incorporate several compatible ideas suggested by the community during the
      public input process of Winter-Spring 2010; one of which would be the processing of Thrift
      Shop donations.

        Processing donations at the former recycling center, across from the current Thrift Shop, would
        allow two new sources of revenue. The first new source would come from preparing the
        current pass through goods for bulk resale. A conservative estimate for this annual revenue is
        approximately $25,000.00. The second source of revenue would come from transforming the
        current donation processing space into retail space (approximately 500 square feet). Increased
        revenue space, along with an expansion of the current advertising campaign is conservatively
        estimated to net an additional $135,000.00.

   3. In addition to the above pilot projects the Department is exploring a partnership with another
      Eastside city to replicate the Thrift Shop model of community reuse/recycle for human services
      funding. A feasibility study is being conducted on placing a campus of human service providers (a
      sort of one stop shopping for citizens needing a host of services) near the downtown area. The
      YFS department is in discussions with this group to develop the infrastructure of volunteers,


                                                                 _________________________________
C-112                                                               City of Mercer Island 2011-2012 Budget
                                                                                   Budget Policies

        donation solicitation and business operations to establish a thrift business. This endeavor would
        have a shared-profits formula for an on-going business arrangement or a multi-year phase out
        business plan. Both options would bring in revenue to the department though this is longer
        term project that will most likely have revenue options for the next biennium.

The YFS department and the YFS Foundation will continue to explore feasible revenue options and
optimize public donations to ensure the community has needed human services.

2011-2012 Budget Impact
                                            2009            2010            2011           2012
                Description                 Actual         Forecast        Budget         Budget
RESOURCES
Budgeted
  Beginning Fund Balance                $    136,009   $     107,362   $    103,414   $      150,316
  KC Grant Revenue                            39,925          40,785         39,400           39,400
  School Counselor Program Support            78,338         141,507         60,000           60,000
  Thrift Shop                                727,136         815,000        949,000          995,000
  Program Fees & Donations                   126,231         129,833        122,500          122,500
  CTC Grant Funding                           99,065          73,653         76,003           74,794
  MIYFS Foundation Support                   193,900         150,000        183,500          157,500
  Interfund Transfer - YFS Endowment           3,291           3,000          3,500            3,500
  Interfund Transfer - General Fund          465,000         440,000        320,000          320,000
     Total Budgeted Resources           $ 1,868,895    $ 1,901,140     $ 1,857,317    $    1,923,010
Not Budgeted
  Beginning Fund Balance (Reserved)          534,246         426,884        323,470          173,154
TOTAL RESOURCES                         $ 2,403,141    $ 2,328,024     $ 2,180,787    $    2,096,164
USES
Budgeted
  YFS Administration                    $    446,206   $     406,503   $    450,271   $      461,936
  Thrift Shop                                281,297         317,226        314,749          323,112
  Diversion                                   15,043          15,130         15,202           15,505
  School Counselor Program                   435,563         485,382        412,376          428,617
  Senior Outreach                             77,149          76,905         79,621           82,784
  VOICE Program                               90,257          76,206        111,205          113,840
  Jobline                                     37,217          34,695         36,904           38,363
  Family Counseling & Assistance             259,198         261,978        260,576          268,953
  Communities That Care                      165,944         169,115        162,413          167,900
  Interfund Transfers - CIP                   61,021          58,000         14,000           22,000
    Total Budgeted Expenditures         $ 1,868,895    $ 1,901,140     $ 1,857,317    $    1,923,010
Not Budgeted
  Ending Fund Balance                        534,246         426,884        323,470          173,154
TOTAL USES                              $ 2,403,141    $ 2,328,024     $ 2,180,787    $    2,096,164




_________________________________
City of Mercer Island 2011-2012 Budget                                                                 C-113
Budget Policies




                  _________________________________
C-114                City of Mercer Island 2011-2012 Budget
                                                                                Budget Summary
This section has been prepared as a general summary of the 2011-2012 biennial budget for the City of Mercer
Island. It is designed to provide City residents and other interested parties with a quick overview of the fiscal
plans of the City Council and Administration for the upcoming two years. The summary is divided into ten
sub-sections:
       City Organization – how the city is organized to do business
       Staffing – who provides the services
       Total Resources – what the funding sources are for the city
       Total Expenditures – how the revenues are spent
       Fund Summary – revenue and expenditure totals by fund
       Property Taxes – where your tax dollars go
       Utility Rates – overview of proposed rate increases
       City Debt – purpose and status of debt issued by the City and debt capacity
       Fund Balances – change in and composition of the ending balance for each fund
       Dashboard Indicators – key measures of what matters most to management team and Council

If a more in-depth understanding of the budget is desired, please take some time to review the wealth of
information found within the graphs, charts, narrative text, and funding level summaries located in the full
budget document.


City Organization
The City of Mercer Island has a Council/Manager form of government. In this form, the City Council,
comprised of seven elected members, hires a City Manager to act as Chief Executive of the City. The City
Manager reports directly to the Council and carries out their policy. Council members listen to their
constituents, the Island residents, and also receive advice and help from the Council appointed Boards and
Commissions, which numbered nine in 2010. The Council is vitally interested in hearing the voices of all
residents and in increasing citizen involvement.

The day to day activities of the City are carried out by the ten departments shown on the chart on the next
page. For an in-depth description of the functions carried out by these departments, see Section G, which
summarizes the Operating Budget by Department. For a more summarized look at the operations of the City,
see Section E (General Fund Summary) and Section F (Utility Funds Summary).




_________________________________
City of Mercer Island 2011-2012 Budget                                                                  D-1
Budget Summary




                 _________________________________
D-2                 City of Mercer Island 2011-2012 Budget
                                                                                    Budget Summary
Staffing
The two charts that follow show the number of full-time and part-time positions authorized by the Council for
employment in the various departments. These authorized positions are those that are considered necessary
to carry out the core mission of the departments. Also included are the reductions to approved positions
resulting from the City Managers recommended service reductions in 2011-2012.

                                  Regular Full Time Equivalents (FTE’s)
        Department                 2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
        City Attorney               3.00    3.00    3.00    3.00    3.00    3.00    3.00    3.00    3.00    3.00
        City Manager                4.00    4.00    4.00    4.00    2.00    2.00    4.00    4.00    3.60    3.60
        Human Resources                                             5.00    5.00    3.00    3.00    3.00    3.00
        Court                                       2.85    2.85    2.90    2.90    3.90    3.90    3.40    3.40
        Development Services       18.00   18.00   17.00   17.00   18.00   18.00   18.00   18.00   17.00   17.00
        Finance                    10.00   10.00   10.00   10.00    7.00    7.00    7.00    7.00    7.00    7.00
        Fire                       30.00   30.00   31.00   31.00   31.50   31.00   31.00   31.00   31.00   31.00
        Park & Recreation          19.00   19.00   20.00   20.00   21.75   21.75   22.50   22.50   22.50   22.50
        Police                     43.50   43.50   36.00   35.00   35.50   36.50   36.50   36.50   35.00   35.00
        Youth & Family Services    14.40   14.40   14.40   14.40   15.50   15.50   15.50   15.50   14.50   14.50
        Maintenance:
          Support Services          7.00    7.00    7.00    7.00    6.50    6.50    7.00    7.00    7.00    7.00
          Right of Way              8.00    8.00    8.00    8.00    8.00    8.00    6.50    6.50    5.50    5.50
          Utilities                13.00   13.00   13.00   13.00   13.00   13.00   13.50   13.50   13.50   13.50
          CIP                       3.50    3.50    3.50    3.50    3.50    3.50    3.00    3.00    3.00    3.00
        Non Departmental (IGS)                                      4.00    4.00    5.00    5.00    5.00    5.00
                  Total           173.40 173.40 169.75 168.75 177.15 177.65 179.40 179.40 174.00 174.00

Changes to Regular FTE’s
          0.40 FTE Reduction in the Communications Coordinator Position;
          0.50 FTE Reduction in Municipal Court Staffing;
          1.0 FTE Reduction of the Transportation Manager Position;
          1.0 FTE Reduction in a Police Hire Ahead Officer Position;
          0.50 FTE Reduction in a Police Records Clerk Position;
          0.50 FTE Reduction in the Youth Development Coordinator Position;
          0.50 FTE Reduction in the YFS Fundraising Coordinator Position; and
          1.0 FTE Reduction of the Right-of-Way Trails Maintenance Position.

In total, a staffing reduction of 5.40 FTE’s is included in the adopted budget for 2011-2012. In addition to the
above authorized positions, the City from time to time needs additional help to carry out programs. The
additional help is classified into three types – contract employees, casual labor, and consultants/contractors.

   Contract employees are brought on to help with work overload conditions. These employees are
    hired for a particular length of time, usually one or two years. A department may request that a contract
    employee become permanent if ongoing workload warrants the request.



_________________________________
City of Mercer Island 2011-2012 Budget                                                                     D-3
Budget Summary
     Casual labor is brought on to supplement the City’s core staff in light of short-term workload issues
      and/or special initiatives the City engages in. The most common use of workload-driven casual labor is the
      employment of seasonal employees in both the Parks Maintenance and Recreation divisions of the Parks
      and Recreation Department. The City employs both 6 month and 9 month seasonal staff. The City also
      uses casual labor on a limited basis for temporary vacancies and other workload issues.

     Consultants are hired when there is a need for a particular expertise that the staff does not possess,
      when there is not enough work to justify hiring a full-time staff person, and when it has been determined
      to be more cost effective than employing additional regular staff. Examples of consultant services are
      architectural services, specialized engineering, and specialized financial services. Contractors are also
      hired to do specialized work such as servicing the City’s heating and cooling systems and janitorial
      maintenance of our buildings.

                                 Contract Full Time Equivalents (FTE’s)
       CONTRACT                     2003     2004     2005      2006     2007     2008     2009      2010     2011      2012
       Development Services                                                                   2.0       2.0      1.0      1.0
       Fire                                                                                   1.0       1.0      -        -
       Maintenance                                                                           0.75     0.75      0.25      0.0
       Park & Recreation                                                                      2.0       4.0      3.0      4.0
       Youth & Family Services                                                                3.0       3.0      3.0      3.0

        Total                        5.75     5.75     8.35    13.25      9.50     9.50     8.75     10.75     7.25     8.00
      Note: Contract FTE’s related to the Capital Improvement Program are not reflected in this table. Rather, only Operating Budget
      contract FTE’s are shown.




                                                                             _________________________________
D-4                                                                             City of Mercer Island 2011-2012 Budget
                                                                                   Budget Summary
                    Full Time Equivalents (FTE’s) and Contract FTE’s

         195.00



         190.00



         185.00



         180.00



         175.00



         170.00



         165.00



         160.00



         155.00
                    2003     2004     2005     2006     2007     2008     2009      2010     2011     2012
     Contract FTE   5.75     5.75     8.35     13.25    9.50     9.50     8.75      10.75    7.25     8.00
     Regular FTE    173.40   173.40   169.75   168.75   177.15   177.65   179.40    179.40   174.00   174.00




_________________________________
City of Mercer Island 2011-2012 Budget                                                                   D-5
Budget Summary
Total Resources
For 2011 and 2012 respectively, the City is forecasting resources of $47,640,060 and $50,737,970. These
totals include fund balance allocated to cover planned expenditures, but exclude the remaining, reserved
beginning fund balances in each fund. Beginning fund balances can be used as resources and are typically used
for capital projects. A summary of fund balances is presented later in this section. The City derives its
revenues from a variety of sources as the graphs on the following pages show. The largest source is for
Charges for Services, which is largely generated from the water, sewer, and stormwater utility rates. Other
service charges include recreation fees, counseling fees, and Thrift Shop sales. The second largest source of
revenue is the property tax paid by our Island residents and businesses. Property taxes are budgeted at $10.6
million in 2011 and $10.8 million in 2012. Sales taxes, real estate excise taxes, utility taxes, and state shared
revenues amount to $10.2 million in 2011 and $11.2 million in 2012. Together, these five revenues account
for almost 44% of the total City resources in the 2011-2012 biennium. The chart below details revenues for
the period 2009-2012. The graphs that follow on the next page show the percentages of the major revenue
sources for 2011 and 2012.

                                    2009-2012 Resources, All Funds
                                                2009            2010             2011            2012
                     Description               Actual         Forecast          Budget          Budget
       RESOURCES
       Budgeted
         Use of Fund Balance                  $ 1,373,037     $ 19,753,395    $ 3,155,440      $ 3,043,033
         Property Tax                          10,299,700      10,537,514       10,636,525     10,842,165
         Sales Tax                              3,023,540       2,943,000        3,032,000       3,154,000
         Business & Utility Taxes               3,777,335       3,691,000        3,845,000       4,032,000
         Real Estate Excise Tax                 1,257,880       1,985,000        1,708,750       2,179,000
         Shared Revenues                        2,785,072       1,777,716        1,588,307       1,867,749
         Utility Overhead                        808,500          863,800          698,017        732,683
         Charge for Service                    33,584,189      16,792,122       18,573,930     20,436,747
         Licenses & Permits                     1,685,102       1,661,775        1,863,970       1,889,670
         District Court Fines                    390,425          370,000          394,000        394,000
         Other Resources                        2,487,408         727,078          438,512        431,250
         Interest                                243,159           75,656           65,312         68,923
         Interfund Transfers In                 2,732,946       2,241,356        1,615,297       1,691,750
           Total Budgeted Resources           64,448,293       63,419,412      47,615,060      50,762,970
       Not Budgeted
         Beginning Fund Balance                31,124,380      17,877,876       15,473,663     13,243,624
       TOTAL RESOURCES                       $ 95,572,672   $ 81,297,288     $ 63,088,723    $ 64,006,595




                                                                 _________________________________
D-6                                                                 City of Mercer Island 2011-2012 Budget
                                                                                                               Budget Summary

                                                2011 Resources, All Funds
                                                   Total: $47,615,060

                                                        Other           Interfund Transfers In
                              District Court Fines       1%                      3%              Use of Fund Balance
                                       1%                                                                7%
                         Licenses & Permits
                                4%

                                                                                                                        Property Tax
                                                                                                                           22%

             Charge for Service
                   39%




                                                                                                                             Sales Tax
                                                                                                                                6%

                                                                                                             Business & Utility Taxes
                                                                                                                       8%


                                                     Utility Overhead
                                                             2%                                          Real Estate Excise Tax
                                                                                   Shared Revenues                 4%
                                                                                         3%




                                                2012 Resources, All Funds
                                                   Total: $50,762,970

                                                             Other          Interfund Transfers In
                              District Court Fines            1%                     3%
                                       1%                                                            Use of Fund Balance
                                                                                                             6%
                         Licenses & Permits
                                4%
                                                                                                                           Property Tax
                                                                                                                              21%




                                                                                                                                  Sales Tax
                                                                                                                                     6%
              Charge for Service
                    40%

                                                                                                                  Business & Utility Taxes
                                                                                                                            8%

                                                                                                         Real Estate Excise Tax
                                                     Utility Overhead                                              4%
                                                             2%                     Shared Revenues
                                                                                          4%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                                        D-7
Budget Summary
Total Expenditures
The 2011-2012 two-year budget for all City funds totals $96.2 million. In 2011, expenditures amount to $46.8
million, while the 2012 total amounts to $49.4 million. Those totals represent the expenditures for 20
different funds that are budgeted by the City. Section I (Recap by Fund) briefly describes and presents the
revenue and expenditures for each fund.

The major funds of the City are the General Fund, the Utility Funds, the Capital Project Funds, and the Street
Fund. The General Fund constitutes the largest operating fund, providing for such general government
services as police and fire protection, emergency medical response, street and park maintenance, recreation
programs, and development services. General Fund expenditures are budgeted at $22.8 million and $23.4
million respectively in 2011 and 2012. The second largest group of funds is the Water, Sewer and Storm
Water Utility Funds which together provide funding for the Water distribution, Sewage disposal and Storm
Water services provided to Mercer Island residents. In 2011, the Utilities are budgeted at $14.4 million,
including capital projects. In 2012, their combined budgets total $15.5 million. For more information on the
General Fund, see Section E of the budget. The Water, Sewer and Storm Water Utilities are described in
Section F.

Another way to look at the overall City budget is by expenditure category. The $46.8 million in 2011
budgeted expenditures is comprised of 14 separate categories as the table below illustrates. The largest
expenditure categories citywide are salaries and benefits at 46.2% of the total budget in 2011.

                                 2009-2012 Expenditures, All Funds
                                               2009            2010             2011            2012
                   Description                Actual         Forecast          Budget          Budget
      USES
      Budgeted
       Salaries & Wages                     $ 15,972,659    $ 17,202,758      $ 16,269,764    $ 16,628,854
       Benefits                                4,987,948       5,705,543        5,337,368       5,868,786
       Supplies                                1,493,978       1,522,438        1,367,058       1,368,006
       Contractual Services                    5,157,729       6,597,293        4,364,768       3,957,147
       Communications                            244,654         287,608          242,962         243,762
       Equipment Rental                        1,685,293       1,688,253        1,742,699       1,742,899
       Insurance                                 809,612         892,543        1,057,881       1,132,257
       Utilities                                 765,221         823,950          795,633         837,867
       Other Services & Charges                1,961,429       2,799,978        1,508,916       1,575,625
       Intergovernmental                       1,020,875       1,040,585        1,006,234       1,028,275
       Water/Sewer Treatment                   4,923,018       4,859,927        5,385,458       5,646,430
       Capital                                15,363,716      16,977,241        4,461,812       5,929,325
       Bond Redemption                           881,260       1,677,824        1,728,251       1,821,654
       Interfund Transfers                     2,674,009       2,359,893        1,533,259       1,684,780
       Total Budgeted Expenditures           57,941,401       64,435,834       46,802,064      49,465,668
      Not Budgeted
       Budget Cuts & Expenditure Savings                       (1,767,649)
       Ending Fund Balance                    37,631,271      18,629,104       16,286,658      14,540,927
      TOTAL USES                           $ 95,572,672    $ 81,297,288      $ 63,088,723    $ 64,006,595

                                                                _________________________________
D-8                                                                City of Mercer Island 2011-2012 Budget
                                                                                                                 Budget Summary

                                                     2011 Expenditures, All Funds
                                                          Total: $46,802,064

                                                        Bond Redemption        Interfund Transfers
                                           Capital            4%                       3%
                                            10%


                      Metro/Water                                                                                  Salaries & Wages
                          11%                                                                                             35%




               Intergovernmental
                      2%


                   Other
                    3%

                Utilities
                  2%
                                                                                                                   Benefits
                               Insurance                                                                            11%
                                  2%

                                    Equipment Rental                                              Supplies
                                          4%                              Contract Services         3%
                                                                                9%
                                                       Communications
                                                           1%




                                                     2012 Expenditures, All Funds
                                                          Total: $49,465,668

                                                     Bond Redemption            Interfund Transfers
                                                           4%                           3%
                                           Capital
                                            12%                                                                    Salaries & Wages
                                                                                                                          34%


                    Metro/Water
                        11%



            Intergovernmental
                   2%

                   Other
                    3%

                            Utilities                                                                             Benefits
                              2%                                                                                   12%
                                        Insurance
                                           2%                                                         Supplies
                                                                           Contract Services            3%
                                                 Equipment Rental
                                                       4%                        8%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                                D-9
Budget Summary
Fund Summary
Summarized below are total revenues and expenditures by fund for the period 2009-2012.

                            Summary of Revenues by Fund for 2009-2012
       Fund                                          2009             2010             2011            2012
       No.                  Description             Actual           Forecast         Budget          Budget


        001   General Fund                      $ 22,758,933     $ 23,212,420     $ 22,775,124    $ 23,414,948
        037   Self Insurance Fund                        4,767          10,000          10,000          10,000
        061   Youth Service Endowment Fund               3,291            3,000          3,500           3,500
              Subtotal General Purpose Funds    $ 22,766,992     $ 23,225,420     $ 22,788,624    $ 23,428,448


        104   Street Fund                       $ 2,187,417      $ 3,246,069      $ 1,363,998     $ 2,035,817
        112   Criminal Justice Fund                   727,134          750,346         547,312         565,666
        117   Beautification Fund                     878,411          841,011         888,802         901,550
        130   Contingency Fund                        176,500          478,522         130,828         415,161
        140   1% For the Arts Fund                    214,908           43,350          40,900          32,000
        160   Youth and Family Services Fund         1,868,895        1,901,140       1,857,317       1,923,010
              Subtotal Special Revenue Funds    $ 6,053,266      $ 7,260,438      $ 4,829,157     $ 5,873,204


        208   Bond Redemptiion (Voted)          $     206,239    $              - $            - $                -
        239   Bond Redemption (Non-Voted)             359,821          453,143         446,030         441,241
              Subtotal Debt Service Funds       $     566,060    $     453,143    $    446,030    $    441,241


        343   Capital Improvement Fund          $ 2,914,606      $ 3,446,078      $ 1,680,197     $ 1,978,167
        345   Technology and Equipment Fund           716,832          832,000         377,000         355,877
        350   Capital Reserve Fund                          -         1,035,000        100,000                -
              Subtotal Capital Funds            $ 3,631,438      $ 5,313,078      $ 2,157,197     $ 2,334,044


        402   Water Fund                        $ 5,422,933      $ 4,585,764      $ 4,851,647     $ 6,266,771
        426   Sewer Fund                            22,243,243       18,352,445       7,220,030       7,431,249
        432   Storm Water Fund                       1,777,391        1,795,331       2,358,281       2,418,022
              Subtotal Enterprise Funds         $ 29,443,566     $ 24,733,540     $ 14,429,958    $ 16,116,042


        503   Equipment Rental Fund             $ 1,318,400      $ 1,712,390      $ 2,179,586     $ 1,827,483
        520   Computer Equipment Fund                 600,403          653,403         709,507         659,507
              Subtotal Internal Service Funds   $ 1,918,803      $ 2,365,793      $ 2,889,093     $ 2,486,990


        606   Firemen's Pension Fund            $      68,168    $      68,000    $     75,000    $     83,000
              Subtotal Trust Funds              $      68,168    $      68,000    $     75,000    $     83,000


                        Total Revenues          $ 64,448,293     $ 63,419,412     $ 47,615,060    $ 50,762,970


                                                                 _________________________________
D-10                                                                City of Mercer Island 2011-2012 Budget
                                                                               Budget Summary
                   Summary of Expenditures by Fund for 2009-2012
    Fund                                          2009             2010             2011              2012
     No.                 Description             Actual           Forecast         Budget            Budget


     001   General Fund                      $ 22,758,933     $ 24,980,069     $ 22,775,124      $ 23,414,948
     037   Self Insurance Fund                        5,000          10,000          10,000            10,000
     061   Youth Service Endowment Fund               3,291            3,000          3,500             3,500
           Subtotal General Purpose Funds    $ 22,767,224     $ 24,993,069     $ 22,788,624      $ 23,428,448


     104   Street Fund                       $ 1,945,499      $ 3,246,069      $ 1,354,957       $ 2,035,817
     112   Criminal Justice Fund                   665,879          750,346         547,312           565,666
     117   Beautification Fund                     873,860          741,011         884,061           891,874
     130   Contingency Fund                              -          478,522         130,828           415,161
     140   1% For the Arts Fund                     37,000           43,350          40,600            10,000
     160   Youth and Family Services Fund         1,868,895        1,901,140       1,857,317         1,923,010
           Subtotal Special Revenue Funds    $ 5,391,134      $ 7,160,438      $ 4,815,075       $ 5,841,528


     208   Bond Redemptiion (Voted)          $     199,880    $              - $               - $               -
     239   Bond Redemption (Non-Voted)             359,821          453,142         446,030           441,241
           Subtotal Debt Service Funds       $     559,701    $     453,142    $    446,030      $    441,241


     343   Capital Improvement Fund          $ 1,309,746      $ 3,446,078      $ 1,680,197       $ 1,978,167
     345   Technology and Equipment Fund           716,832          832,000         377,000           355,877
     350   Capital Reserve Fund                    509,381         1,035,000               -                 -
           Subtotal Capital Funds            $ 2,535,958      $ 5,313,078      $ 2,057,197       $ 2,334,044


     402   Water Fund                        $ 4,852,815      $ 4,585,764      $ 4,851,647       $ 5,626,709
     426   Sewer Fund                            18,070,206       18,352,445       7,220,030         7,431,249
     432   Storm Water Fund                       1,777,391        1,595,558       2,358,281         2,418,022
           Subtotal Enterprise Funds         $ 24,700,412     $ 24,533,767     $ 14,429,958      $ 15,475,980


     503   Equipment Rental Fund             $ 1,318,400      $ 1,366,763      $ 1,647,683       $ 1,357,165
     520   Computer Equipment Fund                 600,403          547,575         542,495           504,260
           Subtotal Internal Service Funds   $ 1,918,804      $ 1,914,338      $ 2,190,178       $ 1,861,425


     606   Firemen's Pension Fund            $      68,168    $      68,000    $     75,000      $     83,000
           Subtotal Trust Funds              $      68,168    $      68,000    $     75,000      $     83,000


                TOTAL EXPENDITURES           $ 57,941,401     $ 64,435,834     $ 46,802,064      $ 49,465,668




_________________________________
City of Mercer Island 2011-2012 Budget                                                                  D-11
Budget Summary
Property Taxes
Property taxes play an essential role in financing the operations of the City of Mercer Island, accounting for
about 22.0% of the City's total budgeted resources in 2011-2012. Mercer Island property owners will pay
$10.64 million in property taxes in 2011 and $10.84 million in 2012 to support City services.

Types of Property Tax
There are two general types of property tax levies collected by the City: 1) regular levy, and 2) voter
approved levy. The regular levy, which is $9.68 million in 2011, represents the base amount of property tax
dedicated to funding the City’s general government operations. Each year the amount of revenue to be raised
from property taxes is determined based on forecasted expenditures, other revenue sources, and state law
limitations. Washington State law, which changed in 1997, limits property tax levies to 101% of the previous
year's tax revenue or to the rate of inflation, whichever is less. This is a big change from the original law which
allowed taxing districts to levy 106% each year. See the Property Tax policy in Section C for additional
information.

There are two types of voter approved levies, which represent property tax increases over and above the
regular levy: 1) excess levy, and 2) levy lid lift. An excess levy is dedicated to paying the principal and interest
on debt issued for capital purchases or improvements. Currently, the City doesn’t have any excess levies. A
levy lid lift is dedicated to funding specific general government operations and/or capital improvements. Voter
approved levies in the past have included land for parks and open space, new fire trucks, the remodeling of
City Hall, and the maintenance and operation of Luther Burbank Park. In November 2008, Mercer Island
voters approved a Parks Maintenance and Operations Levy lid lift for 15 years. The levy lid lift amount in 2011
is $882,000.

Later in this section information regarding the City’s debt is provided. For more detail, see the Debt Financing
policy in Section C.

Property Tax Levy Rates
If a homeowner on Mercer Island only paid property taxes to the City, how much would that amount to? For
a resident with a home valued at $1.0 million, the City's portion of the property tax bill in 2010 amounts to
$1,201. However, Mercer Island is not the only governmental entity that has the authority to levy property
taxes. Following is the millage levy rate for each of the entities to which a property owner pays taxes. The
City portion is 15.4% of the total taxes paid in 2010. The largest levy amount relates to schools, with the
combined portion that goes to the state and the Mercer Island School District amounting to 54.3% of the total
tax bill in 2010. For a $1.0 million home on Mercer Island, the total 2010 levy amounts to $7,805, as noted
below.
                                                          % of Total     2010 Levy
                                        Purpose            in 2010        Amount
                                State School Fund              28.5%         $2,223
                                School District                25.8%         $2,010
                                King County                    16.5%         $1,285
                                City                           15.4%         $1,201
                                Library                         5.9%           $461
                                EMS                             3.8%           $300
                                Port                            2.8%           $216
                                Flood Zone                      1.3%           $105
                                Ferry District                  0.0%             $3
                                Total                         100.0%         $7,805



                                                                   _________________________________
D-12                                                                  City of Mercer Island 2011-2012 Budget
                                                                                                          Budget Summary
Utility Rates
The Water and Sewer Funds are completely self-supporting activities that do not receive funding from
property taxes or any other City fund. The utilities are designed to operate like businesses, charging rates for
the purpose of providing water distribution and sewer disposal services to City residents. The City purchases
its water from the City of Seattle as do many of our neighboring communities. The Wastewater Treatment
Division of King County provides treatment for all of the sewage in the King County area, including Mercer
Island. The City's sewage is pumped to Renton where it is treated through a secondary treatment process.
The resulting sludge is further treated at the West Point Treatment Plant.

The King County Wastewater Treatment rate is the largest part of the total cost of the Sewer utility bill. In
2011, King County treatment costs will be close to $3.8 million, or 69% of the total operating budget. King
County Wastewater Treatment rates have risen dramatically in the past few years because of the recent
construction of the Brightwater Treatment Plant in unincorporated Snohomish County. A history of KC
Wastewater Treatment rate increases is presented in the table below:


Year                      2005            2006            2007              2008                  2009              2010           2011
Monthly Rate (flat) $        25.60    $       25.60   $       27.95     $       27.95     $         31.90       $     31.90    $     36.10
% Increase                     9.4%            0.0%            9.2%              0.0%              14.13%              0.0%          13.2%

For a number of years (1993-2003), the City did not raise its portion of the sewer rate. However, in 2004-
2010, due to the design and construction of part of the Sewer Lake Line, rates were increased between 9%
and 18.1% each year. Sewer rate increases of 9.3% in 2011 and 2012 are recommended to provide capital
reinvestment in the rest of the Sewer System, which was held to a minimum while funds were built up to pay
for the $24.2 million in construction costs for the Sewer Lake Line project.

Seattle Public Utilities has also increased rates annually for the last 6 years. For 2011, water rates will remain
flat for Mercer Island. The City of Seattle sets rates in 3 year periods and has not yet forecast rates for 2012-
2014, but anticipates a large increase (10%-20%) to wholesale water rates in 2012, followed by more moderate
increases of about 5% per year. A history of Seattle Public Utility rate increases is presented in the table
below:


Year                          2005            2006            2007              2008               2009             2010           2011
Monthly Rate (per ccf) * $        1.32    $      1.39     $      1.42       $      1.44       $          1.57   $      1.58    $      1.58
% Increase                        4.0%           5.3%            2.2%              1.4%                  9.0%           0.6%          0.0%
*Rate presented is a weighted average of Peak and Off-Peak Rates, and is adjusted for Sub-regional charges paid by Mercer Island.

In 2006, the Utility Board conducted a thorough review of the City’s water rate structure. Rate equity
between customer classes was reviewed, and the rate block structure was adjusted too. Based on that review,
the City’s water rates were raised an average of 6.65% in 2007, 8.8% in 2008, and 10.5% in 2009. In 2009,
another in-depth rate study reviewed the overall water use (consumption) on which rates are based, customer
cost allocations, capital needs, and identified fire protection costs to be recovered through a utility tax instead
of rates The rate block structure was again adjusted to reduce fluctuations in revenue from declining water
use. Water rates were raised an average of 10% in 2010. For 2011-2012, staff plans on using debt financing
for the First Hill Water Improvement project ($1.2M) in order to bring rate increases below the 12% and 15%
forecast for 2011 and 2012, assuming the project was funded on a pay-as-you-go basis. Consequently, water



_________________________________
City of Mercer Island 2011-2012 Budget                                                                                                D-13
Budget Summary
rate increases of 9.5% in 2011 and 2012 are recommended. It should be noted that the actual increase a
customer experiences will vary based on customer class and actual water consumption.

In May 1993, the City began preparing to make significant changes in the way it manages storm water on
Mercer Island. The catalyst for this effort was new regional, state, and federal requirements that must be met
by local governments. In 1994, the Utility Board, at the direction of the City Council, began studying the
entire storm water management area. The Storm Water Utility was formed in 1996, and the City began
implementing plans for major improvements to the storm water system. The budget reflects the program
development goals as recommended by the Utility Board. The program budget for the storm water system
stayed at a rate of $11.70 for 3 years (2003-2005). In 2006 and 2007 storm water rates were increased 60
cents and 70 cents per month respectively at the recommendation of the Utility Board. The City Council
opted to not take a rate increase in 2008, and held storm water rates at $13.00 per month, following the
Utility Board’s recommendation. In 2009 and 2010, rates were increased by 5.5% each year, which equated to
an increase of 72 cents per month in 2009 and 76 cents per month in 2010. It is recommended that storm
water rates be increased 3.3% in 2011 and 2012. This will allow continuation of the City's storm water quality
monitoring, evaluation, and maintenance and will fund the capital improvement program.

A thorough discussion of emerging issues, operations and maintenance, and rates, along with financial
statements for the Water, Sewer, and Storm Water Utilities are included in Section F.

City Debt
The City has prudently issued little debt over the years, maintaining a sizable debt capacity and consistently
following a conservative fiscal management policy as reflected in the excellent bond ratings from Moody's
rating service—Aa1 rating for its unlimited tax general obligation (UTGO), or voted, bonds and a Aa2 rating
on its limited tax general obligation (LTGO), or non-voted, bonds. Only four cities have equivalent or higher
UTGO bond ratings according to Moody’s: Seattle (Aaa), Bellevue (Aaa), Redmond (Aa1), and Kirkland (Aa1).
A high bond rating equates to lower interest costs and is very desirable.

The City can issue five types of debt which have legal limits set by the State. The five types of debt include:
voted and non-voted general obligation bonds, revenue bonds, lease debt, and loans. For the purposes of the
legal limit debt calculations, leases and loans are included with the non-voted general obligation debt limits. A
schedule of all the City debt classified by type is included later in this section.

Voted Debt
Voted debt is that which the citizens agree to in an election and is supported by special (excess) tax revenues
levied on property each year. Voted debt has generally been used for the purpose of funding large public
buildings or buying open space property. The City currently has no voted debt outstanding.

Non-Voted Debt
Non-voted debt must be paid for out of the general revenues of the city. Non-voted debt includes not only
bonds but also any loans and lease obligations of the City. The active bond issues are described below.
   2003 CCMV Property – This bond issue, paid for from real estate excise taxes, was used to buy the site
    from the Mercer Island School District for the construction of a new community center. The total
    principal owed at the end of 2010 is $1,135,000.

   2004 CCMV Construction – In 2004, the City issued $2.0 million in councilmanic bonds to partially pay
    for the construction of a new community center. The new center was completed in December 2005. The
    total principal owed at the end of 2010 is $1,520,000.

                                                                 _________________________________
D-14                                                                City of Mercer Island 2011-2012 Budget
                                                                                Budget Summary

   2007 Fire Apparatus Lease (Velocity Pumpers) – In 2007, the Mercer Island City Council authorized
    a contract with Pierce Manufacturing to purchase two Velocity Pumper Trucks through a lease purchase
    financing agreement with Municipal Asset Management Inc. in the amount of $1,035,026. The total
    principal owed at the end of 2010 is $758,561.

   2007 Fire Apparatus Lease (Mini Pumper) – In 2007, the Mercer Island City Council authorized a
    contract with Pierce Manufacturing to purchase one Mini Pumper Fire Truck through a lease Purchase
    financing agreement with Municipal Asset Management Inc. in the amount of $251,982. The total principal
    owed at the end of 2010 is $166,336.

   2009 LTGO Emergency Water Supply – In June 2009, the City issued a two year $1,015,000 LTGO
    bond as interim financing for the construction of a well for emergency water supply use. To pay off the
    debt, the Council’s declared intent is to sell a First Hill property owned by the Water Utility, which was
    surplussed in April 2009. In June 2010, given the condition of the Puget Sound real estate market, the
    City amended the terms of the two year LTGO bond, extending the maturity date out another two years
    to June 1, 2013. In addition, the City exercised its option to prepay $40,000 of the principal early, thereby
    reducing the par amount of the bond to $975,000. Debt service is being paid by the Water Fund. The
    total principal owed at the end of 2010 is $975,000.

   2009 LTGO South Mercer Playfields – In 2009, LTGO bonds were issued to fund capital
    improvements at the South Mercer Playfields. The original issue amount was $1,000,000, and the total
    principal outstanding at the end of 2010 is $940,000.

   2009 LTGO Sewer Lake Line – In 2009, LTGO bonds were issued to fund a portion of the sewer lake
    line replacement project. Sewer utility rates are being used to repay the long-term debt. The original
    issue amount was $9,405,000, and the total principal outstanding at the end of 2010 is $9,130,000.

Public Work Trust Fund Loans
In addition to the above debt, the City has the two long-term loans outstanding as of the end of 2010. Public
Works Trust Fund loans are low-interest loans (1% interest) administered through the State of Washington
Department of Community Development. In 1985, the legislature made provisions for this program from the
Public Works Assistance Account, which is funded by the Motor Vehicle Excise Tax (MVET) collected by the
state. Qualifying criteria require jurisdictions to do the following:
    1.   Impose the ¼ of one percent real estate excise tax;
    2.   Have developed a long-term plan for financing public work needs;
    3.   Be using all local revenue sources which are reasonably available for funding public works; and,
    4.   Have an adopted comprehensive plan.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                D-15
Budget Summary
Schedule of Outstanding Debt
                                            City of Mercer Island
                                       Schedule of Long Term Debt
                                                                      Original            Amount Outstanding
                  Description                     Date Issued         Amount                    12/31/2010
Non-Voted Debt:
  2003 Mercerview Property                          05/15/03           2,290,000                          1,135,000
  2004 CCMV Construction                            10/01/04           2,040,000                          1,520,000
  2009 LTGO Water Well                              07/15/09           1,015,000                             975,000
  2009 LTGO South Mercer Playfields                 08/17/09           1,000,000                             940,000
  2009 LTGO Sewer Lake Line                         08/17/09           9,405,000                          9,680,000
Total Non-Voter Approved                                             $15,750,000                       $14,250,000
Voted Debt:
Total Voter Approved                                                             $0                               $0
Lease Obligations
2007 Fire Velocity Pumpers                          07/02/07           1,035,026                             758,561
2007 Fire Mini Pumper                               09/24/07             251,982                             166,336
Total Lease Obligations                                               $1,287,008                           $924,897

       Total General Obligation Debt                                 $17,037,008                       $15,174,897
Public Works Trust Fund Loans
Sewer Pump Rehab II                                     11/06/92         368,625                              35,455
Sewer Lake Line                                         01/31/05       6,650,000                          6,094,118
       Total Public Works Trust Fund                                  $7,018,625                         $6,129,573


Debt Capacity
The debt capacity of the City is limited by law. Below is a chart showing the computation of the debt capacity
as of December 31, 2009.

                                                  LIMITED TAX                         UNLIMITED TAX
                                            General         General               Open Space and  Utility
                                          Purpose Debt    Purpose Debt                Parks      Purposes
                                               (1)             (1)
                                         (based on 1.5%  (based on 2.5%               (based on 2.5%   (based on 2.5%
                                             of AV)          of AV)                       of AV)           of AV)
         Legal Limit                      $130,660,321    $217,767,201                 $217,767,201     $217,767,201
         Add: Cash on hand for
         debt redemption                            4,474                4,474                    0                      0
         Less: Limited Tax Debt
         outstanding                         -15,375,195           -15,375,195                    0                      0
         Less: Unlimited Tax Debt
         outstanding                                    0                    0                    0                      0
         Remaining Debt Capacity,
             Limited Tax                  $115,289,600         $202,396,480
         Remaining Debt Capacity,
             Unlimited Taxes                                                          $217,767,201      $217,767,201
         12/31/09 AV: $8,710,688,041 (I) Indebtedness for all General Purpose debt may not exceed 2.5% if AV, Any non-
         voted debt reduces the margin available for voted general purpose debt.

                                                                          _________________________________
D-16                                                                         City of Mercer Island 2011-2012 Budget
                                                                                          Budget Summary
Fund Balances
General Fund and Other General Government Funds
The City of Mercer Island's General Fund accounts for all financial transactions not required to be accounted
for in a separate fund by statute or generally accepted accounting principles. It is the City’s largest accounting
entity and provides for the majority of its general operations. Reserves are both operational and long term.
Three other general purpose funds are also presented.

General Fund - 001
                                                       2009               2010             2011              2012
                    Description                       Actual            Forecast          Budget            Budget
Beginning Fund Balance                           $ 3,811,784        $ 3,059,553       $ 2,264,282      $ 2,264,282
Plus Revenues                                        22,006,702         22,417,149    22,775,124           23,414,948
Less Expenditures                                    (22,758,933)   (23,212,420) (22,775,124)              (23,414,948)
Ending Fund Balance                              $ 3,059,553        $ 2,264,282       $ 2,264,282      $ 2,264,282
Consisting of:
  Compensated Absence Reserve                         1,001,135          1,001,135        1,001,135         1,001,135
  LEOFF1 Long Term Care Reserve                         913,108           913,108          913,108            913,108
  Deferred Revenues & Customer Deposits                 216,069           216,069          216,069            216,069
  Inventory of Supplies                                 114,777           114,777          114,777            114,777
  Petty Cash                                              3,020              3,020           3,020              3,020
  Revenue Stabilization Reserve                          14,936                  -                -                 -
  Funding for Carryover Expenditures in 2010            122,828                  -                -                 -
  Funding for One Time Expenditures 2010                657,507                  -                -                 -
  Unreserved                                             16,173            16,173           16,173             16,173


Self Insurance Fund - 037
                                                       2009               2010             2011              2012
                    Description                       Actual            Forecast          Budget            Budget
Beginning Fund Balance                           $      111,758     $     111,525     $    111,525     $      111,525
Plus Revenues                                             4,767            10,000           10,000             10,000
Less Expenditures                                         (5,000)          (10,000)         (10,000)           (10,000)
Ending Fund Balance                              $      111,525     $     111,525     $ 111,525        $      111,525
Consisting of:
  Self Insurance Reserve                                111,525           111,525          111,525            111,525




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                  D-17
Budget Summary
Youth Service Endowment Fund - 061
                                                     2009               2010             2011              2012
                    Description                     Actual            Forecast          Budget            Budget
Beginning Fund Balance                          $     309,395     $     309,395     $     309,395     $     309,395
Plus Revenues                                           3,291              3,000            3,500             3,500
Less Expenditures                                       (3,291)           (3,000)           (3,500)           (3,500)
Ending Fund Balance                             $     309,395     $     309,395     $ 309,395         $     309,395
Consisting of:
  Reserve Endowment Principal                         285,856           285,856           285,856           285,856
  Unreserved                                           23,539            23,539            23,539            23,539


Special Revenue Funds
Special Revenue Funds are established to account for the proceeds of specific revenue sources that are
restricted to provide for particular functions or activities of the City. The restricted revenues are segregated
into individual funds to ensure that expenditures are made exclusively for the purpose designated.

Street Fund - 104
                                                     2009               2010             2011              2012
                    Description                     Actual            Forecast          Budget            Budget
Beginning Fund Balance                          $   3,405,383     $ 3,647,300       $ 1,905,461       $ 1,914,501
Plus Revenues                                       2,187,416          1,504,230        1,363,998         1,609,315
Less Expenditures                                   (1,945,499)       (3,246,069)       (1,354,957)       (2,035,817)
Ending Fund Balance                             $ 3,647,300       $ 1,905,461       $ 1,914,501       $ 1,487,999
Consisting of:
  Traffic Signal Reserve                               84,272                  -                -                 -
  Reserve ICW Pedestrian Crossings                          -           225,000           225,000           225,000
  Appropriated for Expenditures Next Year           1,741,839                  -          426,502         1,053,112
  Working Capital Reserve                             200,000           200,000           200,000           200,000
  Unreserved                                        1,621,189          1,480,461        1,062,999             9,887




                                                                      _________________________________
D-18                                                                     City of Mercer Island 2011-2012 Budget
                                                                               Budget Summary
Criminal Justice Fund - 112
                                              2009             2010             2011            2012
                    Description              Actual           Forecast         Budget          Budget
Beginning Fund Balance                   $    756,202     $     817,457    $    548,270    $    484,708
Plus Revenues                                 727,134           481,159         483,750         501,750
Less Expenditures                             (665,879)        (750,346)       (547,312)        (565,666)
Ending Fund Balance                      $    817,457     $     548,270    $ 484,708       $    420,792
Consisting of:
  Treasury Funds Reserve                      165,715           165,715         136,715         107,715
  JAG Proceeds                                160,944            79,437          79,437          79,437
  ENTF Reserve                                 50,872            50,872          50,872          50,872
  Funding for Expenditures Next Year          269,187            63,562          63,916                -
  Working Capital Reserve                      50,000            50,000          50,000          50,000
  Unreserved                                  120,739           138,684         103,768         132,768


Beautification Fund - 117
                                              2009             2010             2011            2012
                    Description              Actual           Forecast         Budget          Budget
Beginning Fund Balance                   $    658,681     $     663,232    $    693,891    $    595,575
Plus Revenues                                 878,411           771,670         785,745         801,550
Less Expenditures                             (873,860)        (741,011)       (884,061)        (891,874)
Ending Fund Balance                      $    663,232     $     693,891    $ 595,575       $    505,251
Consisting of:
  Street Light Control Cabinet Reserve        150,000           150,000         150,000         150,000
  Funding for Expenditures Next Year           69,341           103,057         100,000                -
  Working Capital Reserve                      75,000            75,000          75,000          75,000
  Unreserved                                  368,891           365,834         270,575         280,251


Contingency Fund - 130
                                              2009             2010             2011            2012
                    Description              Actual           Forecast         Budget          Budget
Beginning Fund Balance                   $ 2,167,835      $ 2,344,335      $ 1,865,813     $ 1,734,985
Plus Revenues                                 176,500                 -                -               -
Less Expenditures                                    -         (478,522)       (130,828)        (415,161)
Ending Fund Balance                      $ 2,344,335      $ 1,865,813      $ 1,734,985     $ 1,319,824
Consisting of:
  Contingency Reserve-(City Policy)          2,344,335         1,865,813       1,734,985       1,319,824




_________________________________
City of Mercer Island 2011-2012 Budget                                                                     D-19
Budget Summary
1% For the Arts Fund - 140
                                                     2009              2010              2011              2012
                    Description                     Actual            Forecast          Budget            Budget
Beginning Fund Balance                          $     161,243     $     339,151     $     314,911     $     284,611
Plus Revenues                                         214,908            19,110            10,300            32,000
Less Expenditures                                     (37,000)           (43,350)         (40,600)          (10,000)
Ending Fund Balance                             $     339,151     $     314,911     $ 284,611         $     306,611
Consisting of:
  Funding for Expenditures Next Year                   24,250            30,600                 -                 -
  Unreserved                                          314,901           314,911           284,611           306,611


Youth and Family Services Fund - 160
                                                     2009              2010              2011              2012
                    Description                     Actual            Forecast          Budget            Budget
Beginning Fund Balance                          $     670,255     $     534,246     $     426,884     $     323,470
Plus Revenues                                       1,732,886          1,793,778        1,753,903         1,772,694
Less Expenditures                                   (1,868,895)       (1,901,140)       (1,857,317)       (1,923,010)
Ending Fund Balance                             $     534,246     $     426,884     $ 323,470         $     173,154
Consisting of:
  Funding for Expenditures Next Year                  107,362           103,414           150,316                 -
  Working Capital Reserve                              75,000            75,000            75,000            75,000
  Unreserved                                          351,884           248,470            98,154            98,154


Debt Service Funds
Debt Service Funds account for the accumulation of resources for the payment of principal and interest on
general obligation bonds. General obligation bonds are those for which the full faith and credit of the City are
pledged.

Bond Redemption Voted - 208
                                                     2009              2010              2011              2012
                    Description                     Actual            Forecast          Budget            Budget
Beginning Fund Balance                          $      12,584     $      18,943     $      18,943     $      18,943
Plus Revenues                                         206,239                 -                 -                 -
Less Expenditures                                    (199,880)                -                 -                 -
Ending Fund Balance                             $      18,943     $      18,943     $      18,943     $      18,943
Consisting of:
  Funding for Expenditures Next Year                        -                 -                 -                 -
  Debt Service Reserve                                 18,943            18,943            18,943            18,943




                                                                      _________________________________
D-20                                                                     City of Mercer Island 2011-2012 Budget
                                                                                        Budget Summary
Bond Redemption Non-Voted - 239
                                                     2009              2010              2011              2012
                    Description                     Actual            Forecast          Budget            Budget
Beginning Fund Balance                          $       4,474     $       4,474     $       4,474     $       4,474
Plus Revenues                                         359,821           453,143           446,030           441,241
Less Expenditures                                    (359,821)         (453,143)         (446,030)         (441,241)
Ending Fund Balance                             $       4,474     $       4,474     $       4,474     $       4,474
Consisting of:
  Debt Service Reserve                                  4,474             4,474             4,474             4,474


Capital Project Funds
Capital Project Funds account for financial resources to be used for the acquisition or construction of capital
facilities other than those financed by enterprise or internal service funds.

Capital Improvement Fund - 343
                                                     2009              2010              2011              2012
                    Description                     Actual            Forecast          Budget            Budget
Beginning Fund Balance                          $ 1,456,988       $ 3,061,848       $ 1,177,093       $     892,121
Plus Revenues                                       2,914,606          1,561,323        1,395,225         1,652,600
Less Expenditures                                   (1,309,746)       (3,446,078)       (1,680,197)       (1,978,167)
Ending Fund Balance                             $ 3,061,848       $ 1,177,093       $ 892,121         $     566,555
Consisting of:
  Funding for Expenditures Next Year                1,884,755           284,972           325,567           769,199
  All Weather Field Repl Reserve                       94,903           160,375           247,975           335,575
  Working Capital Reserve                             250,000           250,000           250,000           250,000
  Unreserved                                          832,190           481,746            68,579          (788,219)


Capital Technology & Equipment Fund - 345
                                                     2009              2010              2011              2012
                    Description                     Actual            Forecast          Budget            Budget
Beginning Fund Balance                          $ 1,682,230       $ 1,337,280       $     730,280     $     569,280
Plus Revenues                                         371,882           225,000           216,000           181,000
Less Expenditures                                    (716,832)         (832,000)         (377,000)         (355,877)
Ending Fund Balance                             $ 1,337,280       $     730,280     $ 569,280         $     394,403
Consisting of:
  Fire Defibrilator Replacement                        32,532            32,532            32,532            32,532
  NORCOM                                              409,385           209,877           104,877                 -
  Funding for Expenditures Next Year                  607,000           161,000           174,877            90,000
  Working Capital Reserve                              50,000            50,000            50,000            50,000
  Unreserved                                          238,363           276,871           206,994           221,871



_________________________________
City of Mercer Island 2011-2012 Budget                                                                                D-21
Budget Summary
Capital Reserve Fund - 350
                                                   2009             2010              2011              2012
                    Description                   Actual        Forecast             Budget            Budget
Beginning Fund Balance                         $ 1,579,380     $ 1,069,999       $      34,999     $     134,999
Plus Revenues                                             -                -           100,000                 -
Less Expenditures                                  (509,381)       (1,035,000)               -                 -
Ending Fund Balance                            $ 1,069,999     $      34,999     $ 134,999         $     134,999
Consisting of:
  Unreserved                                      1,069,999           34,999           134,999           134,999


Enterprise Funds
Enterprise Funds account for government activities that are financed and operated in a manner similar to
private business. Costs of providing services to the community are primarily financed by user fees.

Water Fund - 402
                                                   2009             2010              2011              2012
                    Description                   Actual        Forecast             Budget            Budget
Beginning Fund Balance                         $ 1,496,358     $ 2,066,476       $ 1,522,437       $ 1,290,895
Plus Revenues                                     5,422,933        4,041,725         4,620,105         6,266,771
Less Expenditures                                (4,852,815)       (4,585,764)       (4,851,647)       (5,626,709)
Ending Fund Balance                            $ 2,066,476     $ 1,522,437       $ 1,290,895       $ 1,930,957
Consisting of:
  Fiscal Policy Reserves                            723,296          735,391           877,222           948,325
  Capital Funding Reserve                           250,000          281,341           293,567           309,423
  Funding for Expenditures Next Year                544,039          231,542                 -           153,123
  Unreserved                                        549,141          274,163           120,106           520,086


Sewer Fund - 426
                                                   2009             2010              2011              2012
                    Description                   Actual        Forecast             Budget            Budget
Beginning Fund Balance                         $ 8,645,343     $ 12,818,379      $ 1,182,536       $     787,546
Plus Revenues                                    22,243,243        6,716,602         6,825,040         7,138,063
Less Expenditures                               (18,070,207)   (18,352,445)          (7,220,030)       (7,431,249)
Ending Fund Balance                            $ 12,818,379    $ 1,182,536       $ 787,546         $     494,360
Consisting of:
  Operating Reserves                                393,582          403,314           446,512           450,528
  Funding for Expenditures Next Year             11,635,843          394,990           293,186                 -
  Unreserved                                        788,954          384,232            47,848            43,832




                                                                   _________________________________
D-22                                                                  City of Mercer Island 2011-2012 Budget
                                                                                       Budget Summary
Storm Water Fund - 432
                                                    2009              2010              2011              2012
                    Description                    Actual            Forecast          Budget            Budget
Beginning Fund Balance                         $ 1,867,416       $ 1,781,103       $ 1,980,876       $ 1,407,912
Plus Revenues                                      1,691,079          1,795,331        1,785,318         2,063,439
Less Expenditures                                  (1,777,392)       (1,595,558)       (2,358,281)       (2,418,022)
Ending Fund Balance                            $ 1,781,103       $ 1,980,876       $ 1,407,912       $ 1,053,329
Consisting of:
  Operating Reserves                                  81,163            81,661            77,450            80,167
  Funding for Expenditures Next Year                       -           572,963           354,583           245,840
  Unreserved                                       1,699,940          1,326,252          975,879           727,322


Internal Service Funds
Internal Service Funds account for the financing, on a cost-reimbursement basis, of goods and services
provided by one department or agency of the City to another department or agency of the City.

Fleet Rental Fund - 503
                                                    2009              2010              2011              2012
                    Description                    Actual            Forecast          Budget            Budget
Beginning Fund Balance                         $ 2,380,731       $ 2,368,945       $ 2,294,083       $ 1,913,273
Plus Revenues                                      1,306,616          1,291,901        1,266,874         1,211,558
Less Expenditures                                  (1,318,400)       (1,366,763)       (1,647,683)       (1,357,165)
Ending Fund Balance                            $ 2,368,945       $ 2,294,083       $ 1,913,273       $ 1,767,666
Consisting of:
  800 MHz Radio Replacement                          116,977            73,853            97,233           120,613
  Fire Apparatus Sinking Fund                        363,318           347,504           331,690           317,374
  Vehicle Replacements Next Year                     420,489           912,712           615,925           524,819
  Operating Reserve                                  122,294           122,294           122,294           122,294
  Vehicle Replacement Reserve                      1,345,867           837,720           746,131           682,566


Computer Replacement Fund - 520
                                                    2009              2010              2011              2012
                    Description                    Actual            Forecast          Budget            Budget
Beginning Fund Balance                         $     204,698     $     195,528     $     199,356     $     246,368
Plus Revenues                                        591,233           551,403           589,507           589,507
Less Expenditures                                   (600,403)         (547,575)         (542,495)         (504,260)
Ending Fund Balance                            $     195,528     $     199,356     $ 246,368         $     331,615
Consisting of:
  Computer Replace Expenditures Next Year            102,000           120,000            70,000            70,000
  Computer Replacement Reserve                        93,528            79,356           176,368           261,615



_________________________________
City of Mercer Island 2011-2012 Budget                                                                            D-23
Budget Summary
Pension Trust Fund
Trust Funds account for assets held by the City in a trustee capacity or as an agent for individuals, private
organizations, and other governments.

Firemens Pension Fund - 606
                                                     2009           2010           2011             2012
                    Description                     Actual        Forecast       Budget            Budget
Beginning Fund Balance                           $ 1,114,680     $ 1,082,100    $ 1,043,593    $    997,793
Plus Revenues                                          35,588         29,493        29,200           30,000
Less Expenditures                                     (68,168)       (68,000)       (75,000)         (83,000)
Ending Fund Balance                              $ 1,082,100     $ 1,043,593    $ 997,793      $    944,793
Consisting of:
  Funding for Expenditures Next Year                   38,507         45,800        53,000           53,000
  Pension Reserve                                   1,043,593        997,793       944,793          891,793




                                                                  _________________________________
D-24                                                                 City of Mercer Island 2011-2012 Budget
                                                                             Budget Summary
Dashboard Indicators
The City’s performance measurement model, called the Mercer Island Dashboard, was developed in 2007 with
the following objectives in mind:
   1. To identify “top tier” indicators which capture the “state of the City” in terms of what matters most
      to the management team and the City Council.
   2. To collect meaningful information that impacts financial and human resource allocation decisions and
      ultimately organizational direction during the biennial budget/CIP process.
   3. To select a manageable group of measures that has minimal impact on productive staff time in terms of
      data gathering.

The model is comprised of 35 “dashboard” indicators, which are organized around the City’s 6 priorities of
government and broken down into functional areas within each priority of government:

      Community Safety & Security: 8 indicators
       ○   Personal Security
       ○   Crime Prevention Effectiveness
       ○   Traffic Safety Effectiveness
       ○   Timely Crime Response
       ○   Fire Suppression Effectiveness
       ○   Emergency Medical Aid Effectiveness
       ○   Timely Fire & Emergency Medical Aid Responses
       ○   Emergency Preparedness
      Effective & Efficient Public Service Delivery: 14 indicators
       ○   Public Trust
       ○   Community Issues
       ○   Risk Management
       ○   Employee Retention & Morale
       ○   Development Permit Processing
       ○   Court Operations
       ○   Creditworthiness
       ○   Financial Management
       ○   Financial Condition
       ○   Environmental Stewardship (5 indicators)
      Reliable Public Infrastructure: 4 indicators
       ○   General Government Infrastructure Condition (2 indicators)
       ○   Water Utility Infrastructure Condition
       ○   Sewer Utility Infrastructure Condition
      Attractive Neighborhoods & Business Districts: 3 indicators
       ○   Neighborhood & Downtown Attractiveness (2 indicators)
       ○   Economic Vitality
      Recreational, Cultural, Health & Educational Opportunities: 5 indicators
       ○   Recreation Programs & Facilities
       ○   Park Amenities
       ○   Youth Counseling & Intervention

_________________________________
City of Mercer Island 2011-2012 Budget                                                            D-25
Budget Summary
        ○   Senior Outreach & Advocacy
        ○   Volunteerism & Human Services Funding
       Public Communication & Community Involvement: 1 indicator
        ○   Informed Citizenry

In addition, many of the “dashboard” indicators are further broken down into sub-indicators to provide
context, to identify important components of each indicator, and to paint a clearer picture of performance.

Results are shown for 2006-2007, and where appropriate, targets have been established for 2010-2012. The
model is presented on the following page.




                                                               _________________________________
D-26                                                              City of Mercer Island 2011-2012 Budget
                                                                                                                   Budget Summary
Priority of Government
COMMUNITY SAFETY & SECURITY
                            Dashboard                                                       Results                                       Target
                             Indicator                                  2006         2007             2008         2009       2010         2011          2012

Personal Security:
1) % of residents who feel "very safe" or "completely safe"
   walking alone:
      ► In their neighborhood                                           N/A          86%              N/A          86%        N/A          88%           N/A
      ► In the City's Town Center                                       N/A          86%              N/A          87%        N/A          88%           N/A

    Note: A citizen survey is conducted biennially. The most recent survey was conducted in February 2010 and reported as a 2009 result.

Crime Prevention Effectiveness:
2) Mercer Island's crime rate relative to other Eastside cities and
   the King County average (expressed as # of Part 1 violent
   crimes per 1,000 population followed by # of Part 1 property
   crimes per 1,000 population):
      ► Sammamish                                                     0.3 / 11.9   0.2 / 13.8    0.4 / 10.5   0.3 / 8.7       N/A          N/A           N/A
      ► Mercer Island                                                 1.0 / 21.3   0.3 / 17.9    0.6 / 18.7   0.5 / 18.1    0.5 / 18.0   0.5 / 18.0   0.5 / 18.0
      ► Issaquah                                                      0.4 / 46.6   0.4 / 35.0    0.6 / 31.0   0.7 / 23.6      N/A          N/A           N/A
      ► Redmond                                                       1.3 / 35.0   1.5 / 33.3    1.3 / 32.9   1.1 / 31.9      N/A          N/A           N/A
      ► Bellevue                                                      1.6 / 36.6   1.2 / 35.6    1.4 / 36.1   1.3 / 32.9      N/A          N/A           N/A
      ► Kirkland                                                      1.9 / 39.7   1.4 / 39.5    2.0 / 40.2   1.2 / 33.7      N/A          N/A           N/A
      ► King County average                                           4.1 / 51.5   3.7 / 44.5    3.5 / 40.4   3.9 / 42.0      N/A          N/A           N/A

Traffic Safety Effectiveness:
3) Mercer Island's traffic accident rate relative to other Eastside
   cities and the King County average (expressed as # of traffic
   accidents per 1,000 population):
      ► Sammamish                                                       7.37         6.43             6.24         5.46       N/A          N/A           N/A
      ► Mercer Island                                                  12.12        16.04         12.01           12.68      12.50        12.50          12.50
      ► King County average                                            25.20        23.32         21.78           17.24       N/A          N/A           N/A
      ► Redmond                                                        21.89        21.47         20.75           17.27       N/A          N/A           N/A
      ► Issaquah                                                       31.27        23.88         20.82           17.81       N/A          N/A           N/A
      ► Kirkland                                                       25.73        25.87         20.24           17.89       N/A          N/A           N/A
      ► Bellevue                                                       28.38        24.39         24.43           21.45       N/A          N/A           N/A

Timely Crime Response:
4) Patrol officer response to emergency calls:
      ► # of emergency calls                                            431          347              313          451        450          450           450
      ► Average response time to emergency calls                       4.7 min      4.3 min       4.3 min         4.8 min    4.6 min      4.6 min      4.6 min
      ► % of emergency calls responded to within 6 minutes              65%          69%              71%          74%        70%          70%           70%

Fire Suppression Effectiveness:
5) Mercer Island's annual $ fire loss per 1,000 population relative
   to other Eastside cities and fire districts:
      ► Redmond                                                       $ 22,679     $ 13,440     $ 63,361      $     2,406     N/A          N/A           N/A
      ► Bothell                                                       $ 33,119     $ 41,577     $ 17,734      $ 17,283        N/A          N/A           N/A
      ► Mercer Island                                                 $ 47,594     $ 10,735     $ 140,397     $ 18,778        N/A          N/A           N/A
      ► Eastside Fire & Rescue                                        $ 22,614     $ 17,025     $ 25,132      $ 20,927        N/A          N/A           N/A
      ► Average (6 jurisdictions)                                     $ 36,861     $ 37,018     $ 59,868      $ 27,683        N/A          N/A           N/A
      ► Bellevue                                                      $ 27,859     $ 41,017     $ 16,014      $ 42,694        N/A          N/A           N/A
      ► Kirkland                                                      $ 67,301     $ 98,316     $ 96,570      $ 64,008        N/A          N/A           N/A



_________________________________
City of Mercer Island 2011-2012 Budget                                                                                                            D-27
Budget Summary
Priority of Government
COMMUNITY SAFETY & SECURITY
                             Dashboard                                                     Results                                  Target
                                 Indicator                                2006      2007             2008    2009       2010         2011     2012

Emergency Medical Aid Effectiveness:
6) Mercer Island's cardiac arrest survival rate relative to the King
   County average:
       ► Mercer Island                                                    N/A       50%              50%      0%         50%         50%      50%
       ► King County average                                              N/A       46%              49%     43%         N/A         N/A      N/A

Timely Fire & Emergency Medical Aid Responses:
7) Firefighter response to:
       ► Fire suppression calls:
          ● # of calls                                                    107        45              72       63         80           80       80
          ● Average response time                                        6.8 min   6.7 min       6.7 min    6.3 min    6.3 min     6.3 min   6.3 min
          ● % of calls responded to within 6 minutes                      40%       50%              49%     52%        50%          50%      50%
       ► Emergency medical aid calls:
           ● # of calls (excludes motor vehicle accidents)               1,451     1,487         1,530      1,531       1,580       1,600    1,620
           ● Average response time                                       6.2 min   6.0 min       6.0 min    5.8 min    6.0 min     6.0 min   6.0 min
           ● % of calls responded to within 6 minutes                     62%       62%              61%     65%         67%         69%      70%

Emergency Preparedness:
8) % of households that believe they are "mostly prepared" or             N/A       58%              N/A     56%         N/A         60%      N/A
   "completely prepared" for a 7 day emergency entailing
   disruption of power and water services
    Note: A citizen survey is conducted biennially. The most recent survey was conducted in February 2010 and reported as a 2009 result.




Priority of Government
EFFECTIVE & EFFICIENT PUBLIC SERVICE DELIVERY
                            Dashboard                                                     Results                                  Target
                              Indicator                                   2006      2007             2008    2009       2010        2011      2012

Public Trust:
9) % of residents who believe the City is doing a "good" or               61%       56%              N/A     55%         N/A         60%      N/A
   "excellent" job of using tax dollars responsibly
    Note: A citizen survey is conducted biennially. The most recent survey was conducted in February 2010 and
    reported as a 2009 result.


Community Issues:
10) Most important problem facing Mercer Island today according
    to the biennial citizen survey is (only top 5 results are listed):
       ► Traffic/transportation/parking                                   26%       28%              N/A     26%         N/A         N/A      N/A
       ► Education/school funding                                          7%        9%              N/A     13%         N/A         N/A      N/A
       ► Overcrowding/overdevelopment                                     28%       24%              N/A     11%         N/A         N/A      N/A
       ► Nothing                                                           6%       10%              N/A     10%         N/A         N/A      N/A
       ► High taxes/high cost of living                                    6%        3%              N/A      6%         N/A         N/A      N/A

    Note: A citizen survey is conducted biennially. The most recent survey was conducted in February 2010 and reported as a 2009 result.




                                                                                             _________________________________
D-28                                                                                            City of Mercer Island 2011-2012 Budget
                                                                                                              Budget Summary
Priority of Government
EFFECTIVE & EFFICIENT PUBLIC SERVICE DELIVERY
                            Dashboard                                                      Results                                  Target
                             Indicator                                   2006        2007        2008        2009        2010        2011          2012

Risk Management:
11) Total # of insurance claims filed over the past 5 years relative
    to WCIA 5 year rolling average for Group 3/4 cities:
      ► Mercer Island                                                    170         172             175     143         140         140           140
      ► Group 3 cities' average                                           99         100             96       90         100         100           100
      ► Group 4 cities' average                                          225         225             217     209         220         220           220

Employee Retention & Morale:
12) Employee longevity by department or department grouping:
      ► Police & Fire:
          ● Less than 5 years                                            N/A         16%             18%     16%         N/A         N/A           N/A
          ● At least 5 years but less than 10 years                      N/A         28%             22%     15%         N/A         N/A           N/A
          ● At least 10 years                                            N/A         56%             60%     69%         N/A         N/A           N/A
      ► Maintenance and Parks & Recreation:
          ● Less than 5 years                                            N/A         36%             32%     33%         N/A         N/A           N/A
          ● At least 5 years but less than 10 years                      N/A         30%             31%     34%         N/A         N/A           N/A
          ● At least 10 years                                            N/A         34%             37%     33%         N/A         N/A           N/A
      ► Development Services:
          ● Less than 5 years                                            N/A         79%             82%     74%         N/A         N/A           N/A
          ● At least 5 years but less than 10 years                      N/A          8%             9%      11%         N/A         N/A           N/A
          ● At least 10 years                                            N/A         13%             9%      15%         N/A         N/A           N/A
      ► All other departments:
          ● Less than 5 years                                            N/A         38%             42%     39%         N/A         N/A           N/A
          ● At least 5 years but less than 10 years                      N/A         40%             33%     33%         N/A         N/A           N/A
          ● At least 10 years                                            N/A         22%             25%     28%         N/A         N/A           N/A

Permit Processing:
13) % of DSG customers "satisfied" or "very satisfied" with the          N/A         85%             N/A     91%         N/A         90%           N/A
    helpfulness and responsiveness of DSG staff in processing
    single family residential and commercial/multi-family permits
    Note: DSG conducts a customer survey biennially.

Court Operations:
14) Annual Municipal Court activity:
      ► # of cases filed (Mercer Island & Newcastle):
          ● Parking                                                      509         719             542     363         325         325           325
          ● Infractions                                                  2,980       3,206       3,244       2,852       2,600       2,600         2,600
          ● Criminal charges                                             442         430             556     580         500         500           500
          ● Total # of cases filed                                       3,931       4,355       4,342       3,795       3,425       3,425         3,425
      ► Total court-related revenues:
          ● Mercer Island                                              $ 294,288   $ 319,303   $ 341,464   $ 353,732   $ 336,000   $ 360,000   $ 360,000
          ● Newcastle                                                  $ 40,964    $ 55,121    $ 40,704    $ 33,014    $ 34,000    $ 34,000    $ 34,000
          ● Total amount of court-related revenues                     $335,252    $374,424    $382,168    $386,746    $370,000    $394,000    $394,000
          ● % of court-related revenues to expenditures                  125%        132%        118%        100%        93%         111%          107%
      ► # of RALJ (rules on appeal for courts of limited
         jurisdiction) appeals filed related to:
          ● Infractions                                                    1           0              0        0           0           0             0
          ● Criminal charges                                               0           0              0        1           0           0             0


_________________________________
City of Mercer Island 2011-2012 Budget                                                                                                      D-29
Budget Summary
Priority of Government
EFFECTIVE & EFFICIENT PUBLIC SERVICE DELIVERY
                             Dashboard                                                   Results                                  Target
                              Indicator                                   2006    2007            2008     2009        2010        2011        2012

Creditworthiness:
15) City's bond rating (Moody's):
       ► Unlimited Tax General Obligation (UTGO) bonds                    Aa1      Aa1             Aa1      Aa1         Aa1         Aa1         Aa1
       ► Limited Tax General Obligation (LTGO) bonds                      Aa2      Aa2             Aa2      Aa2         Aa2         Aa2         Aa2

Financial Management:
16) Receive unqualified (i.e. clean) audit opinion on prior year's        Yes      Yes             Yes      Yes         Yes         Yes         Yes
    financial statements

Financial Condition:
17) Ratio of tax revenues (i.e. property, sales, and utility taxes) to    1.09    1.12             1.07    1.01         0.98        1.01        1.00
    personnel costs (i.e. salaries, hourly wages, overtime, and
    benefits) in the General Fund

Environmental Stewardship:
18) Average City fleet fuel efficiency:
       ► Full-size, mid-size, compact & subcompact vehicles               N/A    16.8 mpg     17.2 mpg    19.2 mpg   19.5 mpg     20.0 mpg    20.5 mpg
       ► Large/small SUV's, large/small pickup trucks & vans              N/A    9.9 mpg      10.3 mpg    10.5 mpg   10.6 mpg     10.7 mpg    10.8 mpg
       ► Commercial vehicles (requires CDL)                               N/A    6.2 mpg      6.5 mpg     6.9 mpg     7.0 mpg     7.1 mpg     7.2 mpg

    Note: Excludes all Police and Fire Department vehicles, except those used by command staff.

19) Estimated annual reduction in employee commute miles                  N/A      N/A       264,945 mi 324,731 mi   340,968 mi 358,016 mi 375,917 mi
    resulting from flex schedules, ride sharing, and biking                                                           (5% incr)   (5% incr)   (5% incr)


20) % change in energy (electricity and natural gas) usage for all City
    owned buildings/facilities:
       ► Occupied buildings                                               N/A     4.1%         -0.9%       -2.8%       -5.0%       -5.0%       -2.0%
       ► Park facilities (including lighting)                             N/A     7.3%         11.0%       7.9%        -5.0%       -5.0%       -2.0%
       ► Street lights                                                    N/A    -12.3%           1.4%     -7.6%       -5.0%       -5.0%       -2.0%
       ► Water & sewer facilities                                         N/A     -6.9%        -10.1%      2.9%        -2.0%       -2.0%       -1.0%
       ► Total (all City owned buildings/facilities)                      N/A     1.7%         -1.2%       -1.6%       -5.0%       -5.0%       -2.0%

21) % change in annual water consumption by:
       ► Average single family residential customer                       N/A    -10.1%        -4.1%       5.3%        -2.0%       -2.0%       -2.0%
       ► City owned buildings & other facilities                          N/A     43.7%        -31.0%      8.6%        -2.0%       -2.0%       -2.0%
       ► City owned parks                                                 N/A     1.5%         -18.2%      4.6%        -2.0%       -2.0%       -2.0%

22) % of total Mercer Island residential solid waste stream diverted
    from landfill relative to King County average
       ► Mercer Island                                                    N/A      63%             63%      63%         63%         65%         65%
       ► King County average                                              N/A      53%             55%      54%         N/A         N/A         N/A




                                                                                          _________________________________
D-30                                                                                         City of Mercer Island 2011-2012 Budget
                                                                                                                   Budget Summary
Priority of Government
RELIABLE PUBLIC INFRASTRUCTURE
                            Dashboard                                                 Results                                           Target
                            Indicator                             2006         2007          2008          2009            2010            2011          2012

Infrastructure Condition--General Government:
23) % of residents who believe the City is doing a "good" or
    "excellent" job of maintaining the City's:
      ► Streets                                                   N/A          76%              N/A         72%             N/A            80%           N/A
      ► Sidewalks & pedestrian/bicycle paths                      N/A          66%              N/A         65%             N/A            70%           N/A
      ► Parks, trails, and open space                             87%          86%              N/A         90%             N/A            90%           N/A

    Note: A citizen survey is conducted biennially. The most recent survey was conducted in February 2010 and reported as a 2009 result.

24) Pavement condition index (PCI) rating breakdown for
    (noting centerline miles and % of total):
      ► Arterial streets:
          ● Failed (0-20 PCI)                                     N/A       0.0 mi / 0%   0.0 mi / 0%    0.0 mi / 0%     0.0 mi / 0%   0.0 mi / 0%   0.0 mi / 0%
          ● Poor (21-48 PCI)                                      N/A       0.3 mi / 1%   0.0 mi / 0%    0.6 mi / 2%     0.3 mi / 1%   0.3 mi / 1%   0.3 mi / 1%
          ● Fair (49-66 PCI)                                      N/A      5.2 mi / 21% 4.7 mi / 19% 6.2 mi / 24%       6.4 mi / 25% 6.4 mi / 25% 6.4 mi / 25%
          ● Good (67-88 PCI)                                      N/A      12.6 mi / 52% 12.6 mi / 52% 15.5 mi / 61%    15.0 mi / 59% 15.0 mi / 59% 15.0 mi / 59%
          ● Excellent (89-100 PCI)                                N/A      6.2 mi / 26% 7.0 mi / 29% 3.2 mi / 13%       3.8 mi / 15% 3.8 mi / 15% 3.8 mi / 15%
      ► Residential streets:
          ● Failed (0-20 PCI)                                     N/A                                    0.6 mi / 1%     0.0 mi / 0%   0.0 mi / 0%   0.0 mi / 0%
                                                                             18.0 mi /     18.0 mi /
          ● Poor (21-48 PCI)                                      N/A                                    4.0 mi / 7%     2.7 mi / 5%   2.7 mi / 5%   2.7 mi / 5%
                                                                               35%              35%
          ● Fair (49-66 PCI)                                      N/A                                   5.2 mi / 10%    5.4 mi / 10% 5.4 mi / 10% 5.4 mi / 10%
          ● Good (67-88 PCI)                                      N/A        34.0 mi /     34.0 mi /    16.7 mi / 31%   16.2 mi / 30% 16.2 mi / 30% 16.2 mi / 30%
          ● Excellent (89-100 PCI)                                N/A          65%              65%     27.5 mi / 51%   29.7 mi / 55% 29.7 mi / 55% 29.7 mi / 55%

Infrastructure Condition--Water Utility:
25) # of water main breaks per 1,000 service connections
    relative to other Puget Sound cities and utility districts:
      ► Soos Creek Water & Sewer District                         N/A          N/A              0.29        0.06            N/A            N/A           N/A
      ► Renton                                                    N/A          N/A              2.04        0.23            N/A            N/A           N/A
      ► Northshore Utility District                               N/A          N/A              0.29        0.30            N/A            N/A           N/A
      ► Cedar River Water & Sewer District                        N/A          N/A              0.39        0.39            N/A            N/A           N/A
      ► Average (8 jurisdictions)                                 N/A          N/A           0.74           0.48            N/A            N/A           N/A
      ► Bellevue                                                  0.50         0.50             0.70        0.60            N/A            N/A           N/A
      ► Mercer Island                                             1.20         1.20          1.07           0.67            0.80           0.80          0.80
      ► Bothell                                                   N/A          N/A              0.75        0.75            N/A            N/A           N/A
      ► Shoreline Water District                                  N/A          N/A              0.35        0.82            N/A            N/A           N/A

Infrastructure Condition--Sewer Utility:
26) # of sewer system backups per 1,000 service connections
    relative to other Puget Sound cities and utility districts:
      ► Cedar River Water & Sewer District                        N/A          N/A              0.00        0.00            N/A            N/A           N/A
      ► Soos Creek Water & Sewer District                         N/A          N/A              0.03        0.00            N/A            N/A           N/A
      ► Northshore Utility District                               N/A          N/A              0.10        0.10            N/A            N/A           N/A
      ► Kirkland                                                  0.00         0.00             0.00        0.20            N/A            N/A           N/A
      ► Average (8 jurisdictions)                                 N/A          N/A           0.30           0.24            N/A            N/A           N/A
      ► Bellevue                                                  0.30         0.63             0.55        0.25            N/A            N/A           N/A
      ► Mercer Island                                             0.67         0.67          0.69           0.27            0.30           0.30          0.30
      ► Bothell                                                   N/A          N/A              0.23        0.50            N/A            N/A           N/A
      ► Renton                                                    N/A          N/A              0.76        0.60            N/A            N/A           N/A




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                                            D-31
Budget Summary
Priority of Government
ATTRACTIVE, HIGH QUALITY NEIGHBORHOODS & BUSINESS DISTRICTS
                             Dashboard                                                   Results                                   Target
                             Indicator                                   2006      2007        2008       2009          2010        2011        2012

Neighborhood & Downtown Attractiveness:
27) # of code enforcement complaints received related to:
       ► Critical areas/shoreline                                         20        18              7       7            10           12         12
       ► No permit or expired permit                                      35        34             42      12            32           35         35
       ► Property encroachment                                            66        23             37      21            30           35         35
       ► Debris/vehicles                                                  14        16             13       7            14           14         14
       ► Trees (topping/clearing/cutting)                                 20        24             15      27            15           20         20
       ► Other                                                            21        59             28      35            52           39         39
       ► Total # of code enforcement complaints                          176       174             142    109            153         155         155

28) % of residents "satisfied" or "very satisfied" with the overall      N/A       71%             N/A    77%            N/A         80%         N/A
    appearance and condition of the City's Town Center
    Note: A citizen survey is conducted biennially. The most recent survey was conducted in February 2010 and reported as a 2009 result.

Economic Vitality:
29) Sales tax per capita (excluding significant, one-time receipts):
       ► Construction sector                                            $56.93    $71.95      $71.64     $46.43         N/A          N/A         N/A
       ► Retail, wholesale & food services sectors                      $33.00    $37.84      $35.05     $36.46          N/A         N/A         N/A
       ► All other sectors                                              $30.27    $28.88      $35.86     $30.45          N/A         N/A         N/A
       ► Total (all business sectors)                                   $120.20   $138.68     $142.54    $113.34      $110.00      $113.32     $117.30




Priority of Government
RECREATIONAL, CULTURAL, HEALTH & EDUCATIONAL OPPORTUNITIES
                             Dashboard                                                   Results                                   Target
                             Indicator                                   2006      2007        2008       2009          2010        2011        2012

Recreational Programs & Facilities:
30) % of residents who believe the City is doing a "good" or
    "excellent" job of:
       ► Providing recreation programs for youth, adults, and            N/A       79%             N/A    74%            N/A         75%         N/A
         seniors
       ► Operating the Community Center                                  N/A       75%             N/A    74%            N/A         75%         N/A

    Note: A citizen survey is conducted biennially. The most recent survey was conducted in February 2010 and reported as a 2009 result.

Park Amenities:
31) % of residents "satisfied" or "very satisfied" with the available    N/A       78%             N/A    N/A           N/A          75%         N/A
    amenities at the City's parks (e.g. sports fields, sports courts,
    playgrounds, restrooms, and picnic areas)
    Note: A citizen survey is conducted biennially. The most recent survey was conducted in February 2010 and reported as a 2009 result. This question was
    mistakenly excluded from the February 2010 survey.


Youth Counseling & Intervention:
32) Counseling activity in middle/high schools:
       ► # of individual contacts                                        3,329     3,204       3,708      3,577         2,800       2,800       2,800
       ► # of parent consultations                                       501       503             485    448            450         400         400
       ► # of school staff consultations                                 850       994             823    808            700         700         700
       ► # of drug/alcohol assessments                                    23        43             17      14            20           20         20


                                                                                           _________________________________
D-32                                                                                          City of Mercer Island 2011-2012 Budget
                                                                                                                  Budget Summary
Priority of Government
RECREATIONAL, CULTURAL, HEALTH & EDUCATIONAL OPPORTUNITIES
                            Dashboard                                                        Results                                  Target
                             Indicator                                        2006       2007       2008         2009       2010       2011          2012

Senior Outreach & Advocacy:
33) # of seniors and adult children served by Geriatric Specialist             354        290             343     320        250        375          275

Volunteerism & Human Services Funding:
34) Mercer Island Thrift Shop annual activity:
      ► # of volunteer service hours                                          15,869     15,394      14,621      14,558     15,000     15,000     15,000
      ► Gross sales revenue less excise taxes                                $596,633   $658,160    $651,376    $727,136   $815,000   $949,000   $995,000
      ► Net income                                                           $371,520   $398,821    $384,252    $445,839   $497,774   $631,898   $669,372




Priority of Government
PUBLIC COMMUNICATION & COMMUNITY INVOLVEMENT
                            Dashboard                                                           Results                               Target
                             Indicator                                        2006       2007         2008       2009       2010       2011          2012

Informed Citizenry:
35) % of residents "satisfied" or "very satisfied" with the City's efforts     N/A        85%             N/A     85%        N/A        85%          N/A
    to keep them informed through a quarterly citizen newsletter,
    a weekly electronic newsletter (subscription based), information
    provided on the City's website, and Mercer Island Reporter
    articles
    Note: A citizen survey is conducted biennially. The most recent survey was conducted in February 2010 and reported as a 2009 result.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                                        D-33
Budget Summary




                 _________________________________
D-34                City of Mercer Island 2011-2012 Budget
GENERAL FUND
Revenues
               The General Fund is used
               to account for general
               purpose revenues, which
               are used to fund general
               governmental services,
               excluding utilities.
               Following are descriptions
               of the City's major
               revenue sources
               accompanied by historical
               tables and graphs.
General Fund




               _________________________________
E-2               City of Mercer Island 2011-2012 Budget
                                                                                    General Fund
Revenue Summary
There are four major revenues that comprise 79% of the 2011-2012 General Fund budget: property
tax, sales tax, business and utility taxes, and license and permit fees. The table below breaks down
General Fund revenues by category for 2009-2012. Following that is a graph depicting the percentage of
each revenue source relative to the total amount budgeted in each year of the biennium.

                                              2009             2010             2011             2012
                  Description                 Actual          Forecast         Budget           Budget
     RESOURCES
     Budgeted
      Beginning Fund Balance              $    752,231    $     795,271    $           -    $           -
      Property Tax                            9,820,771       10,064,568       10,163,579       10,367,735
      Sales Tax                               2,574,993        2,518,000        2,594,000        2,698,000
      Business & Utility Taxes                3,415,597        3,366,000        3,510,000        3,684,000
      State Shared Revenues                    730,173          612,046          491,505          487,650
      Utility Overhead                         808,500          863,800          698,017          732,683
      EMS Revenues                             714,471          709,091         1,067,891         835,641
      Licenses and Permits                    1,609,719        1,544,225        1,826,120        1,852,120
      General Government                       441,586          392,289          383,212          389,250
      Recreation Programs                     1,237,584        1,197,590        1,350,997        1,414,281
      District Court Fines                     390,425          370,000          394,000          394,000
      Interest                                  82,549           28,850           29,375           39,550
      Interfund Transfers In                   180,335          750,690          266,428          520,038
     Total Budgeted Resources             $ 22,758,933    $ 23,212,420     $ 22,775,124     $ 23,414,948
     Not Budgeted
      Beginning Fund Balance (Reserved)       3,059,553        2,264,282        2,264,282        2,264,282
           TOTAL RESOURCES                $ 25,818,486    $25,476,702      $ 25,039,406     $25,679,230




_________________________________
City of Mercer Island 2011-2012 Budget                                                                       E-3
General Fund

                                               2011 General Fund Revenues


                  Recreation Programs              District Court Fines        Interfund Transfers In
                          6%                                2%                          1%

            General Government
                    2%
        Licenses and Permits
                 8%

                                                                                                               Property Tax
       EMS Revenues                                                                                                45%
            5%


       Utility Overhead
               3%

      State Shared Revenues
                2%



                               Business & Utility Taxes
                                        15%
                                                                    Sales Tax
                                                                      11%




                                               2012 General Fund Revenues


                                                            District Court Fines
                                 Recreation Programs                 2%
                                         6%
                                                                                      Interfund Transfers In
                                                                                               2%
                    General Government
                            2%
               Licenses and Permits
                        8%

             EMS Revenues                                                                                       Property Tax
                  4%                                                                                                44%
          Utility Overhead
                  3%



          State Shared Revenues
                    2%



                    Business & Utility Taxes
                             16%
                                                                          Sales Tax
                                                                            11%




                                                                                             _________________________________
E-4                                                                                             City of Mercer Island 2011-2012 Budget
                                                                                   General Fund

Property Tax
Property tax plays an essential role in financing the general government operations of the City of Mercer
Island, accounting for almost 45% of total General Fund budgeted resources in 2011-2012. In 2011,
Mercer Island property owners will pay a total of $10,163,579 in property taxes to support general
government operations in the General Fund.

There are two types of property tax collected by the City: regular levy and voter approved levy. The
regular levy portion may be used for any purpose that the City deems appropriate. In Mercer Island, as
in most cities, the property tax levy primarily supports the General Fund, which is where most of the
City’s general government operations are budgeted and accounted for. Voter approved levies are for
specific purposes, such as funding new park capital improvements and/or park operations and
maintenance, and may not be used for any purpose other than what the voters approved. For
information about the voter approved taxes levied by the City, see the Property Tax policy in Section C
(Budget Policies).

Each November, as required by Washington State law, the City Council sets the property tax levy for
the coming year. Up until November 1997, this levy was restricted to a maximum of 106 percent of the
previous year's levy plus the amount associated with “new construction” (i.e. additions to the property
tax rolls). However, in 1997, the Washington State Legislature passed Referendum 47 on to the voters
of the state who in turn approved it by a 60% majority. This referendum set a limit on property tax
increases of the lesser of 106% or the rate of inflation, whichever was less. In 2001, Initiative 747 passed in
the State which further changed the property tax law. Initiative 747 limits the property tax levy to a
maximum of 101% of the previous year’s levy, or the rate of inflation, whichever is less. Since the rate
of inflation is normally above 1%, the effective limit on the property tax levy increase will normally be
1%. The initiative also allows higher property tax increases if approved by the voters, a provision that
was already in the statutes. Beginning in 1995, before the state law was changed, the Council decided to
begin ramping down the property tax increases by 0.5% per year, with the goal of eventually matching
the inflation rate. The Council reached that goal in 1999. Below is a table and chart of the General
Fund property tax receipts since 1993, including the budgeted tax amounts for 2011 and 2012.

                   Year       Amount     % Change         Year       Amount     % Change
                   1993      $ 4,701,000                  2003      $ 7,776,612   2.3%
                   1994        5,083,656   8.1%           2004        8,416,000   8.2%
                   1995        5,344,355   5.1%           2005        8,518,954   1.2%
                   1996        5,824,072   9.0%           2006        8,925,023   4.8%
                   1997        6,065,315   4.1%           2007        9,305,222   4.3%
                   1998        6,500,000   7.2%           2008        9,418,055   1.2%
                   1999        6,849,930   5.4%           2009        9,820,771   4.3%
                   2000        7,158,934   4.5%           2010       10,064,568   2.5%
                   2001        7,397,242   3.3%           2011       10,163,579   1.6%
                   2002        7,602,108   2.8%           2012       10,367,735   2.0%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                      E-5
General Fund

                               Property Tax Revenues: 1993-2012
        12,000,000


        10,000,000


         8,000,000


         6,000,000


         4,000,000


         2,000,000


                -




Sales Tax
Until 2000, sales tax revenue was made up of two components—regular sales tax and "sales tax
equalization". Combined, these revenues accounted for about 16% of the 1999 General Fund budget. In
1999, however, an initiative changed the law and the City no longer receives sales tax equalization (see
discussion below). Sales tax revenue is estimated to be almost 12% of total budgeted resources in
2011-2012.

      • Sales and Use Tax: Cities and towns are authorized under 1970 state law to levy a sales and
        use tax of one-half cent per dollar. In 1982, the State authorized an additional half-cent sales
        and use tax for cities and towns. Mercer Island levies the full amount allowed.
      • Sales Tax Equalization: The law that provided for "Sales Tax Equalization" went into effect
        in 1983. The purpose of sales tax equalization was to provide a means for guaranteeing a
        minimum amount of sales tax to each city and town in Washington. That allowed cities with
        little commercial activity to receive, through a combination of the sales tax it "earns" and
        equalization, at least 70 percent of the statewide average per capita sales tax. The amount of
        sales tax equalization each city received was computed on their prior year's sales tax receipts.
        In 1999, however, Initiative 695 was passed by the voters which eliminated the Motor Vehicle
        Excise Tax, which was the source of funds for the distribution of sales tax equalization dollars.
        The effect of the initiative was to bring Mercer Island’s total “sales tax” receipts back to the
        same level that they had been in 1987. This change resulted in a loss of about $1,000,000 in
        revenue per year.

As illustrated in the chart that follows, the City’s sales tax, even with equalization, was very uneven and
fairly unpredictable. Because of the uncertainty of equalization and the economy during the mid-1990’s,
the City has historically used a very conservative figure for predicting sales tax during each biennial


                                                                  _________________________________
E-6                                                                  City of Mercer Island 2011-2012 Budget
                                                                                General Fund
budget. This conservative approach helped the City weather the demise of the sales tax equalization
revenue.

As was done for 2009-2010, the sales tax revenue budgeted in 2011-2012 is primarily based on the
current and projected development activity levels in the City, taking into account building permits that
have been issued to date as well as those that are expected to be issued by mid-2011. In addition, any
new retail square footage in the Town Center is incorporated into the projection. Construction-related
sales tax makes up anywhere from one-third to one-half of the City’s total sales tax receipts, depending
on the level of development activity on the Island, which is why so much attention is paid to
development activity in the sales tax forecast.

In 2009, sales tax revenue was down 30.1%, or almost $1.11 million, compared to 2008. However, total
sales tax revenue in 2008 included $455,000 in unexpected receipts from two non-classified businesses.
Factoring out these extraordinary receipts, actual revenue was down 20.2 percent, or almost $654,000,
in 2009. Of particular note, the “construction” sector was down 35.0% in 2009 after hitting an all time
high in 2007 and leveling off in 2008. Looking at the first half of 2010, sales tax revenue was down 4.9%,
or about $64,000, compared to the same period in 2009. The overall decrease of 4.9% can be primarily
attributed to the “construction” sector, which was down 14.1% relative to the same period in 2009. As
a result, this sector has declined from 50.3% of the City’s total sales tax receipts as of December 31,
2008 to 36.6% as of June 30, 2010. Based on what’s currently in the Development Services Group’s
(DSG) pipeline, significant improvement in development activity is currently underway for single family
residential projects, but no improvement is expected for commercial/multi-family projects until the first
quarter of 2011. Overall, development activity is expected to be flat in 2011-2012 relative to 2010.

Helping counteract the decline in construction-related sales tax is the enactment of the Streamlined
Sales Tax measure by the state legislature in 2007, which took effect on July 1, 2008. As a result,
destination-based sales tax revenues not only from Washington state businesses but also from
participating mail order and internet based businesses began flowing to the City in September 2008. In
2010, it is estimated that the City will receive about $185,000 from this revenue source.

Following is a table and chart containing actual sales tax receipts for 1993-2009 and projected receipts
for 2010-2012, broken down into “regular” sales tax and “equalization” components.

Year Sales Tax Equalization       Total       % Change Year Sales Tax Equalization     Total      % Change
 1993 1,350,470       797,437     2,147,907            2003 2,685,252            -    2,685,252       -14%
 1994 1,254,845       965,135     2,219,980         3% 2004 2,565,501            -    2,565,501        -4%
 1995 1,352,936     1,107,887     2,460,823        11% 2005 2,643,672            -    2,643,672        3%
 1996 1,321,582       868,634     2,190,216       -11% 2006 2,627,513            -    2,627,513        -1%
 1997 1,506,579       966,245     2,472,824        13% 2007 3,949,552            -    3,949,552        50%
 1998 1,570,792       896,194     2,466,986         0% 2008 3,683,977            -    3,675,000        -7%
 1999 1,845,161       968,395     2,813,556        14% 2009 2,574,993            -    2,574,993       -30%
 2000 2,890,410       158,178     3,048,588         8% 2010 2,518,000            -    2,518,000        -2%
 2001 4,356,551           -       4,356,551        43% 2011 2,594,000            -    2,594,000        3%
 2002 3,128,841           -       3,128,841       -28% 2012 2,698,000            -    2,698,000        4%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                  E-7
General Fund
                      Sales Tax and Equalization Receipts: 1993-2012




Utility Taxes
This revenue category comprises almost 16% of total budgeted resources in 2011-2012. The City
charges a tax on the gross receipts of the public and private utilities doing business on Mercer Island.
Cities are limited by state law to charging no more than 6% on electric power, gas, and telephone
utilities. Puget Sound Energy, US West (Quest), AT&T, and a variety of small long distance carriers are
subject to a 6% tax rate. Two other major utilities, Eastside Disposal and Comcast Cable, are subject to
a 7% tax rate. In 2010, the City implemented a water utility tax of 1.7% to offset the fire
hydrant/protection costs that had previously been funded by water utility rates. Because Mercer Island
has had a low housing growth rate, revenue growth from utility taxes is highly dependent on utility rate
increases and weather conditions that affect the use of gas and electric heat.

                  Year      Amount     % Change        Year      Amount     % Change
                  1993     $ 1,311,219                 2003     $ 2,266,195     -5.9%
                  1994       1,365,000      4.1%       2004       2,325,000      2.6%
                  1995       1,440,317      5.5%       2005       2,695,376     15.9%
                  1996       1,621,913     12.6%       2006       2,891,000      7.3%
                  1997       1,663,792      2.6%       2007       3,223,613     11.5%
                  1998       1,687,617      1.4%       2008       3,377,374      4.8%
                  1999       1,898,546     12.5%       2009       3,415,597      1.1%
                  2000       1,967,000      3.6%       2010       3,366,000     -1.5%
                  2001       2,337,863     18.9%       2011       3,510,000      4.3%
                  2002       2,409,176      3.1%       2012       3,684,000      5.0%




                                                               _________________________________
E-8                                                               City of Mercer Island 2011-2012 Budget
                                                                                 General Fund
                                      Utility Taxes: 1993-2012
   4,000,000

   3,500,000

   3,000,000

   2,500,000

   2,000,000

   1,500,000

   1,000,000

       500,000

            -




Shared Revenues
This revenue category consists of both State shared revenues as well as grants and other revenues from
King County and the Federal Government. It comprises about 2% of total budgeted resources in 2011-
2012. Below is a brief description of each of the major components.

   •     Liquor Excise Tax and Liquor Profits – Liquor sales are taxed at the rate of 15% on the
         sales price for individuals and 11.4% for Class H licenses. Cities and towns split 28% of the total
         collected based on population. Additionally, 32% of the tax imposed on wine sales (75 cents per
         gallon) is allocated to cities and towns. The profits of the Liquor Control Board are divided
         among the state, counties, and cities (after deducting a fixed amount for alcoholism research).
         The cities split 40% based on population. Over the years, the per capita amount has declined as
         more cities have incorporated, thereby reducing the amount received by each city.
   •     Marine Patrol Revenue – Revenue for marine patrol services provided by Mercer Island is
         included in this category and comes from two sources. First, the City receives revenue from
         the cities that contract with the Mercer Island Police Department for marine patrol services.
         Second, Mercer Island receives a portion of the vessel registration fees collected by the State of
         Washington and passed on to the City through King County, because it provides marine patrol
         services.
   •     Grants – Sources of grant revenue include federal grants, state grants, and local grants.
         Typically, these monies are one-time funding sources for specific purposes.

Actual revenues for 1993-2009 and estimated revenues for 2010-2012 are displayed in the table and
graph that follow. Because there is so much variability in each of these sources, each individual
component of shared revenues is reviewed and then forecast individually.



_________________________________
City of Mercer Island 2011-2012 Budget                                                                   E-9
General Fund
                   Year      Amount    % Change         Year       Amount    % Change
                   1993     $ 997,875                   2003         461,495    -41.2%
                   1994        764,355    -23.4%        2004         468,182      1.4%
                   1995        718,302     -6.0%        2005         495,451      5.8%
                   1996        652,101     -9.2%        2006         494,660     -0.2%
                   1997        676,706      3.8%        2007         678,936     37.3%
                   1998        710,930      5.1%        2008         696,208      2.5%
                   1999        665,536     -6.4%        2009         730,173      4.9%
                   2000        568,743    -14.5%        2010         612,046    -16.2%
                   2001        844,115     48.4%        2011         491,505    -19.7%
                   2002        785,431     -7.0%        2012         487,650     -0.8%



                                  Shared Revenues: 1993-2012
       1,200,000


       1,000,000


        800,000


        600,000


        400,000


        200,000


             -




Licenses, Permits, and Zoning Fees
Licenses, permits, and zoning fees represent about 8.0% of total budgeted resources in 2011-2012. This
revenue category consists of all fees related to development, cable franchises, and business licenses.
Development activity, both locally and regionally, has slowed significantly from the record pace that
peaked in 2007. Relative to the first half of 2009, single family residential development was up 42.4% for
the first half of 2010 as measured by the number building permits issued. Also, the total valuation for all
building permits (i.e. residential, multi-family, commercial, public, and mixed use) was up 87.5%
compared to 2009. As noted above in the Sales Tax section, Development Services staff expects
development activity overall to remain steady in 2011-2012 compared to 2010. Finally, cable franchise
fees are projected to grow 5-6% annually and business license fees are projected to be flat in 2011-2012.
Actual revenues for 1993-2009 and estimated revenues for 2010-2012 are displayed in the table and
graph that follow.

                                                                 _________________________________
E-10                                                                City of Mercer Island 2011-2012 Budget
                                                                                General Fund


                   Year       Amount % Change           Year       Amount     % Change
                   1993      $ 324,664                  2003        1,263,956      5.9%
                   1994         450,539  38.8%          2004        1,420,500     12.4%
                   1995         464,478   3.1%          2005        2,098,943     47.8%
                   1996         552,463  18.9%          2006        2,034,500     -3.1%
                   1997         650,711  17.8%          2007        2,249,083     10.5%
                   1998         694,865   6.8%          2008        1,844,201    -18.0%
                   1999       1,068,026  53.7%          2009        1,609,719    -12.7%
                   2000       1,183,300  10.8%          2010        1,544,225     -4.1%
                   2001       1,382,951  16.9%          2011        1,826,120     18.3%
                   2002       1,193,398 -13.7%          2012        1,852,120      1.4%



                          License, Permit & Zoning Fees: 1993-2012
      2,500,000


      2,000,000


      1,500,000


      1,000,000


       500,000


             -




Utility Overhead Charges
Utility overhead charges make up about 3% of total budgeted resources in 2011-2012. These charges
include administrative support costs, building maintenance costs (for the Maintenance Center and City
Hall), and liability and property insurance costs which are initially paid for by the General Fund. They
are accounted for as interfund charges by the General Fund to the each of the City’s utility funds (water,
sewer, and storm water). The administrative support component of the charges encompasses a
specified percentage of the City Manager’s Office, the City Attorney’s Office, the Finance Department,
the Human Resources Department, and the City Council’s budget. Additional information regarding
these interfund charges is provided in the Utility Overhead Charges policy in Section C (Budget
Policies). Prior to 1995, staff project engineering time was included in the utility overhead charge rather

_________________________________
City of Mercer Island 2011-2012 Budget                                                                 E-11
General Fund
than charged directly to the capital projects of each utility, which is what happens currently. From 1995
to 2008, the charges have remained relatively flat. For the 2011-2012 biennium, the model was updated
and some allocation methods were changed, resulting in a19.2% decrease in the charge from 2010 to
2011. Actual interfund charges for 1993-2012 are displayed in the table and graph that follow.

                   Year     Amount      % Change      Year      Amount      % Change
                   1993    $ 926,293                  2003     $ 682,727            6%
                   1994      949,487           2.5%   2004       688,565          0.9%
                   1995      643,180         -32.3%   2005       693,571          0.7%
                   1996      665,180           3.4%   2006       698,532          0.7%
                   1997      678,080           1.9%   2007       716,000          2.5%
                   1998      644,004          -5.0%   2008       739,400          3.3%
                   1999      649,072           0.8%   2009       808,500          9.3%
                   2000      655,192           0.9%   2010       863,800          6.8%
                   2001      640,779          -2.2%   2011       698,017        -19.2%
                   2002      645,186           0.7%   2012       732,683          5.0%


                  Water & Sewer Utility Overhead Charges: 1993-2012

   1,000,000
       900,000
       800,000
       700,000
       600,000
       500,000
       400,000
       300,000
       200,000
       100,000
           -




                                                                _________________________________
E-12                                                               City of Mercer Island 2011-2012 Budget
                                                                                General Fund
All Other Revenues
All the remaining revenue categories comprise about 15% of the total budgeted resources in 2011-2012.
Following is a brief description of the remaining revenue categories.
   •   Interfund Transfers In – This category includes amounts transferred in from other funds in
       support of General Fund operating expenditures.
   •   Emergency Medical Service (EMS) Revenues – Beginning in 1990, the City began receiving
       a portion of the 25 cent property tax levy that was voted on by the citizens for 911 emergency
       service. At that time, the City reduced its EMS fee so that Mercer Islander taxpayers would pay
       roughly the same as they did before the new law. In 1996, when the City decided to add 4 new
       firefighters because of the high volume of aid calls, the fee was increased to help pay for that
       enhanced level of service.
   •   Recreation Programs – This category includes the fees that are charged for recreation
       programs offered by the City as well as fees charged at the Community Center. The fee
       structure now in place recovers about 45% of the cost of those programs. See the Parks &
       Recreation Financing policy in Section C (Budget Policies) for more information.
   •   Ambulance Transport Fee – Beginning February 2011, the Fire Department will begin
       charging a fee for transporting patients requiring non-emergency, basic life support, to hospitals.
       The fee will be used to support ongoing General Fund services.
   •   Interest – The money of the City is pooled for investment purposes and allocated to various
       funds per the Investment Earnings policy in Section C (Budget Policies).
   •   Beginning Fund Balance – This consists of several reserves (revenue stabilization,
       emergency, and LEOFF I long-term care), surplus revenues and expenditure savings from a prior
       year, and dedicated funding for one-time costs and expenditure carryovers. For 2011-2012,
       there is no “budgeted” beginning fund balance, reflecting the expectation there will be no
       General Fund surplus in 2010 available for funding 2011-2012 expenditures.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                E-13
General Fund




               _________________________________
E-14              City of Mercer Island 2011-2012 Budget
GENERAL FUND
Expenditures
               The General Fund is the
               general operating fund of
               the City and encompasses
               the following major
               activities, excluding
               utilities: fire and police
               services, street and park
               maintenance,
               development services,
               court services, recreation
               services, legal services,
               financial services, and
               general administration. In
               this section the
               expenditures are shown
               by major functional
               category.
General Fund




               _________________________________
E-16              City of Mercer Island 2011-2012 Budget
                                                                             General Fund
Budget Analysis
A summary analysis follows comparing the 2010 Approved Budget to the 2011-2012 Final Budget,
broken down by year, with “Other Significant Changes,” “Service Enhancements,” and “Service
Reductions” separately identified for 2011 and 2012.

2011-2012 Budget Analysis
General Fund

                                                                                    % Change
                        2011 Analysis                            Budget
                                                                                    2010-2011

2010 Approved Budget                                                  24,980,070
Plus 2011 General Inflationary Increases                                     -           0.0%
Plus (Less) 2011 Other Significant Changes:
  Prior year one-time costs & carryovers                  (679,811)
  Salary and Benefit savings (relative to 2010 budget)    (336,550)
  Salary Savings (no COLA in 2011)                        (115,236)
  Jail costs                                              (119,015)
  Reduce annual technology CIP funding                    (100,000)
  NORCOM fees                                              (59,293)
  Travel and training                                      (39,199)
  Marine patrol program                                    (39,174)
  Move Town Center utility costs to Beautification Fund    (34,000)
  Advertising & postage                                    (32,691)
  Other non-service level reductions                       (20,336)
  Telephone costs                                          (25,025)
  Reduce annual YFS subsidy                                (25,000)
  Police and Fire overtime                                 96,954
    Subtotal                                                          (1,528,376)       -6.1%
2011 Base Budget                                                      23,451,694        -6.1%
Plus 2011 Service Enhancements:
  Total one-time costs                                    108,559
  Total ongoing costs                                      63,100
    Subtotal                                                             171,659
Less 2011 Service Reductions:
  Total one-time savings                                  (130,352)
  Total ongoing savings                                   (717,877)                      0.0%
    Subtotal                                                           (848,229)
2011 Final Budget                                                     22,775,124        -8.8%




_________________________________
City of Mercer Island 2011-2012 Budget                                                          E-17
General Fund
                                                                                                   % Change
                         2012 Analysis                                         Budget
                                                                                                   2011-2012

2011 Final Budget                                                                22,775,124
Plus 2012 General Inflationary Increases                                            683,448             3.0%
Plus (Less) 2012 Other Significant Changes:
  Prior year one-time costs (service packages with
       costs in 2011 only)                                         (23,624)
       Subtotal                                                                     (23,624)           -0.1%
2012 Base Budget                                                                 23,434,948             2.9%
Plus 2012 Service Enhancements:
  Total one-time costs                                             (20,000)
  Total ongoing costs                                                  -
       Subtotal                                                                     (20,000)
Less 2012 Service Reductions:                                                                           0.0%
  Total ongoing savings                                                -
       Subtotal                                                                           -
2012 Final Budget                                                                23,414,948             2.8%



Expenditure Summary
Presented in the table below are expenditures by category for 2009-2011, followed by two pie charts
depicting the percentage of each category relative to total budgeted expenditures in 2011 and 2012.

                                                 2009             2010                  2011           2012
                Description                    Actual           Forecast             Budget           Budget
USES
Budgeted
 Salaries                                      12,087,058        12,964,794         12,133,311        12,330,624
 Benefits                                       3,738,774         4,240,247           3,938,176        4,304,292
 Supplies                                            629,953       754,419              684,508         664,956
 Contractual Services                           1,514,103         1,861,919           1,515,834        1,482,613
 Equipment Rental                               1,201,535         1,215,805           1,219,958        1,220,658
 Utilities & Insurance                          1,162,392         1,236,430           1,307,113        1,398,767
 Other Services and Charges                          656,463       794,345               494,095        509,005
 Intergovernmental                                   669,913       875,831               807,792        827,096
 Interfund Transfers                            1,098,743         1,036,280              674,337        676,937
Total Budgeted Expenditures                 $ 22,758,933       $ 24,980,069       $ 22,775,124      $ 23,414,948
Not Budgeted                                             -                 -                   -               -
 Budget Cuts and Expenditure Savings                             (1,767,649)
 Ending Fund Balance                            3,059,553         2,264,282           2,264,282        2,264,282
TOTAL USES                                  $ 25,818,486       $ 25,476,702        $ 25,039,406     $ 25,679,230

                                                                                _________________________________
E-18                                                                               City of Mercer Island 2011-2012 Budget
                                                                                             General Fund

                                        2011 General Fund Expenditures


                          Other Services and     Intergovernmental
                              Charges                   4%             Interfund Transfers
                                 2%                                            3%

              Utilities & Insurance
                        6%


         Equipment Rental
               5%
                                                                                               Salaries
                                                                                                 53%
        Contractual Services
                7%


          Supplies
            3%




                          Benefits
                           17%




                                       2012 General Fund Expenditures

                                               Intergovernmental
                          Other Services and          4%
                              Charges                                Interfund Transfers
                                 2%                                          3%

               Utilities & Insurance
                         6%


          Equipment Rental
                5%                                                                              Salaries
                                                                                                  53%
        Contractual Services
                6%



            Supplies
              3%




                            Benefits
                             18%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                     E-19
General Fund
Salaries and Benefits
The largest expenditure categories are salaries and benefits, which together comprise almost 71% of the
2011-2012 Budget. Annual salary increases are driven by annual cost of living and step increases
bargained by the City’s unions, which cover about 65% of all City employees. Included in the salary
category are permanent full-time and part-time employees, contract employees, and casual labor used by
the Maintenance and Parks & Recreation Departments. General Fund salaries and benefits are budgeted
at a total cost of $16.1 million in 2011 and $16.6 million in 2012. The $1.1 million reduction in salaries
and benefits in 2011 relative to 2010 is directly related to service level reductions in 2011, to one-time
service enhancements that lapse at the end of 2010 and which aren’t re-budgeted in 2011, and to salary
savings resulting from a reduced or no COLA (cost of living adjustment) in 2010 and no COLA in 2011.
The $563,429 budgeted increase in salaries and benefits in 2012 is wholly attributable to an estimated
COLA of 1.35-1.50% (depending on the bargaining unit), annual step increases included in the City’s
labor contracts, a significant increase in the PERS (Public Employee Retirement System) contribution
rate required of public employers, and a 10% projected increase in medical insurance premiums. See the
Long Term Compensation policy in Section C (Budget Policies) for more information.

                                Salary and Benefit Costs: 1997-2012

       20,000,000
       18,000,000
       16,000,000
       14,000,000
       12,000,000
       10,000,000
        8,000,000
        6,000,000
                                                                                      Benefits
        4,000,000
                                                                                      Salaries
        2,000,000
               -
                    1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012



Supplies
The supplies category includes most office, operating, and maintenance items that employees need to
fulfill their job responsibilities. Common examples include paper, printer and copier toner, cleaning
supplies, fuel and oil, sand, gravel and fertilizer. As a percentage of total budgeted expenditures this
category has consistently hovered around 3.0%. This trend continues in the 2011-2012 Budget.

Utilities
The utilities category includes all the major utility costs – water, sewer, storm water, electricity and gas.
Also included is the cost of dumping waste (e.g. from excavations and cleaning of ditches). For 2011, the
following utility rate increases are expected: 9.5% for water, 9.3% for sewer, 3.3% for stormwater, 2%
for electricity and 2% for gas. Given these significant rate increases, the City continues to promote
conservation efforts by all departments.



                                                                  _________________________________
E-20                                                                 City of Mercer Island 2011-2012 Budget
                                                                                             General Fund
Insurance
The City buys all liability and property insurance through the Washington Cities Insurance Authority
(WCIA). WCIA is mostly self insured for liability purposes and has been building a cash reserve from
the member cities over the past 10 years to help keep premium costs down and to provide a higher
amount of liability coverage. Liability insurance premiums are based on a combination of number of
worker hours and the City’s actual liability claims over the past 5 years.

                           Supplies, Utilities, and Insurance Costs: 1997-2012
        2,500,000



        2,000,000



        1,500,000
                                                                                                        Insurance
                                                                                                        Utilities
        1,000,000
                                                                                                        Supplies


         500,000



              -
                      1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012



Contractual Services
This category includes all the individuals and firms with which the city contracts for services. Included
are the following: consultants, landscaping services, janitorial services, outside legal services, and
recreational class instructors. Below is a graph of contracted services expenditures for the period
1997-2012.

                                        Contractual Services: 1997-2010

         2,500,000


         2,000,000


         1,500,000


         1,000,000


          500,000


                  -
                       1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012



_________________________________
City of Mercer Island 2011-2012 Budget                                                                              E-21
General Fund
Equipment Rental
This category includes "rental and replacement charges" assessed to each department by the Equipment
Rental Fund for the City’s vehicle fleet and by the Computer Equipment Fund for the City’s computers.
Replacement cost, useful life, salvage value, and department needs are assessed biennially when the rates
are established. For the 2011-2012 biennium, these internal charges are being kept flat overall relative
to the 2009-2010 biennium. See the Reserves—Equipment Replacement policy in Section C (Budget
Policies) for more information.
                                    Equipment Rental: 1997-2012

       1,400,000

       1,200,000

       1,000,000

        800,000

        600,000

        400,000

        200,000

             -
                   1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012



Other Services and Charges
This category consists of a variety of miscellaneous payments, including advertising, printing, travel,
communications, postage, subscriptions, tuition and registrations, election costs, copying, and
miscellaneous charges.

Intergovernmental
This category includes charges for services from other governmental agencies. Examples include
mandatory contributions to the King County Alcoholism program and Puget Sound Clean Air Agency
and voluntary payments in support of regional associations. Expenditures in this category have typically
been quite modest with small increases from year to year.

Interfund Transfers
Interfund transfers consist of two types: 1) transfers to fund ongoing costs/programs; and 2) transfers
to fund significant one-time operating or capital costs. Transfers for ongoing costs/programs are
ultimately funded by the general revenues of the City. Transfers for one-time operating or capital costs
are funded by the General Fund’s prior year’s surplus, which is generated by excess revenues over what
was budgeted and expenditure savings. The disposition of the prior year’s surplus is usually finalized by
the Council in June.

There are two long standing, ongoing annual transfers budgeted again in 2011-2012, though they have
been reduced due to the projected revenue shortfalls: 1) a $150,000 transfer to the Technology &


                                                                  _________________________________
E-22                                                                 City of Mercer Island 2011-2012 Budget
                                                                            General Fund
Equipment Fund to support the City’s technology projects and to fund the purchase of larger pieces of
equipment that are outside the scope of departmental budgets (reduced from $250,000); and 2) a
$320,000 transfer to the Youth & Family Services Fund to help support ongoing program costs (reduced
from $465,000). See the YFS Financing policy in Section C (Budget Policies) for more information.




_________________________________
City of Mercer Island 2011-2012 Budget                                                           E-23
General Fund




               _________________________________
E-24              City of Mercer Island 2011-2012 Budget
UTILITY FUNDS SUMMARY

                                         The following pages
                                         contain important
                                         information about the
                                         utilities as a whole.
                                         This section identifies
                                         the emerging issues
                                         for each utility,
                                         followed by a brief
                                         discussion of their
                                         operation,
                                         maintenance and
                                         capital reinvestment
                                         programs. The
                                         proposed utility rates
                                         for 2011 and 2012
                                         and the underlying
                                         cost drivers are
                                         discussed. Finally,
                                         income statements
                                         are presented for the
                                         Water, Sewer, and
                                         Storm Water Utilities.




_________________________________
City of Mercer Island 2011-2012 Budget
Utility Funds Summary




                        _________________________________
F-2                        City of Mercer Island 2011-2012 Budget
                                                                 Utility Funds Summary
Emerging Issues for the Utilities
During the 2011-2012 biennium, Mercer Island’s utilities will experience fiscal impacts caused by
developments elsewhere in the region and new state and federal regulations. The continued pace of
development in the greater Puget Sound area is driving local governments to plan and develop new
utility infrastructure, manage endangered natural resources, and find ways to make our resources more
sustainable. Each of the City’s utilities will be affected differently. A major focus for the City’s utilities,
like utilities throughout our region in the post 9-11 and Hurricane Katrina era, is preparing for a major
disaster or emergency. The following summarizes the emerging issues on the horizon for each utility.

Sanitary Sewer
King County completed a Regional Wastewater Services Plan (RWSP) in 1999, describing the need for
extra capacity to meet the demands of rapid population growth. The Plan addresses how to meet these
demands while protecting public health and our valuable water resources. The RWSP outlines a number
of important projects and programs that King County will implement over the next 30 years and work
that is already well underway. King County started construction of the new Brightwater Treatment
Plant in 2006 and it is anticipated that the Plant will start-up and operations will begin in 2011, with the
entire system scheduled to be completed in 2012. The new facilities will include a treatment plant,
conveyance (pipes and pumps taking wastewater to and from the plant), and a marine outfall, which will
improve the conveyance system in the north end of the County. The operation and maintenance of the
King County Wastewater collection and treatment facility, as well as new projects to increase system
capacity, drive the King County Sewage Treatment rates paid by City of Mercer Island utility customers.

King County is attempting to control the growing demand for sewage treatment capacity in the region
through a new Regional Inflow/Infiltration (I/I) Control Program that was included in the 1999 Regional
Wastewater Services Plan (RWSP). I/I is a term used to describe clean storm runoff and/or
groundwater that enters the sewer system through cracked pipes, leaky manholes, or improperly
connected roof drains, storm drains, and parking lot connections. Most inflow comes from storm water
and most infiltration comes from groundwater. I/I has a major effect on the size of King County’s
conveyance and treatment systems and, ultimately, the rates businesses and residents pay to operate
and maintain them.

This I/I Control Program is designed to determine where I/I comes from, establish that it is cost-
effective to remove I/I, and recommend actions to actively control I/I in the future. The program is
based on a cooperative partnership between King County and 34 local component agencies including
Mercer Island.

Ten pilot projects were completed within King County’s service area at a cost of approximately $13.2
million funded by King County through sewer rates. Mercer Island was the recipient of one such
project in 2003. About 16,000 linear feet of leaky mains were lined at a cost of $1.2 million in the East
Seattle neighborhood on Mercer Island. The purpose of the pilot projects was to evaluate the
effectiveness of various rehabilitation techniques and to document the effectiveness of specific pilot
projects in reducing excessive I/I flows in the King County conveyance and treatment system. Successes
can be used as models for future projects. In 2007-2008, King County conducted an I/I reduction
feasibility analysis in four candidate project areas (Bellevue, Issaquah, Renton, and Skyway). During
2011-12 King County will construct initial I/I reduction projects in Skyway, Bellevue, and Issaquah. These
projects will test the cost-effectiveness of I/I reduction on a scale large enough to potentially offset the
need for larger conveyance or storage facilities.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                       F-3
Utility Funds Summary
An update of the City's General Sewer Plan was completed in 2002. The Plan has been used as a guide
for capital budget planning including this budget. In anticipation of the 2011-2016 Budget development,
staff prepared a more detailed capital spending plan than provided in the General Sewer Plan. The Plan
is relevant and current and is not expected to require a major update for years to come. Unlike the
Department of Health’s requirement to update Water System Plans every six years, the Sewer Plan
must be updated only when it is no longer considered current due to changes in regulations, system
needs, growth patterns, or other factors.

The long-anticipated Sewer Lake Line Replacement Project is expected to be complete in 2011. The
feasibility study for the project was completed in 2002. Design and permitting continued throughout the
following two biennia at a cost of $2.1 million. Permitting for this work in Lake Washington was a
challenge as a result of the recent listing of the Puget Sound Chinook salmon as a threatened species
under the Endangered Species Act and the issuance of the 4d rule. In July 2007, the City opened bids to
construct the project and received a low bid of $27.4 million. Adding costs for contingency,
construction management, project management, and mitigation, the total construction cost was
estimated to be $32.1 million. This cost far exceeded the estimated $15 million construction cost. On
September 17, 2007, the City Council rejected all Sewer Lake Line bids and directed staff to proceed
with a peer review and project re-assessment. This process included re-visiting the original in-lake
design approach, re-assessing pipe condition, exploring minimizing trenching for the in-lake Sewer Line,
and bidding the Pump Station separately from the in-lake Sewer Line work. The peer review,
reassessment, and redesign work completed in 2007-2008 cost an additional $393,320. On May 19,
2008, the Council reviewed project re-assessment work and directed staff to proceed with re-designing
and re-packaging the Sewer Lake Line project with a goal of going to bid in October 2008. The project
includes Reach 3 and Pump Station 4. Reach 4 was deleted for future construction. The City awarded
construction contracts on December 1, 2008 for the Lake Line to Manson Construction for $14.8
million and for Pump Station 4 to Stellar J for $4.3 million. Adding costs for contingency, construction
management, project management, and mitigation, the total construction budget was set at $24.2M in
February 2009. The Lake Line will be the Island's most expensive sewer capital project.

A sewer rate analysis was conducted in 2003 and has been reviewed annually since then. The analysis
looked at the rate impacts of the capital projects identified in the General Sewer Plan, particularly the
Lake Line Replacement Project, as well as operation and maintenance costs associated with the utility.
This was the first formal rate analysis and rate increase in a decade. Annual rate increases between 9%
and 18.1% have been implemented between 2004 and 2010 to provide funding for the Sewer Fund, and
specifically the Sewer Lake Line project.

For the last 6 years, capital funding has been focused on the Sewer Lake Line, with a minimum amount
of funding dedicated to reinvestment in the rest of the system. Starting in 2011, the City will begin to
increase funding for more routine reinvestment in lining or repairing sewer lines, upgrading pump
stations and replacing obsolete generators. Another driver to increase the level of capital reinvestment
is the reduction of sewer back-ups into homes (the City has received a few costly insurance claims in
the last 5 years). An attempt to reduce backups will require greater reinvestment in the sewer
collection system. Also, in the last couple of years backups in the Sewer Lake Line have started
occurring at a greater frequency. In response, an action plan is being developed that addresses both
capital improvements and operational changes that should act to reduce backups. Capital reinvestment
levels are expected to increase from close to $600K in 2011 to slightly over $1M in 2016.




                                                                 _________________________________
F-4                                                                 City of Mercer Island 2011-2012 Budget
                                                              Utility Funds Summary
Solid Waste
The King County Solid Waste Division remains the primary provider of waste transfer and landfill
services for suburban cities. Collection services, including garbage recycling and yard waste, on the
Island are provided under the City's contract with Allied Waste. A new long-term contract with Allied
was negotiated and approved in 2009. The County provides grant funding that provides the two special
recycling events held each year on Mercer Island.

King County’s 2001 Comprehensive Solid Waste Management Plan is in the process of being updated. A
preliminary draft of the Comprehensive Plan was ready for review at the end of 2009. The update
process should be completed in 2011. The plan will reflect major policy decisions being made as part of
the development of the Transfer and Waste Export System Plan in 2006. The Export Plan provides a
blueprint for the future of the County’s solid waste system as the County prepares to begin exporting
waste when the Cedar Hills Regional Landfill closes in several years. The plan was developed in
collaboration with cities served by the County system through the Metropolitan Solid Waste
Management Advisory Committee.

The update of the Comprehensive Plan is expected to call for the expansion and modernization of
several Transfer Stations, including the Factoria Transfer Station in the next 5 years. This upgrade will
allow additional services to be provided that will benefit Island residents, such as expanded collection of
bulky yard debris. A relatively new service benefiting Island residents, the collection of household
hazardous waste, became available at the Factoria Transfer Station in September of 2002 and continues
to be a highly popular feature of the transfer station. The Plan update process has analyzed whether to
change the County’s waste reduction and recycling goals. With growing interest in sustainability, it is
anticipated that more aggressive goals ultimately will be established.

Stormwater
Municipal storm and surface water utilities throughout the region are working to comply with new
requirements evolving from the listing of the Puget Sound Chinook salmon and other species as
threatened under the Endangered Species Act (ESA). At the same time, they also are facing the
implementation of new Phase II National Pollution Discharge Elimination System (NPDES) permit
requirements. Approximately 100 small to medium jurisdictions including Mercer Island fall under the
requirements of the permit.

NPDES is an ongoing program to protect and improve surface water quality. NPDES requires cities to
implement six "minimum control measures," including public education and involvement about the
impacts of stormwater, detection and elimination of polluting discharges, post-construction management
of stormwater in redevelopment and new development, and "good housekeeping" efforts for municipal
operations. NPDES is implemented through permits for 5 year terms with specific requirements for
compliance. For example, the City updated its storm water regulations in late 2009 to comply with the
permit.

The Lake Washington/Cedar/Sammamish Watershed Chinook Salmon Conservation Plan was
completed in 2005. The plan is based on best available science, provides a long-term strategy for
bringing salmon off the list of threatened species, and is based on adaptive management principles. This
planning effort was funded by jurisdictions throughout Water Resource Inventory Area (WRIA) 8, which
is the state-designated planning area that encompasses parts of King and Snohomish counties along with
Mercer Island and 23 other cities. During the 2007-2008 biennium, implementation of the plan hit full
stride and will continue in the new biennium.



_________________________________
City of Mercer Island 2011-2012 Budget                                                                   F-5
Utility Funds Summary
The City’s first ever Comprehensive Basin Review was completed in 2006. It identifies and prioritizes
capital projects for years to come. The CIP section is updated in even numbered years to support the
development of the capital program in the budget. The Basin Review is the City’s “road map” for the
utility to ensure continued reliable operation while addressing ongoing erosion problems in ravines,
replacing or rehabilitating aging pipes, and protecting water quality in Lake Washington.

Since 1999, King County has provided the City with technical assistance to evaluate water quality
conditions in several sub-basins on the Island. This effort involves sampling and analysis of stormwater
in these basins. In general, the results indicate that pollutants found in the samples are typical of built-
out urban cities, and capital improvements focused on erosion in watercourses correlate to an
improvement to water quality.

Water
The Cascade Water Alliance (Cascade) formed in 1998 with Mercer Island becoming its second member
to join. Cascade’s formation followed years of work by elected officials in the greater King County
region to develop independent water supplies for suburban cities and water districts. Seattle initially
supported the formation of a “new entity” to provide water supply outside its city limits. In 1999, a
water supply contract negotiated by Seattle and the group that became Cascade failed to gain enough
support (75% of Seattle’s 27 wholesale purveyors) to be accepted by Seattle. Today, Seattle’s policy is
that they will continue to own, operate, and control the Seattle water supply system. They offered new
wholesale contracts to individual or groups of water utilities for either full or partial water supply
requirements.

In late 2002, Cascade adopted a new interlocal agreement for its members that heightened the potential
for near-term water shortages and large capital expenditures for development of new supply. In January
2003, the Utility Board and City staff recommended that Mercer Island withdraw from the Cascade
Water Alliance on the belief that Seattle’s water system is a more certain supply for the City of Mercer
Island’s low-growth needs at lower long-term cost increases for our utility customers.

The City Council agreed and in June 2003 approved a new supply contract with the City of Seattle.
Eleven wholesale water customers including Mercer Island, who had 30-year contracts, now have new
60-year water service agreements with Seattle. Mercer Island has a seat on the Seattle Public Utilities
Operating Board that oversees the new wholesale contract.

For water utilities throughout the region, the growing pressure on limited storage capacity has meant a
continuing focus on conservation. Mercer Island's “Be Responsible” conservation campaign kicked off in
2001, and will continue in the coming biennium. “Be Responsible” is designed to complement the
Seattle Public Utilities' conservation programs, which are more regional in nature, by targeting
residential usage during the summer when consumption is at its peak. A conservation surcharge on the
summer water bills of Island customers is funding “Be Responsible”. In general, with behavior changes
and the installation of lower flow toilets and appliances, Mercer Island’s overall water use has declined.

In 2004, the City completed the Utility Vulnerability Assessment and Emergency Response Plan required
by the Bioterrorism Preparedness and Response Act of 2002. This work highlighted the importance of
creating more drinking water storage on the Island. In 2005, the City Council, Utility Board, and staff
agreed that a small well would be the most cost-effective and reliable way to provide an emergency
supply of drinking water for Island residents. Feasibility work for the well was completed in 2005, and
design work was completed in 2006. Early in 2007, a test well was drilled to a depth of 570 feet,
producing water of both the quality and quantity to serve as a short-term source in the event of an
interruption in the Island’s supply from Seattle Public Utilities. During testing, the test well produced

                                                                   _________________________________
F-6                                                                   City of Mercer Island 2011-2012 Budget
                                                             Utility Funds Summary
300 gallons per minute (gpm) for 24 hours, enough to provide about 5 gallons per person on a daily
basis for up to seven days. In 2007-2008, a Temporary Use Plan for the test well and conceptual
designs of the permanent well facility were developed. Feasibility, Test Well Construction, Temporary
Use Planning, and Conceptual Design were completed at a cost of $525,000. In April 2008, Council
reviewed the well project and directed staff to move forward with the design of the permanent well
facility, allocating $135,000 for final design. The City Council reviewed the design of the permanent well
and authorized staff to bid the project on December 1, 2008. The City awarded the construction
contract on June 15, 2009 for $812,000 to Equity Builders, LLC. Construction was complete, and the
project close-out accepted by Council on July 19, 2010. Construction and a portion of the design costs
for the well were funded with a short-term loan for $1,015,000, with repayment to come from the
anticipated sale of the First Hill property. In June 2010, the bond terms were amended, extending the
terms of the loan to June 2013, with a true interest cost of 2.72%. In addition, $40,000 was paid on the
principal balance using project savings from construction of the well, thereby reducing the principal
balance to $975,000. The proceeds from the future sale of the First Hill property will be used to pay
this principal balance.

In July 2008, the updated Comprehensive Water System Plan was adopted by the City Council. State
law requires an update at least every six years. The plan looks at future demands on the system and
how storage and other system requirements may change. Compliance with future water quality
regulations and capital requirements also are examined. The plan was used as a guide for capital budget
planning during the development of the 2011-2012 biennial budget.

In April of 2009 the Washington State Department of Health (DOH) performed a sanitary survey of the
City’s water system. DOH Group A drinking water regulation, WAC 246-290-416, requires routine
sanitary surveys of all Group A systems once every five years. The purpose of the survey was to assess
the overall operation, maintenance and management of the water system towards ensuring the
distribution of safe and reliable drinking water. The last survey was performed in April of 2004. DOH
reported to the City of Mercer Island that their water system appears to be in great condition; a result
of a functional operations and maintenance program that continues to evolve based on education and
experiences. The survey also noted that the City’s facilities appeared to be well maintained.


Operation and Maintenance of the Utilities
Water is delivered to the head works by Seattle Public Utilities' 16” and 24” water supply lines. The
water is stored in two 4-million gallon reservoirs for domestic use and fire protection. On average,
about 800 million gallons of water are purchased annually. A majority of water used is distributed
through 122 miles of 4” to 30” waterlines and is delivered to customers through approximately 7,300
water meters. To control high water pressure in the lower elevations in the system, 87 pressure
reducing stations (PRV's) are necessary. There are approximately 1,800 in-line valves installed for
control and isolation purposes. There are also 1,120 fire hydrants in the system.

Sewer collection and transmission services are provided to 7,200 single-family residences, 1,300 multi-
family units, and 155 businesses and schools connected to the sanitary sewer collection system. Sewage
is pumped through 102.7 miles of pipe and through 17 sewage pump stations to the two King County
Wastewater pumping stations (located at the North end and on the Southeast side of the Island) which
then pump the sewage over to the King County Wastewater Treatment Facility in Renton . The City’s
goal is to perform all work in accordance with City, State, and Federal rules and regulations, including
the City's Sewer Comprehensive Plan and the Growth Management Act.



_________________________________
City of Mercer Island 2011-2012 Budget                                                                  F-7
Utility Funds Summary
The City’s Storm Water system is made up of close to 7,600 catch basins, 132 miles of storm lines, 18.8
miles of water courses, and 28.1 miles of ditches. The City’s goal is to comply with State and Federal
regulations affecting storm water quality by performing maintenance using our established standards.
Operations and Maintenance (O&M) programs are necessary to protect property from flooding and to
prevent pollutants and sediments that have been captured by storm water facilities from being washed
into the lake during storm events. The Storm Water Utility relies heavily on contracted services to
perform many of these operations.

The budget for the Operation and Maintenance of the City’s three Utilities is discussed in detail in
Section G (Operating Budget by Department) of the Budget (see Maintenance Department).


Capital Reinvestment in the Utilities
Capital Reinvestment in the three City Utilities is guided by the City’s Comprehensive Water System
Plan, General Sewer Plan, and Comprehensive Basin Review. Due to the impact of capital costs on rates
and the variation in funding levels needed over time, each utility establishes and maintains a capital
projects schedule of at least six years in duration. The schedule includes project description, scheduled
year of construction, and total estimated cost. Each project is identified as an improvement project or a
replacement project (including repair and rehabilitation). Details of the capital replacement projects
proposed for each utility for the 2011-2012 biennium are included in Section H (Capital Improvement
Program) of the Budget.


Historical Utility Rate Increases
Rate increases have varied significantly over time. For several of the City’s utilities, there have been
several years when no rate increase was taken. For example, there was no increase in Sewer rates for
the 10 year period from 1994 to 2003. A summary of the 20 year rate history for the City’s Water and
Sewer utilities are presented in the tables below:

Water Rate History                                       Sewer Rate History

      Year   Incr/Decr     Year      Incr/Decr               Year     Incr/Decr     Year      Incr/Decr
      2010     8.40%       2000        5.30%                 2010       9.75%        2000       0.00%
      2009     9.50%       1999        9.50%                 2009       8.00%        1999       0.00%
      2008     8.30%       1998        6.70%                 2008       18.10%       1998       0.00%
      2007     9.15%       1997        0.00%                 2007       12.00%       1997       0.00%
      2006     6.50%       1996        0.00%                 2006       9.00%        1996       0.00%
      2005     2.35%       1995        0.00%                 2005       9.00%        1995       0.00%
      2004     3.50%       1994        0.00%                 2004       9.40%        1994       0.00%
      2003    10.00%       1993        0.85%                 2003       0.00%        1993      49.20%
      2002     2.50%       1992        0.00%                 2002       0.00%        1992       3.25%
      2001     0.25%       1991        0.00%                 2001       0.00%        1991       0.00%
 10 Yr Avg     6.05%     20 Yr Avg    4.14%               10 Yr Avg     7.53%     20 Yr Avg     6.39%




                                                                 _________________________________
F-8                                                                 City of Mercer Island 2011-2012 Budget
                                                                 Utility Funds Summary

The Stormwater Utility was formed late in 1995. A summary of the 15 year rate history for the City’s
Stormwater utility is presented in the following table:

Stormwater Rate History

    Year        Incr/Decr     Year      Incr/Decr
    2010          5.50%       2000        7.25%
    2009          5.50%       1999        2.40%
    2008          0.00%       1998       14.00%
    2007          5.70%       1997       40.00%
    2006          5.10%       1996       15.50%
    2005          5.40%       1995        N/A
    2004          0.00%       1994        N/A
    2003          0.00%       1993        N/A
    2002          0.00%       1992        N/A
    2001          0.00%       1991        N/A
 10 Yr Avg       2.72%      15 Yr Avg    7.09%



Utility Funding and Rate Setting
In 1993, the Utility Board and City staff worked closely to establish financial policies to guide future rate
and budget decisions. One of the guiding policies is “Each utility will establish rates sufficient on an annual
basis to meet all utility cash requirements including operating expenses, debt service, additions to reserves and
rate-funded capital costs.” The fiscal policies are detailed in Section C (Budget Policies) of the Budget (see
Utility Fiscal Policies).

The Utility Board reviews the proposed biennial budget for each of the City’s three utilities and makes
rate recommendations on an annual basis. During 2006 and again in 2009, an in-depth study of the
City’s Water Rates was conducted by Financial Consulting Solutions Group (FCSG) with review and key
decisions made by the Utility Board. The 2006 study included a review of the fiscal policies for the
Water Utility, an analysis of the revenue requirement and customer cost allocations of the Water
Utility, rate design incorporating cost of service adjustments, and a review of non-rate charges and
miscellaneous fees charged by the Water Utility. The 2009 study reviewed the overall water use
(consumption) on which rates are based, customer cost allocations, capital needs, and identified fire
protection costs to be recovered through a utility tax instead of rates.

The 2011-2012 biennial budget was developed based on the following rate increases:

           Water – 9.5% average increase in 2011 and 2012 across all customer classes. This rate
           increase is largely driven by the cost of purchased water and planned capital improvement
           needs. Seattle Public Utilities sets rates in 3 year periods and has not yet forecast rates for
           2012-2014, but anticipates a large increase (10%-20%) to wholesale water rates in 2012,
           followed by more moderate increases of about 5% per year. The Utility Board recommends
           increasing the annual capital funding level to $1.6 M during the 6 year planning period, as
           recommended in the Water System Plan, to fund projected capital reinvestment projects for
           mains and hydrants. Staff recommends using debt financing for the First Hill Water


_________________________________
City of Mercer Island 2011-2012 Budget                                                                        F-9
Utility Funds Summary
        Improvements ($1.2M) planned for 2012, in order to bring rates below the 12% and 15%
        forecast for 2011 and 2012 under pay-as-you-go. The Utility Board unanimously recommends a
        9.5% increase to Water Rates for 2011. For a single family residential customer the 2011 rate
        increase translates into a $5.11 increase in the bi-monthly bill, assuming an average water usage
        of 15 ccf per bi-monthly billing period and a ¾” meter.

        Sanitary Sewer – 9.3% increase in 2011 and 2012. This covers the City’s portion of operating
        and maintaining the sanitary sewer system and equals about 50% of the total bi-monthly sewer
        bill paid by the average single family residential customer. The other 50% is the Sewage
        Treatment charge (discussed below). The rate increase is largely driven by the capital
        reinvestment needs of the system, after being held to a minimum during construction of the
        Sewer Lake Line replacement project. After an initial review of rates, staff recommended
        reducing capital reinvestment planned for 2014 in order to bring rates below the 9.75%
        originally forecast for 2011 and to better balance the project workload on staff. The Utility
        Board unanimously recommends a 9.3% increase for 2011. This represents a $5.83 increase to
        the average single family residential customer’s bi-monthly sewer bill, with a winter water use of
        15 ccf per bi-monthly period.

        Sewage Treatment – Sewage Treatment rates charged by King County Wastewater
        Treatment, which represents a “pass through” charge, will increase in 2011 by 13.2%, which
        represents an $8.40 increase in the bi-monthly bill for an average single family residential
        customer.

        Storm Water – 3.3% increase in 2011 and 2012. This translates into a 96 cent increase in the
        2011 bi-monthly bill of a single family residential customer.

        Emergency Medical Service (EMS) – Emergency Medical Service rates are adjusted annually
        for inflation based on the Seattle metro area’s CPI-W. A rate increase of 0.85% is
        recommended for 2011, which corresponds to the First Half 2010 CPI-W. For 2011, rates will
        be adjusted for the actual costs of the four firefighter positions supported by this rate and rates
        for customer class will be reviewed based on EMS call history. Finally, the demand portion of
        the rate was adjusted based on revenue expected to be collected from ambulance transport
        fees. As a result, a flat rate of $6.78 per ESU was adopted for 2011. The average single family
        residential customer’s bi-monthly bill will increase by $3.18 to $6.78 per bi-monthly bill.

Taken together, the total (i.e. water, sewer, storm water, and EMS) bi-monthly utility bill for the average
single family residential customer will go up by 11.0% in 2011 and 5.5% in 2012, which equates to a
$23.48 increase and a $13.07 increase respectively, as noted in the table below.

                        Description                   2010            2011           2012
            Bi-Monthly Bill                             $213.42         $236.90        $249.97
            Rate Increase over Prior Year                  5.8%           11.0%           5.5%
            Dollar Increase over Prior Year              $11.66          $23.48         $13.07




                                                                  _________________________________
F-10                                                                 City of Mercer Island 2011-2012 Budget
                                                                    Utility Funds Summary
Comparison of Mercer Island to King County City Average*
In order to provide some context for the rate history and proposed increases for the City of Mercer
Island, a comparison of 2010 water, sewer, and stormwater utility rates between Mercer Island and the
King County City average is presented in the table below.

                 Description                     Water            Sewer            Storm           Total
    Mercer Island                                     $53.84           $63.22           $28.96      $146.02
    King County average                               $69.21           $53.15           $21.76      $144.12

   * Based on data from the 2010 AWC (Association of Washington Cities) Tax and User Fee Survey.

It should be noted that the sewer utility rate for Mercer Island and the King County City average
reflects sanitary sewer costs only. The King County sewage treatment pass through charge is excluded.

Income statements for the Water Fund, Sewer Fund, and Storm Water Fund are presented on the
following three pages.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                        F-11
Utility Funds Summary

                                   Water Fund Income Statement

                                                 2009               2010               2011              2012
                     Description                 Actual            Estimate           Budget            Budget
       Revenues:
          Sales/Service                      $    4,076,013    $ 3,773,745        $    4,315,004    $ 4,735,428
          Conservation Surcharge                    45,387            25,000             30,000            30,000
          Cell Tower Lease / Utility Tax            26,177            64,620             75,089            82,271
          Meter Installations                       62,517            80,000             90,000           100,000
       Total Revenues                        $ 4,210,094       $3,943,365         $ 4,510,093       $4,947,699
       Operating Expenses:
          Salaries and Benefits              $     823,409     $     885,341      $     923,098     $     968,520
          Supplies                                 141,800           180,300            197,600           207,600
          SPU Purchased Water                     1,617,528         1,544,927         1,614,113         1,856,230
          Contractual Services                     226,019           192,690            140,620           137,520
          Equipment Rental                         115,819           114,341            124,134           124,134
          Other Services and Charges                93,258           110,330            118,281           119,723
          Insurance                                 53,200            58,400             78,674            83,926
          Taxes                                    207,241           197,325            216,883           238,228
          City Administration                      250,000           265,000            176,425           184,043
       Total Operating Expenses              $ 3,528,273       $3,548,654         $ 3,589,828       $3,919,924


       Net Income                            $    681,821      $ 394,711          $    920,265      $1,027,775
       Other Financial Sources (Uses) :
          Connection Charges                 $     181,148     $      92,160      $     102,400     $     112,640
          Interest                                  16,691              6,200             7,612             6,432
          Debt Proceeds - Well, First Hill        1,015,000                   -                -        1,200,000
          Debt Service                              (10,359)          (69,264)           (26,520)        (118,845)
          Capital Projects                       (1,314,183)         (967,846)        (1,235,299)       (1,587,940)
       Total Sources (Uses)                  $   (111,703) $ (938,750)            $(1,151,807) $ (387,713)


       Net Increase (Decrease) in
       Working Capital                       $    570,118      $ (544,039)        $ (231,542)       $ 640,062
       Working Capital:
          Beginning Working Capital          $    1,496,358    $ 2,066,476        $    1,522,437    $ 1,290,895
          Net Increase (Decrease)                  570,118           (544,039)         (231,542)          640,062
       Ending Working Capital                $ 2,066,476       $1,522,437         $ 1,290,895       $1,930,957
         Less: Fiscal Policy Reserves        $    (723,296) $        (735,391) $       (877,222) $       (948,325)
         Less: Capital Funding Reserve            (250,000)          (281,341)         (293,567)         (309,422)
       Working Capital Available             $ 1,093,180       $ 505,705          $    120,106      $ 673,210

                                                                        _________________________________
F-12                                                                       City of Mercer Island 2011-2012 Budget
                                                               Utility Funds Summary

                                 Sewer Fund Income Statement

                                          2009               2010               2011              2012
           Description                   Actual             Estimate           Budget            Budget
 Revenues:
   Sales/Service                    $     2,520,776     $     2,766,500    $    3,038,270    $    3,336,422
   Charges for KC Treatment               3,365,840           3,315,000         3,771,345         3,790,200
Total Revenues                       $   5,886,616      $    6,081,500     $   6,809,615     $   7,126,622
 Operating Expenses:
   Salaries and Benefits            $       659,096     $      693,037     $     739,075     $     775,291
   Supplies                                  50,297             48,600            57,100            57,100
   Contractual Services                     225,012            270,390           335,820           303,320
   KC Sewage Treatment Charges            3,305,490           3,315,000         3,771,345         3,790,200
   Equipment Rental                          67,108             69,158            68,104            68,104
   Other Services and Charges                92,482            100,880            97,388           108,106
   Insurance                                 53,200             58,400            96,859           104,123
   Taxes                                     97,098             98,000            99,900           100,400
   City Administration                      250,000            265,000           176,425           184,043
Total Operating Expenses             $   4,799,783      $    4,918,465     $   5,442,016     $   5,490,687


Net Income                           $   1,086,833      $    1,163,035     $   1,367,599     $   1,635,935
 Other Financial Sources (Uses) :
   Interest Earnings                $       108,795     $       26,031     $      11,825     $        7,841
   Connection Charges                         2,930             10,000              3,600             3,600
   Federal STAG Grant                       227,929            249,071                  -                 -
   Debt Proceeds - Sewer Lk Line         16,016,973            350,000                  -                 -
   Debt Service - Sewer Lk Line            (195,914)         (1,104,383)       (1,130,173)       (1,130,583)
   Sewer Lake Line Project               (12,698,320)       (11,522,679)                -                 -
   Other Capital Projects                  (376,188)           (806,918)         (647,841)         (809,979)
Total Sources (Uses)                 $   3,086,205      $(12,798,878)      $ (1,762,589)     $ (1,929,121)


Net Increase (Decrease) in
Working Capital                      $   4,173,037      $(11,635,843) $         (394,990) $       (293,186)
 Working Capital:
   Beginning Working Capital        $     8,645,343     $    12,818,380    $    1,182,536    $     787,546
   Net Increase (Decrease)                4,173,037         (11,635,843)         (394,990)         (293,186)
Ending Working Capital               $ 12,818,380       $    1,182,537     $    787,546      $    494,360
  Less: Fiscal Policy Reserves      $      (393,582) $         (403,314) $       (446,512) $       (450,528)
  Less: Reserve for Lake Line            (11,522,679)                  -                -                 -
Working Capital Available            $     902,119      $     779,223      $    341,034      $     43,832

_________________________________
City of Mercer Island 2011-2012 Budget                                                                    F-13
Utility Funds Summary

                               Storm Water Fund Income Statement

                                           2009               2010               2011              2012
               Description                 Actual            Estimate           Budget            Budget
 Revenues:
       Sales/Service                  $     1,538,228 $        1,622,831 $       1,676,384 $       1,731,705
       Grants - FEMA, NPDES                   94,209             50,000            65,134            65,134
Total Revenues                        $    1,632,437     $    1,672,831     $   1,741,518     $   1,796,839
 Operating Expenses:
       Salaries and Benefits          $      433,143 $          454,870 $         444,808 $         467,855
       Supplies                               53,018             22,200            21,900            21,900
       Contractual Services                  224,125            391,420           302,204           304,604
       Other Services and Charges             30,552             35,750            27,784            28,264
       Equipment Rental                       59,623             61,992            68,414            68,414
       Insurance                              50,000             55,000            48,074            51,889
       Utilities                              20,365             28,600            28,000            28,000
       Intergovernmental                      10,715             11,730            12,630            13,630
       City Administration                    55,600             59,000            39,279            40,976
Total Operating Expenses              $     937,140      $    1,120,562     $    993,093      $   1,025,532


Net Income                            $     695,297      $     552,269      $    748,425      $    771,307
 Other Financial Sources (Uses) :
       Fee-in-Lieu                    $       38,573 $          115,000 $          35,000 $          35,000
       Interest                               20,068               7,500             8,800             6,600
       Grant - LID Project                          -                   -                -          225,000
       Capital Projects                      (840,251)          (474,997)       (1,365,188)       (1,392,490)
Total Sources (Uses)                   $    (781,610) $        (352,497) $ (1,321,388) $ (1,125,890)


Net Increase (Decrease) in
Working Capital                       $      (86,313) $        199,773      $    (572,963) $       (354,583)
 Working Capital:
       Beginning Working Capital      $     1,867,416 $        1,781,103 $       1,980,876 $       1,407,912
       Net Increase (Decrease)                (86,313)          199,773           (572,963)         (354,583)
Ending Working Capital                $    1,781,103     $    1,980,876     $   1,407,912     $   1,053,329
  Less: Fiscal Policy Reserves        $       (81,163) $         (81,661) $        (77,450) $        (80,167)
Working Capital Available             $    1,699,940     $    1,899,215     $   1,330,462     $    973,162



                                                                   _________________________________
F-14                                                                  City of Mercer Island 2011-2012 Budget
 Section G. Operating Budget by Department

                                  Table of Contents

City Attorney’s Office .................................................................... G-1

City Council ...................................................................................... G-9

City Manager’s Office...................................................................... G-17

Development Services Group ....................................................... G-27

Finance Department ........................................................................ G-43

Fire Department .............................................................................. G-55

Human Resources Department .................................................... G-69

Maintenance Department............................................................... G-79

Municipal Court ............................................................................... G-103

Parks & Recreation Department .................................................. G-111

Police Department........................................................................... G-129

Youth & Family Services Department ......................................... G-151

Non-Departmental .......................................................................... G-165
CITY ATTORNEY’S OFFICE
      _________________________________
G-2      City of Mercer Island 2011-2012 Budget
                                      Department:
                                City Attorney’s Office

Description
The City Attorney’s Office is primarily responsible for the following functions: 1) legal advice and
defense; and 2) prosecution and criminal management.




Staffing Summary
      Type of Employee               2009        2010         2011        2012        Percent Change
   & Department Function            Actual     Forecast      Budget      Budget        10-11     11-12
Regular (Ongoing):
  Prosecution & Criminal Mgt            0.80         0.80        1.00         1.00      25.0%      0.0%
  Legal Advice & Defense                2.20         2.20        2.00         2.00       -9.1%     0.0%
Total Regular                           3.00         3.00        3.00         3.00       0.0%      0.0%
Contracted (Temporary):
  Prosecution & Criminal Mgt             -            -           -            -          N/A      N/A
  Legal Advice & Defense                 -            -           -            -          N/A      N/A
Total Contracted                         -            -           -            -         N/A       N/A




_________________________________
City of Mercer Island 2011-2012 Budget                                                                    G-3
                                  Department:
                            City Attorney’s Office


                                      2011-2012 Resources




                  General Purpose Revenue
                          Support
                           100%




                                            2011-2012 Uses



      Salaries & Wages
             64%
                                                                                     Benefits
                                                                                      18%




                                                                         Contract Services
                                                                               12%

                                            Other   Fleet & Computer
                                             4%          Charges
                                                            2%




                                                                _________________________________
G-4                                                                City of Mercer Island 2011-2012 Budget
                                      Department:
                                City Attorney’s Office

Resources & Uses Summary
                                   2009         2010       2011       2012      Percent Change
             Description          Actual       Forecast   Budget     Budget     10-11     11-12
Resources:
  Beginning Fund Balance                 -          -          -          -        N/A      N/A
  General Purpose Revenue          471,585      517,222    480,977    495,209     -7.0%     3.0%
Total Resources                   471,585       517,222   480,977    495,209      -7.0%     3.0%
Uses:
  Salaries & Wages                 287,958      336,447    309,895    313,990     -7.9%     1.3%
  Benefits                          80,945       91,219     82,852     92,989     -9.2%    12.2%
  Supplies                               942      1,800      1,200      1,200    -33.3%     0.0%
  Contractual Services              75,898       59,100     59,000     59,000     -0.2%     0.0%
  Communications                         905      2,500       750        750     -70.0%     0.0%
  Fleet/Computer/Equip Rental        7,506        7,506     10,330     10,330    37.6%      0.0%
  Other Services & Charges          17,430       18,650     16,950     16,950     -9.1%     0.0%
  Intergovernmental Services             -          -          -          -        N/A      N/A
  Capital                                -          -          -          -        N/A      N/A
Total Uses                        471,585       517,222   480,977    495,209      -7.0%     3.0%



Expenditure Summary by Function
             Department            2009         2010       2011       2012      Percent Change
              Function            Actual       Forecast   Budget     Budget     10-11     11-12
Legal Advice & Defense             372,116      394,948    341,308    351,528    -13.6%     3.0%
Prosecution & Criminal Mgt          99,469      122,274    139,669    143,681    14.2%      2.9%
                Total             471,585       517,222   480,977    495,209    -7.0%     3.0%




_________________________________
City of Mercer Island 2011-2012 Budget                                                        G-5
                                           Department:
                                     City Attorney’s Office

2011-2012 Budget Analysis
General Fund
                                                                              % Change
                           2011 Analysis                    Budget
                                                                              2010-2011

2010 Approved Budget                                              517,222
Plus 2011 General Inflationary Increases                                  -        0.0%
Plus (Less) 2011 Other Significant Changes:
  Salary & benefit savings (relative to 2010 budget)   (34,919)
  Backfill for Paralegal                                (2,100)
  Dues & subscriptions                                   (800)
  Other operating costs                                  (426)
  Public defender costs                                 2,000
      Subtotal                                                    (36,245)         -7.0%
2011 Base Budget                                                  480,977          -7.0%
Plus 2011 Service Enhancement Requests:
  None                                                       -
      Subtotal                                                            -        0.0%
Less 2011 Service Reduction Proposals:
  None
      Subtotal                                                            -
2011 Final Budget                                                 480,977          -7.0%

                                                                              % Change
                           2012 Analysis                    Budget
                                                                              2011-2012

2011 Final Budget                                                 480,977
Plus 2012 General Inflationary Increases                             14,232        3.0%
Plus (Less) 2012 Other Significant Changes:
  None                                                       -
      Subtotal                                                            -        0.0%
2012 Base Budget                                                  495,209          3.0%
Plus 2012 Service Enhancement Requests:
  None                                                       -
      Subtotal                                                            -        0.0%
Less 2012 Service Reduction Proposals:
  None                                                       -
      Subtotal                                                            -
2012 Final Budget                                                 495,209          3.0%

                                                          _________________________________
G-6                                                          City of Mercer Island 2011-2012 Budget
                            Department Function:
                   Prosecution & Criminal Management

Description
Prosecute all criminal citations (e.g. driving while under the influence, domestic violence, assaults, and
thefts) and traffic infractions (e.g. speeding and parking violations) issued by Mercer Island Police
Department and handle appeals of Municipal Court decisions (RALJ hearings) to King County Superior
Court.


Priority of Government
#1 The community will be safe.


Services & Products
•   Exercise prosecutorial discretion in making filing determinations.
•   Train Mercer Island police officers on probable cause statements, writing reports, and witness
    preparation.
•   Meet with Mercer Island Municipal Court staff to insure expeditious adjudication of all court
    matters.
•   Prepare and respond to legal discovery requests.
•   Work with public defender and other defense counsel on case resolution.


2011-2012 Key Initiatives
•   Research and update City’s municipal criminal code.


Expenditure Summary by Category
           Expenditure                2009         2010         2011         2012        Percent Change
           Description               Actual      Forecast      Budget       Budget        10-11     11-12
Salaries & Wages                        33,815       69,125       82,228       83,338      19.0%      1.3%
Benefits                                13,089       20,799       24,191       27,093      16.3%     12.0%
Supplies                                   -            -            -            -          N/A       N/A
Contractual Services                    45,999       25,000       27,000       27,000        8.0%     0.0%
Communications                             -            -            -            -          N/A       N/A
Fleet/Computer/Equipment Rental            -            -            -            -          N/A       N/A
Other Services & Charges                 6,567        7,350        6,250        6,250      -15.0%     0.0%
Intergovernmental Services                 -            -            -            -          N/A       N/A
Total                                  99,469      122,274      139,669      143,681       14.2%      2.9%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                  G-7
                                    Department Function:
                                 Legal Advice & Defense

Description
Provide legal representation and counsel to the City Manager, City Council, City departments, and
Council-appointed boards and commissions.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•     Represent the City in civil litigation and administrative hearings in the areas of tort defense, land use,
      personnel and labor, contract, and municipal law.
•     Prepare City ordinances, contracts, and legal documents.
•     Handle special projects as assigned by the City Manager, including legislative monitoring and
      advocacy for City interests.
•     Control and monitor litigation including the City's insurance pool, Washington Cities Insurance
      Authority.
•     Represent the City in intergovernmental disputes.
•     Assist City Clerk in responding to Public Records Act requests.


2011-2012 Key Initiatives
•     Research and update City’s Land Use regulations.


Expenditure Summary by Category
           Expenditure                   2009         2010         2011          2012       Percent Change
            Description                 Actual      Forecast      Budget       Budget         10-11    11-12
Salaries & Wages                         254,144      267,322      227,667       230,652      -14.8%      1.3%
Benefits                                  67,855       70,420        58,661       65,896      -16.7%    12.3%
Supplies                                     942         1,800        1,200        1,200      -33.3%      0.0%
Contractual Services                      29,900       34,100        32,000       32,000       -6.2%      0.0%
Communications                               905         2,500          750          750      -70.0%      0.0%
Fleet/Computer/Equipment Rental            7,506         7,506       10,330       10,330       37.6%      0.0%
Other Services & Charges                  10,864       11,300        10,700       10,700       -5.3%      0.0%
Intergovernmental Services                    -            -            -            -           N/A      N/A
Total                                   372,116       394,948      341,308      351,528       -13.6%     3.0%




                                                                     _________________________________
G-8                                                                     City of Mercer Island 2011-2012 Budget
CITY COUNCIL
       _________________________________
G-10      City of Mercer Island 2011-2012 Budget
                                        Department:
                                       City Council

Description
The City Council is comprised of seven members who are elected on a non-partisan, "at-large" basis to
four-year terms by majority votes of the Mercer Island citizenry. The City Council serves as the
legislative branch of Mercer Island City government, establishing all City policies and passing all
ordinances and resolutions. From its members, the City Council elects a Mayor and a Deputy Mayor to
preside over City Council meetings and establish a focal point for conducting the Council's business.
The Mayor, Deputy Mayor, and the other five Council members serve on a part-time basis. Council
Meetings are scheduled the first and third Monday of the each month. Council members serve as
liaisons between the City Council and City advisory boards and commissions, communicating
information, policies, and work priorities between the bodies. In addition, Council members represent
Mercer Island interests in various regional and state forums.




Staffing Summary
      Type of Employee              2009        2010        2011        2012       Percent Change
   & Department Function           Actual     Estimate     Budget      Budget       10-11    11-12
Regular (Ongoing):
  Legislative Oversight                  -          -           -           -          N/A     N/A
  Sister City Program                    -          -           -           -          N/A     N/A
Total Regular                            -          -           -           -         N/A      N/A
Contracted (Temporary):
  Legislative Oversight                  -          -           -           -          N/A     N/A
  Sister City Program                    -          -           -           -          N/A     N/A
Total Contracted                         -          -           -           -         N/A      N/A




_________________________________
City of Mercer Island 2011-2012 Budget                                                          G-11
                               Department:
                              City Council



                          2011-2012 Resources




                                                   General Purpose Revenue
                                                            100%




                              2011-2012 Uses

                  Other
                  19%




                                                                 Salaries & Wages
                                                                        53%
       Supplies
         24%




                           Benefits
                             4%




                                               _________________________________
G-12                                              City of Mercer Island 2011-2012 Budget
                                      Department:
                                     City Council

Resources & Uses Summary
                                   2009            2010       2011        2012       Percent Change
             Description           Actual        Estimate    Budget      Budget       10-11     11-12
Resources:
  Beginning Fund Balance                   -        35,000           -           -    -100.0%      N/A
  General Purpose Revenue            49,414         57,165     36,265      36,265      -36.6%      0.0%
Total Resources                     49,414          92,165     36,265      36,265      -60.7%     0.0%
Uses:
  Salaries & Wages                   17,600         19,200     19,200      19,200       0.0%       0.0%
  Benefits                               1,434       1,565       1,565       1,565      0.0%       0.0%
  Supplies                               9,089      10,500       8,500       8,500     -19.0%      0.0%
  Contractual Services                   9,973      47,000           -           -    -100.0%      N/A
  Other Services & Charges           11,318         13,900       7,000       7,000     -49.6%      0.0%
Total Uses                          49,414          92,165     36,265      36,265      -60.7%     0.0%



Expenditure Summary by Function
             Department            2009           2010        2011        2012       Percent Change
              Function            Actual         Estimate    Budget      Budget      10-11      11-12
Legislative Oversight               47,976         87,265      34,765      34,765     -60.2%      0.0%
Sister City Program                  1,438          4,900       1,500       1,500     -69.4%      0.0%
Total                              49,414          92,165     36,265      36,265      -60.7%      0.0%




_________________________________
City of Mercer Island 2011-2012 Budget                                                             G-13
                                             Department:
                                            City Council

2011-2012 Budget Analysis
General & Capital Reserve Funds
                                                                              % Change
                         2011 Analysis                   Budget
                                                                              2010-2011

2010 Approved Budget                                               92,165
Plus 2011 General Inflationary Increases                                 -         0.0%
Plus (Less) 2011 Other Significant Changes:
  Prior year one-time costs & carryovers:
       - I-90 Lobbyist                              (35,000)
  Contract services (Council retreat)               (12,000)
  Sister City travel & supplies                      (3,400)
  Travel, tuition & registrations                    (2,750)
  Other operating costs                              (2,750)
       Subtotal                                                   (55,900)       -60.7%
2011 Base Budget                                                   36,265        -60.7%
Plus 2011 Service Enhancement Requests:
  None                                                    -
       Subtotal                                                          -         0.0%
Less 2011 Service Reduction Proposals:
  None
       Subtotal                                                          -
2011 Final Budget                                                  36,265        -60.7%

                                                                              % Change
                         2012 Analysis                   Budget
                                                                              2011-2012

2011 Final Budget                                                  36,265
Plus 2012 General Inflationary Increases                                 -         0.0%
Plus (Less) 2012 Other Significant Changes:
  None                                                    -
       Subtotal                                                          -         0.0%
2012 Base Budget                                                   36,265          0.0%
Plus 2012 Service Enhancement Requests:
  None                                                    -
       Subtotal                                                          -         0.0%
Less 2012 Service Reduction Proposals:
  None                                                    -
       Subtotal                                                          -
2012 Final Budget                                                  36,265          0.0%

                                                              _________________________________
G-14                                                             City of Mercer Island 2011-2012 Budget
                                  Department Function:
                                 Legislative Oversight

Description
Identify Council priorities, provide policy direction, and approve funding during the biennial budget
process and at regular and special Council meetings for current services; ongoing and temporary staffing;
new programs; one-time studies, contractual services, and equipment costs; reserves; and capital
improvement projects.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Attend advisory board and commission meetings.
•   Report on Council actions, policies, and work priorities.
•   Convey work products and priorities between City Council and boards and commissions.
•   Assist in recruitment and appointment of advisory board members and commissioners.
•   Accessibility through council meetings, letters, phone, and personal contact.
•   Explain City policy and practices to citizens and media.
•   Connect citizens to City staff to address concerns and needs effectively.
•   Participate in the Eastside Transportation Program as it relates to local and Eastside transit needs.
•   Participate and be active in state matters through the Association of Washington Cities.
•   Participate in and monitor activities of the Metropolitan King County/Regional Committees.
•   Continue semi-annual joint meetings of the School Board and City Council.


2011-2012 Key Initiatives
•   Conduct at least one annual planning session to establish work plan and priorities.


Expenditure Summary by Category
           Expenditure                2009         2010         2011         2012         Percent Change
           Description               Actual      Estimate      Budget       Budget           10-11     11-12
Salaries & Wages                        17,600       19,200       19,200       19,200          0.0%      0.0%
Benefits                                 1,434        1,565        1,565        1,565          0.0%      0.0%
Supplies                                 8,011        8,000        7,000        7,000         -12.5%     0.0%
Contractual Services                     9,973       47,000          -            -          -100.0%     N/A
Other Services & Charges                10,958       11,500        7,000        7,000         -39.1%     0.0%
Total                                  47,976       87,265       34,765       34,765         -60.2%      0.0%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                    G-15
                                  Department Function:
                                 Sister City Program

Description
A non-profit community based organization promoting educational, cultural and other exchanges
between Thonon les Bains, France and the City of Mercer Island, Washington. It is an association of
individuals and organizations interested in promoting close ties between both cities. The association’s
mission is “to create opportunities for citizens and organizations of Mercer Island to experience and
explore other cultures through long-term friendships and partnerships.”


Priority of Government
#5 The community will support a broad range of recreational, cultural, health, and educational
   opportunities.


Services & Products
•   Inform and educate the public about our sister city Thonon les Bains.
•   Advance educational, cultural, and other relationships between Mercer Island and Thonon les Bains.


2011-2012 Key Initiatives
•   Support communications with and possible exchanges between Mercer Island and Thonon les Bains.


Expenditure Summary by Category
           Expenditure               2009         2010         2011         2012       Percent Change
           Description              Actual      Estimate     Budget       Budget        10-11     11-12
Supplies                                1,078        2,500       1,500        1,500      -40.0%     0.0%
Contractual Services                      -            -           -            -          N/A      N/A
Communications                            -            -           -            -          N/A      N/A
Other Services & Charges                 360        2,400          -            -      -100.0%      N/A
Intergovernmental Services                -            -           -            -          N/A      N/A
Total                                  1,438        4,900        1,500        1,500     -69.4%      0.0%




                                                                _________________________________
G-16                                                               City of Mercer Island 2011-2012 Budget
CITY MANAGER’S OFFICE
       _________________________________
G-18      City of Mercer Island 2011-2012 Budget
                                       Department:
                                  City Manager’s Office

Description
Appointed by the City Council, the City Manager serves as the chief executive officer of the City. The
City Manager is primarily responsible for the preparation of the City's biennial budget, the enforcement
and implementation of all laws and policies, and the efficient and effective delivery of all City services.
Directing the allocation and organization of the City's resources, the City Manager's Office oversees the
development and implementation of all policy and program initiatives, including the City Council's top
legislative priorities. The City Manager’s Office also includes the City Clerk and Public Communications
functions.




Staffing Summary
      Type of Employee               2009         2010        2011         2012       Percent Change
   & Department Function            Actual      Estimate     Budget       Budget       10-11     11-12
Regular (Ongoing):
  Admin & Intergovt'l Relations          2.00        2.00         2.00         2.00       0.0%     0.0%
  City Clerk                             1.00        1.00         1.00         1.00       0.0%     0.0%
  Public Communications                  1.00        1.00         0.60         0.60     -40.0%     0.0%
Total Regular                           4.00         4.00         3.60        3.60      -10.0%     0.0%
Contracted (Temporary):
  Admin & Intergovt'l Relations           -           -            -            -         N/A      N/A
  City Clerk                              -           -            -            -         N/A      N/A
  Public Communications                   -           -            -            -         N/A      N/A
Total Contracted                          -           -            -           -          N/A      N/A




_________________________________
City of Mercer Island 2011-2012 Budget                                                                   G-19
                                  Department:
                             City Manager’s Office


                                     2011-2012 Resources




                                                                        General Purpose Revenue
                                                                                 100%




                                        2011-2010 Uses


                                     Equip Rental
                    Communications       1%         Other Services
                        1%                              11%

         Contract Services
               3%

         Supplies
           2%




       Benefits
        17%




                                                                                       Salaries
                                                                                         65%




                                                                     _________________________________
G-20                                                                    City of Mercer Island 2011-2012 Budget
                                     Department:
                                City Manager’s Office

Resources & Uses Summary
                                   2009       2010       2011       2012      Percent Change
             Description          Actual     Estimate   Budget     Budget     10-11     11-12
Resources:
  Beginning Fund Balance                 -        -          -          -        N/A      N/A
  General Purpose Revenue          776,534    787,048    698,136    727,962    -11.3%     4.3%
Total Resources                   776,534     787,048   698,136    727,962     -11.3%     4.3%
Uses:
  Salaries & Wages                 428,390    498,898    462,765    469,280     -7.2%     1.4%
  Benefits                        113,387     130,528    114,205    128,516    -12.5%    12.5%
  Supplies                           4,656     25,000     13,500     13,500    -46.0%     0.0%
  Contractual Services              80,524     20,700     18,000     18,000    -13.0%     0.0%
  Communications                     6,409      8,750      5,000      5,000    -42.9%     0.0%
  Fleet/Computer/Equip Rental       15,322     15,322     10,616     10,616    -30.7%     0.0%
  Other Services & Charges        127,845      87,850     74,050     83,050    -15.7%    12.2%
  Intergovernmental Services             -        -          -          -        N/A      N/A
  Capital                                -        -          -          -        N/A      N/A
Total Uses                        776,534     787,048   698,136    727,962     -11.3%     4.3%



Expenditure Summary by Function
             Department            2009       2010       2011       2012      Percent Change
              Function            Actual     Estimate   Budget     Budget     10-11     11-12
Admin & Intergovt'l Relations      433,340    438,669    422,749    441,429     -3.6%     4.4%
City Clerk                         215,066    177,219    172,632    180,830     -2.6%     4.7%
Public Communications              128,128    171,160    102,756    105,704    -40.0%     2.9%
Total                             776,534     787,048   698,136    727,962     -11.3%     4.3%




_________________________________
City of Mercer Island 2011-2012 Budget                                                     G-21
                                           Department:
                                      City Manager’s Office

2011-2012 Budget Analysis
General Fund
                                                                                 % Change
                       2011 Analysis                        Budget
                                                                                 2010-2011

2010 Approved Budget                                                 787,048
Plus 2011 General Inflationary Increases                                    -         0.0%
Plus (Less) 2011 Other Significant Changes:
  Salary & benefit savings (relative to 2010 budget)   (12,437)
  Supplies                                             (11,500)
  Professional services & special projects             (10,000)
  Travel, tuition & registrations                       (4,600)
  Other operating savings                               (4,499)
  Election expenses                                     4,000
       Subtotal                                                      (39,036)         -5.0%
2011 Base Budget                                                     748,012          -5.0%
Plus 2011 Service Enhancement Requests:
  None                                                       -
       Subtotal                                                             -         0.0%
Less 2011 Service Reduction Proposals:
  Communications Coordinator (0.4 FTE reduction)       (49,876)
       Subtotal                                                      (49,876)
2011 Final Budget                                                    698,136        -11.3%
                                                                                 % Change
                       2012 Analysis                        Budget
                                                                                 2011-2012

2011 Final Budget                                                    698,136
Plus 2012 General Inflationary Increases                              24,826          3.6%
Plus (Less) 2012 Other Significant Changes:
  Professional services & special projects              5,000
       Subtotal                                                        5,000          0.7%
2012 Base Budget                                                     727,962          4.3%
Plus 2012 Service Enhancement Requests:
  None                                                       -
       Subtotal                                                             -         0.0%
Less 2012 Service Reduction Proposals:
  None                                                       -
       Subtotal                                                             -
2012 Final Budget                                                    727,962          4.3%

                                                                  _________________________________
G-22                                                                 City of Mercer Island 2011-2012 Budget
                         Department Function:
           Administration & Intergovernmental Relations

Description
Implement City Council priorities, oversee management of all City departments, and provide
representation of Mercer Island interests in local, regional, and state forums.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Organize City resources to fulfill City Council's work program.
•   Coordinate City Council business agenda with Mayor and Deputy Mayor.
•   Represent the City in various regional and sub-regional activities (e.g. Eastside Transportation
    Partnership, Eastside Public Safety Communication Agency, eCityGov Alliance, NORCOM, and
    ARCH)
•   Provide staffing resources to City Council.


2011-2012 Key Initiatives
•   Complete City Council work program.
•   Assist City Council with strategic initiatives regarding I-90, aquatics, fire station, Youth Theatre
    Northwest, and joint facility use with the Mercer Island School District.


Expenditure Summary by Category
           Expenditure                 2009         2010         2011         2012        Percent Change
           Description                Actual      Estimate      Budget       Budget          10-11     11-12
Salaries & Wages                       260,235      326,845      328,290      332,465          0.4%        1.3%
Benefits                                67,282       78,661       75,026        84,531         -4.6%    12.7%
Supplies                                 3,575        5,000         4,500        4,500        -10.0%       0.0%
Contractual Services                    64,023        2,500           -            -         -100.0%       N/A
Communications                           3,108        2,750         2,500        2,500         -9.1%       0.0%
Fleet/Computer/Equipment Rental          9,663        9,663         5,433        5,433        -43.8%       0.0%
Other Services & Charges                25,454       13,250         7,000       12,000        -47.2%    71.4%
Total                                 433,340       438,669      422,749      441,429          -3.6%     4.4%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                      G-23
                                     Department Function:
                                        City Clerk

Description
Fulfill the state legal requirements of the City Clerk position, support the City Council and City
Manager, and manage the City’s website.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Manage official City records including ordinances, resolutions, agreements, and minutes.
•   Provide administrative support to the City Manager and City Council.
•   Coordinate City Council meeting agenda packet creation and distribution.
•   Process affidavits of publication regarding ordinances and notices.
•   Serve as liaison to King County regarding elections.
•   Collaborate with the Finance Department on the issuance of business licenses to amusement,
    towing, and massage establishments.
•   Manage the registration and training of public notaries.
•   Maintain appointment records of City boards and commissions and coordinate the appointment
    process.
•   Provide training to employees regarding City Clerk and City Council policies and procedures.
•   Track and coordinate the processing of public disclosure requests.
•   Maintain the City's municipal code and coordinate any supplements thereto, including zoning codes.
•   Maintain the City’s contracts and agreements database.
•   Maintain and update the City's website and provide training to employees.


2011-2012 Key Initiatives
•   Implement a city-wide automated agenda creation process.
•   Continue development of the records management system for essential public records.
•   Continue development and implementation of document management system.


Expenditure Summary by Category
           Expenditure                2009         2010         2011         2012        Percent Change
           Description               Actual       Estimate     Budget       Budget           10-11    11-12
Salaries & Wages                        94,698       90,755       88,998       90,148         -1.9%     1.3%
Benefits                                24,734       26,752       25,292       28,340         -5.5%    12.1%
Supplies                                     20         -            -            -            N/A      N/A
Fleet/Computer/Equipment Rental          2,812        2,812        2,592        2,592         -7.8%     0.0%
Other Services & Charges                92,802       56,900       55,750       59,750         -2.0%     7.2%
Total                                 215,066      177,219      172,632      180,830          -2.6%     4.7%
                                                                  _________________________________
G-24                                                                 City of Mercer Island 2011-2012 Budget
                               Department Function:
                             Public Communications

Description
Plan, organize, and supervise the City's community outreach efforts, town hall meetings, and media
relations to encourage informed input from Mercer Island citizens.


Priority of Government
#6 The community will support open and informed public involvement processes within the structure
   of representative, democratic decision making.


Services & Products
•   Publish the Mercer Island Quarterly, an all-Island newsletter about City services and programs.
•   Publish MI Weekly online news brief.
•   Facilitate town hall and other city meetings.
•   Coordinate the City's media relations to provide accurate, consistent, and useful information.
•   Produce website content.
•   Assist all departments in public involvement and education by providing communications strategy,
    graphic design, and advertising support.
•   Monitor current events and issues that may impact the City.
•   Develop brochures, handouts, and web content for services and programs that involve multiple City
    departments.
•   Maintain effective relations with local and regional organizations.


2011-2012 Key Initiatives
•   Continue communications outreach to the community through newsletters, media contacts, and
    website postings.
•   Develop further means of improving community access to City government and more opportunities
    to participate in decision-making processes.
•   Continue cable broadcasting of Council meetings.
•   Plan and organize community workshops to provide education about specific City programs and
    services.




_________________________________
City of Mercer Island 2011-2012 Budget                                                               G-25
                               Department Function:
                             Public Communications

Expenditure Summary by Category
           Expenditure            2009       2010       2011        2012       Percent Change
           Description            Actual    Estimate   Budget     Budget        10-11     11-12
Salaries & Wages                   73,458     81,298     45,477      46,667     -44.1%      2.6%
Benefits                           21,371     25,115     13,887      15,645     -44.7%     12.7%
Supplies                            1,062     20,000      9,000       9,000     -55.0%      0.0%
Contractual Services               16,501     18,200     18,000      18,000       -1.1%     0.0%
Communications                      3,301      6,000      2,500       2,500     -58.3%      0.0%
Fleet/Computer/Equipment Rental     2,847      2,847      2,592       2,592       -9.0%     0.0%
Other Services & Charges            9,589     17,700     11,300      11,300     -36.2%      0.0%
Total                             128,128    171,160   102,756     105,704      -40.0%      2.9%




                                                         _________________________________
G-26                                                        City of Mercer Island 2011-2012 Budget
DEVELOPMENT
SERVICES GROUP
       _________________________________
G-28      City of Mercer Island 2011-2012 Budget
                               Department:
                       Development Services Group

Description
The Development Services Group (DSG) is responsible for regulating all development activities on the
Island. DSG reviews all private development permits to ensure that the public infrastructure is
protected and, when necessary, enhanced. DSG is comprised of the following functions: 1)
administration & customer services, 2) building plan review & inspection services, 3) development
engineering, and 4) land use planning services.




_________________________________
City of Mercer Island 2011-2012 Budget                                                           G-29
                                 Department:
                         Development Services Group

Staffing Summary
       Type of Employee             2009       2010        2011        2012       Percent Change
   & Department Function            Actual    Estimate    Budget     Budget        10-11     11-12
Regular (Ongoing):
  Administration & Customer Svcs       6.50        6.50       6.50        6.50        0.0%     0.0%
  Building Plan Rvw & Inspec Svcs      4.50        4.50       4.50        4.50        0.0%     0.0%
  Development Engineering              3.75        3.75       2.75        2.75      -26.7%     0.0%
  Land Use Planning Services           3.00        3.00       3.00        3.00        0.0%     0.0%
Total Regular                         17.75      17.75      16.75        16.75       -5.6%     0.0%
Contracted (Temporary):
  Administration & Customer Svcs        -           -          -           -          N/A      N/A
  Building Plan Rvw & Inspec Svcs      1.00        1.00       1.00        1.00        0.0%     0.0%
  Development Engineering               -           -          -           -          N/A      N/A
  Land Use Planning Services           1.00        1.00        -           -       -100.0%     N/A
Total Contracted                       2.00       2.00       1.00         1.00      -50.0%     0.0%




                                                            _________________________________
G-30                                                           City of Mercer Island 2011-2012 Budget
                                        Department:
                                Development Services Group


                                                    2011-2012 Resources




                                                                                                        Development Permit Fees
                                                                                                                56%




       Stormwater Rates
             1%

       Sewer Rates
          1%

          Water Rates
             1%

                     Street Fund REET                          Land Use Fees
                             1%                                     6%
                                           Other Charges for
                                               Services
                                                  1%




                                                        2011-2012 Uses


                                                  Communications
                                                                        Equipment Rental
                                                      1%
                                                                              4%
                         Contractual Services
                                 4%
                                                                                  Other Services & Charges
                                                                                             1%
                 Supplies
                   1%



              Benefits
               20%




                                                                                                             Salaries & Wages
                                                                                                                    69%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                            G-31
                                   Department:
                           Development Services Group

Resources & Uses Summary
                                    2009        2010        2011        2012       Percent Change
             Description           Actual     Estimate    Budget      Budget        10-11     11-12
Resources:
  Beginning Fund Balance (GF)       194,814     370,398         -           -       -100.0%     N/A
  Business & Occupation Tax           2,472         -           -           -          N/A      N/A
  Development Permit Fees           928,761     875,000   1,155,000   1,155,000      32.0%      0.0%
  Land Use Fees                     122,488     111,000     116,000     116,000        4.5%     0.0%
  Other Charges for Services         27,812      13,000      23,000      23,000      76.9%      0.0%
  State Shared Revenues              51,979         -           -           -          N/A      N/A
  Real Estate Excise Taxes           57,189      66,365      24,973      26,126      -62.4%     4.6%
  Water Rates                        25,758      29,142      24,975      26,128      -14.3%     4.6%
  Sewer Rates                        22,784      29,142      24,975      26,128      -14.3%     4.6%
  Stormwater                         22,784      29,142      24,973      26,126      -14.3%     4.6%
  General Purpose Revenue           716,179     995,303     637,913     701,831      -35.9%    10.0%
Total Resources                   2,173,021   2,518,492   2,031,810   2,100,340      -19.3%     3.4%
Uses:
  Salaries & Wages                1,509,521   1,627,186   1,417,438   1,440,079      -12.9%     1.6%
  Benefits                          445,127     458,952     389,920     436,509      -15.0%    11.9%
  Supplies                           10,418      40,700      19,200      19,200      -52.8%     0.0%
  Contractual Services               71,465     244,550      78,700      77,700      -67.8%    -1.3%
  Communications                      8,913       9,150       9,430       9,430        3.1%     0.0%
  Fleet/Computer/Equip Rental        99,829      99,829      89,147      89,147      -10.7%     0.0%
  Other Services & Charges           14,750      38,125      27,975      28,275      -26.6%     1.1%
  Capital                            12,997         -           -           -          N/A      N/A
Total Uses                        2,173,021   2,518,492   2,031,810   2,100,340      -19.3%     3.4%



Expenditure Summary by Function
             Department             2009        2010        2011        2012       Percent Change
              Function             Actual     Estimate    Budget      Budget        10-11     11-12
Administration & Customer Svcs      646,779     695,009     681,707     703,470       -1.9%     3.2%
Building Plan Rvw & Inspec Svcs     661,401     730,654     681,715     706,493       -6.7%     3.6%
Development Engineering             461,965     603,802     352,790     365,563      -41.6%     3.6%
Land Use Planning Services          402,875     489,027     315,598     324,814      -35.5%     2.9%
Total                             2,173,021   2,518,492   2,031,810   2,100,340      -19.3%     3.4%



                                                             _________________________________
G-32                                                            City of Mercer Island 2011-2012 Budget
                                   Department:
                           Development Services Group

2011-2012 Budget Analysis
General, Street & Beautification Funds
                                                                                % Change
                        2011 Analysis                         Budget
                                                                                2010-2011

2010 Approved Budget                                                2,431,066
Plus 2011 General Inflationary Increases                                    -        0.0%
Plus (Less) 2011 Other Significant Changes:
   Prior year one-time costs & carryovers:
     - Contract staff salaries & benefits               (196,898)
     - Comp plan update                                  (80,000)
     - Transportation plan                               (80,000)
     - Building code update                              (18,500)
     - Document scanning (carryover)                      (6,750)
     - Bicycle/pedestrian study (carryover)               (6,000)
   Salary & benefit savings (relative to 2010 budget)    (42,820)
   Casual labor costs                                    (20,000)
   Other Contract services                               (11,100)
   Travel, tuition & registrations                        (5,000)
   Other operating costs                                  (2,033)
   Fire Marshal Contrac Services                         18,000
     Subtotal                                                       (451,101)      -18.6%
2011 Base Budget                                                    1,979,965      -18.6%
Plus 2011 Service Enhancement Requests:
   Retain contract Building Plans Examiner (1.0 FTE)     99,819
     Subtotal                                                          99,819        4.1%
Less 2011 Service Reduction Proposals:
   Transportation Manager (1.0 FTE reduction)           (122,898)
     Subtotal                                                       (122,898)
2011 Final Budget                                                   1,956,886      -19.5%




_________________________________
City of Mercer Island 2011-2012 Budget                                                      G-33
                              Department:
                      Development Services Group

2011-2012 Budget Analysis
General, Street & Beautification Funds (cont’d)
                                                                            % Change
                     2012 Analysis                      Budget
                                                                            2011-2012

  2011 Final Budget                                          1,956,886
  Plus 2012 General Inflationary Increases                       65,071           3.3%
  Plus (Less) 2012 Other Significant Changes:
       None                                              -
        Subtotal                                                       -          0.0%
  2012 Base Budget                                           2,021,957            3.3%
  Plus 2012 Service Enhancement Requests:
       None                                              -
        Subtotal                                                       -          0.0%
  Less 2012 Service Reduction Proposals:
       None                                              -
        Subtotal                                                       -
  2012 Final Budget                                          2,021,957            3.3%




                                                  _________________________________
G-34                                                 City of Mercer Island 2011-2012 Budget
                                    Department:
                            Development Services Group

2011-2012 Budget Analysis
Water, Sewer & Storm Water Funds
                                                                     % Change
                       2011 Analysis               Budget
                                                                     2010-2011

2010 Approved Budget                                        87,426
Plus 2011 General Inflationary Increases                         -        0.0%
Plus (Less) 2011 Other Significant Changes:
   Prior year one-time costs & carryovers:
     - Casual labor                           (15,000)
   Cellular phone & registration fees          1,185
   Other operating costs                       1,313
     Subtotal                                            (12,502)       -14.3%
2011 Base Budget                                            74,924      -14.3%
Plus 2011 Service Enhancement Requests:
   None                                             -
     Subtotal                                                    -        0.0%
Less 2011 Service Reduction Proposals:
   None
     Subtotal                                                    -
2011 Final Budget                                           74,924      -14.3%


                                                                     % Change
                       2012 Analysis               Budget
                                                                     2011-2012

2011 Final Budget                                           74,924
Plus 2012 General Inflationary Increases                     3,459        4.6%
Plus (Less) 2012 Other Significant Changes:
   None                                             -
     Subtotal                                                    -        0.0%
2012 Base Budget                                            78,383        4.6%
Plus 2012 Service Enhancement Requests:
   None                                             -
     Subtotal                                                    -        0.0%
Less 2012 Service Reduction Proposals:
   None                                             -
     Subtotal                                                    -
2012 Final Budget                                           78,383        4.6%

_________________________________
City of Mercer Island 2011-2012 Budget                                           G-35
                           Department Function:
                  Administration & Customer Services

Description
Provide supervision to the department’s 4 teams. Serve as the primary point of contact for public
information related to development and as an advocate for customers interested or engaged in
development activity on the Island. Coordinate all facets of the permitting process, which encompass
permit intake, permit issuance, permit tracking, field inspections, and records management. Provide
liaison services for organizations, large projects, and community-wide issues.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Provide public information, tip sheets, guidelines, and applications for private building and land
    development.
•   Respond to all general information and permit application inquiries over the phone and over the
    counter.
•   Process all permits for building, land use, and design reviews.
•   Schedule, attend, and coordinate all pre-application meetings for development permits.
•   Maintain tracking system for permitting, inspections, code enforcement, land use planning, and
    design review.
•   Schedule all field inspections for building compliance with codes and approved plans.
•   Maintain records for all plans, permits, historical street address files, and archive files for use by staff
    and for public information requests.
•   Provide staff support to the City Council, City Manager, Advisory Boards, and other departments.
•   Provide code compliance oversight and direction.


2011-2012 Key Initiatives
•   Conduct analysis of appropriate DSG costs and fees to assure that the City’s goal of full cost
    recovery for all eligible permit activities is implemented.
•   Develop clear administrative procedures for Code Enforcement.




                                                                    _________________________________
G-36                                                                   City of Mercer Island 2011-2012 Budget
                            Department Function:
                   Administration & Customer Services

Expenditure Summary by Category
           Expenditure             2009       2010       2011       2012      Percent Change
           Description            Actual     Estimate   Budget     Budget     10-11     11-12
Salaries & Wages                   446,031    496,288    494,927    503,111     -0.3%     1.7%
Benefits                           137,195    119,472    113,560    127,139     -4.9%    12.0%
Supplies                             4,318      7,500      7,500      7,500     0.0%      0.0%
Contractual Services                21,038     28,750     20,500     20,500    -28.7%     0.0%
Communications                       2,115      2,000      2,000      2,000     0.0%      0.0%
Fleet/Computer/Equipment Rental     28,049     28,049     31,270     31,270    11.5%      0.0%
Other Services & Charges             8,033     12,950     11,950     11,950     -7.7%     0.0%
Total                             646,779     695,009   681,707    703,470      -1.9%     3.2%




_________________________________
City of Mercer Island 2011-2012 Budget                                                     G-37
                         Department Function:
            Building Plan Review & Inspection Services

Description
Process, review, and complete all private, non-profit, and public (i.e. city, state, regional, and utility
entities) development permits, encompassing building plans examination and field inspection for code
compliance with issued permits. Conduct reviews of trees and vegetation on private property.


Priority of Government
#1 The community will be safe.
#4 The community will support attractive, high quality neighborhood and business environments.


Services & Products
•   Provide customer service and assistance on building permit requirements and processes.
•   Provide public notice and information.
•   Provide timely project information at early project design phase during pre-application process.
•   Perform plans examination for compliance with applicable International Building Code (IBC) and
    other ordinances within 3 weeks for express permits and 6 weeks for regular permits.
•   Perform building site inspections to review conformance with plans and regulations.
•   Update building codes, public safety requirements, and public information tip sheets.
•   Provide on-line services for plan submittal and review, permits, inspections, and public information.


2011-2012 Key Initiatives
•   Continue with contract Plans Examiner to provide timely review of residential and commercial
    building permits.
•   Provide electronic plan review to improve communication, lower customer costs, and improve
    sustainability efforts.
•   Absorb Fire plan review and construction inspection duties resulting from the elimination of the Fire
    Marshal position in the Fire Department.




                                                                   _________________________________
G-38                                                                  City of Mercer Island 2011-2012 Budget
                          Department Function:
             Building Plan Review & Inspection Services

Expenditure Summary by Category
            Expenditure            2009       2010       2011       2012      Percent Change
            Description            Actual    Estimate   Budget     Budget     10-11     11-12
 Salaries & Wages                  462,780    491,302    464,525    471,895     -5.5%     1.6%
 Benefits                          137,027    144,774    137,646    154,054     -4.9%    11.9%
 Supplies                            5,057     22,200      3,700      3,700    -83.3%     0.0%
 Contractual Services                2,942     15,700     32,200     33,200   105.1%      3.1%
 Communications                      3,810      4,500      4,500      4,500     0.0%      0.0%
 Fleet/Computer/Equipment Rental    39,278     39,278     28,744     28,744    -26.8%     0.0%
 Other Services & Charges            4,510     12,900     10,400     10,400    -19.4%     0.0%
 Capital                             5,997        -          -          -     100.0%      N/A
 Total                             661,401    730,654   681,715    706,493      -6.7%     3.6%




_________________________________
City of Mercer Island 2011-2012 Budget                                                    G-39
                                  Department Function:
                               Development Engineering

Description
Conduct engineering review and site inspection of all land use and private development projects,
including the impact on and use of the City’s rights-of-way and utility infrastructure. Conduct
neighborhood and Town Center transportation planning and traffic management for all modes of travel.


Priority of Government
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.


Services & Products
•      Provide customer service assistance on utility and right-of-way options and requirements related to
       private development.
•      Provide guidance at detailed pre-application meetings.
•      Conduct water, sewer, and storm drainage inspections for all private development
•      Protect public utility and roadway infrastructure by ensuring that all private development conforms
       to adopted engineering standards through quality permit review and field inspection
•      Perform plan review and inspection of right-of-way permits
•      Ensure implementation and enforcement of engineering standards associated with private
       development
•      Coordinate the annual update and adoption of the six year TIP
•      Coordinate all modes of transportation improvements including transit, bicycles and pedestrians.


2011-2012 Key Initiatives
•      Implementation of the National Pollution Discharge Elimination System (NPDES) Phase II Permit
       requirements.


Expenditure Summary by Category
               Expenditure              2009         2010        2011         2012       Percent Change
               Description             Actual      Estimate     Budget      Budget        10-11     11-12
    Salaries & Wages                    330,446      360,767     233,913      237,975      -35.2%     1.7%
    Benefits                             89,197      102,273      69,819       78,230      -31.7%    12.0%
    Supplies                                688        8,500        6,500       6,500      -23.5%     0.0%
    Contractual Services                   9,633     104,600      18,750       18,750      -82.1%     0.0%
    Communications                         2,289       1,650        1,930       1,930      17.0%      0.0%
    Fleet/Computer/Equipment Rental      20,837       20,837      18,803       18,803       -9.8%     0.0%
    Other Services & Charges               1,875       5,175        3,075       3,375      -40.6%     9.8%
    Capital                                7,000         -            -           -          N/A      N/A
    Total                               461,965     603,802      352,790     365,563      -41.6%      3.6%
                                                                  _________________________________
G-40                                                                 City of Mercer Island 2011-2012 Budget
                               Department Function:
                           Land Use Planning Services

Description
Process all land use and non-single family design review permit applications consistent with adopted
policies in the Comprehensive Plan and applicable Unified Land Development Code (ULDC) regulations
and within timeframes required by state law. These include rezones, code amendments, conditional use
permits, variances, deviations, subdivision plats, lot line adjustments, shoreline development permits and
exemptions, SEPA determinations, accessory dwelling units (ADU’s), all land use appeals, major new
construction, and minor revision design reviews, and staff administrative design reviews.


Priority of Government
#4 The community will support attractive, high quality neighborhood and business environments.


Services & Products
•   Conduct land use and non-single family design permit reviews.
•   Provide property, zoning, and land use development information to customers.
•   Conduct land use/zoning compliance reviews on all building permits.
•   Conduct Critical Areas Ordinance (CAO) permit reviews.
•   Provide staff support to Planning Commission, Design Commission, City Council, and selected
    committees and task forces.
•   Monitor, maintain, and update Comprehensive Plan, including annual buildable lands report.
•   Administer and update Shoreline Master Program (required by State).
•   Conduct required SEPA and other environmental reviews by Code Official.
•   Prepare land development code amendments as requested by City Council or private sector/citizen
    applicants.


2011-2012 Key Initiatives
•   Completion of the Shoreline Master Program Update.
•   Assist in developing Mercer Island School District Master Plan.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                G-41
                               Department Function:
                           Land Use Planning Services

Expenditure Summary by Category
           Expenditure            2009       2010       2011        2012       Percent Change
           Description            Actual    Estimate   Budget     Budget        10-11     11-12
Salaries & Wages                  270,264    278,829    224,073     227,098      -19.6%     1.4%
Benefits                           81,708     92,433     68,895      77,086      -25.5%    11.9%
Supplies                              354      2,500      1,500       1,500      -40.0%     0.0%
Contractual Services               37,852     95,500      7,250       5,250      -92.4%   -27.6%
Communications                        700      1,000      1,000       1,000        0.0%     0.0%
Fleet/Computer/Equipment Rental    11,665     11,665     10,330      10,330      -11.4%     0.0%
Other Services & Charges              332      7,100      2,550       2,550      -64.1%     0.0%
Total                             402,875    489,027   315,598     324,814       -35.5%     2.9%




                                                         _________________________________
G-42                                                        City of Mercer Island 2011-2012 Budget
FINANCE DEPARTMENT
       _________________________________
G-44      City of Mercer Island 2011-2012 Budget
                                          Department:
                                           Finance

Description
The Finance Department provides financial planning, analysis and reporting, treasury, and accounting
services for all of the City’s operations.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                 G-45
                                   Department:
                                    Finance

Staffing Summary
       Type of Employee    2009        2010       2011        2012       Percent Change
   & Department Function   Actual    Estimate    Budget     Budget        10-11     11-12
Regular (Ongoing):
  Financial Services          7.00        7.00       7.00        7.00        0.0%     0.0%
Total Regular                 7.00       7.00       7.00         7.00        0.0%     0.0%
Contracted (Temporary):
  Financial Services           -           -          -           -          N/A      N/A
Total Contracted               -          -           -           -          N/A      N/A




                                                   _________________________________
G-46                                                  City of Mercer Island 2011-2012 Budget
                                                     Department:
                                                      Finance


                                                2011-2012 Resources


                                                         Business & Occupation
                                                                   Tax
                                                                   3%                   Business License Fees
                                                                                                11%


                                                                                                       Water Rates & Reserves
                                                                                                                13%


         General Purpose Revenue
                   55%




                                                                                                  Sewer Rates & Reserves
                                                                                                           14%

                                                                                   Stormwater Rates &
                                                                                       Other Chgs
                                                                                          4%




                                                     2011-2012 Uses


                                                       Equipment Rental
                                                             3%             Other Services & Charges
                                    Communications                                     3%
                                        2%

                    Contractual Services
                           15%



                    Supplies
                      1%




                                                                                                       Salaries & Wages
                               Benefits                                                                       58%
                                18%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                          G-47
                                        Department:
                                         Finance

Resources & Uses Summary
                                2009        2010         2011        2012       Percent Change
             Description        Actual    Estimate     Budget      Budget        10-11     11-12
Resources:
  Beginning Fund Balance            -            -           -           -          N/A      N/A
  Business & Occupation Tax      29,599      26,800       27,200      27,300        1.5%     0.4%
  Business License Fees         117,035     110,000      110,000     110,000        0.0%     0.0%
  Water Rates                    68,197      76,697      138,265     139,245      80.3%      0.7%
  Sewer Rates                    67,500      75,947      164,465     134,245     116.6%    -18.4%
  Storm Water Rates              19,377      27,704       36,751      38,526      32.7%      4.8%
  General Purpose Revenue       646,358     746,557      539,252     576,516      -27.8%     6.9%
Total Resources                 948,066   1,063,705    1,015,933   1,025,832       -4.5%     1.0%
Uses:
  Salaries & Wages              569,755     595,138      583,103     590,846       -2.0%     1.3%
  Benefits                      168,440     184,709      175,459     196,115       -5.0%    11.8%
  Supplies                        5,154       9,000        6,100       6,100      -32.2%     0.0%
  Contractual Services          123,843     172,170      165,100     145,400       -4.1%   -11.9%
  Communications                 19,466      30,300       19,900      20,500      -34.3%     3.0%
  Fleet/Computer/Equip Rental    26,038      26,038       33,096      33,096      27.1%      0.0%
  Other Services & Charges       35,369      46,350       33,175      33,775      -28.4%     1.8%
  Intergovernmental Services        -            -           -           -          N/A      N/A
  Capital                           -            -           -           -          N/A      N/A
Total Uses                      948,066   1,063,705    1,015,933   1,025,832       -4.5%     1.0%



Expenditure Summary by Function
             Department         2009        2010         2011        2012       Percent Change
              Function          Actual    Estimate     Budget      Budget        10-11     11-12
Financial Services              948,066    1,063,705   1,015,933   1,025,832       -4.5%     1.0%
                Total           948,066   1,063,705    1,015,933   1,025,832     -4.5%     1.0%




                                                          _________________________________
G-48                                                         City of Mercer Island 2011-2012 Budget
                                                 Department:
                                                  Finance

2011-2012 Budget Analysis
General & Beautification Funds
                                                                                       % Change
                        2011 Analysis                                Budget
                                                                                       2010-2011

2010 Approved Budget                                                       883,357
Plus 2011 General Inflationary Increases                                          -         0.0%
Plus (Less) 2011 Other Significant Changes:
   Direct charge utility billing positions to Utility Funds    (141,616)
   Financial system hardware support and consulting             (17,850)
   Salary & benefit savings (relative to 2010 budget)           (15,681)
   EMS rate study                                               (15,000)
   State audit costs                                            (10,000)
   Travel, tuition & registrations                               (5,000)
   Other operating costs                                         (1,758)
     Subtotal                                                              (206,905)      -23.4%
2011 Base Budget                                                           676,452        -23.4%
Plus 2011 Service Enhancement Requests:
   None                                                               -
     Subtotal                                                                     -         0.0%
Less 2011 Service Reduction Proposals:
   None                                                               -
     Subtotal                                                                     -
2011 Final Budget                                                          676,452        -23.4%




_________________________________
City of Mercer Island 2011-2012 Budget                                                             G-49
                                    Department:
                                     Finance

2011-2012 Budget Analysis
General & Beautification Funds (cont’d)
                                                                          % Change
                    2012 Analysis                     Budget
                                                                          2011-2012

2011 Final Budget                                           676,452
Plus 2012 General Inflationary Increases                       22,364           3.3%
Plus (Less) 2012 Other Significant Changes:
   EMS rate study                                 15,000
       Subtotal                                                15,000           2.2%
2012 Base Budget                                            713,816             5.5%
Plus 2012 Service Enhancement Requests:
   None                                                -
       Subtotal                                                     -           0.0%
Less 2012 Service Reduction Proposals:
   None                                                -
       Subtotal                                                     -
2012 Final Budget                                           713,816             5.5%




                                                  _________________________________
G-50                                                 City of Mercer Island 2011-2012 Budget
                                                  Department:
                                                   Finance

2011-2012 Budget Analysis
Water, Sewer & Storm Water Funds
                                                                                      % Change
                        2011 Analysis                               Budget
                                                                                      2010-2011

2010 Approved Budget                                                      180,348
Plus 2011 General Inflationary Increases                                          -        0.0%
Plus (Less) 2011 Other Significant Changes:
   Printing & postage                                         (10,600)
   Travel, tuition & registrations                              (5,975)
   Salary & benefit savings (relative to 2010 budget)           (5,604)
   Other operating costs                                         (304)
   Direct charge utility billing positions to Utility Funds   141,616
     Subtotal                                                             119,133        66.1%
2011 Base Budget                                                          299,481        66.1%
Plus 2011 Service Enhancement Requests:
   Sewer rate model development                                35,000
   Water meter replacement assessment                           5,000
     Subtotal                                                                40,000      22.2%
Less 2011 Service Reduction Proposals:
   None                                                              -
     Subtotal                                                                     -
2011 Final Budget                                                         339,481        88.2%

                                                                                      % Change
                        2012 Analysis                               Budget
                                                                                      2011-2012

2011 Final Budget                                                         339,481
Plus 2012 General Inflationary Increases                                     12,535        3.7%
Plus (Less) 2012 Other Significant Changes:
   Prior year one-time costs & carryovers:
     - Sewer rate model development                           (35,000)
     - Water meter replacement assessment                       (5,000)
     Subtotal                                                             (40,000)       -11.8%
2012 Base Budget                                                          312,016         -8.1%
Plus 2012 Service Enhancement Requests:
   None                                                              -
     Subtotal                                                                     -        0.0%
Less 2012 Service Reduction Proposals:
   None                                                              -
     Subtotal                                                                     -
2012 Final Budget                                                         312,016         -8.1%

_________________________________
City of Mercer Island 2011-2012 Budget                                                            G-51
                                     Department Function:
                                     Financial Services

Description
Prepare quarterly and annual financial reports, financial analyses, and long-range financial forecasts for
internal and external stakeholders. Oversee development of the City’s biennial budget. Coordinate
citywide performance measurement efforts. Provide accounts payable, utility administration (water,
sewer, stormwater, and EMS), business licensing and tax collection, accounts receivable, and treasury
management services.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Biennial budget document
•   Annual financial statements
•   Quarterly financial status report
•   Annual, citywide performance measurement report (Mercer Island Dashboard)
•   6 year Capital Improvement Program
•   5 year financial forecasting model
•   Water, sewer, stormwater, and EMS utility rate studies
•   Other tax/fee studies (e.g. business licensing and B&O tax structure)
•   Revenue and expenditure analyses
•   Provide financial information to bond rating agencies
•   Internal control policies
•   Weekly processing of vendor payments
•   Water meter reading, utility billing, and utility administration
•   Business licensing
•   Business and occupation tax billing
•   Other miscellaneous accounts receivable
•   Cash, investment, and debt management


2011-2012 Key Initiatives
•   Develop investment policy to guide staff efforts to more actively manage City’s idle cash.
•   Overhaul the Sewer rate model, making it easier to perform “what if” analysis.
•   Draft a comprehensive set of accounting policies and procedures.
•   Conduct the emergency medical services (EMS) biennial rate study.




                                                                   _________________________________
G-52                                                                  City of Mercer Island 2011-2012 Budget
                                  Department Function:
                                  Financial Services

Expenditure Summary by Category
           Expenditure             2009        2010        2011        2012      Percent Change
           Description            Actual     Estimate    Budget      Budget      10-11     11-12
Salaries & Wages                   569,755     595,138     583,103     590,846     -2.0%     1.3%
Benefits                           168,440     184,709     175,459     196,115     -5.0%    11.8%
Supplies                             5,154       9,000       6,100       6,100    -32.2%     0.0%
Contractual Services               123,843     172,170     165,100     145,400     -4.1%   -11.9%
Communications                      19,466      30,300      19,900      20,500    -34.3%     3.0%
Fleet/Computer/Equipment Rental     26,038      26,038      33,096      33,096    27.1%      0.0%
Other Services & Charges            35,369      46,350      33,175      33,775    -28.4%     1.8%
Total                             948,066    1,063,705   1,015,933   1,025,832     -4.5%     1.0%




_________________________________
City of Mercer Island 2011-2012 Budget                                                        G-53
       _________________________________
G-54      City of Mercer Island 2011-2012 Budget
FIRE DEPARTMENT
       _________________________________
G-56      City of Mercer Island 2011-2012 Budget
                                          Department:
                                             Fire

Description
The Fire Department’s primary mission is to protect the community by preventing, intervening, or
controlling events that left unchecked would result in property loss, injury, or loss of life. The
Department delivers these services via a tiered methodology involving public education, code
enforcement, and emergency and non-emergency intervention systems. These systems are organized
into five functional areas; 1) administration, 2) operations, 3) code enforcement, 4) training, and 5)
public education.




_________________________________
City of Mercer Island 2011-2012 Budget                                                              G-57
                                   Department:
                                      Fire

Staffing Summary
       Type of Employee    2009        2010       2011        2012       Percent Change
   & Department Function   Actual    Estimate    Budget     Budget        10-11     11-12
Regular (Ongoing):
  Administration              3.00        3.00       3.00        3.00        0.0%     0.0%
  Operations                 28.00      28.00       28.00       28.00        0.0%     0.0%
  Fire Code Enforcement        -           -          -           -          N/A      N/A
  Training                     -           -          -           -          N/A      N/A
  Public Education             -           -          -           -          N/A      N/A
Total Regular                31.00      31.00      31.00        31.00       0.0%      0.0%
Contracted (Temporary):
  Administration               -           -          -           -          N/A      N/A
  Operations                   -           -          -           -          N/A      N/A
  Fire Code Enforcement       1.00        1.00        -           -       -100.0%     N/A
  Training                     -           -          -           -          N/A      N/A
  Public Education             -           -          -           -          N/A      N/A
Total Contracted              1.00       1.00         -           -      -100.0%      N/A




                                                   _________________________________
G-58                                                  City of Mercer Island 2011-2012 Budget
                                                     Department:
                                                        Fire


                                               2011-2012 Resources


                                     Ambulance Transport Fee      Development Permit Fees
                                              3%                           0%

                                                                                 King County EMS Levy
                                                                                         8%


                                                                                            EMS Charge for Service
                                                                                                     8%




           General Purpose Revenue
                     81%




                                                    2011-2012 Uses


                                               Equipment Rental   Other
                                                     4%            1%
                           Contract Services                               Intergovernmental
                                 1%                                             Services
                                                                                  4%

                         Supplies
                           3%


                    Benefits
                     18%




                                                                                                   Salaries & Wages
                                                                                                          70%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                G-59
                                          Department:
                                             Fire

Resources & Uses Summary
                                  2009        2010         2011        2012       Percent Change
             Description         Actual     Estimate     Budget      Budget        10-11     11-12
Resources:
  Beginning Fund Balance              -            -           -           -          N/A      N/A
  Ambulance Transport Fee             -            -       262,500      26,250        N/A    -90.0%
  Development Permit Fees          28,389      34,000       12,050      12,050      -64.6%     0.0%
  State & Local Grants              3,259       1,500        1,500       1,500        0.0%     0.0%
  King County EMS Levy            397,249     394,091      394,091     394,091        0.0%     0.0%
  EMS Charge for Service          317,222     315,000      411,300     415,300      30.6%      1.0%
  Other Charges for Service         3,438       7,000        3,500       3,500      -50.0%     0.0%
  Donations                          870        2,000        1,000       1,000      -50.0%     0.0%
  Miscellaneous                    47,100       2,000        2,000       2,000        0.0%     0.0%
  General Purpose Revenue       3,887,581    4,226,768   3,829,716   4,207,984       -9.4%     9.9%
Total Resources                 4,685,107   4,982,359    4,917,657   5,063,675       -1.3%     3.0%
Uses:
  Salaries & Wages              3,429,737    3,474,882   3,429,660   3,507,142       -1.3%     2.3%
  Benefits                        733,717     884,150      853,479     916,161       -3.5%     7.3%
  Supplies                        109,416     161,434      160,684     161,684       -0.5%     0.6%
  Contractual Services             49,332      67,225       67,225      67,225        0.0%     0.0%
  Communications                   15,935      27,606       11,800      11,800      -57.3%     0.0%
  Fleet/Computer/Equip Rental     157,691     166,868      175,482     175,482        5.2%     0.0%
  Other Services & Charges         19,278      22,425       21,700      22,400       -3.2%     3.2%
  Intergovernmental Services      170,001     177,769      197,627     201,781      11.2%      2.1%
  Capital                             -            -           -           -          N/A      N/A
Total Uses                      4,685,107   4,982,359    4,917,657   5,063,675       -1.3%     3.0%



Expenditure Summary by Function
             Department           2009        2010         2011        2012       Percent Change
              Function           Actual     Estimate     Budget      Budget        10-11     11-12
Administration                    533,292     561,040      493,873     506,873      -12.0%     2.6%
Operations                      3,911,956    4,150,805   4,281,026   4,408,805        3.1%     3.0%
Fire Code Enforcement             121,451     121,217       15,926      19,550      -86.9%    22.8%
Training                           97,069     117,609      118,626     120,241        0.9%     1.4%
Public Education                   21,340      31,688        8,206       8,206      -74.1%     0.0%
Total                           4,685,107   4,982,359    4,917,657   5,063,675       -1.3%     3.0%


                                                            _________________________________
G-60                                                           City of Mercer Island 2011-2012 Budget
                                                   Department:
                                                      Fire

2011-2012 Budget Analysis
General Fund
                                                                                       % Change
                       2011 Analysis                                 Budget
                                                                                       2010-2011

2010 Approved Budget                                                       4,982,359
Plus 2011 General Inflationary Increases                                           -        0.0%
Plus (Less) 2011 Other Significant Changes:
   Salary & benefit savings (relative to 2010 budget)           (52,414)
   Cellular phone & pager costs                                 (15,806)
   Other operating costs                                         5,339
   NORCOM dispatch services                                     20,858
   Firefighter overtime (correction to historical experience)   60,099
     Subtotal                                                                 18,076        0.4%
2011 Base Budget                                                           5,000,435        0.4%
Plus 2011 Service Enhancement Requests:
   None                                                               -
     Subtotal                                                                      -        0.0%
Less 2011 Service Reduction Proposals:
   Eliminate Fire Marshal (1.0 FTE reduction)                   (82,778)
     Subtotal                                                               (82,778)
2011 Final Budget                                                          4,917,657       -1.3%


                                                                                       % Change
                       2012 Analysis                                 Budget
                                                                                       2011-2012


2011 Final Budget                                                          4,917,657
Plus 2012 General Inflationary Increases                                    146,018         3.0%
Plus (Less) 2012 Other Significant Changes:
   None                                                               -
     Subtotal                                                                      -        0.0%
2012 Base Budget                                                           5,063,675        3.0%
Plus 2012 Service Enhancement Requests:
   None                                                               -
     Subtotal                                                                      -        0.0%
Less 2012 Service Reduction Proposals:
   None                                                               -
     Subtotal                                                                      -
2012 Final Budget                                                          5,063,675        3.0%

_________________________________
City of Mercer Island 2011-2012 Budget                                                             G-61
                                     Department Function:
                                      Administration

Description
This function encompasses all the administrative and program support necessary to accomplish the
mission of the department.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Provide support for all department programs and initiatives.
•   Maintain inventory of office supplies and equipment for staff.
•   Manage networked copy/printing service for staff.
•   Conduct assessment/promotional exams.
•   Participate in regional fire and EMS initiatives and programs.
•   Coordinate fire public education efforts and programs.


2011-2012 Key Initiatives
•   Identify opportunities to implement more efficient solutions to existing administrative processes,
    capitalizing on sustainability opportunities.
•   Continue to identify and implement cost controls and efficiencies for Department expenditures.
•   Identify funding for Station 92 design & construction


Expenditure Summary by Category
           Expenditure                2009         2010         2011          2012       Percent Change
           Description               Actual      Estimate      Budget        Budget          10-11     11-12
Salaries & Wages                      344,272      331,728      330,703       335,145          -0.3%     1.3%
Benefits                                74,191       96,113       92,980      101,538          -3.3%     9.2%
Supplies                                21,490       32,825       32,825       32,825          0.0%      0.0%
Contractual Services                    19,194       21,465       21,465       21,465          0.0%      0.0%
Communications                           4,607        5,000            -          -          -100.0%     N/A
Fleet/Computer/Equipment Rental         65,307       67,509          9,500      9,500         -85.9%     0.0%
Other Services & Charges                 4,230        6,400          6,400      6,400          0.0%      0.0%
Intergovernmental Services                 -            -              -          -             N/A      N/A
Capital                                    -            -              -          -             N/A      N/A
Total                                 533,292      561,040      493,873      506,873         -12.0%      2.6%




                                                                  _________________________________
G-62                                                                 City of Mercer Island 2011-2012 Budget
                                   Department Function:
                                      Operations

Description
This function encompasses the delivery of Fire, Rescue, and Emergency Medical services to the Mercer
Island community and neighboring communities per mutual aid agreements with the objective of
eliminating or reducing the impacts of injury or property damage. Fire Operations include all elements
necessary to deliver these services such as support, maintenance, and preparation of systems necessary
for the delivery of services.


Priority of Government
#1 The community will be safe.


Services & Products
•   Respond to all fire, emergency medical, and rescue calls for service.
•   Provide dive team services collaboratively with Mercer Island Police Department.
•   Respond to all water rescue incidents.
•   Coordinate maintenance of all department fire apparatus, vehicles and equipment.
•   Maintain operational supplies and equipment inventories.
•   Provide blood pressure checking services to the community.
•   Contract with City of Bellevue/NORCOM for dispatch services.
•   Maintain and service all City fire extinguishers.


2011-2012 Key Initiatives
•   Prepare bid specifications for apparatus replacement and replace aid unit.
•   Continue to identify and implement fuel saving strategies.
•   Increase cardiac survival rates for Mercer Island community.
•   Complete SERRA Project.
•   Provide responding fire officers with comprehensive pre-incident information thereby increasing
    safety and reducing loss.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                G-63
                                  Department Function:
                                     Operations

Expenditure Summary by Category
           Expenditure              2009        2010        2011        2012       Percent Change
           Description             Actual     Estimate    Budget      Budget        10-11     11-12

Salaries & Wages                  2,902,454   2,939,152   2,997,005   3,066,506        2.0%     2.3%
Benefits                            634,793     762,306     757,999     812,123       -0.6%     7.1%
Supplies                             80,870     116,303     116,303     116,303        0.0%     0.0%
Contractual Services                 19,745      33,260      33,260      33,260        0.0%     0.0%
Communications                       10,535      22,606      11,800      11,800      -47.8%     0.0%
Fleet/Computer/Equipment Rental      92,384      99,359     165,982     165,982      67.1%      0.0%
Other Services & Charges              1,174       1,050       1,050       1,050        0.0%     0.0%
Intergovernmental Services          170,001     176,769     197,627     201,781      11.8%      2.1%
Capital                                 -           -           -           -          N/A      N/A
Total                             3,911,956   4,150,805   4,281,026   4,408,805       3.1%      3.0%




                                                             _________________________________
G-64                                                            City of Mercer Island 2011-2012 Budget
                                 Department Function:
                              Fire Code Enforcement

Description
This function encompasses all aspects of preventing injury or property loss by assisting DSG with
building plan reviews for compliance with adopted fire codes; annual company fire inspections by
operational staff; occupancy inspections and permitting by the Fire Code Official; and management of the
fire inspection program and data collection and reporting to applicable State and Federal Agencies.


Priority of Government
#1 The community will be safe.


Services & Products
•   Administer and enforce all applicable federal, state and local fire and life safety codes.
•   Develop and prepare amendments to fire, life safety, and building codes reflecting solutions to latest
    trends and techniques in building construction and findings from fire loss statistics.
•   Review zone changes and lot divisions and devise solutions to diverse land development projects.
•   Manage fire inspection program.
•   Manage the Company Fire Inspection Program
•   Assist Development Services staff with plan review services for all new and re-model construction
    projects on the Island.
•   Assist Development Services staff with Code and Fire Loss related issues.


2011-2012 Key Initiatives
•   Assess impacts and opportunities from International Fire Code adoption.
•   Identify opportunities to reduce commercial building owner’s insurance premiums.
•   Reduce property and content loss.
•   Integrate of Community Risk Reduction Strategy.


Expenditure Summary by Category
           Expenditure                2009         2010        2011         2012        Percent Change
           Description               Actual     Estimate      Budget       Budget        10-11    11-12
Salaries & Wages                       90,975       90,386       11,076      13,000      -87.7%    17.4%
Benefits                               21,824       24,931        2,500        2,500     -90.0%      0.0%
Supplies                                1,648        2,250        1,500        2,500     -33.3%    66.7%
Communications                            752          -            -            -          N/A      N/A
Other Services & Charges                6,253        3,650          850        1,550     -76.7%    82.4%
Intergovernmental Services                -            -            -            -          N/A      N/A
Capital                                   -            -            -            -          N/A      N/A
Total                                121,451      121,217       15,926       19,550      -86.9%    22.8%


_________________________________
City of Mercer Island 2011-2012 Budget                                                                G-65
                                      Department Function:
                                          Training

Description
This function is responsible for ensuring that operational staff are fully trained and certified to provide all
types of emergency services to the community. It ensures that department staff meet, or exceed, all
applicable standards and regulatory requirements with respect to training. It encompasses all the
programmatic elements of the Fire Department training programs assuring that the highest level of
safety and professionalism are practiced in every aspect of pursuing our goals and objectives.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Develop monthly, quarterly, and annual training requirements.
•   Ensure firefighters meet minimum training requirements in a safe and effective manner.
•   Attend regional training meetings.
•   Develop training programs and objectives based on department needs, keeping firefighters in a state
    of readiness.
•   Keep firefighters updated on current trends and technology.
•   Manage training and re-certifications for all department Emergency Medical Technicians.


2011-2012 Key Initiatives
•   Implement succession & mentoring plan developed in 2010.
•   Maintain competency in all skills and abilities needed to perform the mission of the Mercer Island
    Fire Department.
•   Develop solutions to integrate new legislative restrictions while maintaining required training for
    operations staff.


Expenditure Summary by Category
           Expenditure                 2009          2010         2011         2012        Percent Change
           Description                Actual       Estimate      Budget       Budget         10-11     11-12
Salaries & Wages                         76,343       89,309       90,876        92,491        1.8%      1.8%
Benefits                                  1,953          800           -            -        -100.0%     N/A
Supplies                                    717        3,000        3,000         3,000        0.0%      0.0%
Contractual Services                     10,393       12,500       12,500        12,500        0.0%      0.0%
Communications                                42         -             -            -           N/A      N/A
Other Services & Charges                  7,621       11,000       12,250        12,250       11.4%      0.0%
Intergovernmental Services                  -          1,000           -            -        -100.0%     N/A
Total                                   97,069      117,609       118,626      120,241         0.9%      1.4%


                                                                   _________________________________
G-66                                                                  City of Mercer Island 2011-2012 Budget
                                    Department Function:
                                    Public Education

Description
This function is responsible for eliminating or reducing injury or property loss through public outreach.
It includes the delivery of information through a variety of mediums and programs providing classes and
educational opportunities to individuals and groups.


Priority of Government
#5 The community will support a broad range of recreational, cultural, health, and educational
   opportunities.


Services & Products
•   Provide CPR, first aid, and fire extinguisher classes and information.
•   Conduct DUI drills for Mercer Island High School.
•   Offer the following programs: Physicians Orders for Life-Sustaining Treatment (POLST), HIPAA
    Information, Post Fire Assistance, Station Tour, Safety Talk, and Birthday Party.
•   Attend public events such as Public Safety Days, Summer Celebration!, Pancake Breakfast Food
    Drive, Fire House Munch, and JCC Truck Days.


2011-2012 Key Initiatives
•   Identify community incident trends and develop appropriate educational opportunities based on a
    risk / benefit assessment model.
•   Identify opportunities to provide information to the community using existing technologies.
•   Assist commercial occupancies with developing and deploying incident action plans.


Expenditure Summary by Category
           Expenditure                2009        2010         2011         2012       Percent Change
           Description               Actual     Estimate      Budget      Budget        10-11     11-12
Salaries & Wages                       15,694       24,307          -           -       -100.0%      N/A
Benefits                                  955          -            -           -          N/A       N/A
Supplies                                4,691        7,056       7,056        7,056        0.0%     0.0%
Contractual Services                      -            -            -           -          N/A       N/A
Communications                            -            -            -           -          N/A       N/A
Other Services & Charges                  -           325        1,150        1,150     253.8%      0.0%
Capital                                   -            -            -           -          N/A       N/A
Total                                 21,340       31,688        8,206        8,206      -74.1%     0.0%




_________________________________
City of Mercer Island 2011-2012 Budget                                                               G-67
       _________________________________
G-68      City of Mercer Island 2011-2012 Budget
HUMAN RESOURCES
       _________________________________
G-70      City of Mercer Island 2011-2012 Budget
                                  Department:
                                Human Resources

Description
The Human Resources Department encompasses human resources and payroll services for the City.




Staffing Summary
      Type of Employee            2009        2010        2011       2012      Percent Change
   & Department Function         Actual      Estimate    Budget     Budget      10-11    11-12
Regular (Ongoing):
  Admin & Human Resources            2.00         2.00      2.00        2.00      0.0%     0.0%
  Payroll Services                   1.00         1.00      1.00        1.00      0.0%     0.0%
Total Regular                        3.00        3.00       3.00        3.00      0.0%     0.0%
Contracted (Temporary):
  Admin & Human Resources                -         -         -           -         N/A     N/A
  Payroll Services                       -         -         -           -         N/A     N/A
Total Contracted                         -        -          -           -         N/A     N/A




_________________________________
City of Mercer Island 2011-2012 Budget                                                      G-71
                                      Department:
                                    Human Resources


                                     2011-2012 Resources




                                                             General Purpose Revenue
                                                                      100%




                                        2011-2012 Uses

                                      Equipment Rental
                                                         Other Services & Charges
                   Communications           2%
                                                                    2%
                       1%

        Contractual Services
               17%


       Supplies
         2%


                                                                                       Salaries & Wages
                                                                                              58%


              Benefits
               18%




                                                                 _________________________________
G-72                                                                City of Mercer Island 2011-2012 Budget
                                  Department:
                                Human Resources

Resources & Uses Summary
                                  2009        2010       2011       2012      Percent Change
             Description         Actual      Estimate   Budget     Budget     10-11     11-12
Resources:
  Beginning Fund Balance                 -        -          -          -        N/A      N/A
  General Purpose Revenue         463,171     491,575    452,766    465,457     -7.9%     2.8%
Total Resources                   463,171     491,575   452,766    465,457      -7.9%     2.8%
Uses:
  Salaries & Wages                267,702     280,317    267,443    270,967     -4.6%     1.3%
  Benefits                         82,201      87,730     78,948     88,115    -10.0%    11.6%
  Supplies                         10,764      12,150      8,700      8,700    -28.4%     0.0%
  Contractual Services             71,438      72,500     77,000     77,000     6.2%      0.0%
  Communications                    3,159       3,500      3,500      3,500     0.0%      0.0%
  Fleet/Computer/Equip Rental      10,178      10,178      8,025      8,025    -21.2%     0.0%
  Other Services & Charges         17,730      25,200      9,150      9,150    -63.7%     0.0%
  Intergovernmental Services             -        -          -          -        N/A      N/A
  Capital                                -        -          -          -        N/A      N/A
Total Uses                        463,171     491,575   452,766    465,457      -7.9%     2.8%



Expenditure Summary by Function
             Department           2009        2010       2011       2012      Percent Change
              Function           Actual      Estimate   Budget     Budget     10-11     11-12
Admin & Human Resources           341,634     371,095    332,104    341,432    -10.5%     2.8%
Payroll Services                  121,538     120,480    120,662    124,025     0.2%      2.8%
Total                             463,171     491,575   452,766    465,457      -7.9%     2.8%




_________________________________
City of Mercer Island 2011-2012 Budget                                                     G-73
                                           Department:
                                         Human Resources

2011-2012 Budget Analysis
General Fund
                                                                              % Change
                       2011 Analysis                        Budget
                                                                              2010-2011

2010 Approved Budget                                              491,575
Plus 2011 General Inflationary Increases                                  -        0.0%
Plus (Less) 2011 Other Significant Changes:
  Salary & benefit savings (relative to 2010 budget)   (21,656)
  Advertising                                           (7,000)
  Tuition assistance program                            (5,000)
  Travel, tuition & registrations                       (4,700)
  Other operating costs                                  (453)
       Subtotal                                                   (38,809)        -7.9%
2011 Base Budget                                                  452,766         -7.9%
Plus 2011 Service Enhancement Requests:
  None                                                       -
       Subtotal                                                           -        0.0%
Less 2011 Service Reduction Proposals:
  None                                                       -
       Subtotal                                                           -
2011 Final Budget                                                 452,766         -7.9%

                                                                              % Change
                       2012 Analysis                        Budget
                                                                              2011-2012

2011 Final Budget                                                 452,766
Plus 2012 General Inflationary Increases                             12,691        2.8%
Plus (Less) 2012 Other Significant Changes:
  None                                                       -
       Subtotal                                                           -        0.0%
2012 Base Budget                                                  465,457          2.8%
Plus 2012 Service Enhancement Requests:
  None                                                       -
       Subtotal                                                           -        0.0%
Less 2012 Service Reduction Proposals:
  None                                                       -
       Subtotal                                                           -
2012 Final Budget                                                 465,457          2.8%

                                                             _________________________________
G-74                                                            City of Mercer Island 2011-2012 Budget
                          Department Function:
                  Administration & Human Resources

Description
Plan, organize, develop, and administer uniform Human Resources policies, procedures, and programs.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Recruit and fill vacant full and part-time positions.
•   Negotiate labor agreements with unions.
•   Advise department directors and supervisors on interpretation and application of human resource
    policies and procedures and provide technical expertise on human resources management related
    issues.
•   Coordinate city-wide training.
•   Through an effective performance evaluation process and by utilizing pay-for-performance, ensure
    employees receive annual feedback on their performance.
•   Manage the citywide employee recognition and service award program.
•   Manage the City's benefit programs.
•   Maintain and update HRIS database and evaluate processes for data collection.
•   Prepare annual benefit statements and conduct employee orientations and exit interviews.
•   Maintain accurate central employee records.
•   Assist managers and supervisors with employee-related issues.
•   Develop and implement comprehensive proposals for new programs or major revisions of existing
    programs to enhance the efficiency, effectiveness, and quality of City workforce or work
    environment where consistent with Council priorities.
•   Staff the Civil Service Commission and Disability Board.
•   Obtain cooperation and sensitively resolve interpersonal problems through the application of
    communications and interpersonal skills.


2011-2012 Key Initiatives
•   Explore alternative options for providing cost-effective and quality medical insurance for employees.
•   Update and distribute Employee Handbook.
•   Review all HR processes and procedures and make efficient, streamlined, and customer service
    related improvements.




_________________________________
City of Mercer Island 2011-2012 Budget                                                               G-75
                           Department Function:
                   Administration & Human Resources

Expenditure Summary by Category
           Expenditure            2009       2010       2011        2012       Percent Change
           Description            Actual    Estimate   Budget     Budget        10-11     11-12
Salaries & Wages                  202,621    214,050    203,111     205,766       -5.1%     1.3%
Benefits                           62,168     65,217     57,668      64,341      -11.6%    11.6%
Supplies                            8,130     11,650      8,200       8,200      -29.6%     0.0%
Contractual Services               38,188     42,500     43,000      43,000       1.2%      0.0%
Communications                      3,159      3,500      3,500       3,500       0.0%      0.0%
Fleet/Computer/Equipment Rental    10,178     10,178      8,025       8,025      -21.2%     0.0%
Other Services & Charges           17,190     24,000      8,600       8,600      -64.2%     0.0%
Total                             341,634    371,095   332,104     341,432      -10.5%      2.8%




                                                         _________________________________
G-76                                                        City of Mercer Island 2011-2012 Budget
                                     Department Function:
                                      Payroll Services

Description
Process the City’s bi-weekly payroll, culminating in the issuance of checks to employees and payment
transmittals to various employee benefits vendors, the state, and federal government agencies.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Process and transmit bi-weekly payroll for 200+ employees.
•   Enter payroll labor tracking information into the City’s financial system.
•   Prepare, balance, and process payments to benefits vendors.
•   Process payroll quarterly reports required by state and federal law.
•   Respond to employee and retiree inquiries related to payroll and/or retirement payments.
•   Maintain employees’ payroll information in the Payroll/HR system and the City’s financial system.
•   Ensure compliance with payroll-related laws and regulations.
•   Maintain payroll and tax filing-related records.
•   Process leave accrual reports for employees and maintain all leave accrual records.
•   Administer the reporting of retirement earnings for City employees into four separate retirement
    systems.
•   Process payments for supplemental retirement benefits for LEOFF I retirees.
•   Maintain and monitor worker’s compensation claims and process reports to ensure compliance with
    state regulations.


2011-2012 Key Initiatives
•   Automate benefits administration and enrollment and provide employee access to payroll and
    benefits information through an internet-based system.


Expenditure Summary by Category
           Expenditure                2009         2010         2011         2012        Percent Change
           Description               Actual      Estimate      Budget       Budget           10-11    11-12
Salaries & Wages                       65,082       66,267       64,332       65,201          -2.9%     1.4%
Benefits                               20,033       22,513       21,280       23,774          -5.5%    11.7%
Supplies                                2,634          500          500          500           0.0%     0.0%
Contractual Services                   33,249       30,000       34,000       34,000          13.3%     0.0%
Other Services & Charges                  540        1,200          550          550         -54.2%     0.0%
Total                                 121,538      120,480      120,662      124,025           0.2%     2.8%



_________________________________
City of Mercer Island 2011-2012 Budget                                                                   G-77
       _________________________________
G-78      City of Mercer Island 2011-2012 Budget
MAINTENANCE DEPARTMENT
       _________________________________
G-80      City of Mercer Island 2011-2012 Budget
                                           Department:
                                          Maintenance

Description
The Maintenance Department consists of the following functions: 1) administration, 2) capital projects
engineering, 3) right of way services, 4) water utility services, 5) sewer utility services, 6) stormwater
utility services, 7) solid waste services, 8) facilities services, 9) fleet services, and 10) customer field
response services. The capital projects engineering function is fully budgeted and accounted for within
the City’s Capital Improvement Program (CIP). All of these functions are organized around 4 teams:
1) Capital Projects, 2) Right-of-Way, 3) Utilities, and 4) Support Services.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                   G-81
                                     Department:
                                    Maintenance

Staffing Summary
       Type of Employee          2009       2010        2011        2012       Percent Change
   & Department Function         Actual    Estimate    Budget     Budget        10-11     11-12
Regular (Ongoing):
  Administration                    2.80        2.80       3.20        3.20      14.3%      0.0%
  Right-of-Way Services             6.50        6.50       5.50        5.50      -15.4%     0.0%
  Water Utility Services            6.40        6.40       6.50        6.50        1.6%     0.0%
  Sewer Utility Services            4.40        4.40       4.50        4.50        2.3%     0.0%
  Stormwater Utility Services       2.70        2.70       2.50        2.50       -7.4%     0.0%
  Solid Waste Services               -           -          -           -          N/A      N/A
  Facilities Services               1.00        1.00       0.50        0.50      -50.0%     0.0%
  Fleet Services                    1.20        1.20       1.20        1.20        0.0%     0.0%
  Customer Field Response Svcs      2.00        2.00       2.00        2.00        0.0%     0.0%
Total Regular                      27.00      27.00      25.90        25.90       -4.1%     0.0%
Contracted (Temporary):
  Administration                     -           -          -           -          N/A      N/A
  Right-of-Way Services             0.50       0.50         -           -       -100.0%     N/A
  Water Utility Services             -           -          -           -          N/A      N/A
  Sewer Utility Services             -           -          -           -          N/A      N/A
  Stormwater Utility Services        -           -          -           -          N/A      N/A
  Solid Waste Services               -           -          -           -          N/A      N/A
  Facilities Services               0.25       0.25        0.25         -          0.0% -100.0%
  Fleet Services                     -           -          -           -          N/A      N/A
  Customer Field Response Svcs       -          -           -           -          N/A      N/A
Total Contracted                    0.75       0.75       0.25          -        -66.7% -100.0%




                                                         _________________________________
G-82                                                        City of Mercer Island 2011-2012 Budget
                                                     Department:
                                                    Maintenance


                                                 2011-2012 Resources


                                                  General Purpose Revenue
                                                            12%
                        State and Local Grants
                                                                                       B&O Tax
                                  1%
                                                                                         1%
                Internal Charges
                       4%                                                                                Water Rates
                                                                                                            27%

            Stormwater Rates
                  6%




                                                                         Sewer Rates
                                                                            48%




                                                         2011-2012 Uses


                                                          Debt Service         Salaries & Wages
                                                              9%                      15%
                     General Admin Support
                              3%                                                                         Benefits
                                                                                                           5%



                                                                                                                     Supplies
                                                                                                                       5%

          KC Sewer Treatment
                28%

                                                                                                              Water Purchases
                                                                                                                   13%



                                                                                                 Contract Services
                               Other                                                                   10%
                                3%
                                             Utilities
                                                             Insurance         Equipment Rental
                                               3%
                                                                2%                   4%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                          G-83
                                         Department:
                                        Maintenance

Resources & Uses Summary
                                     2009         2010         2011         2012        Percent Change
              Description           Actual      Estimate      Budget       Budget        10-11    11-12
Resources:
  Beginning Fund Balance                    -            -            -            -       N/A      N/A
  Business & Occupation Tax           139,845      170,000      166,453      166,948      -2.1%     0.3%
  Real Estate Excise Tax               97,968      125,989       80,000       80,000     -36.5%     0.0%
  Water Rates & Other Chgs          3,405,938    3,415,921    3,411,562    3,830,228      -0.1%    12.3%
  Sewer Rates & Other Chgs          4,877,131    5,890,865    6,341,383    6,417,729       7.6%     1.2%
  Stormwater Rates & Other Chgs       808,683      986,815      847,770      876,561     -14.1%     3.4%
  Internal Charges                    431,968      510,777      485,227      500,496      -5.0%     3.1%
  State and Local Grants               80,802       87,355      101,134       94,134      15.8%    -6.9%
  General Purpose Revenue           1,745,985    1,880,978    1,639,875    1,676,849     -12.8%     2.3%
Total Resources                    11,588,320   13,068,700   13,073,404   13,642,945       0.0%     4.4%
Uses:
  Salaries & Wages                  1,947,628    2,107,888    1,923,781    1,954,770      -8.7%     1.6%
  Benefits                            670,744      709,708      640,685      705,247      -9.7%    10.1%
  Supplies                            596,057      624,800      629,900      647,900       0.8%     2.9%
  Water Purchases                   1,617,528    1,544,927    1,614,113    1,856,230       4.5%    15.0%
  Contractual Services              1,150,781    1,495,730    1,275,734    1,287,234     -14.7%     0.9%
  Communications                       66,015       50,900       54,200       54,400       6.5%     0.4%
  Fleet/Computer/Equip Rental         455,879      469,122      478,499      478,499       2.0%     0.0%
  Insurance                           178,960      197,800      249,607      265,938      26.2%     6.5%
  Utilities                           404,881      402,097      418,672      441,106       4.1%     5.4%
  Other Services & Charges            424,073      436,725      446,526      480,411       2.2%     7.6%
  King County Sewage Treatment      3,305,490    3,315,000    3,771,345    3,790,200      13.8%     0.5%
  Intergovernmental Services           18,769       20,620       21,520       22,520       4.4%     4.6%
  General Administration Support      555,600      589,000      392,129      409,062     -33.4%     4.3%
  Debt Service (Principal & Int)      195,914    1,104,383    1,156,693    1,249,428       4.7%     8.0%
  Capital                                   -            -            -            -       N/A      N/A
Total Uses                         11,588,320   13,068,700   13,073,404   13,642,945       0.0%     4.4%




                                                                _________________________________
G-84                                                               City of Mercer Island 2011-2012 Budget
                                         Department:
                                        Maintenance

Expenditure Summary by Function
           Department                2009         2010         2011         2012       Percent Change
            Function                Actual      Estimate      Budget       Budget      10-11     11-12
Administration                        466,606      493,566      526,594      540,806     6.7%      2.7%
Right-of-Way Services               1,364,150    1,478,245    1,229,362    1,253,746    -16.8%     2.0%
Water Utility Services              3,237,117    3,242,170    3,230,457    3,643,790     -0.4%    12.8%
Sewer Utility Services              4,717,300    5,717,114    6,160,278    6,231,291     7.8%      1.2%
Stormwater Utility Services           695,866      863,064      731,799      755,257    -15.2%     3.2%
Solid Waste Services                   45,466       50,750       50,900       50,900     0.3%      0.0%
Facilities Services                   441,677      503,974      460,712      461,464     -8.6%     0.2%
Fleet Services                        431,968      510,777      485,227      500,496     -5.0%     3.1%
Customer Field Response Services      188,169      209,040      198,075      205,195     -5.2%     3.6%
Total                              11,588,320   13,068,700   13,073,404   13,642,945     0.0%      4.4%




_________________________________
City of Mercer Island 2011-2012 Budget                                                             G-85
                                              Department:
                                             Maintenance

2011-2012 Budget Analysis
General, Street & Beautification Funds
                                                                                   % Change
                        2011 Analysis                           Budget
                                                                                   2010-2011

2010 Approved Budget                                                  2,214,322
Plus 2011 General Inflationary Increases                                      -          0.0%
Plus (Less) 2011 Other Significant Changes:
   Prior year one-time costs & carryovers:
       - Town Center improvements                          (35,000)
       - Resource Conservation Manager                     (24,226)
   Salary & benefit savings (relative to 2010 budget)      (65,561)
   Contracted services, repair and maintenance             (16,950)
   Operating supplies                                       (7,300)
   Other operating costs                                    (2,515)
   Travel, tuition & registrations                          (1,650)
   Utility costs (PSE, water, garbage)                     37,175
       Subtotal                                                       (116,027)         -5.2%
2011 Base Budget                                                      2,098,295         -5.2%
Plus 2011 Service Enhancement Requests:
   Retain contract Conservation Manager (0.25 FTE)          7,357
   Improve Town Center beautification level of service        153
       Subtotal                                                          7,510           0.3%
Less 2011 Service Reduction Proposals:
   ROW Trail Maintenance position (1.0 FTE reduction)      (84,217)
   Contract ROW Arborist position (0.5 FTE reduction)      (44,244)
   Facilities Maintenance Technician (0.5 FTE reduction)   (42,866)
   Reduce ROW casual labor                                 (12,150)
       Subtotal                                                       (183,477)
2011 Final Budget                                                     1,922,328        -13.2%




                                                           _________________________________
G-86                                                          City of Mercer Island 2011-2012 Budget
                                              Department:
                                             Maintenance

2011-2012 Budget Analysis
General, Street & Beautification Funds (cont’d)
                                                                               % Change
                      2012 Analysis                         Budget
                                                                               2011-2012

2011 Final Budget                                                 1,922,328
Plus 2012 General Inflationary Increases                             38,093         2.0%
Plus (Less) 2012 Other Significant Changes:
   Prior year one-time costs & carryovers:
     - Contract Conservation Manager (0.25 FTE)         (7,624)
     Subtotal                                                        (7,624)       -0.4%
2012 Base Budget                                                  1,952,797         1.6%
Plus 2012 Service Enhancement Requests:
   None                                                      -
     Subtotal                                                             -         0.0%
Less 2012 Service Reduction Proposals:
   None                                                      -
     Subtotal                                                             -
2012 Final Budget                                                 1,952,797         1.6%




_________________________________
City of Mercer Island 2011-2012 Budget                                                     G-87
                                             Department:
                                            Maintenance

2011-2012 Budget Analysis
Equipment Rental Fund
                                                                               % Change
                      2011 Analysis                         Budget
                                                                               2010-2011

2010 Approved Budget                                              510,777
Plus 2011 General Inflationary Increases                                  -         0.0%
Plus (Less) 2011 Other Significant Changes:
  Contracted services, repair and maintenance          (21,000)
  Salary & benefit savings (relative to 2010 budget)    (2,050)
  Other operating costs                                 (2,500)
       Subtotal                                                   (25,550)          -5.0%
2011 Base Budget                                                  485,227           -5.0%
Plus 2011 Service Enhancement Requests:
  None                                                       -
       Subtotal                                                           -         0.0%
Less 2011 Service Reduction Proposals:
  None
       Subtotal                                                           -
2011 Final Budget                                                 485,227           -5.0%

                                                                               % Change
                      2012 Analysis                         Budget
                                                                               2011-2012

2011 Final Budget                                                 485,227
Plus 2012 General Inflationary Increases                             15,269         3.1%
Plus (Less) 2012 Other Significant Changes:
  None                                                       -
       Subtotal                                                           -         0.0%
2012 Base Budget                                                  500,496           3.1%
Plus 2012 Service Enhancement Requests:
  None                                                       -
       Subtotal                                                           -         0.0%
Less 2012 Service Reduction Proposals:
  None                                                       -
       Subtotal                                                           -
2012 Final Budget                                                 500,496           3.1%


                                                         _________________________________
G-88                                                        City of Mercer Island 2011-2012 Budget
                                             Department:
                                            Maintenance

2011-2012 Budget Analysis
Water, Sewer & Storm Water Funds
                                                                                          % Change
                         2011 Analysis                                 Budget
                                                                                          2010-2011

2010 Approved Budget                                                        10,343,601
Plus 2011 General Inflationary Increases                                              -        0.0%
Plus (Less) 2011 Other Significant Changes:
   Admin, insurance & facilities charges paid to General Fund   (165,783)
   Prior year one-time costs and carryovers:
     - Stormwater maintenance (carryover)                        (90,630)
     - NPDES Phase 11 grant costs                                (50,000)
   Salary & benefit savings (relative to 2010 budget)            (66,983)
   Emergency well operating supplies                               8,000
   Other operating costs                                         13,549
   State utility taxes                                           31,120
   Debt service                                                  52,310
   Water purchases & sewage treatment                           525,531
     Subtotal                                                                   257,114        2.5%
2011 Base Budget                                                            10,600,715         2.5%
Plus 2011 Service Enhancement Requests:
   NPDES grant program                                           65,134
     Subtotal                                                                    65,134        0.6%
Less 2011 Service Reduction Proposals:
   None                                                                -
     Subtotal                                                                         -
2011 Final Budget                                                           10,665,849         3.1%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                G-89
                                    Department:
                                   Maintenance

2011-2012 Budget Analysis
Water, Sewer & Storm Water Funds (cont’d)
                                                                        % Change
                   2012 Analysis                   Budget
                                                                        2011-2012

2011 Final Budget                                      10,665,849
Plus 2012 General Inflationary Increases                    523,803          4.9%
Plus (Less) 2012 Other Significant Changes:
   None                                            -
       Subtotal                                                   -          0.0%
2012 Base Budget                                       11,189,652            4.9%
Plus 2012 Service Enhancement Requests:
   None                                            -
       Subtotal                                                   -          0.0%
Less 2012 Service Reduction Proposals:
   None                                            -
       Subtotal                                                   -
2012 Final Budget                                      11,189,652            4.9%




                                              _________________________________
G-90                                             City of Mercer Island 2011-2012 Budget
                                       Department Function:
                                        Administration

Description
Provide direction and administrative support to the Capital Projects, Right-of-Way, Utilities, and
Support Services teams.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Maintain computerized maintenance management system.
•   Provide warehouse services.
•   Conduct monthly safety meetings.
•   Coordinate department training.
•   Maintain timekeeping and other personnel records.
•   Coordinate purchasing and record keeping for fleet services.


2011-2012 Key Initiatives
•   Maintain current service levels.


Expenditure Summary by Category
           Expenditure                  2009       2010         2011         2012        Percent Change
           Description                 Actual     Estimate     Budget       Budget           10-11    11-12
Salaries & Wages                        281,104    288,568      299,620      303,576           3.8%     1.3%
Benefits                                 84,524      86,833       86,940       97,196          0.1%    11.8%
Supplies                                  6,793       5,200        4,800        4,800         -7.7%     0.0%
Contractual Services                     21,608      32,200       30,800       30,800         -4.3%     0.0%
Communications                           15,334      17,600       16,000       16,000         -9.1%     0.0%
Fleet/Computer/Equipment Rental          49,645      49,645       71,314       71,314         43.6%     0.0%
Other Services & Charges                  5,570      11,000       14,600       14,600         32.7%     0.0%
Intergovernmental Services                2,028       2,520        2,520        2,520          0.0%     0.0%
Total                                  466,606     493,566      526,594      540,806           6.7%     2.7%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                   G-91
                                  Department Function:
                                Right-of-Way Services

Description
Provide all aspects of maintenance for 84 miles of public roadways, from sweeping and pothole repairs
to sign installation and street light repairs. Manage trees in the public right-of-way for health and safety,
control roadside vegetation to ensure safe sight distances and vehicle clearances, maintain sidewalks, and
maintain planter beds on Island Crest Way and in the Town Center.


Priority of Government
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.
#4 The community will support attractive, high quality neighborhood and business environments.


Services & Products
•   Patch potholes, utility cuts, and other roadway problem spots.
•   Install and maintain traffic signs.
•   Maintain traffic signals.
•   Sweep streets.
•   Remove snow and ice.
•   Maintain roadway shoulders.
•   Maintain City-owned street lights.
•   Replace pavement markings.
•   Repair guardrails.
•   Clean catch-basins and shallow ditches.
•   Mow roadside vegetation.
•   Maintain sidewalks.
•   Prune major roadside hedges.
•   Evaluate and remove hazardous trees.
•   Remove and replace problem trees.
•   Maintain planter beds on Island Crest Way.
•   Maintain Town Center planted medians.


2011-2012 Key Initiatives
•   Continue replacement program for wooden street light poles.
•   Use new technology to prevent icing problems on City streets.
•   Re-plant eroded and unsightly right-of-way locations to control erosion and improve tree canopy.
•   Remove sight obstructions caused by encroaching vegetation.
•   Evaluate street sweeping frequency and methods to reduce non-point pollution reaching Lake
    Washington.
•   Increase monitoring and abatement of ROW encroachments.
•   Increase Town Center Beautification efforts to include sidewalk repairs, tree gate replacements, and
    removal/replacement of diseased and dying trees.
•   Continue pavement marking efforts.
                                                                  _________________________________
G-92                                                                 City of Mercer Island 2011-2012 Budget
                                Department Function:
                              Right-of-Way Services

Expenditure Summary by Category
            Expenditure             2009        2010        2011        2012      Percent Change
            Description            Actual     Estimate    Budget      Budget      10-11     11-12
Salaries & Wages                    471,261     493,299     396,004     400,698    -19.7%     1.2%
Benefits                            174,462     175,703     138,692     153,382    -21.1%    10.6%
Supplies                             99,236      94,100      73,100      73,100    -22.3%     0.0%
Contractual Services                287,172     395,100     313,100     318,100    -20.8%     1.6%
Communications                       20,174       1,300        500         500     -61.5%     0.0%
Fleet/Computer/Equipment Rental     191,214     200,393     194,816     194,816     -2.8%     0.0%
Utilities                           117,683     109,000     106,300     106,300     -2.5%     0.0%
Other Services & Charges              2,947       9,350       6,850       6,850    -26.7%     0.0%
Intergovernmental Services               -          -           -           -        N/A      N/A
Capital                                  -          -           -           -        N/A      N/A
Total                             1,364,150   1,478,245   1,229,362   1,253,746    -16.8%     2.0%




_________________________________
City of Mercer Island 2011-2012 Budget                                                         G-93
                                 Department Function:
                                Water Utility Services

Description
Provide business administration services and operational support to the City's water utility. Provide the
full range of maintenance activities and operational expertise required for reliable 24-hour services from
the City's water utility. Ensure compliance with all state and federal rules and regulations for public
utilities.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.


Services & Products
•   Purchase wholesale water from the City of Seattle.
•   Issue water conservation alerts and provide public education on water usage.
•   Ensure compliance with federal and state regulations.
•   Provide safe and reliable water for domestic use and fire protection.
•   Operate, maintain, and repair reservoirs, pumping stations, distribution lines, valves, hydrants, and
    meters.


2011-2012 Key Initiatives
•   Continue Leak Detection effort to reduce unaccounted for water use as required by State Water
    Efficiency rules.
•   Improve reservoir security through enhanced surveillance system, fence repairs, and automated
    security gate.
•   Continue replacing larger meters to reduce unaccounted for water loss.
•   Train City utility crew and emergency management volunteers in the operation and use of the
    emergency well located in Rotary Park.




                                                                 _________________________________
G-94                                                                City of Mercer Island 2011-2012 Budget
                                    Department Function:
                                   Water Utility Services

Expenditure Summary by Category
             Expenditure                 2009        2010        2011        2012      Percent Change
             Description                Actual     Estimate    Budget      Budget      10-11     11-12
 Salaries & Wages                        437,991     483,131     456,731     472,883     -5.5%     3.5%
 Benefits                                151,317     161,882     154,281     171,363     -4.7%    11.1%
 Supplies                                140,404     178,700     196,250     206,250     9.8%      5.1%
 Water Purchases                       1,617,528   1,544,927   1,614,113   1,856,230     4.5%     15.0%
 Contractual Services                    191,517     153,300      95,800      96,300    -37.5%     0.5%
 Communications                            6,638       7,000       7,700       7,900    10.0%      2.6%
 Fleet/Computer/Equipment Rental          96,783      95,305      99,229      99,229     4.1%      0.0%
 Insurance                                53,200      58,400      78,674      83,926    34.7%      6.7%
 Utilities                                31,506      42,000      53,000      53,000    26.2%      0.0%
 Other Services & Charges                253,701     245,525     264,734     286,821     7.8%      8.3%
 Intergovernmental Services                6,533       7,000       7,000       7,000     0.0%      0.0%
 General Administration Support          250,000     265,000     176,425     184,043    -33.4%     4.3%
 Debt Service (Principal & Interest)         -           -        26,520     118,845      N/A    348.1%
 Capital                                     -           -           -           -        N/A      N/A
 Total                                 3,237,117   3,242,170   3,230,457   3,643,790     -0.4%   12.8%




_________________________________
City of Mercer Island 2011-2012 Budget                                                             G-95
                                  Department Function:
                                Sewer Utility Services

Description
Provide business administration services and operational support to the City's sewer utility. Provide the
full range of maintenance activities and operational expertise required for reliable 24-hour services from
the City's sewer utility. Ensure compliance with all state and federal rules and regulations for public
utilities.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.


Services & Products
•   Contract for sewage treatment services (METRO).
•   Ensure compliance with federal and state regulations.
•   Clean, inspect, and maintain the sanitary sewer system to ensure effective service while preventing
    property damage.


2011-2012 Key Initiatives
•   Complete final phase of sewer telemetry improvements.
•   Complete comprehensive sewer video inspection program with focus on backup prevention.
•   Continue contracted services for sewer cleaning to reverse upward trend in claims from backups.
•   Correct deteriorating conditions in sewer collection system through prioritized repair and
    rehabilitation projects.
•   Implement recommendation for preventing backups in the sewer lake line.




                                                                 _________________________________
G-96                                                                City of Mercer Island 2011-2012 Budget
                                    Department Function:
                                  Sewer Utility Services

Expenditure Summary by Category
            Expenditure                 2009        2010        2011        2012      Percent Change
            Description                Actual     Estimate    Budget      Budget      10-11     11-12
Salaries & Wages                        325,469     339,919     319,391     331,496     -6.0%     3.8%
Benefits                                107,922     112,790     107,778     119,521     -4.4%    10.9%
Supplies                                 48,873      47,000      55,750      55,750    18.6%      0.0%
Contractual Services                    179,259     213,500     244,000     245,500    14.3%      0.6%
Communications                           23,869      25,000      30,000      30,000    20.0%      0.0%
Fleet/Computer/Equipment Rental          48,072      50,122      43,199      43,199    -13.8%     0.0%
Insurance                                53,200      58,400      96,859     104,123    65.9%      7.5%
Utilities                                42,753      44,000      45,000      45,000     2.3%      0.0%
Other Services & Charges                136,479     142,000     140,358     151,876     -1.2%     8.2%
King County Sewage Treatment          3,305,490   3,315,000   3,771,345   3,790,200    13.8%      0.5%
General Administration Support          250,000     265,000     176,425     184,043    -33.4%     4.3%
Debt Service (Principal & Interest)     195,914   1,104,383   1,130,173   1,130,583     2.3%      0.0%
Total                                 4,717,300   5,717,114   6,160,278   6,231,291     7.8%      1.2%




_________________________________
City of Mercer Island 2011-2012 Budget                                                             G-97
                                 Department Function:
                             Stormwater Utility Services

Description
Provide business administration services and operational support to the City's stormwater utility.
Provide the full range of maintenance activities and operational expertise required for reliable 24-hour
services from the City's stormwater utility. Ensure compliance with all state and federal rules and
regulations for public utilities.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.


Services & Products
•   Monitor stormwater quality.
•   Ensure compliance with federal and state regulations.
•   Convey drainage through natural and piped system to Lake Washington safely and with minimal
    impact to the Lake.


2011-2012 Key Initiatives
•   Reach full compliance with new NPDES stormwater regulations.
•   Identify opportunities to demonstrate low impact development techniques.


Expenditure Summary by Category
            Expenditure               2009        2010         2011         2012       Percent Change
            Description              Actual     Estimate      Budget       Budget        10-11     11-12
Salaries & Wages                      181,686     197,433      183,929      192,414       -6.8%      4.6%
Benefits                               59,828       62,745      59,834       66,515       -4.6%     11.2%
Supplies                               51,326       20,600      20,600       20,600        0.0%      0.0%
Contractual Services                  202,993     361,130      276,134      277,634      -23.5%      0.5%
Fleet/Computer/Equipment Rental        40,587       42,956      45,465       45,465        5.8%      0.0%
Insurance                              50,000       55,000      48,074       51,889      -12.6%      7.9%
Utilities                              20,365       28,600      28,000       28,000       -2.1%      0.0%
Other Services & Charges               23,272       24,500      18,484       18,764      -24.6%      1.5%
Intergovernmental Services             10,208       11,100      12,000       13,000        8.1%      8.3%
General Administration Support         55,600       59,000      39,279       40,976      -33.4%      4.3%
Total                                695,866      863,064      731,799      755,257      -15.2%      3.2%




                                                                 _________________________________
G-98                                                                City of Mercer Island 2011-2012 Budget
                                   Department Function:
                                  Solid Waste Services

Description
Contract with Allied Waste for curbside disposal and recycling services. Provide disposal options for
hard-to-recycle items, ranging from home electronics and appliances to motor oil and tires.


Priority of Government
#4 The community will support attractive, high quality neighborhood and business environments.


Services & Products
•   Hold two special collection events annually for hard to recycle items.


2011-2012 Key Initiatives
•   Implement enhanced service provisions in new long-term contract with Allied Waste.
•   Expand the menu of items accepted at Recycling Events held twice a year.


Expenditure Summary by Category
           Expenditure               2009         2010         2011           2012      Percent Change
           Description              Actual       Estimate     Budget         Budget     10-11     11-12
Salaries & Wages                          381         700          500           500     -28.6%     0.0%
Benefits                                    61           50        -              -     -100.0%     N/A
Supplies                                1,080          -         1,000          1,000      N/A      0.0%
Contractual Services                   43,944      50,000       49,400         49,400     -1.2%     0.0%
Communications                            -            -           -              -        N/A      N/A
Fleet/Computer/Equipment Rental           -            -           -              -        N/A      N/A
Other Services & Charges                  -            -           -              -        N/A      N/A
Intergovernmental Services                -            -           -              -        N/A      N/A
Total                                 45,466       50,750       50,900        50,900      0.3%      0.0%




_________________________________
City of Mercer Island 2011-2012 Budget                                                               G-99
                                   Department Function:
                                   Facilities Services

Description
Provide preventative and corrective maintenance to all City buildings through a combination of
contracted services and one City staff member.


Priority of Government
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.


Services & Products
•   Coordinate scheduled preventative building maintenance.
•   Respond to building maintenance requests.
•   Manage grounds maintenance contracts.
•   Prepare capital improvement plan and oversee facilities CIP projects.


2011-2012 Key Initiatives
•   Complete work design analysis for Facilities Project Coordinator.
•   Begin life-cycle analysis for key City facilities.


Expenditure Summary by Category
            Expenditure              2009         2010        2011           2012      Percent Change
            Description             Actual      Estimate     Budget         Budget     10-11       11-12
Salaries & Wages                      55,369       80,944       48,614        31,267    -39.9%     -35.7%
Benefits                              21,021       29,843       17,216        12,881    -42.3%     -25.2%
Supplies                              15,061       17,500       17,500        17,500      0.0%       0.0%
Contractual Services                 148,595      186,500     183,500        183,500     -1.6%       0.0%
Communications                            -           -            -             -        N/A        N/A
Fleet/Computer/Equipment Rental         7,740       8,740        7,210         7,210    -17.5%       0.0%
Utilities                            192,573      178,497     186,372        208,806      4.4%      12.0%
Other Services & Charges                1,317       1,950         300           300     -84.6%       0.0%
Total                                441,677     503,974      460,712       461,464      -8.6%       0.2%




                                                                _________________________________
G-100                                                              City of Mercer Island 2011-2012 Budget
                                     Department Function:
                                      Fleet Services

Description
Provide preventative maintenance and repairs for more than 150 vehicles and pieces of heavy equipment
through a combination of contracted services and one City staff member.


Priority of Government
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.


Services & Products
•   Coordinate fleet acquisitions and replacements.
•   Perform, or contract out, repairs to vehicles and equipment.
•   Conduct emissions testing.
•   Purchase fuel for fleet.


2011-2012 Key Initiatives
•   Maintain Evergreen Fleets “Platinum” certification, encompassing a review of the entire fleet in
    terms of vehicle utilization, right sizing, fuel efficiency, and carbon emission reduction opportunities.


Expenditure Summary by Category
            Expenditure                2009         2010         2011          2012       Percent Change
            Description               Actual      Estimate      Budget       Budget         10-11    11-12
Salaries & Wages                        67,109       82,598        82,088       83,208       -0.6%      1.4%
Benefits                                26,258       29,730        28,240       31,389       -5.0%    11.2%
Supplies                               233,233      260,500      260,500       268,500        0.0%      3.1%
Contractual Services                    75,693      104,000        83,000       86,000      -20.2%      3.6%
Communications                              -            -            -            -           N/A      N/A
Fleet/Computer/Equipment Rental          6,626         6,749        4,199        4,199      -37.8%      0.0%
Insurance                               22,560       26,000        26,000       26,000        0.0%      0.0%
Other Services & Charges                   490         1,200        1,200        1,200        0.0%      0.0%
Total                                 431,968       510,777      485,227      500,496        -5.0%     3.1%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                  G-101
                             Department Function:
                       Customer Field Response Services

Description
Provide a quick and efficient response to a variety of customer requests involving City utilities and the
public right-of-way.


Priority of Government
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.


Services & Products
•   Repair water leaks.
•   Locate underground utilities.
•   Replace water meters.
•   Control vegetation overgrowth.
•   Patch potholes.
•   Assess sewer problems.
•   Perform right-of-way inspections
•   Clear roadway hazards.


2011-2012 Key Initiatives
•   Maintain current service levels.


Expenditure Summary by Category
           Expenditure                 2009         2010        2011         2012        Percent Change
           Description                 Actual      Estimate    Budget       Budget        10-11    11-12
Salaries & Wages                       127,257      141,296     136,904      138,728       -3.1%     1.3%
Benefits                                45,351       50,132      47,704       53,000       -4.8%    11.1%
Supplies                                      51      1,200         400          400      -66.7%     0.0%
Contractual Services                       -            -            -            -          N/A      N/A
Communications                             -            -            -            -          N/A      N/A
Fleet/Computer/Equipment Rental         15,212       15,212      13,067       13,067      -14.1%     0.0%
Other Services & Charges                   298        1,200          -            -      -100.0%      N/A
Intergovernmental Services                 -            -            -            -          N/A      N/A
Total                                  188,169      209,040     198,075      205,195       -5.2%     3.6%




                                                                 _________________________________
G-102                                                               City of Mercer Island 2011-2012 Budget
MUNICIPAL COURT
        _________________________________
G-104      City of Mercer Island 2011-2012 Budget
                                        Department:
                                      Municipal Court

Description
The Mercer Island Municipal Court is responsible for processing all civil infractions (comprised mostly of
traffic and parking violations) and criminal citations/complaints filed by the City of Mercer Island and the
City of Newcastle, which contracts for court services with the City.




Staffing Summary
      Type of Employee                2009         2010         2011         2012        Percent Change
   & Department Function             Actual      Estimate      Budget       Budget        10-11     11-12
Regular (Ongoing):
  Civil & Criminal Case Processing        3.85         3.85         3.35         3.35      -13.0%     0.0%
Total Regular                             3.85         3.85         3.35         3.35     -13.0%      0.0%
Contracted (Temporary):
  Civil & Criminal Case Processing         -            -            -            -          N/A      N/A
Total Contracted                           -            -            -            -          N/A      N/A




_________________________________
City of Mercer Island 2011-2012 Budget                                                                G-105
                                            Department:
                                          Municipal Court


                                          2011-2012 Resources




                                                             Court Fines & Forefeits
                                                                     100%




                                                 2011-2012 Uses

                                          Equipment Rental
                                                4%
                                                                Other Services & Charges
                   Contractual Services                                    2%
                           4%


           Supplies
             1%



        Benefits
         22%




                                                                                              Salaries & Wages
                                                                                                     66%




                                                                              _________________________________
G-106                                                                            City of Mercer Island 2011-2012 Budget
                                     Department:
                                   Municipal Court

Resources & Uses Summary
                                   2009         2010        2011        2012      Percent Change
             Description           Actual      Estimate   Budget      Budget       10-11     11-12
Resources:
  Court Fines & Forefeits          390,425      370,000     394,000     394,000       6.5%     0.0%
  General Purpose Revenue                -       63,134         -           -      -100.0%     N/A
Total Resources                    390,425      433,134    394,000     394,000       -9.0%     0.0%
Uses:
  Salaries & Wages                 269,682      300,471     238,887     242,112     -20.5%     1.4%
  Benefits                           81,639      94,073      74,786      83,645     -20.5%    11.8%
  Supplies                            1,958       3,650       2,750       2,750     -24.7%     0.0%
  Contractual Services               15,578      12,000      14,000      14,000      16.7%     0.0%
  Communications                         652        800        600         600      -25.0%     0.0%
  Fleet/Computer/Equip Rental        14,077      13,765      17,150      17,150      24.6%     0.0%
  Other Services & Charges            4,227       8,375       6,900       6,900     -17.6%     0.0%
  Intergovernmental Services             -          -           -           -         N/A      N/A
  Capital                                -          -           -           -         N/A      N/A
Total Uses                         387,813      433,134    355,073     367,157      -18.0%    3.4%

Note: The net excess resources in 2011 and 2012 will be used to fund other governmental services in
the General Fund.


Expenditure Summary by Function
             Department            2009         2010        2011        2012      Percent Change
              Function             Actual      Estimate   Budget      Budget       10-11     11-12
Civil & Criminal Case Processing   387,813      433,134     355,073     367,157     -18.0%     3.4%
Total                              387,813      433,134    355,073     367,157      -18.0%     3.4%




_________________________________
City of Mercer Island 2011-2012 Budget                                                         G-107
                                            Department:
                                          Municipal Court

2011-2012 Budget Analysis
General Fund
                                                                               % Change
                          2011 Analysis                     Budget
                                                                               2010-2011

2010 Approved Budget                                              433,134
Plus 2011 General Inflationary Increases                                  -         0.0%
Plus (Less) 2011 Other Significant Changes:
  Salary & benefit savings (relative to 2010 budget)   (31,318)
   Travel, tuition & registrations                      (1,375)
   Other operating costs                                1,185
   Interpreter services                                 3,000
     Subtotal                                                     (28,508)          -6.6%
2011 Base Budget                                                  404,626           -6.6%
Plus 2011 Service Enhancement Requests:
  None                                                       -
     Subtotal                                                             -         0.0%
Less 2011 Service Reduction Proposals:
  Court Administrator (0.5 FTE reduction)              (49,553)
     Subtotal                                                     (49,553)
2011 Final Budget                                                 355,073         -18.0%
                                                                               % Change
                          2012 Analysis                     Budget
                                                                               2011-2012

2011 Final Budget                                                 355,073
Plus 2012 General Inflationary Increases                             12,084         3.4%
Plus (Less) 2012 Other Significant Changes:
  None                                                       -
     Subtotal                                                             -         0.0%
2012 Base Budget                                                  367,157           3.4%
Plus 2012 Service Enhancement Requests:
  None                                                       -
     Subtotal                                                             -         0.0%
Less 2012 Service Reduction Proposals:
  None                                                       -
     Subtotal                                                             -
2012 Final Budget                                                 367,157           3.4%
                                                         _________________________________
G-108                                                       City of Mercer Island 2011-2012 Budget
                               Department Function:
                       Civil & Criminal Case Processing

Description
Adjudicate civil infractions and criminal cases; issue subpoenas and warrants; maintain case files; schedule
cases; assess and collect fines and forfeitures; conduct motions, evidentiary hearings, discovery matters,
bench and jury trials, and sentencing hearings.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Hold court hearings in a timely fashion as required by the Washington State Supreme Court.
•   Adjudicate civil infractions and set hearing dates.
•   Complete monthly reports to the Office of Administrator of the Courts.
•   Provide probation services to ensure compliance with judgments and sentencings.
•   Collect court fines.


2011-2012 Key Initiatives
•   Bring the infraction and probation collections up to date and maintain regular audit of cases for
    timely collection actions.
•   Continue to evaluate and improve customer service.
•   Attend training and continuing education classes to remain current on Court rules, regulations and
    procedures.


Expenditure Summary by Category
           Expenditure                2009         2010         2011         2012        Percent Change
           Description               Actual      Estimate      Budget       Budget           10-11    11-12
Salaries & Wages                      269,682      300,471      238,887      242,112         -20.5%     1.4%
Benefits                                81,639       94,073       74,786       83,645        -20.5%    11.8%
Supplies                                 1,958        3,650        2,750        2,750        -24.7%     0.0%
Contractual Services                    15,578       12,000       14,000       14,000         16.7%     0.0%
Communications                             652          800          600          600        -25.0%     0.0%
Fleet/Computer/Equipment Rental         14,077       13,765       17,150       17,150         24.6%     0.0%
Other Services & Charges                 4,227        8,375        6,900        6,900        -17.6%     0.0%
Total                                 387,813      433,134      355,073      367,157         -18.0%     3.4%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                  G-109
        _________________________________
G-110      City of Mercer Island 2011-2012 Budget
PARKS & RECREATION
DEPARTMENT
        _________________________________
G-112      City of Mercer Island 2011-2012 Budget
                                      Department:
                                  Parks & Recreation

Description
The Parks & Recreation Department assumes a major role in developing a sense of community and
enhancing a patron’s quality of life by providing recreational and social programs to preschool age
children, youth, teen, adult, family, and senior populations and by organizing and hosting special events.
Partnerships with community agencies, businesses, and institutions are actively sought to ensure that
service needs are met. In terms of physical assets, the Parks & Recreation Department is responsible
for operating and maintaining the Community Center at Mercer View (CCMV), over 460 acres of parks
and open space, and more than 50 miles of trails. The Parks & Recreation Department is organized
around the following five functions: 1) Administration, 2) Community Center at Mercer View, 3) Parks
Maintenance, and 4) Recreation & Special Programs.




_________________________________
City of Mercer Island 2011-2012 Budget                                                              G-113
                                      Department:
                                  Parks & Recreation

Staffing Summary
        Type of Employee           2009       2010        2011        2012       Percent Change
   & Department Function           Actual    Estimate    Budget     Budget        10-11     11-12
Regular (Ongoing):
  Administration                      4.75        4.75       4.00        4.00      -15.8%     0.0%
  Community Center                    3.90        3.90       3.50        3.50      -10.3%     0.0%
  Parks Maintenance                   9.50        9.50       9.90        9.90        4.2%     0.0%
  Recreation & Special Programs       4.35        4.35       5.10        5.10      17.2%      0.0%
Total Regular                        22.50      22.50      22.50        22.50       0.0%      0.0%
Contracted (Temporary):
  Administration                      1.00        1.00       1.00        1.00        0.0%     0.0%
  Community Center                     -          2.00       2.00        3.00        0.0%    50.0%
  Parks Maintenance                   0.30        0.30        -           -       -100.0%     N/A
  Recreation & Special Programs       0.70        0.70        -           -       -100.0%     N/A
Total Contracted                      2.00       4.00       3.00         4.00      -25.0%   33.3%




                                                           _________________________________
G-114                                                         City of Mercer Island 2011-2012 Budget
                                                 Department:
                                             Parks & Recreation


                                                    2011-2012 Resources


                                                              Field Rentals          Boat Launch
                                             B&O Tax               3%                    1%
                                               1%
                                                                                                   Recreation & Special
                                                                                                        Programs
                                                                                                           13%


                                                                                                           WSDOT I90 Support
                                                                                                                10%




                                                                                                            CCMV Rentals
        General Purpose                                                                                        9%
           Revenue
             59%                                                                                      CCMV Program Fees
                                                                                                             3%


                                                                                                    CCMV Long
                                                                                                    Term Rentals
                                                                                                        1%
                                                                                Miscellaneous
                                                                                     1%




                                                           2011-2012 Uses


                                                     Other       Intergovernmental
                                                      2%              Services
                                        Utilities                       2%
                                          8%
                                                                                     Capital
                     Equipment Rental                                                 1%
                           7%


            Communications                                                                                     Salaries & Wages
                1%                                                                                                    47%


            Contract Services
                  12%




                          Supplies
                            5%


                                                Benefits
                                                 15%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                            G-115
                                        Department:
                                    Parks & Recreation

Resources & Uses Summary
                                      2009        2010        2011        2012       Percent Change
              Description            Actual     Estimate    Budget      Budget        10-11     11-12
Resources:
  Beginning Fund Balance                  -       131,814         -           -       -100.0%     N/A
  Business and Occupation Tax          77,670      98,051      42,513      46,626      -56.6%     9.7%
  1% for the Arts Fund                    -        10,600      40,600      10,000     283.0%    -75.4%
  Field and Park Facility Rentals      78,443     105,000     111,000     145,500        5.7%    31.1%
  Boat Launch Ticket Sales             38,031      36,000      46,400      46,400      28.9%      0.0%
  Recreation and Special Programs     603,293     573,379     585,950     580,450        2.2%    -0.9%
  WSDOT I90 Support                   443,812     444,120     447,895     451,000        0.8%     0.7%
  CCMV Facilities Rental Fees         382,976     305,200     402,466     432,166      31.9%      7.4%
  CCMV Program and Fee Rev             66,386     113,100     106,680     106,680       -5.7%     0.0%
  CCMV Long Term Rentals               27,804      27,911      31,048      35,848      11.2%     15.5%
  Donations                             8,156      17,000      34,953      34,737     105.6%     -0.6%
  Grants                                4,500      14,500         -           -       -100.0%     N/A
  Miscellaneous                        38,701      34,225      37,070      37,070        8.3%     0.0%
  General Purpose Revenue           2,467,363   2,869,428   2,548,925   2,558,884      -11.2%     0.4%
Total Resources                     4,237,135   4,780,328   4,435,500   4,485,361       -7.2%     1.1%
Uses:
  Salaries & Wages                  1,934,857   2,158,179   2,090,432   2,098,928       -3.1%     0.4%
  Benefits                            541,668     633,431     603,195     682,378       -4.8%    13.1%
  Supplies                            279,806     290,710     290,924     267,872        0.1%    -7.9%
  Contractual Services                701,553     752,044     586,179     552,668      -22.1%    -5.7%
  Communications                       28,907      42,392      29,317      29,317      -30.8%     0.0%
  Fleet/Computer/Equip Rental         264,353     273,747     290,074     289,324        6.0%    -0.3%
  Utilities                           347,968     410,953     365,461     384,756      -11.1%     5.3%
  Other Services & Charges            117,915     123,372      84,118      84,318      -31.8%     0.2%
  Intergovernmental Services           20,108      65,500      64,800      64,800       -1.1%     0.0%
  Capital                                 -        30,000      31,000      31,000        3.3%     0.0%
Total Uses                          4,237,135   4,780,328   4,435,500   4,485,361       -7.2%     1.1%




                                                               _________________________________
G-116                                                             City of Mercer Island 2011-2012 Budget
                                    Department:
                                Parks & Recreation

Expenditure Summary by Function
         Department                2009        2010        2011        2012      Percent Change
           Function               Actual     Estimate    Budget      Budget      10-11     11-12
Administration                     696,509     791,744     659,655     676,056    -16.7%     2.5%
Community Center                   688,926     802,823     865,383     898,886     7.8%      3.9%
Parks Maintenance                1,830,057   2,100,227   1,963,657   1,981,488     -6.5%     0.9%
Recreation & Special Programs    1,021,643   1,085,533     946,805     928,931    -12.8%    -1.9%
Total                           4,237,135    4,780,328   4,435,500   4,485,361     -7.2%     1.1%




_________________________________
City of Mercer Island 2011-2012 Budget                                                       G-117
                                         Department:
                                     Parks & Recreation

2011-2012 Budget Analysis
General & 1% for the Arts Funds
                                                                                     % Change
                        2011 Analysis                             Budget
                                                                                     2010-2011

2010 Approved Budget                                                    4,238,157
Plus 2011 General Inflationary Increases                                        -          0.0%
Plus (Less) 2011 Other Significant Changes:
   Prior year one-time costs & carryovers:
     - 1.0 FTE contract Recreation Coordinator               (66,814)
     - CCMV equipment, advertising and repairs (carryover)   (35,000)
     - Parks Maintenance equipment (carryover)               (30,000)
   Temporary Reduction Parks Manager (1.0 FTE)               (95,985)
   Staff assignment change (shift to I-90 Landscsaping)      (77,808)
   Recreation program instructors                            (26,572)
   Printing, postage & advertising                           (19,866)
   Travel, tuition & registrations                           (11,549)
   Telephone, cellular phones and pagers                      (7,039)
   Other operating costs                                      8,000
   CCMV building maintenance                                 34,916
   CCMV Casual to Contract staff conversions                 39,253

     Subtotal                                                           (288,464)         -6.8%
2011 Base Budget                                                        3,949,693         -6.8%
Plus 2011 Service Enhancement Requests:
   Continue CCMV contract custodial services                 32,100
   Establish CCMV equipment sinking fund                     31,000
     Subtotal                                                              63,100          1.5%
Less 2011 Service Reduction Proposals:
   Reduce park maintenance level of service (B to C)         (19,000)
   Summer Celebration fireworks evening                      (24,500)
   Groveland Beach lifeguards                                (24,200)
     Subtotal                                                            (67,700)
2011 Final Budget                                                       3,945,093         -6.9%



                                                             _________________________________
G-118                                                           City of Mercer Island 2011-2012 Budget
                                      Department:
                                  Parks & Recreation

2011-2012 Budget Analysis
General & 1% for the Arts Funds (cont’d)
                                                                       % Change
                     2012 Analysis                   Budget
                                                                       2011-2012

2011 Final Budget                                          3,945,093
Plus 2012 General Inflationary Increases                      84,501        2.1%
Plus (Less) 2012 Other Significant Changes:
   None                                               -
     Subtotal                                                      -        0.0%
2012 Base Budget                                           4,029,594        2.1%
Plus 2012 Service Enhancement Requests:
   None                                               -
     Subtotal                                                      -        0.0%
Less 2012 Service Reduction Proposals:
   Reduce Recreation and Arts Events            (41,858)
     Subtotal                                               (41,858)
2012 Final Budget                                          3,987,736        1.1%




_________________________________
City of Mercer Island 2011-2012 Budget                                             G-119
                                           Department:
                                       Parks & Recreation

2011-2012 Budget Analysis
Beautification Fund
                                                                                  % Change
                       2011 Analysis                           Budget
                                                                                  2010-2011


2010 Approved Budget                                                 542,171
Plus 2011 General Inflationary Increases                                    -          0.0%
Plus (Less) 2011 Other Significant Changes:
  Convert mowing contract to internal labor (represents
    net savings)                                          (15,764)
  Irrigation savings                                      (34,472)
  Other operating costs                                    (1,527)
    Subtotal                                                         (51,763)         -9.5%
2011 Base Budget                                                     490,408          -9.5%
Plus 2011 Service Enhancement Requests:
  None                                                          -
    Subtotal                                                                -          0.0%
Less 2011 Service Reduction Proposals:
  None                                                          -
    Subtotal                                                                -
2011 Final Budget                                                    490,408          -9.5%

                                                                                  % Change
                       2012 Analysis                           Budget
                                                                                  2011-2012


2011 Final Budget                                                    490,408
Plus 2012 General Inflationary Increases                                7,218          1.5%
Plus (Less) 2012 Other Significant Changes:
  None                                                          -
    Subtotal                                                                -          0.0%
2012 Base Budget                                                     497,626           1.5%
Plus 2012 Service Enhancement Requests:
  None                                                          -
    Subtotal                                                                -          0.0%
Less 2012 Service Reduction Proposals:
  None                                                          -
    Subtotal                                                                -
2012 Final Budget                                                    497,626           1.5%

                                                               _________________________________
G-120                                                             City of Mercer Island 2011-2012 Budget
                                     Department Function:
                                      Administration

Description
Provide overall leadership to the department through strategic planning, budget preparation and
monitoring, and performance measurement, and oversee park planning, grant development, project
management, and citizen outreach efforts.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Provide scheduling services for City owned and selected School District ballfields and facilities.
•   Coordinate volunteer recruitment, training, and retention efforts for social services, community
    center programs, and park maintenance.
•   Implement Park and Recreation Plan as well as other park master plans.
•   Develop master plans for selected parks.
•   Oversee CIP planning and project management efforts.
•   Pursue grant funding opportunities in support of park projects and recreation services.
•   Provide staff support to Ballfield User Group (BUG), Open Space Conservancy Trust, Senior
    Commission, and Council Park and Recreation Subcommittee.
•   Process, review, and grant special event and special use permits.
•   Coordinate park planning in conjunction with private development proposals.
•   Manage park property database (e.g. easements, encroachments, and leases).
•   Coordinate logistical support for City sponsored and regional special events (e.g. July 4th, Summer
    Celebration!, Seafair, Rotary Half Marathon, and Sockeye fishery).
•   Solicit and account for donations in conjunction with Northwest Parks Foundation.
•   Review and evaluate properties for potential acquisition.
•   Coordinate department sponsorships and marketing activities.


2011-2012 Key Initiatives
•   Implement results of the Ballfield Use Analysis and Policy Committee recommendations.
•   Implement Park and Recreation Strategic Plan.
•   Develop, review and update department policy manual.
•   Provide department direction for improved efficiency measures.
•   Implement Open Space Conservancy Trust Work Plan.
•   Implement web-based feature allowing online viewing of facility schedules, availability, and use.
•   Provide assistance to the Mercer Island Boys & Girls Club in developing a master facility scheduling
    system for the new PEAK facility.




_________________________________
City of Mercer Island 2011-2012 Budget                                                              G-121
                                  Department Function:
                                   Administration

Expenditure Summary by Category
           Expenditure             2009       2010       2011        2012       Percent Change
           Description            Actual     Estimate   Budget     Budget        10-11     11-12
Salaries & Wages                   395,874    428,257    344,489     348,991      -19.6%     1.3%
Benefits                           113,644    132,102     99,905     111,804      -24.4%    11.9%
Supplies                            18,640     40,600     23,400      23,400      -42.4%     0.0%
Contractual Services                26,858     39,222     53,275      53,275      35.8%      0.0%
Communications                       7,965     10,572      5,035       5,035      -52.4%     0.0%
Fleet/Computer/Equipment Rental     93,608     94,190     93,198      93,198       -1.1%     0.0%
Other Services & Charges            31,813     41,300     35,553      35,553      -13.9%     0.0%
Intergovernmental Services           8,108      5,500      4,800       4,800      -12.7%     0.0%
Capital                                -          -          -           -          N/A      N/A
Total                             696,509     791,744   659,655     676,056       -16.7%     2.5%




                                                          _________________________________
G-122                                                        City of Mercer Island 2011-2012 Budget
                                  Department Function:
                                 Community Center

Description
Provide 7-day a week opportunities at the Community Center at Mercer View (CCMV) for drop-in and
programmed recreation activities as well as amenities for business meeting rentals and special events;
provide three leased spaces to two (2) childcare providers; and serve as one of the community’s
emergency shelters during disasters or prolonged utility outages.


Priority of Government
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.
#5 The community will support a broad range of recreational, cultural, health, and educational
   opportunities.


Services & Products
•   Overall management of the CCMV facility and its general activities.
•   Financial management of CCMV operating budget.
•   Provide 7-day per week staffing needs for 106 operating hours of the facility.
•   Provide all on-site customer service needs for the general public including in-person reception,
    telephone reception, daily janitorial needs, rental check-in and check-out, fee calculations and
    collections, monitor general activities of the public, and enforce code of conduct.
•   Primary registration source for all department programs offered to patrons.
•   Host a majority of recreational programs offered by Department.
•   Primary reception desk for Parks and Recreation Department.
•   General administrative support of the entire Parks & Recreation Department.
•   Management of long term tenant leases and facility-based maintenance needs of Annex.
•   CCMV staff supports department programs and special events.
•   Act as an informational hub and clearinghouse for the City as a whole.
•   Manage CCMV website content.
•   Provide venue for large community wide events (Rotary Run, Leap for Green, and Summer
    Celebration.)
•   Perform all marketing and advertising efforts for the room rentals and drop-in programs including
    advertisement within various publications, on-line advertising and promotion, and website
    promotion.
•   Book all room and gymnasium rentals at CCMV, including site tours.
•   Perform set-up and take-down of room rentals.
•   Assist Recreation Instructors with room usage, AV/Media use, and other administrative needs.
•   Encompass environmental stewardship within daily activities and decisions.
•   Coordinate with Mercer Island Art Gallery to host up to six separate hangings per year, with CCMV
    selling the corresponding artwork for the Arts Council.
•   Provide specialized spaces for preschool youth, seniors, fitness, dance, games, and art activities.
•   Manage approximately 8,550 hours of drop in sports activities for 8 drop-in programs.
•   Issue annual boat launch permits, and collect pea patch fees.
•   Serve as a public library extension.
•   Insure that CCMV is prepared to act as Emergency Shelter.
_________________________________
City of Mercer Island 2011-2012 Budget                                                             G-123
                                   Department Function:
                                  Community Center

2011-2012 Key Initiatives
•   Achieve (not to exceed) authorized subsidy level, and come in at or under approved expenditure
    limits.
•   Continue to review and analyze current rental occupancy and rates to maximize usage and rental
    revenue.
•   Continue to maintain a high level of service.
•   Continue to develop, review and update policies.
•   Proactively address risk management issues.
•   Ensure the preservation of the CCMV facility to prolong its useful life.
•   Review and update gym usage policies versus actual usage of gymnasium to ensure consistency with
    departmental policies.
•   Continue to develop/update/implement business strategies and a corresponding marketing plan to
    minimize the financial burden on the City.
•   Continue to strive to become even more efficient in overall operations and management of facility.
•   Continue to support and serve as a venue for high profile community events.
•   Keep Mercer Island Residents & Businesses at the forefront of decision making process.
•   Ensure emergency preparedness of the CCMV.


Expenditure Summary by Category
            Expenditure              2009        2010        2011         2012       Percent Change
            Description             Actual     Estimate     Budget      Budget        10-11     11-12
Salaries & Wages                     322,512     408,557     422,955      426,819        3.5%     0.9%
Benefits                              80,348      97,811     125,691      156,409      28.5%     24.4%
Supplies                              76,221      48,500       46,500      44,028       -4.1%    -5.3%
Contractual Services                 100,495      93,250     117,528      115,963      26.0%     -1.3%
Communications                         3,030       5,690        5,350       5,350       -6.0%     0.0%
Fleet/Computer/Equipment Rental       16,754      18,765       19,167      19,167        2.1%     0.0%
Utilities                             76,065      90,750       79,742      82,700      -12.1%     3.7%
Other Services & Charges              13,501      39,500       17,450      17,450      -55.8%     0.0%
Intergovernmental Services               -           -            -           -          N/A      N/A
Capital                                  -           -         31,000      31,000        N/A      0.0%
Total                               688,926      802,823     865,383     898,886        7.8%      3.9%




                                                               _________________________________
G-124                                                             City of Mercer Island 2011-2012 Budget
                                     Department Function:
                                    Parks Maintenance

Description
Maintain high demand, multi-use athletic fields, playgrounds, sport courts, swimming beaches, street-end
waterfront access areas, hiking, biking and equestrian trails, open spaces areas, and picnic facilities.
Provide arboricultural planning, project management, and consultation services for tree and urban
forests in public open spaces and parks. Maintain and repair public art installations.


Priority of Government
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.
#4 The community will support attractive, high quality neighborhood and business environments.


Services & Products
•   Provide customer service response to citizen generated park maintenance issues.
•   Maintain 460 acres of parks and open space, over 50 miles of trails, 20 street-end parks, 14 multi-
    use athletic fields, 12 playgrounds, 2 guarded swim beaches, 2 off-leash areas, 4 picnic facilities, and 1
    boat launch.
•   Coordinate ballfield maintenance program with Ballfield User Group.
•   Manage facility, park, open space, and trail capital projects.
•   Support over 3,800 field use reservations and 550 field preps annually.
•   Support volunteer and neighborhood park stewardship projects.
•   Support recreation programs with logistical support and park preparations.
•   Support CCMV operations with logistical support and grounds maintenance services.
•   Support citywide and regional special events, including July 4th, Summer Celebration!, Seafair,
    Sockeye fishery, triathlons, and half marathons.
•   Provide maintenance support to 10 Lakes to Locks Water Trailheads.
•   Manage landscape maintenance contracts for City Hall, Fire Stations, CCMV, and the Thrift Shop.
•   Develop and implement forest management and open space vegetation plans.
•   Plan and conduct forest stewardship training for citizen volunteers.
•   Coordinate volunteer work projects in parks and open spaces.
•   Conduct property surveys and identify encroachments.
•   Provide staff support to the Open Space Conservancy Trust.
•   Conduct hazardous tree inspections and coordinate their removal.
•   Develop planting plans and recommend replacement plantings.
•   Coordinate public art maintenance management plan with contracted service provider.
•   Support Parks Department Capital Projects.
•   Conduct routine inspections of playgrounds and athletic facilities.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                  G-125
                                   Department Function:
                                  Parks Maintenance

2011-2012 Key Initiatives
•   Continue implementation of Park and Recreation Strategic Plan.
•   Implement park master plans.
•   Implement Open Space Vegetation Plan.
•   Implement Pioneer Park Forest Management Plan.
•   Implement Open Space Conservancy Trust Work Plan.
•   Continue to develop and implement sustainable best management practices.


Expenditure Summary by Category
            Expenditure             2009        2010        2011        2012       Percent Change
            Description            Actual     Estimate    Budget      Budget        10-11     11-12
Salaries & Wages                    802,158     879,116     930,800     932,910        5.9%     0.2%
Benefits                            234,799     278,850     268,022     292,807       -3.9%     9.2%
Supplies                            141,413     156,035     177,775     157,275      13.9%    -11.5%
Contractual Services                232,714     235,447      82,682      78,831      -64.9%    -4.7%
Communications                       12,335      17,327      13,900      13,900      -19.8%     0.0%
Fleet/Computer/Equipment Rental     115,847     117,839     141,624     140,874      20.2%     -0.5%
Utilities                           271,903     320,203     285,719     302,056      -10.8%     5.7%
Other Services & Charges              6,888       5,410       3,135       2,835      -42.1%    -9.6%
Intergovernmental Services           12,000      60,000      60,000      60,000        0.0%     0.0%
Capital                                 -        30,000         -           -       -100.0%     N/A
Total                             1,830,057   2,100,227   1,963,657   1,981,488       -6.5%     0.9%




                                                             _________________________________
G-126                                                           City of Mercer Island 2011-2012 Budget
                              Department Function:
                        Recreation & Special Programs

Description
Plan, develop, promote, organize, and schedule all City sponsored recreation and special programs,
which include athletics, health and fitness, aquatics, social services, senior services, cultural arts, outdoor
recreation, and special interest classes for all skill levels and for families, preschoolers, youth, teens,
adults, and seniors. In addition, the recreation function provides the community a number of special
events for all ages to include: performing arts and literacy events, carnival, pet events, trail events, and
the Summer Celebration festival.


Priority of Government
#5 The community will support a broad range of recreational, cultural, health, and educational
   opportunities.


Services & Products
•   Coordinate recreation service delivery with other agencies/organizations, including Boys and Girls
    Club, Jewish Community Center, Northwest Center (Mary Wayte Pool), Youth Theatre Northwest,
    Mercer Island Preschool Association, service clubs, Island Vision, Mercer Island Library, and the
    Mercer Island School District.
•   Provide Lifeguards at Luther Burbank swimming beaches.
•   Provide staff support to Mercer Island Arts Council.
•   Negotiate, develop, and maintain service contracts with contract instructors and partner agencies.
•   Maintain recreation program database and online registration system.
•   Coordinate www.myparksandrecreation.com efforts with 8 other cities.
•   Provide a variety of events to the community.
•   Develop promotional materials, including flyers, quarterly recreational guide, newspaper ads, and
    newsletters.
•   Coordinate with artists to maintain indoor and outdoor gallery spaces.


2011-2012 Key Initiatives
•   Build and develop Playful City U.S.A. community outreach, adventure playground and outdoor play
    awareness and implement revenues to support sustainability.
•   Research creative alternative revenue resources including sponsorships and donations.
•   Build health, wellness and sustainable awareness through programming.
•   Continue to support high profile community events for the City and partner organizations.
•   Develop and implement marketing strategies to increase recreational participants.
•   Build cultural competency awareness at events.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                   G-127
                               Department Function:
                         Recreation & Special Programs

Expenditure Summary by Category
           Expenditure              2009        2010       2011        2012       Percent Change
           Description             Actual     Estimate    Budget     Budget        10-11     11-12
Salaries & Wages                    414,313     442,249    392,188     390,208      -11.3%    -0.5%
Benefits                            112,877     124,668    109,577     121,358      -12.1%    10.8%
Supplies                             43,532      45,575     43,249      43,169       -5.1%    -0.2%
Contractual Services                341,486     384,124    332,694     304,599      -13.4%    -8.4%
Communications                        5,578       8,803      5,032       5,032      -42.8%     0.0%
Fleet/Computer/Equipment Rental      38,145      42,953     36,085      36,085      -16.0%     0.0%
Other Services & Charges             65,713      37,162     27,980      28,480      -24.7%     1.8%
Capital                                 -           -          -           -          N/A      N/A
Total                             1,021,643   1,085,533   946,805     928,931       -12.8%    -1.9%




                                                            _________________________________
G-128                                                          City of Mercer Island 2011-2012 Budget
POLICE DEPARTMENT
        _________________________________
G-130      City of Mercer Island 2011-2012 Budget
                                          Department:
                                            Police

Description
The Police Department is organized around the following functions: 1) Administration, 2) Patrol, 3)
Marine Patrol, 4) Investigations & special programs, 5) Records, Property & Dispatch, 6) Special Teams,
7) Training, 8) Emergency Management, and 9) Jails.




_________________________________
City of Mercer Island 2011-2012 Budget                                                            G-131
                                              Department:
                                                Police

Staffing Summary
          Type of Employee            2009        2010       2011        2012       Percent Change
   & Department Function              Actual    Estimate    Budget     Budget        10-11     11-12
Regular (Ongoing):
  Administration                         4.00        4.00       4.00        4.00        0.0%     0.0%
  Patrol                                22.00      22.00       21.00       21.00       -4.5%     0.0%
  Marine Patrol                          2.00        2.00       2.00        2.00        0.0%     0.0%
  Investigations & Special Programs      5.00        5.00       5.00        5.00        0.0%     0.0%
  Records, Property & Dispatch           2.50        2.50       2.00        2.00      -20.0%     0.0%
  Special Teams                           -           -          -           -          N/A      N/A
  Emergency Management                   1.00        1.00       1.00        1.00        0.0%     0.0%
  Training                                -           -          -           -          N/A      N/A
  Jails                                   -           -          -           -          N/A      N/A
Total Regular                           36.50      36.50      35.00        35.00       -4.1%     0.0%
Contracted (Temporary):
  Administration                          -           -          -           -          N/A      N/A
  Patrol                                  -           -          -           -          N/A      N/A
  Marine Patrol                           -           -          -           -          N/A      N/A
  Investigations & Special Programs       -           -          -           -          N/A      N/A
  Records, Property & Dispatch            -           -          -           -          N/A      N/A
  Special Teams                           -           -          -           -          N/A      N/A
  Emergency Management                    -           -          -           -          N/A      N/A
  Training                                -           -          -           -          N/A      N/A
  Jails                                   -           -          -           -          N/A      N/A
Total Contracted                          -          -           -           -          N/A      N/A




                                                              _________________________________
G-132                                                            City of Mercer Island 2011-2012 Budget
                                                      Department:
                                                        Police


                                                  2011-2012 Resources


                                          Beginning Fund Balance            Sales Tax
                                            (Criminal Justice)          (Criminal Justice)
                                                    1%                         8%            Vessel Registration Fees
                                                                                                       2%


                                                                                                       Marine Patrol Contract
                                                                                                                1%




                General Purpose Revenue
                          88%




                                                       2011-2012 Uses


                                                    Intergovernmental
                                        Other            Services             Capital
                                         1%                9%                  0%
                     Equipment Rental
                           8%

              Contract Services
                    1%

                Supplies
                  2%


                                                                                                               Salaries & Wages
                                                                                                                      60%
                    Benefits
                     19%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                            G-133
                                          Department:
                                            Police

Resources & Uses Summary
                                   2009        2010        2011        2012       Percent Change
             Description          Actual     Estimate    Budget      Budget        10-11     11-12
Resources:
  Beginning Fund Balance (CJ)          -       269,187      63,562      63,916      -76.4%     0.6%
  Sales Tax (Criminal Justice)     479,813     453,160     465,750     483,750        2.8%     3.9%
  Vessel Registration Fees         114,683     103,000     100,000     100,000       -2.9%     0.0%
  Federal and Local Grants          91,725       9,999         -           -       -100.0%     N/A
  MI School District (SRO)          18,054      18,000      18,000      18,000        0.0%     0.0%
  Marine Patrol Contract           146,419     138,420      60,000      62,000      -56.7%     3.3%
  False Alarm Charges                5,050       3,500       3,500       3,500        0.0%     0.0%
  Miscellaneous                    222,715       4,500       3,600       3,600      -20.0%     0.0%
  General Purpose Revenue        4,467,035   5,078,581   4,962,154   5,098,406       -2.3%     2.7%
Total Resources                  5,545,494   6,078,347   5,676,566   5,833,172       -6.6%     2.8%
Uses:
  Salaries & Wages               3,266,475   3,515,804   3,400,769   3,473,373       -3.3%     2.1%
  Benefits                         971,602   1,114,074   1,058,494   1,125,026       -5.0%     6.3%
  Supplies                         117,217     111,549     100,750     100,750       -9.7%     0.0%
  Contractual Services              90,252      62,800      55,150      55,520      -12.2%     0.7%
  Communications                    23,741      27,400      27,400      27,400        0.0%     0.0%
  Fleet/Computer/Equip Rental      445,305     447,478     447,134     447,134       -0.1%     0.0%
  Other Services & Charges          56,621      82,000      67,680      68,680      -17.5%     1.5%
  Intergovernmental Services       539,036     683,842     485,789     501,889      -29.0%     3.3%
  Capital                           35,245      33,400      33,400      33,400        0.0%     0.0%
Total Uses                       5,545,494   6,078,347   5,676,566   5,833,172       -6.6%     2.8%




                                                            _________________________________
G-134                                                          City of Mercer Island 2011-2012 Budget
                                             Department:
                                               Police

Expenditure Summary by Function
           Department                 2009        2010        2011        2012      Percent Change
            Function                 Actual     Estimate    Budget      Budget      10-11     11-12
Administration                        814,971     855,308     856,184     872,927     0.1%      2.0%
Patrol                              2,561,480   2,833,957   2,750,897   2,830,590     -2.9%     2.9%
Marine Patrol                         491,943     466,397     424,491     434,056     -9.0%     2.3%
Investigations & Special Programs     621,572     669,980     641,924     664,994     -4.2%     3.6%
Records, Property & Dispatch          648,589     784,443     659,589     680,030    -15.9%     3.1%
Special Teams                          35,705      40,700      40,700      40,700     0.0%      0.0%
Emergency Management                  146,625     160,882     162,604     166,780     1.1%      2.6%
Training                               68,760      92,680      85,192      85,400     -8.1%     0.2%
Jails                                 155,849     174,000      54,985      57,695    -68.4%     4.9%
Total                               5,545,494   6,078,347   5,676,566   5,833,172     -6.6%     2.8%




_________________________________
City of Mercer Island 2011-2012 Budget                                                          G-135
                                               Department:
                                                 Police

2011-2012 Budget Analysis
General & Criminal Justice Funds
                                                                                      % Change
                        2011 Analysis                              Budget
                                                                                      2010-2011

2010 Approved Budget                                                     6,078,347
Plus 2011 General Inflationary Increases                                         -          0.0%
Plus (Less) 2011 Other Significant Changes:
   Prior year one-time costs & carryovers:
     - ARRA vehicle grant                                      (9,999)
   Jail cost savings (Yakima & Issaquah contracts)           (119,015)
   NORCOM fees                                                (80,151)
   Salary & benefit savings (relative to 2010 budget)         (59,035)
   Marine Patrol program                                      (39,174)
   Travel, tuition & registrations                             (5,320)
   Other operating costs                                        2,321
   Patrol overtime (driven mostly by Hire Ahead reduction)    32,355
     Subtotal                                                            (278,018)         -4.6%
2011 Base Budget                                                         5,800,329         -4.6%
Plus 2011 Service Enhancement Requests:
   None                                                             -
     Subtotal                                                                    -          0.0%
Less 2011 Service Reduction Proposals:
   Hire Ahead Patrol Officer (1.0 FTE reduction)              (85,506)
   Police Records Clerk (0.5 FTE reduction)                   (38,257)
     Subtotal                                                            (123,763)
2011 Final Budget                                                        5,676,566         -6.6%




                                                              _________________________________
G-136                                                            City of Mercer Island 2011-2012 Budget
                                         Department:
                                           Police

2011-2012 Budget Analysis
General & Criminal Justice Funds (cont’d)
                                                                        % Change
                    2012 Analysis                      Budget
                                                                        2011-2012

2011 Final Budget                                           5,676,566
Plus 2012 General Inflationary Increases                     156,606         2.8%
Plus (Less) 2012 Other Significant Changes:
   None                                                 -
     Subtotal                                                       -        0.0%
2012 Base Budget                                            5,833,172        2.8%
Plus 2012 Service Enhancement Requests:
   None                                                 -
     Subtotal                                                       -        0.0%
Less 2012 Service Reduction Proposals:
   None                                                 -
     Subtotal                                                       -
2012 Final Budget                                           5,833,172        2.8%




_________________________________
City of Mercer Island 2011-2012 Budget                                              G-137
                                     Department Function:
                                      Administration

Description
Oversee Police Services and Operations divisions and implement policies, procedures, and practices to
accomplish the department’s mission.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Prepare and monitor biennial budget.
•   Develop departmental policies and procedures.
•   Negotiate and administer two labor contracts.
•   Manage dispatch services contract with NORCOM.
•   Oversee department training and records maintenance.
•   Maintain department accreditation.
•   Provide staff resources to Public Safety Committee.
•   Provide public information to the news media.
•   Maintain personnel files.


2011-2012 Key Initiatives
•   Continue to monitor dispatch service with NORCOM.
•   Maintain Policy and Procedures manual with bi-annual updates.
•   Continue development of strategic plan.
•   Negotiate three year contracts for both bargaining units.
•   Develop comprehensive Public Disclosure policy and procedures.


Expenditure Summary by Category
           Expenditure                2009         2010         2011         2012        Percent Change
           Description               Actual      Estimate      Budget       Budget           10-11    11-12
Salaries & Wages                      535,398      552,747      542,715      549,763          -1.8%     1.3%
Benefits                              129,972      141,220      136,526      146,221          -3.3%     7.1%
Supplies                                 7,240       12,899        3,500        3,500        -72.9%     0.0%
Contractual Services                     1,927        1,700        1,700        1,700          0.0%     0.0%
Communications                          12,402       12,700       12,700       12,700          0.0%     0.0%
Fleet/Computer/Equipment Rental         95,142       95,142     120,143      120,143          26.3%     0.0%
Other Services & Charges                 6,692        9,900        9,900        9,900          0.0%     0.0%
Capital                                 26,199       29,000       29,000       29,000          0.0%     0.0%
Total                                 814,971      855,308      856,184      872,927           0.1%     2.0%

                                                                  _________________________________
G-138                                                                City of Mercer Island 2011-2012 Budget
                                     Department Function:
                                           Patrol

Description
Protect life and property, enforce laws and ordinances, investigate crimes, and maintain civil order.


Priority of Government
#1 The community will be safe.


Services & Products
•   Conduct initial investigation of crimes, collisions, and other citizen complaints.
•   Protect life and property through crisis intervention.
•   Promote crime prevention.
•   Apprehend/arrest criminals.
•   Enforce traffic laws.
•   Transport prisoners.
•   Enforce leash laws.
•   Establish community connections through outreach efforts.
•   Provide additional security for private citizens and organizations.
•   Provide field training for new recruits.


2011-2012 Key Initiatives
•   Reduce the impact of crime through proactive enforcement and community outreach.
•   Continue to thoroughly process crime scenes.
•   Further utilize Records Management System data sources for crime analysis tools.
•   Continue to work with the Washington Traffic Safety Commission on traffic safety initiatives.
•   Continue implementation of Sector electronic ticketing and accident reporting system.
•   Continue to find ways to “harden” the community against terrorism.
•   Focus on traffic/pedestrian safety – school zones and CBD.
•   Utilize new Traffic Collision Data Software to further target traffic enforcement efforts.
•   Work with City IGS Staff to further implement and refine online crime mapping.
•   Continue to analyze growth patterns and calls for service in the Central Business District.
•   Continue to work closely with other City staff and community groups on special event planning.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                  G-139
                                  Department Function:
                                        Patrol

Expenditure Summary by Category
           Expenditure              2009        2010        2011        2012       Percent Change
           Description             Actual     Estimate    Budget      Budget        10-11     11-12
Salaries & Wages                  1,815,635   2,004,472   1,963,896   2,006,818       -2.0%     2.2%
Benefits                            571,118     661,278     626,514     663,285       -5.3%     5.9%
Supplies                             14,591       8,350       8,350       8,350        0.0%     0.0%
Contractual Services                  5,898       8,500       8,500       8,500        0.0%     0.0%
Fleet/Computer/Equipment Rental     150,557     150,557     142,837     142,837       -5.1%     0.0%
Other Services & Charges               733         800         800          800        0.0%     0.0%
Capital                               2,947         -           -           -          N/A      N/A
Total                             2,561,480   2,833,957   2,750,897   2,830,590       -2.9%     2.9%




                                                             _________________________________
G-140                                                           City of Mercer Island 2011-2012 Budget
                                    Department Function:
                                     Marine Patrol

Description
Oversee police and EMS services on Lake Washington. Includes code/law enforcement, rescue, public
education, and public assistance.


Priority of Government
#1 The community will be safe.


Services & Products
•   Investigate collisions/crimes relating to marine events.
•   Provide uniformed presence on the lake.
•   Develop/implement prevention programs on the water.
•   Train all new/current boat operators.
•   Provide search and rescue operations.
•   Provide drowning prevention classes.
•   Provide dignitary protection.
•   Participate in taskforces.
•   Offer boating safety classes.
•   Provide special event coverage.


2011-2012 Key Initiatives
•   Reduce boating collisions through proactive boating law enforcement and boater education.
•   Further develop Marine Patrol city wide disaster response plans with Emergency Management.
•   Continue to work with affiliated agencies to ensure a safe boating environment.
•   Continue to work closely with our marine contract cities to ensure a high level of service to these
    communities.
•   Continue to participate in regional marine law enforcement programs and initiatives.
•   Continue to provide water safety and boating education programs to the community.


Expenditure Summary by Category
           Expenditure               2009         2010          2011       2012       Percent Change
           Description              Actual      Estimate       Budget     Budget        10-11    11-12
Salaries & Wages                     193,136      207,478       187,900    192,430       -9.4%     2.4%
Benefits                              54,965       60,539        57,464     61,129       -5.1%     6.4%
Supplies                              13,252       13,100        11,700     11,700      -10.7%     0.0%
Contractual Services                  63,093        8,800         9,150      9,520        4.0%     4.0%
Fleet/Computer/Equipment Rental      143,730      144,730       135,527    135,527       -6.4%     0.0%
Other Services & Charges              23,766       31,750        22,750     23,750      -28.3%     4.4%
Total                                491,943      466,397      424,491     434,056       -9.0%     2.3%
_________________________________
City of Mercer Island 2011-2012 Budget                                                             G-141
                            Department Function:
                    Investigations & Special Programs

Description
Investigate criminal acts, complete case filings, forward charges against offenders, and work with other
agencies to solve crimes. Provide special programs to Mercer Island schools relating to drug and alcohol
abuse and bullying prevention.


Priority of Government
#1 The community will be safe.
#5 The community will support a broad range of recreational, cultural, health, and educational
   opportunities.


Services & Products
•   Investigate of misdemeanor and felony crimes.
•   Interview and interrogate victims, witnesses, and suspects.
•   Process crime scenes for evidence.
•   Engage in stake out/surveillance.
•   Prepare and execute search warrants.
•   Prepare case filings.
•   Provide court testimony.
•   Provide sex offender monitoring and tracking.
•   Monitor pawn shop activities.
•   Participate in task forces.
•   Provide uniformed presence within Mercer Island schools.
•   Serve as liaison between the Police Department, the Mercer Island School District, the Youth and
    Family Services Department, and the Juvenile Justice System.
•   Develop/implement prevention programs in the schools.
•   Provide classroom presentations relating to dating violence prevention in the high school.
•   Provide specialized crime prevention classes for the business community.
•   Provide personal safety classes for community residents.
•   Participate in fund raising drives.
•   Participate in community events.


2011-2012 Key Initiatives
•   Continue to vigorously pursue criminals who victimize Island residents.
•   Continue to participate in Eastside Narcotics Taskforce (ENTF).
•   Continue to participate in Coalition of Small Police Agencies (CSPA) Major Crimes Taskforce.
•   Develop training curriculum for Patrol Officers relating to new case law(s).
•   Continue to work closely with the Mercer Island School District in addressing drug/alcohol issues.
•   Focus on prevention of crime against children.
•   Focus on juvenile delinquency issues.
•   Work closely with school counselors in addressing adolescent issues.

                                                               _________________________________
G-142                                                             City of Mercer Island 2011-2012 Budget
                               Department Function:
                       Investigations & Special Programs

Expenditure Summary by Category
           Expenditure             2009         2010       2011       2012      Percent Change
           Description            Actual       Estimate   Budget     Budget     10-11     11-12
Salaries & Wages                   451,560      478,034    459,169    472,771     -3.9%     3.0%
Benefits                           130,429      150,654    145,648    155,116     -3.3%     6.5%
Supplies                             5,412        4,200      4,200      4,200     0.0%      0.0%
Contractual Services                 1,509        2,000      2,000      2,000     0.0%      0.0%
Communications                           601        -          -          -        N/A      N/A
Fleet/Computer/Equipment Rental     26,392       26,392     22,207     22,207    -15.9%     0.0%
Other Services & Charges             5,669        8,700      8,700      8,700     0.0%      0.0%
Intergovernmental Services               -          -          -          -        N/A      N/A
Total                             621,572       669,980   641,924    664,994      -4.2%     3.6%




_________________________________
City of Mercer Island 2011-2012 Budget                                                      G-143
                               Department Function:
                             Emergency Management

Description
Develop and maintain all documentation and programs necessary to meet the City’s responsibilities for
disaster preparedness.


Priority of Government
#1 The community will be safe.


Services & Products
•   Continuously update Comprehensive Emergency Management Plan (CEMP) and Hazard
    Identification Vulnerability Analysis (HIVA) documents and other associated response plans.
•   Manage the City’s Emergency Operations Center (EOC) and supporting resources.
•   Participate in King County Zone 1 coordination center activities.
•   Manage new Emergency Response Teams.
•   Provide disaster preparedness classes and information to City staff, residents, volunteers, and
    community groups.
•   Stay current on disaster related issues and steps that can be taken to prepare for a potential
    disaster.


2011-2012 Key Initiatives
•   Assist the business community in developing business continuity plans.
•   Strengthen ability to respond to citywide emergencies with new Emergency Response Teams.
•   Improve communications network for EOC operations.
•   Identify and implement new incident tracking and resource tracking system.
•   Continue to identify available resources local and national levels.


Expenditure Summary by Category
           Expenditure                2009        2010         2011         2012       Percent Change
           Description               Actual     Estimate      Budget       Budget        10-11    11-12
Salaries & Wages                       89,505       89,743      92,357       94,582        2.9%       2.4%
Benefits                               25,827       30,305      29,679       31,500       -2.1%       6.1%
Supplies                               24,371       26,000      26,000       26,000        0.0%       0.0%
Contractual Services                      327        5,000        2,000       2,000      -60.0%       0.0%
Fleet/Computer/Equipment Rental         3,334        3,334        5,943       5,943       78.3%       0.0%
Other Services & Charges                  250        4,000        4,000       4,000        0.0%       0.0%
Intergovernmental Services              3,012        2,500        2,625       2,755        5.0%       5.0%
Total                                146,625      160,882      162,604      166,780        1.1%       2.6%



                                                                 _________________________________
G-144                                                               City of Mercer Island 2011-2012 Budget
                                Department Function:
                           Records, Property & Dispatch

Description
Provide initial police contact to the public; maintain records; manage confiscated property and evidence;
and contract for police dispatch services with City of Kirkland and NORCOM (beginning 7/01/09).


Priority of Government
#1 The community will be safe.


Services & Products
•   Address public needs at service window.
•   Prepare correspondence to other criminal justice agencies.
•   Take fingerprints for permits/licenses.
•   Respond to patrol officer, detective, and public record requests.
•   Record, store, maintain, and dispose of property and evidence.
•   Prepare concealed weapons permits.
•   Draft crime prevention materials.
•   Compile statistics.
•   Manage alarm system database.
•   Coordinate AFIS program.


2011-2012 Key Initiatives
•   Continue education relating to public disclosure requests.
•   Plan for NIBRS/WIBRS reporting in place of UCR reporting.
•   Continue education relating to RMS statistic retrieval.
•   Continue involvement with King County AFIS staff and with regional RAIN and LYNX systems.


Expenditure Summary by Category
           Expenditure               2009         2010         2011        2012        Percent Change
           Description              Actual      Estimate      Budget      Budget        10-11     11-12
Salaries & Wages                     153,120      147,330      121,220     123,289       -17.7%     1.7%
Benefits                               55,655      53,598       45,863       50,975      -14.4%    11.1%
Supplies                               18,217        7,500       7,500        7,500       0.0%      0.0%
Contractual Services                    2,229      22,500       17,500       17,500      -22.2%     0.0%
Communications                         10,738      14,700       14,700       14,700       0.0%      0.0%
Fleet/Computer/Equipment Rental        26,150      27,323       20,477       20,477      -25.1%     0.0%
Other Services & Charges                2,305        4,150       4,150        4,150       0.0%      0.0%
Intergovernmental Services           380,176      507,342      428,179     441,439      -15.6%      3.1%
Total                                648,589      784,443      659,589     680,030      -15.9%      3.1%

_________________________________
City of Mercer Island 2011-2012 Budget                                                              G-145
                                   Department Function:
                                    Special Teams

Description
Include Dive Team rescues and recoveries, Special Operations Team high-risk details, and Bike Team
traffic control and public relations.


Priority of Government
#1 The community will be safe.


Services & Products
Dive Team
• Perform drowning rescue and recoveries.
• Process underwater crime scenes.
• Participate in regional anti-terrorism detection.
• Protect dignitaries.

Special Operations Team
• Execute high-risk search warrants.
• Contain crime scenes.
• Provide training to Patrol Officers (Active Shooter responses).
• Protect Dignitaries.
• Asses risk of high value targets.
• Support ENTF search warrant executions.

Bike Patrol
• Enforce traffic laws with an emphasis on the Town Center.
• Provide bicycle safety classes.
• Patrol Parks.
• Engage in community oriented policing.
• Provide uniformed presence at community special events.


2011-2012 Key Initiatives
•   Continue proactive educational campaigns relating to drowning prevention and water safety.
•   Secure the necessary equipment for all special team functions.
•   Continue to engage in mutual training dives with other area dive teams.
•   Certify all divers at the NOAA Working Diver level.
•   Continue joint training with the Bellevue Police SWAT Team.
•   Provide enhanced tactical training to Patrol officers.
•   Review, revise and continue school/public facility safety pre-planning and mapping.
•   Continue to provide bike safety programs to the school district and community.
•   Focus bike patrols in CBD/Park areas and continue to support city special events.


                                                              _________________________________
G-146                                                            City of Mercer Island 2011-2012 Budget
                                  Department Function:
                                   Special Teams

Expenditure Summary by Category
           Expenditure             2009       2010       2011       2012      Percent Change
           Description            Actual     Estimate   Budget     Budget     10-11    11-12
Salaries & Wages                         -        -          -          -        N/A     N/A
Benefits                                 -      2,800      2,800      2,800     0.0%     0.0%
Supplies                            16,516     19,000     19,000     19,000     0.0%     0.0%
Contractual Services                 9,251      8,800      8,800      8,800     0.0%     0.0%
Communications                           -        -          -          -        N/A     N/A
Fleet/Computer/Equipment Rental          -        -          -          -        N/A     N/A
Other Services & Charges             3,838      5,700      5,700      5,700     0.0%     0.0%
Intergovernmental Services               -        -          -          -        N/A     N/A
Capital                              6,100      4,400      4,400      4,400     0.0%     0.0%
Total                              35,705      40,700    40,700     40,700      0.0%     0.0%




_________________________________
City of Mercer Island 2011-2012 Budget                                                   G-147
                                     Department Function:
                                         Training

Description
Provide full compliment of training for Police personnel.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Firearms proficiency/qualification
•   First aid/CPR
•   Blood borne pathogens
•   Less than lethal force
•   Defensive tactics
•   NIMS
•   BAC/DUI
•   Interrogation skills
•   Supervision skills
•   Anti-harassment
•   Personnel/labor law
•   Officer development
•   In-service roll call training


2011-2012 Key Initiatives
•   Ensure all officers meet mandatory training requirements.
•   Continue to provide a highly trained compliment of officers for this community.
•   Ensure compliance with career level certification.
•   Recruit top available police candidates.


Expenditure Summary by Category
           Expenditure                   2009      2010         2011         2012        Percent Change
           Description               Actual       Estimate     Budget       Budget           10-11    11-12
Salaries & Wages                         28,121      36,000       33,512       33,720         -6.9%     0.6%
Benefits                                  3,636      13,680       14,000       14,000          2.3%     0.0%
Supplies                                 17,618      20,500       20,500       20,500          0.0%     0.0%
Contractual Services                      6,018       5,500        5,500        5,500          0.0%     0.0%
Other Services & Charges                 13,368      17,000       11,680       11,680        -31.3%     0.0%
Total                                    68,760     92,680       85,192       85,400          -8.1%     0.2%



                                                                  _________________________________
G-148                                                                City of Mercer Island 2011-2012 Budget
                                   Department Function:
                                          Jails

Description
Manage contracted jail services with City of Renton, City of Issaquah, King County and Yakima County.


Priority of Government
#1 The community will be safe.


Services & Products
•   Oversee inmate location.
•   Oversee/coordinate prisoner transports.
•   Oversee jail billing.


2011-2012 Key Initiatives
•   Do not renew Yakima Jail contract, which has a daily commitment of 4 beds.
•   Reduce daily bed commitment at Issaquah Jail from 2 beds to 1 bed.
•   Continue to monitor jail contracts, seeking efficiencies whenever possible.
•   Participate in regional jail administration and operations committees.


Expenditure Summary by Category
           Expenditure              2009         2010        2011        2012       Percent Change
           Description             Actual      Estimate     Budget      Budget       10-11     11-12
Salaries & Wages                         -           -           -            -         N/A      N/A
Benefits                                 -           -           -            -         N/A      N/A
Supplies                                             -           -            -         N/A      N/A
Contractual Services                     -           -           -            -         N/A      N/A
Communications                           -           -           -            -         N/A      N/A
Fleet/Computer/Equipment Rental          -           -           -            -         N/A      N/A
Other Services & Charges                 -           -           -            -         N/A      N/A
Intergovernmental Services          155,849      174,000      54,985       57,695     -68.4%     4.9%
Capital                                  -           -           -            -         N/A      N/A
Total                               155,849     174,000       54,985      57,695      -68.4%     4.9%




_________________________________
City of Mercer Island 2011-2012 Budget                                                           G-149
        _________________________________
G-150      City of Mercer Island 2011-2012 Budget
YOUTH & FAMILY SERVICES
DEPARTMENT
        _________________________________
G-152      City of Mercer Island 2011-2012 Budget
                                  Department:
                            Youth & Family Services

Description
The Youth & Family Services (YFS) Department provides a wide range of human and community
services for Mercer Island residents. These services include programs that offer counseling and
intervention; youth development, prevention of risk behaviors and family assistance; and community
education, advocacy, and planning. YFS is organized around the following functions: 1) Administrative
Services, 2) Professional Services, and 3) Thrift Shop.




_________________________________
City of Mercer Island 2011-2012 Budget                                                           G-153
                                 Department:
                           Youth & Family Services

Staffing Summary
        Type of Employee       2009      2010        2011        2012       Percent Change
   & Department Function      Actual    Estimate    Budget     Budget        10-11     11-12
Regular (Ongoing):
  Administration                 3.50        3.50       3.00        3.00      -14.3%     0.0%
  Professional Services         11.00      11.00       10.50       10.50       -4.5%     0.0%
  Thrift Shop                    1.00        1.00       1.00        1.00        0.0%     0.0%
Total Regular                   15.50      15.50      14.50        14.50       -6.5%     0.0%
Contracted (Temporary):
  Administration                  -           -          -           -          N/A      N/A
  Professional Services          1.00        1.00       1.00        1.00        0.0%     0.0%
  Thrift Shop                    2.00        2.00       2.00        2.00        0.0%     0.0%
Total Contracted                 3.00       3.00       3.00         3.00       0.0%      0.0%




                                                      _________________________________
G-154                                                    City of Mercer Island 2011-2012 Budget
                                           Department:
                                     Youth & Family Services


                                                     2011-2012 Resources



                                                                       Begin Fund Balance
                                            General Fund Support                                     Federal, State & Local
                                                                               7%
                                                    17%                                                     Grants
                                                                                                               6%
               MIYFS Foundation
                   Support                                                                                       MI School District
                      9%                                                                                           (Shared Cost)
                                                                                                                        3%


              Donations
                2%



                    YFS Fees
                      5%




                                                                                                     Thrift Shop Sales
                                                                                                            51%




                                                          2011-2012 Uses


                                                          Utilities   Other Services
                                  Equipment Rental
                                                            1%          & Charges
                                        5%
                                                                           3%
                        Contract Services                                              Interfund Transfers
                              4%                                                               1%


                Supplies
                  3%




             Benefits                                                                                                    Salaries & Wages
              21%                                                                                                               62%




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                                      G-155
                                        Department:
                                  Youth & Family Services

Resources & Uses Summary
              Description             Actual     Estimate    Budget      Budget        10-11     11-12
Resources:
  Beginning Fund Balance               136,009     254,443     103,414     150,316      -59.4%    45.4%
  Sales Tax (Criminal Justice)          10,000      10,000      10,000      10,000        0.0%     0.0%
  Federal, State & Local Grants        138,990     114,438     115,403     114,194        0.8%    -1.0%
  MI School District (Shared Cost)      24,000      60,000      60,000      60,000        0.0%     0.0%
  Thrift Shop Sales                    727,136     815,000     949,000     995,000      16.4%      4.8%
  YFS Fees                              86,309      87,650      90,000      90,000        2.7%     0.0%
  Interest Earnings                      3,291       3,000       3,500       3,500      16.7%      0.0%
  Donations                             39,922      42,183      32,500      32,500      -23.0%     0.0%
  Youth Svcs Endowment Support           3,291       3,000       3,500       3,500      16.7%      0.0%
  MIYFS Foundation Support             193,900     150,000     183,500     157,500      22.3%    -14.2%
  General Fund Support                 519,338     521,507     320,000     320,000      -38.6%     0.0%
Total Resources                      1,882,185   2,061,221   1,870,817   1,936,510       -9.2%     3.5%
Uses:
  Salaries & Wages                   1,157,284   1,282,943   1,171,481   1,186,214       -8.7%     1.3%
  Benefits                             365,787     416,255     377,744     419,899       -9.3%    11.2%
  Supplies                              48,742      65,722      57,950      57,950      -11.8%     0.0%
  Contractual Services                  76,447      68,900      76,300      76,800      10.7%      0.7%
  Communications                         3,105       4,650       4,025       4,025      -13.4%     0.0%
  Fleet/Computer/Equip Rental           84,939      86,198      89,217      89,217        3.5%     0.0%
  Utilities                             11,455      10,900      11,500      12,005        5.5%     4.4%
  Other Services & Charges              60,113      54,653      55,100      54,900        0.8%    -0.4%
  Intergovernmental Services            10,000      10,000      10,000      10,000        0.0%     0.0%
  Capital                                  -           -           -           -          N/A      N/A
  Interfund Transfers                   64,312      61,000      17,500      25,500      -71.3%    45.7%
Total Uses                           1,882,185   2,061,221   1,870,817   1,936,510       -9.2%     3.5%



Expenditure Summary by Function
              Department               2009        2010        2011        2012       Percent Change
               Function               Actual     Estimate    Budget      Budget        10-11     11-12
Administration                         449,497     497,164     453,771     465,436       -8.7%     2.6%
Professional Services                1,090,370   1,188,831   1,088,297   1,125,962       -8.5%     3.5%
Thrift Shop                            342,318     375,226     328,749     345,112      -12.4%     5.0%
Total                                1,882,185   2,061,221   1,870,817   1,936,510       -9.2%     3.5%

                                                                _________________________________
G-156                                                              City of Mercer Island 2011-2012 Budget
                                       Department:
                                 Youth & Family Services

2011-2012 Budget Analysis
Youth & Family Services, Criminal Justice & Youth Services Endowment Funds
                                                                                       % Change
                        2011 Analysis                                Budget
                                                                                       2010-2011

2010 Approved Budget                                                       2,061,221
Plus 2011 General Inflationary Increases                                           -        0.0%
Plus (Less) 2011 Other Significant Changes:
   Salary & benefit savings (relative to 2010 budget)           (69,469)
   Thrift Shop annual capital reinvestment needs                (44,000)
   Other operating costs                                         (9,935)
   Travel, tuition & registrations                               (5,653)
   Dues & subscriptions                                          (3,500)
   Thrift Shop contract services (merchant fees, armored car)    8,000
   Emergency Assistance                                          8,500
     Subtotal                                                              (116,057)       -5.6%
2011 Base Budget                                                           1,945,164       -5.6%
Plus 2011 Service Enhancement Requests:
   None                                                               -
     Subtotal                                                                      -        0.0%
Less 2011 Service Reduction Proposals:
   Development Coordinator (0.5 FTE reduction)                  (41,901)
   VOICE Coordinator (0.5 FTE reduction)                        (32,446)
     Subtotal                                                               (74,347)
2011 Final Budget                                                          1,870,817       -9.2%




_________________________________
City of Mercer Island 2011-2012 Budget                                                             G-157
                                Department:
                          Youth & Family Services

2011-2012 Budget Analysis
Youth & Family Services, Criminal Justice & Youth Services Endowment Funds (cont’d)
                                                                            % Change
                   2012 Analysis                        Budget
                                                                            2011-2012

2011 Final Budget                                            1,870,817
Plus 2012 General Inflationary Increases                         65,693           3.5%
Plus (Less) 2012 Other Significant Changes:
   None                                                  -
    Subtotal                                                          -           0.0%
2012 Base Budget                                             1,936,510            3.5%
Plus 2012 Service Enhancement Requests:
   None                                                  -
    Subtotal                                                          -           0.0%
Less 2012 Service Reduction Proposals:
   None                                                  -
    Subtotal                                                          -
2012 Final Budget                                            1,936,510            3.5%




                                                    _________________________________
G-158                                                  City of Mercer Island 2011-2012 Budget
                                     Department Function:
                                      Administration

Description
Provide managerial direction, oversight and administrative support to YFS Department programs and
staff. Execute planning efforts to ensure service configuration reflects community needs and explore,
vet and execute options to increase revenues for community and human services.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Receive visitors and clients to Luther Burbank building.
•   Hire, train, and supervise student interns.
•   Monitor and maintain office functions for effectiveness and efficiency.
•   Oversee function of the Mercer Island Thrift shop.
•   Provide staff resources to Advisory Board.
•   Manage Department Professional Services and Programs
•   Evaluate service effectiveness and facilitate change processes.
•   Develop programs and initiatives.
•   Oversee volunteer and community service staff.
•   Recruit, orient, and staff YFS Foundation Board
•   Oversee the execution and development of fundraising endeavors
•   Generate revenue options


2011-2012 Key Initiatives
•   Facilitate community dialogues on social and human needs.
•   Secure funding to meet current and emergent community needs.
•   Mobilize and coalesce efforts to address significant social and community issues.
•   Execute collaborative community fundraising.




_________________________________
City of Mercer Island 2011-2012 Budget                                                            G-159
                                  Department Function:
                                   Administration

Expenditure Summary by Category
           Expenditure             2009       2010       2011        2012       Percent Change
           Description            Actual     Estimate   Budget     Budget        10-11     11-12
Salaries & Wages                   250,245    281,508    253,331     256,752      -10.0%     1.4%
Benefits                            77,055     86,608     71,773      80,217      -17.1%    11.8%
Supplies                            14,605     19,000     16,750      16,750      -11.8%     0.0%
Contractual Services                 6,015      4,700      9,300       9,300      97.9%      0.0%
Communications                       1,039      2,450      1,800       1,800      -26.5%     0.0%
Fleet/Computer/Equipment Rental     84,939     86,198     89,217      89,217        3.5%     0.0%
Other Services & Charges            12,307     13,700      8,100       7,900      -40.9%    -2.5%
Interfund Transfers                  3,291      3,000      3,500       3,500      16.7%      0.0%
Total                             449,497     497,164   453,771     465,436        -8.7%     2.6%




                                                          _________________________________
G-160                                                        City of Mercer Island 2011-2012 Budget
                                  Department Function:
                                 Professional Services

Description
Provide a wide array of community-based and school based services to children, youth, couples,
individuals, families, and seniors on Mercer Island at the Luther Burbank Administration Building and
each of the island schools. Services include volunteer and leadership development opportunities for
Mercer Island youth; counseling and intervention services; financial, food, and other basic assistance to
low-income Mercer Island individuals and families in need; senior outreach; information, referral and
consultation services; community mobilization; employment assistance; and alcohol an drug prevention
and intervention


Priority of Government
#5 The community will support a broad range of recreational, cultural, health, and educational
   opportunities.


Services & Products
•   Manage Community Service program for middle and high school aged youth:
    o Summer Volunteer Program (middle school aged youth)
    o Volunteer Outreach In Communities Everywhere (high school aged youth)
•   Oversee year-round calendar of youth volunteer and leadership opportunities.
•   Maintain job boards for local employers (on-line and physical postings).
•   Provide school-based and department-based counseling and consultation services.
•   Provide human services information and referrals.
•   Consult with parents and teachers.
•   Organize/oversee school based counseling groups (e.g. for new students, for children who have lost
    a loved one to cancer, for at-risk youth, and for social skills).
•   Assist children and youth with conflict management.
•   Oversee peer mediation and peer led programs. (Bridges and Natural Helpers for adolescents)
•   Oversee anti-bullying curriculum.
•   Provide senior outreach service, home visits, and conduct classes on aging and elder care issues.
•   Provide trainings and consultations for city departments dealing effectively with difficult situations.
•   Maintain provider network of Island therapists and counselors.
•   Provide vocational/employment-related presentations and workshops.
•   Mobilize community to reduce underage drinking and decrease youth risk behaviors.
•   Oversee holiday sponsorships for low-income families.
•   Provide limited financial assistance for basic needs including a food pantry.


2011-2012 Key Initiatives
•   Execute Positive Community Norms Campaign to reduce underage drinking and substance abuse.
•   Support and enhance child functioning to help children and youth take advantage of their school
    experience.
•   Support seniors in ways that enable them to maintain their independence and self determination.
•   Support community health through linkages to services.

_________________________________
City of Mercer Island 2011-2012 Budget                                                                G-161
                              Department Function:
                             Professional Services

Expenditure Summary by Category
           Expenditure          2009        2010        2011        2012       Percent Change
           Description         Actual     Estimate    Budget      Budget        10-11     11-12
Salaries & Wages                760,236     831,350     760,236     769,954       -8.6%     1.3%
Benefits                        233,178     268,356     244,561     272,508       -8.9%    11.4%
Supplies                         14,852      25,022      19,000      19,000      -24.1%     0.0%
Contractual Services             27,899      16,200      15,500      15,500       -4.3%     0.0%
Communications                     436         500         500          500        0.0%     0.0%
Other Services & Charges         43,769      37,403      38,500      38,500        2.9%     0.0%
Intergovernmental Services       10,000      10,000      10,000      10,000        0.0%     0.0%
Total                         1,090,370   1,188,831   1,088,297   1,125,962       -8.5%     3.5%




                                                         _________________________________
G-162                                                       City of Mercer Island 2011-2012 Budget
                                   Department Function:
                                      Thrift Shop

Description
Provide a resource for re-use and recycling of community members' donations; provide opportunities
for volunteers of all ages; and generate funding for the department’s array of human services.


Priority of Government
#5 The community will support a broad range of recreational, cultural, health, and educational
   opportunities.


Services & Products
•   Manage retail Thrift Shop operation, which is open to public four days per week.
•   Conduct eBay auctions of high value/specialty donated items.
•   Manage vehicle donation program.
•   Maintain household goods and clothing recycle/donation center for MI residents.
•   Provide volunteer opportunities for adults and youth.
•   Provide internships and community services placements for youth and young adults.


2011-2012 Key Initiatives
•   Maximize proceeds from donations through multiple strategies.
•   Explore and Execute business and revenue generating endeavors.
•   Maintain and expand volunteer recruitment efforts.
•   Provide a revenue base for the Youth and Family Services Department.


Expenditure Summary by Category
            Expenditure              2009        2010         2011         2012      Percent Change
            Description             Actual     Estimate     Budget       Budget       10-11      11-12
Salaries & Wages                     146,803     170,085      157,914      159,508       -7.2%     1.0%
Benefits                              55,554      61,291       61,410       67,174       0.2%      9.4%
Supplies                              19,284      21,700       22,200       22,200       2.3%      0.0%
Contractual Services                  42,534      48,000       51,500       52,000       7.3%      1.0%
Communications                         1,631       1,700        1,725        1,725       1.5%      0.0%
Utilities                             11,455      10,900       11,500       12,005       5.5%      4.4%
Other Services & Charges               4,037       3,550        8,500        8,500    139.4%       0.0%
Interfund Transfers                   61,021      58,000       14,000       22,000      -75.9%    57.1%
Total                               342,318      375,226     328,749      345,112       -12.4%     5.0%




_________________________________
City of Mercer Island 2011-2012 Budget                                                             G-163
        _________________________________
G-164      City of Mercer Island 2011-2012 Budget
NON-DEPARTMENTAL
        _________________________________
G-166      City of Mercer Island 2011-2012 Budget
                                      Department:
                                   Non-Departmental

Description
Non-Departmental consists of those functions that cannot be attributed to a specific department,
namely: 1) information technology, 2) geographic information systems, 3) mandatory intergovernmental
services, 4) voluntary intergovernmental services, and 5) other general government services.




Staffing Summary
      Type of Employee              2009         2010        2011       2012       Percent Change
   & Department Function           Actual       Estimate    Budget     Budget       10-11    11-12
Regular (Ongoing):
  Information Technology                 3.00        3.00      3.00        3.00       0.0%     0.0%
  Geographic Information Systems         2.00        2.00      2.00        2.00       0.0%     0.0%
  Mandatory Intergovt'l Services          -           -         -           -         N/A      N/A
  Voluntary Intergovt'l Services          -           -         -           -         N/A      N/A
  Other General Gov't Services            -           -         -           -         N/A      N/A
Total Regular                          5.00         5.00       5.00        5.00       0.0%     0.0%
Contracted (Temporary):
  Information Technology                  -           -         -           -         N/A      N/A
  Geographic Information Systems          -           -         -           -         N/A      N/A
  Mandatory Intergovt'l Services          -           -         -           -         N/A      N/A
  Voluntary Intergovt'l Services          -           -         -           -         N/A      N/A
  Other General Gov't Services            -           -         -           -         N/A      N/A
Total Contracted                         -           -          -           -         N/A      N/A




_________________________________
City of Mercer Island 2011-2012 Budget                                                         G-167
                                      Department:
                                   Non-Departmental


                                       2011-2012 Resources


                                                  Beginning Fund   B&O Tax    Fire Insurance
                                                   Balance 10%       3%       Premium Tax
                                                                                    1%
                                                                                         Water Rates
                                                                                             1%
                                                                                             Sewer Rates
                                                                                                1%



                                                                                             Internal Charges
                                                                                                   12%




        General Purpose Revenue
                  71%




                                            2011-2012 Uses


                                                                     Salaries & Wages
             Interfund Transfers                                            11%
                    27%



                                                                                             Benefits
                                                                                              21%




         Intergovernmental
              Services
                8%                                                                             Supplies
                                                                                                 2%
                                                                                          Contract Services
                        Other                                                                   5%
                         1%                                                             Communications
                                                                                            2%
                                                                    Equipment Rental
                                    Insurance                             2%
                                       22%




                                                                   _________________________________
G-168                                                                 City of Mercer Island 2011-2012 Budget
                                   Department:
                                Non-Departmental

Resources & Uses Summary
                                   2009        2010        2011        2012      Percent Change
             Description          Actual     Estimate    Budget      Budget      10-11     11-12
Resources:
  Beginning Fund Balance           329,405     621,849     233,885     515,161    -62.4%   120.3%
  Business & Occupation Tax       100,000      100,000     125,000     125,000    25.0%      0.0%
  Fire Insurance Premium Tax        23,871      25,418      25,000      25,000     -1.6%     0.0%
  Street Fund                        1,022         -           -           -        N/A      N/A
  Water Rates                       28,380      26,894      41,546      43,168    54.5%      3.9%
  Sewer Rates                       28,283      26,894      41,366      43,168    53.8%      4.4%
  Stormwater Rates                  35,483      26,901      18,465      19,185    -31.4%     3.9%
  Internal Charges                397,077      445,575     422,495     434,260     -5.2%     2.8%
  Interest Earnings                 11,718       4,075       4,200       5,000     3.1%     19.0%
  General Purpose Revenue        2,290,593   2,334,355   2,399,778   2,238,624     2.8%     -6.7%
Total Resources                 3,245,832    3,611,961   3,311,735   3,448,566     -8.3%     4.1%
Uses:
  Salaries & Wages                332,642      404,612     384,994     404,863     -4.8%     5.2%
  Benefits                        627,552      705,312     727,476     801,126     3.1%     10.1%
  Supplies                          71,956      81,438      55,500      55,500    -31.8%     0.0%
  Contractual Services            108,698      221,700     177,380     154,600    -20.0%   -12.8%
  Communications                    64,428      79,660      76,000      76,000     -4.6%     0.0%
  Fleet/Computer/Equip Rental       78,219      62,962      85,291      86,241    35.5%      1.1%
  Insurance                       610,409      664,743     787,274     844,319    18.4%      7.2%
  Other Services & Charges          16,914      32,400      18,000      20,000    -44.4%    11.1%
  Intergovernmental Services      231,271      316,854     281,483     284,980    -11.2%     1.2%
  Capital                                -       6,000         -           -     -100.0%     N/A
  Interfund Transfers            1,103,743   1,036,280     718,337     720,937    -30.7%     0.4%
Total Uses                      3,245,832    3,611,961   3,311,735   3,448,566     -8.3%    4.1%




_________________________________
City of Mercer Island 2011-2012 Budget                                                       G-169
                                    Department:
                                 Non-Departmental

Expenditure Summary by Function
          Department               2009        2010        2011        2012       Percent Change
            Function              Actual     Estimate    Budget      Budget        10-11     11-12
Information Technology             397,077     445,575     422,495     434,260       -5.2%     2.8%
Geographic Information Systems     186,253     216,837     219,539     226,926        1.2%     3.4%
Mandatory Intergovt'l Services      27,568      28,150      29,566      30,453        5.0%     3.0%
Voluntary Intergovt'l Services     189,616     270,704     230,117     232,027      -15.0%     0.8%
Other General Gov't Services     2,445,317   2,650,695   2,410,018   2,524,900       -9.1%     4.8%
Total                            3,245,832   3,611,961   3,311,735   3,448,566       -8.3%     4.1%




                                                            _________________________________
G-170                                                          City of Mercer Island 2011-2012 Budget
                                            Department:
                                         Non-Departmental

2011-2012 Budget Analysis
Information Technology (IT) & Geographic Information Systems (GIS)
General, Street, Utility & Computer Replacement Funds
                                                                               % Change
                        2011 Analysis                        Budget
                                                                               2010-2011

2010 Approved Budget                                               662,412
Plus 2011 General Inflationary Increases                                   -        0.0%
Plus (Less) 2011 Other Significant Changes:
   Computer & network supplies                          (11,400)
   Salary & benefit savings (relative to 2010 budget)    (8,779)
   Travel, tuition & registrations                       (6,000)
   Other operating costs                                  (999)
   King County I-NET fees                                6,800
     Subtotal                                                      (20,378)        -3.1%
2011 Base Budget                                                   642,034         -3.1%
Plus 2011 Service Enhancement Requests:
   None                                                       -
     Subtotal                                                              -        0.0%
Less 2011 Service Reduction Proposals:
   None                                                       -
     Subtotal                                                              -
2011 Final Budget                                                  642,034         -3.1%

                                                                               % Change
                        2012 Analysis                        Budget
                                                                               2011-2012

2011 Final Budget                                                  642,034
Plus 2012 General Inflationary Increases                              19,152        3.0%
Plus (Less) 2012 Other Significant Changes:
   None                                                       -
     Subtotal                                                              -        0.0%
2012 Base Budget                                                   661,186          3.0%
Plus 2012 Service Enhancement Requests:
   None                                                       -
     Subtotal                                                              -        0.0%
Less 2012 Service Reduction Proposals:
   None                                                       -
     Subtotal                                                              -
2012 Final Budget                                                  661,186          3.0%

_________________________________
City of Mercer Island 2011-2012 Budget                                                     G-171
                                         Department:
                                      Non-Departmental

2011-2012 Budget Analysis
Intergovernmental Services & Other General Government Services
General, Self-Insurance, Beautification & Firemen’s Pension Funds
                                                                                            % Change
                         2011 Analysis                                 Budget
                                                                                            2010-2011

2010 Approved Budget                                                         2,949,549
Plus 2011 General Inflationary Increases                                               -          0.0%
Plus (Less) 2011 Other Significant Changes:
   Prior year one-time costs & carryovers:
     - Temporary YFS School Counselor funding                     (81,507)
     - ARCH Trust Fund contribution                               (45,078)
     - EECBG grant equipment (electric bicycles, meters)          (14,038)
   General Fund contribution to YFS                              (105,000)
   Interfund transfer to Technology CIP                          (100,000)
   Computer Support Tech (move to IT rental rates)                (73,986)
   Community survey (conducted biennially)                        (25,000)
   Travel, dues, subscripions, tuition and registrations           (6,500)
   Other operating costs                                            3,060
   LEOFF 1 retiree disability, medical and pension costs          26,670
   Liability & property insurance                                122,531
     Subtotal                                                                 (298,848)         -10.1%
2011 Base Budget                                                             2,650,701          -10.1%
Plus 2011 Service Enhancement Requests:
   Open space vegetation management support (transfer to CIP)     75,000
     Subtotal                                                                   75,000            2.5%
Less 2011 Service Reduction Proposals:
   2011-2012 reduction of General Fund contribution to YFS        (40,000)
   Voluntary Intergovernmental Contributions                      (16,000)
     Subtotal                                                                   (56,000)
2011 Final Budget                                                            2,669,701           -9.5%




                                                                _________________________________
G-172                                                              City of Mercer Island 2011-2012 Budget
                                       Department:
                                    Non-Departmental

2011-2012 Budget Analysis
Intergovernmental Services & Other General Government Services
General, Self-Insurance, Beautification & Firemen’s Pension Funds (cont’d)
                                                                                 % Change
                        2012 Analysis                          Budget
                                                                                 2011-2012

 2011 Final Budget                                                  2,669,701
 Plus 2012 General Inflationary Increases                               23,599        0.9%
 Plus (Less) 2012 Other Significant Changes:
   Liability & property insurance                          33,955
   LEOFF 1 retiree disability, medical and pension costs   60,125
     Subtotal                                                           94,080        3.5%
 2012 Base Budget                                                   2,787,380         4.4%
 Plus 2012 Service Enhancement Requests:
   None                                                         -
     Subtotal                                                                -        0.0%
 Less 2012 Service Reduction Proposals:
   None                                                         -
     Subtotal                                                                -
 2012 Final Budget                                                  2,787,380         4.4%




_________________________________
City of Mercer Island 2011-2012 Budget                                                G-173
                               Department Function:
                          Information Technology (IT)

Description
Support, maintain, and procure all information and technology infrastructure that connects 7 City
facilities and 10 operating departments, including wired and wireless networks, PC’s and laptops,
servers, phones, peripheral devices (e.g. printers, copiers, and PDA’s), citywide and departmental
applications, and City business systems. Consult, train, and assist City staff on all technology issues and
initiatives.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Provide 24/7 Helpdesk services related to all network, PC, and connected peripherals.
•   Provide contract and vendor management for all technology related services.
•   Provide network service support, including e-mail, internet access, wireless access, and virtual
    private networking.
•   Provide support of City business systems such as financial, utility billing, fire records, document
    management, permitting, email, etc.
•   Procure and implement annual computer, server, network, phone, and peripheral replacement
    program.
•   Manage the implementation of technology projects.
•   Develop custom applications where needed.
•   Provide or contract for computer training of City staff.


2011-2012 Key Initiatives
•   Complete migration from a physical server to virtual server infrastructure.
•   Continue to convert City physical and digital document management to electronic document
    management system.
•   Develop and implement a mobile pilot for maintenance management.
•   Implement an intranet update at minimal cost to the City.
•   Continue report development for department management.
•   Participate in the online electronic plan review project with eCityGov Alliance.




                                                                  _________________________________
G-174                                                                City of Mercer Island 2011-2012 Budget
                                  Department Function:
                             Information Technology (IT)

Expenditure Summary by Category
           Expenditure             2009       2010       2011       2012      Percent Change
           Description            Actual     Estimate   Budget     Budget     10-11     11-12
Salaries & Wages                   212,731    226,268    219,410    222,482     -3.0%     1.4%
Benefits                            62,297     71,947     67,485     75,478     -6.2%    11.8%
Supplies                            33,946     25,900     14,500     14,500    -44.0%     0.0%
Contractual Services                23,605     49,100     50,500     50,500     2.9%      0.0%
Communications                      42,895     38,460     42,800     42,800    11.3%      0.0%
Fleet/Computer/Equipment Rental          -        -          -          -        N/A      N/A
Other Services & Charges             8,642     12,900      6,000      6,000    -53.5%     0.0%
Intergovernmental Services          12,960     15,000     21,800     22,500    45.3%      3.2%
Capital                                  -      6,000        -          -     -100.0%     N/A
Total                             397,077     445,575   422,495    434,260      -5.2%     2.8%




_________________________________
City of Mercer Island 2011-2012 Budget                                                    G-175
                         Department Function:
                Geographic Information Systems (GIS)

Description
Support City departments by building and maintaining maps related to the City’s infrastructure (streets,
sewer, water, storm, etc.), services, and properties (residential, commercial, and public). Provide access
to geographic information through printed maps for the public, through a web-based viewing tool for
City staff, and via the eCityGov consortium for both the public and City staff.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   Update property layer, which includes plats, short plats, lot-line revisions, etc.
•   Update easement layer, which includes all utility and non-utility easements.
•   Update utility layers, which include all water, sewer, and storm drainage infrastructure.
•   Update annual Transportation Improvement Plan (TIP) maps.
•   Provide printed maps for Fire (including Bellevue Fire) and Police use in vehicles.
•   Update and deliver annual Water Utility atlas to utility teams and engineers.
•   Update and deliver annual Sewer Utility atlas to utility teams and engineers.
•   Provide maps and information to support services and decision making in all City departments.
•   Provide map books for use by the public and staff in DSG Customer Service.
•   Provide online web based access to GIS data.
•   Maintain software for GIS data and access to online GIS.
•   Maintain GIS data to support departmental business systems such as permitting, maintenance
    management, utility billing, parks, public safety dispatching and addressing, etc.


2011-2012 Key Initiatives
•   Further Development of External and Internal Web GIS websites.
•   Implement upgrade to version 10.0 of GIS software in order to optimize usage of all GIS-related
    software.
•   Deliver annual Fire Response Wall Maps to Station 91 and Station 92.
•   Deliver annual Water and Sewer Atlases to Utilities Crews and Engineers.
•   Update Public Safety Mapping of Crime and Fire incidents on public web GIS site.
•   Create Parks and Trails Mapping on public web GIS site.
•   Integrate Streets and Pavement Data into existing Streets layer.
•   Consolidate Land Use layers from GIS and Planning and combine with Document Management
    System.
•   Assist in the development of NWMaps mapping portal.




                                                                  _________________________________
G-176                                                                City of Mercer Island 2011-2012 Budget
                         Department Function:
                Geographic Information Systems (GIS)

Expenditure Summary by Category
            Expenditure            2009         2010       2011       2012      Percent Change
            Description            Actual      Estimate   Budget     Budget     10-11     11-12
 Salaries & Wages                  119,911      134,763    137,348    139,203     1.9%      1.4%
 Benefits                           38,342       47,165     47,121     52,653     -0.1%    11.7%
 Supplies                            3,422          -          -          -        N/A      N/A
 Contractual Services               17,410       28,000     15,000     15,000    -46.4%     0.0%
 Communications                          -          -          -          -        N/A      N/A
 Fleet/Computer/Equipment Rental     6,909        6,909     20,070     20,070   190.5%      0.0%
 Other Services & Charges                260        -          -          -        N/A      N/A
 Intergovernmental Services              -          -          -          -        N/A      N/A
 Capital                                 -          -          -          -        N/A      N/A
 Total                             186,253      216,837   219,539    226,926      1.2%      3.4%




_________________________________
City of Mercer Island 2011-2012 Budget                                                     G-177
                        Department Function:
               Mandatory Intergovernmental Services

Description
Participate in the following regional efforts as required by state law: 1) King County Alcoholism
program, which provides treatment for alcoholics, persons incapacitated by alcohol, and intoxicated
persons (per RCW 70.96); and 2) Puget Sound Air Pollution Control Authority, which is responsible for
the prevention, abatement, and control of air pollution (per RCW 70.94) in the Puget Sound region.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.
#4 The community will support attractive, high quality neighborhood and business environments.


Services & Products
•   Remit 2% of liquor taxes received quarterly to King County Alcoholism program.
•   Support Atmospheric monitoring and implementation of pollution controls.


2011-2012 Key Initiatives
•   Continue participation in King County Alcoholism program.
•   Continue participation in Puget Sound Air Pollution Control Authority.


Expenditure Summary by Category
           Expenditure              2009         2010        2011            2012     Percent Change
           Description              Actual     Estimate     Budget      Budget        10-11     11-12
Salaries & Wages                         -           -            -             -        N/A      N/A
Benefits                                 -           -            -             -        N/A      N/A
Supplies                                 -           -            -             -        N/A      N/A
Contractual Services                     -           -            -             -        N/A      N/A
Communications                           -           -            -             -        N/A      N/A
Fleet/Computer/Equipment Rental          -           -            -             -        N/A      N/A
Other Services & Charges                 -           -            -             -        N/A      N/A
Intergovernmental Services            27,568      28,150      29,566         30,453      5.0%     3.0%
Capital                                  -           -            -             -        N/A      N/A
Total                                27,568       28,150      29,566         30,453     5.0%      3.0%




                                                               _________________________________
G-178                                                             City of Mercer Island 2011-2012 Budget
                          Department Function:
                Voluntary Intergovernmental Services

Description
Participate on a voluntary basis in the following organizations: Association of Washington Cities
(AWC), A Regional Coalition for Housing (ARCH), Suburban Cities Association (SCA), Puget Sound
Regional Council (PSRC), and Alliance for Innovation. Support the Interlocal Waterfowl program.
Contract for human services with the following agencies/programs: Eastside Legal Aid Program (ELAP),
Eastside Sexual Assault Center for Children, King County Sexual Assault Resource Center, and the City
of Seattle’s Re-investing in Youth Program.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.
#3 The community will support reliable public infrastructure and protect its considerable public
   investments.
#4 The community will support attractive, high quality neighborhood and business environments.
#5 The community will support a broad range of recreational, cultural, health, and educational
   opportunities.


Services & Products
•   AWC is the official organization of cities and towns in the state, established to aid local
    governments in finding solutions of common problems.
•   ARCH plans and coordinates affordable housing efforts for the cities of Bellevue, Kirkland,
    Redmond, Woodinville, Bothell, Mercer Island, and Issaquah to achieve local, regional, and state
    affordable housing goals and mandates.
•   SCA is the forum that elected officials in King County use to coordinate regional policy efforts
    affecting King County cities.
•   PSRC is a voluntary organization of cities and counties committed to cooperative planning for the
    future of the region.
•   Alliance for Innovation is a network of local governments throughout the nation that share
    information about innovative programs, services, and technologies.
•   The interlocal waterfowl program is a regional effort to control the Canadian Geese population and
    reduce the birds' impact on public and private waterfront properties.
•   ELAP provides free legal advice to indigents and senior citizens on the Eastside, sponsoring bi-
    weekly clinics on various legal subjects including domestic relations, wills, trusts, and real property.
•   The Eastside Sexual Assault Center for Children provides intervention and counseling services for
    families dealing with the sexual assault of children.
•   The King County Sexual Assault Resource Center provides services to victims of sexual assault and
    public education to schools and communities related to sexual assault.
•   The RIY program is a countywide effort that seeks to increase resources for proven, cost effective
    services for troubled youth that reduce crime and save criminal justice and other deep-end system
    costs.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                G-179
                           Department Function:
                 Voluntary Intergovernmental Services

2011-2012 Key Initiatives
•   Continue participation in state, regional, and national organizations, except for the Suburban Cities
    Association in 2011-2012.
•   Discontinue participation in the Interlocal Waterfowl program in 2011-2012.
•   Maintain current agreements with human service agencies/programs.


Expenditure Summary by Category
           Expenditure                2009         2010         2011        2012        Percent Change
           Description               Actual     Estimate      Budget       Budget        10-11     11-12
Salaries & Wages                          -            -            -            -          N/A      N/A
Benefits                                  -            -            -            -          N/A      N/A
Supplies                                  -            -            -            -          N/A      N/A
Contractual Services                      -            -            -            -          N/A      N/A
Communications                            -            -            -            -          N/A      N/A
Fleet/Computer/Equipment Rental           -            -            -            -          N/A      N/A
Other Services & Charges                  -            -            -            -          N/A      N/A
Intergovernmental Services            189,616      270,704     230,117      232,027       -15.0%     0.8%
Capital                                   -            -            -            -          N/A      N/A
Total                                189,616      270,704      230,117      232,027      -15.0%      0.8%




                                                                 _________________________________
G-180                                                               City of Mercer Island 2011-2012 Budget
                           Department Function:
                   Other General Government Services

Description
Encompass goods and services that are either citywide or non-departmental in scope and interfund
transfers from the General Fund to other funds in support of various programs.


Priority of Government
#2 The community will support effective, efficient, and legal delivery of public services.


Services & Products
•   General office supplies, postage, postage machine rental, copier leases, and armored car service
•   Community survey, fiscal studies, labor contract negotiation support, and management consulting
    services
•   Annual eGov membership and operating costs
•   General, property, and automobile liability insurance
•   Employee salary adjustment reserve
•   LEOFF 1 retiree direct medical costs and health insurance premiums
•   Firemen's Pension payments to eligible retirees
•   Ongoing General Fund support of Youth & Family Services programs
•   Ongoing General Fund support of technology and equipment portion of CIP


2011-2012 Key Initiatives
•   Engage a consultant to conduct an actuarial study of police and fire retiree medical and long-term
    care costs and of firefighter pension costs.


Expenditure Summary by Category
            Expenditure               2009         2010         2011         2012        Percent Change
            Description              Actual      Estimate      Budget       Budget           10-11     11-12
Salaries & Wages                           -         43,581       28,236       43,178         -35.2%    52.9%
Benefits                              526,914      586,200      612,870      672,995           4.5%      9.8%
Supplies                                34,588       55,538       41,000       41,000         -26.2%     0.0%
Contractual Services                    67,683     144,600      111,880        89,100         -22.6%   -20.4%
Communications                          21,532       41,200       33,200       33,200         -19.4%     0.0%
Fleet/Computer/Equipment Rental         71,310       56,053       65,221       66,171         16.4%      1.5%
Insurance                             610,409      664,743      787,274      844,319          18.4%      7.2%
Other Services & Charges                 8,011       19,500       12,000       14,000         -38.5%    16.7%
Intergovernmental Services               1,127        3,000          -            -          -100.0%     N/A
Interfund Transfers                  1,103,743    1,036,280     718,337      720,937          -30.7%     0.4%
Total                               2,445,317    2,650,695    2,410,018    2,524,900           -9.1%     4.8%


_________________________________
City of Mercer Island 2011-2012 Budget                                                                   G-181
        _________________________________
G-182      City of Mercer Island 2011-2012 Budget
    Section H. Capital Improvement Program

                                   Table of Contents

Introduction ...................................................................................... H-1

Project Summary.............................................................................. H-12

Individual Project Sheets ................................................................ H-19

Six-Year Fund Statements .............................................................. H-107
                                                           Capital Improvement Program

Introduction
The two plans that make up the 2011-2012 Capital Improvement Program (CIP)—the Capital
Reinvestment Plan (CRP) and Capital Facilities Plan (CFP)—have been developed according to the
guidelines set forth in the CIP budget policy (see Section C) and the City’s Comprehensive Plan.

Each biennium, Council provides direction through its regular meetings, semi-annual planning
discussions, and various budget policies. Adoption of comprehensive planning documents, including the
Transportation Improvement Plan (TIP) in June 2010, the Pedestrian and Bicycle Facilities Plan in June
2010, the Park and Recreation Plan in February 2007, the Open Space Vegetation Plan in 2004, the
Luther Burbank Park Master Plan in April 2006, the Ballfield Use Analysis in October 2007, the Water
System Plan in July 2008, the General Sewer Plan in February 2003, and the Comprehensive (Storm)
Basin Review in December 2006 give more specific project direction. In the case of the TIP, the Council
approves the street and other related projects, which are then simply inserted into the capital budget.

Staff has been developing the 2011-2016 CIP since March 2010. A preview of the proposed CIP was
presented to Council in June 2010. The Preliminary CIP was presented to Council on October 18,
2010. Adopted changes from the Council budget review process are detailed later in this section and
have been reflected throughout the Final Budget Document.

The capital budget is made up almost entirely of reinvestment projects (CRP) to maintain our existing
infrastructure. The most significant reinvestments (all close to $1.0 million) are for stabilization of
Storm Watercourse Basin 6.3 in 2011, improvements to the First Hill Water System in 2012, and
resurfacing a segment of Island Crest Way in 2012.

2011-2012 Proposed CIP
Table 1 compares planned spending for specific categories of projects in the 2011-2012 CIP with the
actual and forecasted costs for the previous two biennia. (Actual spending varies from budget due to
factors such as permitting delays, bids which vary from project cost estimates and added projects.)

                  Table 1 – Comparison of Proposed Budget by Project Category
                                                                             2007-08            2009-10             2011-12
Project Category                                                              Actual           Forecast             Budget

Parks, Recreation and Open Space [1]                                         $3,600,921         $2,919,782         $1,997,000
                                                     [2]                     $4,443,071         $4,576,104         $3,046,000
Streets, Pedestrian and Bicycle Facilities
Buildings, Equipment and Technology [3]                                      $6,650,031         $4,847,019         $3,130,000
            [4]                                                              $3,944,852 $28,599,027                $6,292,000
Utilities
Total                                                                      $18,638,875 $40,941,932 $14,465,000

[1] Includes $1.0 million for improvements to South Mercer Playfields and $1.1 million for Luther Burbank Park in 2007-2008. Also
   includes $1.0 million for additional improvements to South Mercer Ballfields in 2009-2010.
[2] Includes $1.1 million for SE 40th Corridor improvements and $1.0 million for improvements to 76th Avenue in the Town Center in
   2007-2008. Also includes an additional $700,000 for SE 40th Corridor improvements, $1.2 million for Town Center Traffic Signal
   improvements, $1.1 million for Residential Streets, and $300,000 for East Mercer Way Shoulder construction in 2009-2010.
[3] Includes $3.3 million for Fleet Replacements (including Fire Engines, Marine Patrol Boats, an Aid Car, Vactor and Jet Trucks, and a
   Street Sweeper) in 2007-2008. Also includes $1.0 million for PEAK in 2009-2010.
[4] Includes $24.2 million for Sewer Lake Line construction in 2009-2010. Also includes $847,000 for construction of the Emergency
   Water Supply Well Facility in 2009-2010.




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                            H-1
Capital Improvement Program

Capital Improvement Financing Strategy
Each biennial capital budget is part of a broader CIP financing plan that looks into the future to match
facility needs with realistic financing strategies. (Please refer also to the CIP budget policy in Section C
for additional detail.)

Consistent with established budget policies and past Council financing strategies, CIP funding for the
next two years relies heavily on existing, available fund balances and projected revenues from Real
Estate Excise Taxes (REET), Fuel Taxes (State shared revenues), and Utility rates. The General Fund
continues to be the sole source for capital investments in technology and equipment.

Most revenues for capital projects come with restrictions. Utility rates may only be used for projects of
the respective utility; fuel taxes may only be used for street and trail projects; and REET is reserved for
capital projects to help develop a community’s public infrastructure (e.g., parks, open space and streets).
The City’s capital financing strategy has been to use these restricted revenues on a “pay as you go” basis
for needed improvements. This strategy remains unchanged, except for costly utility projects for which
debt financing can “smooth” utility rate spikes.

REET is the 0.5% tax paid by the seller in property transactions. State law restricts the use of REET for
specific capital purposes. REET-1 (the 1st quarter of 1% of the sales price) may be used for streets,
parks, facilities, or utilities. REET-2 (the 2nd quarter of 1% of the sales price) may be used for streets,
parks, or utilities, but may not be used for facilities. Neither REET-1 nor REET-2 may be used for
equipment or technology.

REET is the largest revenue source for the projects in the Street and Capital Improvement Funds. REET
revenue can vary significantly from year to year as its base (property sales) is highly dependent on
economic conditions and interest rates. With current economic conditions, REET revenues declined in
2008, then declined further in 2009 due to a significant drop in the number of home sales from 603
homes in 2004 to a low of 260 homes in 2008 and 267 homes in 2009. Average home prices also
declined from a high of $1.24 million in 2008 to $854,000 a year later. REET has recovered slightly in
2010, with the first time homebuyer tax credit incentive and lower home prices. It is anticipated that
home sales will continue to recover, although at a moderate rate, in 2011 and 2012.

Continuing the City’s CIP financing strategy, REET-1 revenues are used to fund parks, open space, and
public building maintenance projects and to pay the debt service on the Mercer View property and the
new Community Center. REET-2 revenues continue to be used for infrastructure needs, namely
construction and maintenance of streets, pedestrian and bicycle facilities.

Because they cannot rely upon REET revenues, expenditures for new vehicles, equipment, and
technology come from general purpose revenue, reserve, or grant funding sources. An example is the
purchase of Firefighting Equipment, including technical rescue tools, planned for this biennium.

Consistent with their financial policies, utility capital improvements are funded from utility rates,
primarily on a pay-as-you-go basis.

Table 2 below shows an overview of the CIP financing strategy.




                                                                   _________________________________
H-2                                                                   City of Mercer Island 2011-2012 Budget
                                                                  Capital Improvement Program

                                    Table 2 - Capital Improvement Program Financing Strategy

               REET 1                                 REET 2                  General Purpose Revenues                              Utilities

Parks                                    Streets                              Equipment                             Sanitary Sewer
  •       Construction                    •   Construction                     •     Vehicle Replacement                 •    Construction
  •       Maintenance                     •   Maintenance                      •     Public Safety Items                 •    Maintenance
Open Space                               Pedestrian and Bicycle               Technology                            Stormwater
  •       Property Acquisition           Facilities                            •     Computers                           •    Construction
  •       Planning                        •   Construction                     •     Software                            •    Maintenance
  •       Improvements                    •   Maintenance                      •     Communications                 Water
Public Buildings                                                                                                         •    Construction
  •       Repair                                                                                                         •    Maintenance
  •       Maintenance
  •       Planning and Design




Real Estate Excise Tax (REET) Forecast
In September 2010, staff revised the REET Forecast, increasing the projected number of house sales in
2010 to 300 (up from the 275 forecast for the CIP Preview in June 2010), followed by a slow recovery
in 2011-2016. In addition, staff revised the 2010 REET forecast to reflect an increase in the average
home sale price from the $942,000 projected in June 2010 up to $1.0 million. The revised projection
more accurately reflects the trend that has been seen in the region.

Historical home sales (1999-2009) as well as the forecasted number of home sales (2010-2016) are
shown in the chart below.

                                                          Number of Home Sales
 # Sales
  700

                                                   603
                                                          579
  600
             563                                                 545

                                           486                                                                                           500    500    500
  500                                                                                                                         475
                     442           433                                  429
                                                                                                                   400
  400
                            358
                                                                                                            325
                                                                                                  300
  300                                                                                     267
                                                                                260


  200


  100

                                                                                                                                     -
      -
             1999    2000   2001   2002    2003    2004   2005   2006   2007       2008   2009   2010      2011   2012       2013   2014       2015   2016
                                                                                                 Fcst      Fcst   Fcst       Fcst   Fcst       Fcst   Fcst




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                                                   H-3
Capital Improvement Program

Historical home sale prices (1999-2009) as well as forecasted home sale prices (2010-2016) are shown
in the chart below.

                                                                             Average Home Sale Price
  $ Millions
      1.60

                                                                                                                                                                                                  1.39
      1.40
                                                                                                                                                                                       1.29
                                                                                                                  1.24
                                                                                                                                                                              1.19
      1.20
                                                                                                        1.07                                                1.05     1.11
                                                                                                                                       1.00      1.00
      1.00                                                                                    0.96
                                                                                    0.90
                                                                                                                            0.85
                                                                        0.80
      0.80                                                    0.74
                              0.70                  0.69
                    0.66                  0.64
      0.60


      0.40


      0.20


        -
                    1999      2000        2001      2002      2003      2004        2005      2006      2007      2008      2009      2010      2011     2012       2013     2014     2015     2016
                                                                                                                                      Fcst      Fcst     Fcst       Fcst     Fcst     Fcst     Fcst




The historical trend for REET Revenue (shown in millions) as well as the forecast for REET used in
developing the Preliminary Budget is presented in the chart below. Note that the spike in 2010 revenue
reflects the sale of Shorewood Heights Apartments in September 2010, generating about $500,000 in
REET.

   $4.00
                                                                        $3.71                                                                                                             $3.59
                                                                                                                                                                              $3.33
   $3.50
                                                                                                                                                                    $3.10
                                                                                                 $2.93
   $3.00                                                                                                                                                $2.77
                                                                                    $2.77
   $2.50
                                                                     $2.50
                                                                                                                              $1.98
               $1.97                                                                                 $2.35                                               $2.18
   $2.00
                           $1.62            $1.51
                                                           $1.82
   $1.50
                                                                                                                                        $1.71

   $1.00
                                   $1.17                                                                             $1.26

   $0.50

   $0.00
             1999      2000        2001      2002      2003      2004        2005      2006      2007      2008      2009      2010     2011      2012       2013     2014     2015     2016
                                                                                                                               Fcst     Fcst      Fcst       Fcst     Fcst     Fcst     Fcst




                                                                                                                               _________________________________
H-4                                                                                                                               City of Mercer Island 2011-2012 Budget
                                                          Capital Improvement Program

Fund Balance Trends
The fund balance in the Street Fund was drawn down by close to $1.4 million in 2009-2010, and is
expected to be drawn down by an additional $420,000 during the 2011-2012 biennium, in accordance
with the 6-year TIP (Transportation Improvement Plan). The available fund balance in the Street Fund
is projected to be completely used by the end of 2014, given the current REET revenue forecast and
planned projects.

The fund balance in the CIP Fund was drawn down by $280,000 in 2009-2010, and is expected to be
drawn down by an additional $620,000 during the 2011-2012 biennium, largely as a result of continued
capital reinvestment needs in conjunction with the drop in REET revenue available to fund projects.
Planned capital reinvestment projects for 2013-2016 will draw the available fund balance into a negative
position starting in 2013, given current revenue forecasts.

The available fund balance in the Technology and Equipment Fund will be drawn down to about $394,000
by the end of 2012 as a result of the reduced contribution from the General Fund and planned
reinvestment in technology and equipment in 2011 and 2012. While the available fund balance is
projected to decline during the 6 year plan, it is still projected to have a positive balance at the end of
2016.

Rates are set for the Water, Sewer, and Storm Water Funds at levels to support daily operations, routine
maintenance, and capital reinvestment planned for the 6 year period (2011-2016). Available fund
balances are used in conjunction with new revenues generated from rates and occasional debt proceeds
to meet the funding needs of each utility. Financing for all funds are planned so that fund balances are
drawn down by the end of the 6 year period.

See Section F (Utility Funds Summary) and Section I (Recap by Fund) for more details on fund balances.

Project Management
Project Management staff costs are built into the budget of each capital project. Historical (2005-2010)
and planned (2011-2012) staffing levels are as follows:

      DEPARTMENT             POSITION                      2005    2006    2007    2008    2009    2010    2011    2012
      Regular FTE's
      Development Services   City Engineer                 0.25    0.25    0.25    0.25    0.25    0.25    0.25    0.25
      Maintenance            Assistant City Engineer       1.00    1.00    1.00     1.00    0.60    0.60   0.60    0.60
      Maintenance            Street Engineer                1.00    1.00    1.00    1.00    1.00    1.00   1.00    1.00
      Maintenance            Utilities Engineer             1.00    1.00    1.00    1.00    1.00    1.00   1.00    1.00
      Maintenance            Facilities Team Member          -       -      0.50    0.50    0.50    0.50   0.50    0.50

       Total Regular FTE                                    3.25    3.25    3.75    3.75    3.35    3.35    3.35    3.35
      Contract FTE's
      City Manager           Records Management Coord        -       -       -       -      1.00    1.00    -       -
      Maintenance            Storm Water Proj Mgr            -       -      1.00    1.00    0.75    0.75   0.75    1.00
      Maintenance            Contract Streets Proj Mgr       -       -      0.50    0.50    1.00    1.00    -       -
      Parks and Recreation   Forest Steward                  -       -       -       -      0.75    0.75   0.75    0.75
      Parks and Recreation   Contract Parks Proj Mgr         -       -      0.50    0.50    1.00    1.00    -       -
      Non-Departmental       CIP Administrative Support      -       -       -       -      0.50    0.50    -       -

       Total Contract FTE                                   -       -      2.00    2.00    5.00    5.00    1.50    1.75

       TOTAL CIP FTE                                       3.25    3.25    5.75    5.75    8.35    8.35    4.85    5.10




_________________________________
City of Mercer Island 2011-2012 Budget                                                                                     H-5
Capital Improvement Program

Contract staffing is used to manage fluctuations in the number of capital projects and when specialized
skills are required. Given the decline in REET revenues and, consequently the number of CIP projects,
the 2011-2012 Budget assumes a reduction of 3.5 contract FTE’s: 2 Project Managers, a Records
Management Coordinator and a half-time CIP Administrative Support position. One Project Manager
and the Administrative Support position (1.5 FTE’s) were vacant in 2010.

In addition to the listed staffing, a small percentage of time is spent by Parks staff (Parks and Recreation
Operations Superintendent, Parks Maintenance Team Leader, and the Parks Arborist) and the
Information and Geographic Services Team on capital project management. Where significant, time is
charged directly to the projects worked on.

Finally, a small percentage of Finance, City Attorney’s Office, Public Information Coordinator,
Maintenance Director, Parks and Recreation Director, and City Manager’s Office support is provided to
capital projects. In order to eliminate a subsidy of CIP by the General Fund, this time is charged through
a CIP Overhead Charge to the Capital Project Funds (Streets, Water, Sewer, Storm Water, and CIP)
and credited back to the General Fund.

Summary of Changes to Proposed CIP
On June 21, 2010, the Council was given a preview of the proposed 2011-2016 CIP. At that meeting,
the Council indicated they would like to modify certain projects. Table 3 summarizes the changes
directed by the Council and made by staff for the 2011-2012 Preliminary Budget.

                   Table 3 – Summary of Changes to the 2011-2012 Preview CIP in ’000s
                                      June        Prelim
                Project              Preview Budget Change                                       Notes


Council Directed Changes:
 Residential Streets                   1,100         849         (251) Adopted TIP reduced funding for residential streets
 Fire Station 92 Replacement           4,600               -   (4,600) Push design/construction from 2011/2012 to 2013/2014
  Total Council Changes                5,700         849       (4,851)
Staff Changes:
 Luther Burbank Minor Improvements       223         220           (3) Refine project budget
 Minor Park Improvements                 176         108          (68) Restore 2009-10 budget cut due to improvement in REET
 Computer Replacements                   238         190          (48) Refine project budget
 Fleet Replacements                    1,526        1,529            3 Refine project budget
 Thrift Shop Repairs                         48       36          (12) Push restroom repair from 2011 to 2013
 PBF Plan Implementation 1.b                 45            -      (45) Unsuccessful in CPPW grant application; project cancelled
  Total Staff Changes                  2,256       2,083        (173)
Plus All Other Projects               11,533       11,533            - No change
TOTAL                                 19,489      14,465       (5,024)

During the Council’s review of the Preliminary Budget, additional modifications were made to the
proposed CIP. Table 4 summarizes the changes directed by the Council and made by staff for the 2011-
2012 Final Budget.




                                                                               _________________________________
H-6                                                                               City of Mercer Island 2011-2012 Budget
                                                         Capital Improvement Program

                  Table 4 – Summary of Changes to the 2011-2012 Preliminary CIP in ’000s
                                        Prelim       Final
                 Project                Budget Budget Change                                     Notes
Council Directed Changes:
    Luther Burbank Admin Bldg Repairs      101           94        (7) Remove intercom system
    Minor Park Improvements                108               8   (100) Reduce Clarke Beach swim area repairs by $100K
    Open Space Vegetation Mgmt             650          800       150 Restore $75K in 2011 and 2012
    Total Council Changes                  859          902        43
Staff Changes:
    EOC Incident Management                 50               -    (50) Purchase off-the-shelf software in 2010.
    Low Impact Development                  75          300       225 Notified of $225K DOE grant receipt.
    I-90 Park Improvements                 115           47       (68) I-90 Play Equip purchased in 2010 (instead of Groveland)
    Groveland Playground Equipment               -       68        68 I-90 Play Equip purchased in 2010 (instead of Groveland)
    Total Staff Changes                    240          415      175
Plus All Other Projects                  13,366      13,366          - No change
TOTAL                                   14,465       14,683      218



Project Highlights
•     Island Crest Way – This project will resurface Island Crest Way (86th SE to SE 53rd). The
      project is scheduled for design ($100,000) in 2011 and construction (just over $1.0 million) in 2012.
      The City will also continue its modest arterial street preservation program.

•     Residential Streets – Per Council direction, annual residential street overlays will be undertaken
      at an accelerated pace in the biennium. The biennial allocation for residential overlays is $951,000,
      which represents an increase of $231,000 over the average amount of spent per biennium during
      the last two biennia.

•     East Mercer Way Shoulders (Phase 7) – This project would extend shoulder improvements on
      East Mercer Way south from the 5600 block to the 7400 block of East Mercer Way. Additional
      Phases of shoulder work (Phases 8 and 9) are anticipated in 2013 and 2015 also.

•     First Hill Water System Improvements – This project will re-configure the First Hill pressure
      zone by upsizing the 4-inch water main and making connection changes between the water mains in
      the First Hill pressure zone and the water mains served by the reservoir zone. The project is
      scheduled for design ($200,000) in 2011 and construction ($1.2 million) in 2012. In order to lower
      water rates, as well as in recognition of the good bid environment and low interest rates, staff
      proposes using debt financing for the construction of these improvements.

•     General Sewer System Improvements – Shifting efforts from the Sewer Lakeline project, staff
      will focus on increasing the level of system-wide improvements including pipe lining, pipe
      replacement, manhole rehabilitation, and installing clean-outs in the Sewer Lake Line (at a pace of
      approximately one per biennium).

•     Sub-Basin 6.3 – This project will stabilize approximately 800 linear feet of watercourse with
      severe bank erosion which has resulted in the destabilization of the upper bank slopes.
      Improvements to Basin 6 (SE 40th to Shorewood Apts.) are being designed in 2010, with
      construction ($995,000) planned for 2011.


_________________________________
City of Mercer Island 2011-2012 Budget                                                                                            H-7
Capital Improvement Program

Partially or Unfunded Capital Needs
Reflected in the 6 Year Plan (2011-2016)
Three of the projects included in the proposed 2011-2016 CIP are only partially funded or unfunded.
For one of the projects, full funding depends on receipt of a grant. The funding status for these projects
is summarized in the table below.

                                                      Funded         Unfunded       Total Cost          Funding Source
                Project Description                  2011-2016       2011-2016      Estimate        for Unfunded Portion
Island Crest Park Ballfield Lights Replacement          338,000          45,000        383,000 PSE or Energy Grant
PBF Plan Implementation                                     -           100,000        100,000 Excess REET
Fire Station 92 Replacement *                               -         4,600,000      4,600,000 To be determined
Totals                                                  338,000       4,745,000      5,083,000

* Note that the cost estimate for Fire Station 92 is a placeholder for budget planning purposes. It is very preliminary and will
  be refined after the programmatic study (2010). A more accurate cost estimate will be developed during design (2013).

Of particular note are the following projects:

•     PBF Plan Implementation – The Pedestrian and Bicycle Facilities Plan was adopted on June 21,
      2010. This project is a placeholder, showing staff’s desire to construct a project from the recently
      adopted PBF Plan. A possible funding source is REET in excess of the 2011-2012 forecast.

•     South Fire Station – Station 92 located at 8473 SE 68th Street was constructed in 1962. If the
      building is to continue providing emergency response services, it will eventually need significant
      renovation such as seismic strengthening. The cost estimate of $4.6 million is a placeholder for
      budget planning purposes. It is very preliminary and will be refined after the programmatic study
      (2010). A more accurate cost estimate will be developed during design (2013). Possible funding
      sources include cost savings from the Sewer Lake Line project, REET in excess of the 2011-2012
      forecast, voted debt (20 years), and a federal grant.

Not reflected in the 6 Year Plan (2011-2016)
In addition to the projects planned above, there are significant capital improvements that are not
included in the 2011-2016 plan and for which a funding source has not yet been determined. The
following projects continue to be unfunded or partially funded:

•     Luther Burbank Master Plan Implementation – Design and construction costs to implement
      master plan improvements identified in the 2005-2006 planning process were estimated at $8.0
      million. Two master plan elements started to be addressed in the 2007-2008 CIP Budget (Shoreline
      Restoration and Off-Leash Area Improvements) at a cost of $1.25 million. In November 2008, a
      $12.0 million parks bond levy to fund park capital improvements, including master plan elements for
      Luther Burbank, was put to a vote and failed. A new funding source for these improvements has
      not been identified.

•     Town Center Pedestrian Plaza Water Feature (78th Avenue SE at I-90) – A pedestrian
      plaza was constructed in 2010 by developers of the neighboring properties. Preliminary schematic
      designs for a water feature within this new plaza are being considered. Refined cost estimate are



                                                                                _________________________________
H-8                                                                                City of Mercer Island 2011-2012 Budget
                                              Capital Improvement Program

    under development. Potential funding includes 1% for the Arts and available fund balance in the
    Beautification Fund.

•   Open Space Acquisition (5-6 acres) – This consists of one-time purchases of open space
    property as opportunities arise at a cost of approximately $2.0 million per acre. The preferred
    funding source identified is voted debt (20 years). REET-1 and other fund balances could also be
    used.

•   Utility Projects – there is a long list of Utility reinvestment projects (undersized water mains,
    sewer lake line clean-outs, aging sewer pipe, storm water basins, and conveyance pipe), which could
    be tackled at a faster pace with higher rate increases or additional capital resources.

Reader’s Guide to the CIP
The CIP section of the budget attempts to satisfy various interests, ranging from a high level overview to
detailed specifics of each project planned for the upcoming biennium. The 2011-2016 CIP Project
Summary provides the most succinct presentation of project costs, timing, and funding sources. In this
summary, projects are organized by plan (CRP vs. CFP) first and then by project category:

    A.   Parks, Recreation and Open Space
    B.   Streets, Pedestrian and Bicycle Facilities
    C.   General Government (Equipment, Public Buildings, and Technology)
    D.   Sewer Utility
    E.   Storm Water Utility
    F.   Water Utility

Readers who are interested in project details will want to focus on the Individual Project Sheets. The
project sheets include a detailed project description, identifying the business need and existing
conditions. Detailed expenditure information and revenue sources are described as well. Finally, an
overview of each project’s schedule is presented. On both the CIP Project Summary and Individual
Project Sheets, revenues and expenditures are expressed in thousands of dollars, rounded to the
nearest $1,000.

For the long-range view, Six-Year Fund Statements show projects planned for future years (2011-2016)
and the long-term funding plan. Understandably, predictions about projects in the last four years of the
period are not as precise as for the projects the Council formally approves for implementation in 2011-
2012. Six-year funding plans are presented for the following City Funds:

    1.   Street Fund
    2.   Capital Improvement Fund
    3.   Technology and Equipment Fund
    4.   Water Fund
    5.   Sewer Fund
    6.   Storm Water Fund




_________________________________
City of Mercer Island 2011-2012 Budget                                                                 H-9
Capital Improvement Program




                              _________________________________
H-10                             City of Mercer Island 2011-2012 Budget
CAPITAL
IMPROVEMENT PROGRAM
Project Summary


                  This section includes a
                  listing of projects by Plan
                  (Reinvestment or New
                  Facilities) and a listing of
                  projects by Functional
                  Category.
Capital Improvement Program




H-12                          _________________________________
                                  City of Mercer Island 2011-2012 Budget
Capital Improvement Program
Capital Reinvestment Plan

Parks, Recreation and Open Space                                                                                                              Project Costs (in thousands)                                                                         Source of Funds (in thousands)
                                       Project Description                                                          2010        2011       2012       2013        2014        2015        2016        Total     REET       Street       Utilities General      Fees       Contrib's Grants       Other       Total

   Funded - No Changes
          19   Open Space - Vegetation Management                             Open Space                               444        422        378         471         490         509         529        2,799    1,797              0          0           0          0          0           0     1,002       2,799
          20   Luther Burbank Minor Park Improvements                         Parks Improvements                       110        110        110         110         110         110         110         660           0            0          0           0          0          0           0      660         660
          21   Recurring Park Projects                                        Parks Repairs and Maintenance            120        120        120         120         120         120         120         720      720               0          0           0          0          0           0           0      720
          22   Homestead - Minor Improvements                                 Parks Repairs and Maintenance                 0          0      68         250             0           0           0       318      318               0          0           0          0          0           0           0      318
          23   Island Crest Park Minor Improvements                           Parks Repairs and Maintenance                 0          0      68             0           0           0           0        68        68              0          0           0          0          0           0           0       68
   Funded - Modified
          24   Minor Park Improvements                                        Parks Improvements                            0          8          0      584         520         100         275        1,487    1,487              0          0           0          0          0           0           0     1,487
          25   Minor Park Improvement - Groveland Play Equipment              Parks Improvements                            0          0      68             0           0           0           0        68        68              0          0           0          0          0           0           0       68
          26   I-90 Park Improvements                                         Parks Repairs and Maintenance                35      47             0          0       100             0       140         287      287               0          0           0          0          0           0           0      287
          27   South Mercer Playfields Park Improvements                      Parks Repairs and Maintenance                 0          0          0          68           0          83      759         910      151               0          0           0       759           0           0           0      910
   Funded - New Project
          28 Community Center Mercerview Grounds                              Parks Repairs and Maintenance                 0          0          0          15          50           0           0       65        65              0          0           0          0          0           0           0       65
   Unfunded or Partially Funded
          29 Island Crest Park Ballfield Lights Replacement                   Parks Repairs and Maintenance                 0          0     383             0           0           0           0       383      338               0          0           0          0          0       45              0      383

Total Parks, Recreation and Open Space costs                                                                          709         707       1,195      1,618       1,390        922        1,933       7,765     5,299              0         0           0        759           0      45        1,662       7,765



Streets, Pedestrian and Bicycle costs                                                                                                         Project Costs (in thousands)                                                                         Source of Funds (in thousands)
                                       Project Description                                                          2010        2011       2012       2013        2014        2015        2016        Total     REET       Street       Utilities General      Fees       Contrib's Grants       Other       Total

   Funded - No Changes
          30 Arterial Preservation Program                                    Annual Street Maintenance Program            70      70         70             70          70          70          70      420           0       420             0           0          0          0           0           0      420
          31 Pavement Marking Replacement                                     Annual Street Maintenance Program            25      35         35             36          38          40          41      225           0       225             0           0          0          0           0           0      225
   Funded - Modified
          32   Residential Street Overlays                                    Annual Street Maintenance Program      1,080        378        471         707         509         764         550        3,379          0     3,379             0           0          0          0           0           0     3,379
          33   Arterial Street Improvements (2013 - 2016)                     Arterial Street Improvements                 0           0          0      644       1,231         588         265        2,728          0     2,728             0           0          0          0           0           0     2,728
          34   Island Crest Way Resurfacing (86th to 53rd) - Phase I          Arterial Street Improvements                 0      100       1,045            0           0           0            0     1,145          0     1,145             0           0          0          0           0           0     1,145
          35   PBF Reinvestment - Island Crest Way (86th to 53rd)             Pedestrian and Bicycle Facilities            0           0     120             0           0           0           0       120           0       120             0           0          0          0           0           0      120
          36   Pedestrian and Bicycle Facilities (PBF) - Reinvestment         Pedestrian and Bicycle Facilities            0           0          0      109         136         206             70      521           0       521             0           0          0          0           0           0      521
          37   Town Center Streets - 80th Ave, SE 29th and 32nd               Town Center Street Reconstruction            0           0          0          0       100         647             0       747           0       747             0           0          0          0           0           0      747
          38   Town Center Streets - Overlay                                  Town Center Street Reconstruction            0           0          0      680             0           0           0       680           0       680             0           0          0          0           0           0      680
   Funded - New Project
          39 Chip Seal Pilot Project                                          Annual Street Maintenance Program            0      102             0          0           0           0           0       102           0       102             0           0          0          0           0           0      102

Total Streets, Pedestrian and Bicycle costs                                                                          1,175        685       1,741      2,246       2,084       2,315        996       10,067           0    10,067            0           0           0          0       0               0   10,067



               LEGEND:
               Projects included in the 2011-2012 Preliminary Budget are shown in bold text with gray background.




_____________________________
City of Mercer Island 2011-2012 Budget                                                                                                                                                                                                                                                                                 H-13
Capital Improvement Program

General Government                                                                                                                        Project Costs (in thousands)                                                                         Source of Funds (in thousands)
                                                            Project Description                                 2010        2011       2012       2013        2014        2015        2016        Total     REET       Street       Utilities General      Fees        Contrib's Grants       Other       Total

   Funded - No Changes
          40   Fuel Clean Up                                                      Other Equipment                      70      74         75              0           0           0           0      149           0            0          0           0           0          0           0      149         149
          41   Firefighting Equipment                                             Small Technology/Equipment           35      36         35             35          36          36          35      213           0            0          0        213            0          0           0           0      213
          42   Computer Equipment Replacements                                    Technology                       102        120         70         143         188         143             85      749           0            0          0           0       749            0           0           0      749
          43   Website Redesign                                                   Technology                           35          0      15             0           15          0           0        30           0            0          0          30           0          0           0           0       30
          44   Technology Strategic Plan                                          Technology                            0          0          0           0           0           0          75       75           0            0          0          75           0          0           0           0       75
          45   Server Upgrades                                                    Technology                           25          0          0           0          50           0           0       50           0            0          0          50           0          0           0           0       50
   Funded - Modified
          46   Fleet Replacements                                                 Other Equipment                  254        913        616         525         415         755         841        4,065          0            0          0           0     4,065            0           0           0     4,065
          47   City Hall Building Repairs                                         Public Buildings                     71      79         52         199         188         142         188         848      848               0          0           0           0          0           0           0      848
          48   Maintenance Building Repairs                                       Public Buildings                     71      53         12             85          95      199         102         546      136               0        410           0           0          0           0           0      546
          49   Thrift Shop Repairs                                                Public Buildings                     57      14         22             44          51          41          30      202           0            0          0           0           0        202           0           0      202
          50   North Fire Station Repairs                                         Public Buildings                 113         35         54             83          53          88          79      392      392               0          0           0           0          0           0           0      392
          51   South Fire Station Repairs                                         Public Buildings                     11      22         15             24          32          31          28      152      152               0          0           0           0          0           0           0      152
          52   Luther Burbank Admin Building Repairs                              Public Buildings                     48      46         48             57          41          40          36      268      268               0          0           0           0          0           0           0      268
          53   Community Center Building Repairs                                  Public Buildings                     49     132         88             71          67          48          48      454      454               0          0           0           0          0           0           0      454
          54   High Accuracy Orthophotos                                          Technology                            0          0      45             0            0          30          0        75           0            0          0          75           0          0           0           0       75
          55   Financial System Upgrades                                          Technology                           30          0          0          25           0           0           0       25           0            0          0          25           0          0           0           0       25
          56   CIP Database Enhancements                                          Technology                            0          0          0          50           0           0           0       50           0            0          0          50           0          0           0           0       50
          57   Mobile Asset Data Collection                                       Technology                            0          0          0          60           0           0           0       60           0        10            20          30           0          0           0           0       60
          58   Maintenance Management System Refresh                              Technology                            0          0      10             0           20      150             0       180           0            0          0        180            0          0           0           0      180
          59   Document Management                                                Technology                           73      65         65             70          70           0           0      270           0            0          0        270            0          0           0           0      270
   Funded - New Project
          60   Fuel System Update                                                 Technology                            0      10             0          0           0           0           0        10           0            0          0           0          10          0           0           0       10
          61   Self Contained Breathing Apparatus Replacement                     Small Technology/Equipment           0           0          0          55          55          65          65      240           0            0          0        240            0          0           0           0      240
          62   CCMV Technology & Equipment Replacement                            Small Technology/Equipment            0      31         31             32          32          42          42      210           0            0          0        210            0          0           0           0      210
          63   Phone System Upgrades                                              Technology                           0           0          0          15          15          15          15       60           0            0          0          60           0          0           0           0       60

Total General Government costs                                                                                   1,044       1,630      1,253      1,573       1,423       1,825       1,669       9,373     2,250          10          430       1,508      4,824         202        0          149       9,373




Sewer Utility                                                                                                                             Project Costs (in thousands)                                                                         Source of Funds (in thousands)
                                                            Project Description                                 2010        2011       2012       2013        2014        2015        2016        Total     REET       Street       Utilities General      Fees        Contrib's Grants       Other       Total

   Funded - No Changes
          64 Sewer System Emergency Repairs                                       Sewer System Rehabilitation          50      50         50             50          50          50          50      300           0            0        300           0          0           0           0           0      300
   Funded - Modified
          65   General Sewer System Improvements                                  Sewer System Improvements        180        434        515         500         200         844         757        3,250          0            0      3,250           0           0          0           0           0     3,250
          66   Sanitary Sewer System Telemetry                                    Sewer System Improvements        150         50             0          0            0          0           0        50           0            0         50           0           0          0           0           0       50
          67   Sewer System Generator Replacement                                 Sewer System Rehabilitation          70          0     140             0       150             0       160         450           0            0        450           0           0          0           0           0      450
          68   Sewer System Pump Station Repairs                                  Sewer System Rehabilitation          50      55         55             60          60          65          65      360           0            0        360           0           0          0           0           0      360
   Funded - New Project
          69 East Mercer Way Sewer Replacement                                    Sewer System Improvements             0          0          0          75      500              0           0      575           0            0        575           0           0          0           0           0      575

Total Sewer Utility costs                                                                                         500         589        760        685         960         959        1,032       4,985           0            0      4,985          0           0           0       0               0    4,985




                                                                                                                                                                                                                                                                       _____________________________
H-14                                                                                                                                                                                                                                                                   City of Mercer Island 2011-2012 Budget
Capital Improvement Program

Storm Drainage Utility                                                                                                                           Project Costs (in thousands)                                                                         Source of Funds (in thousands)

                                                          Project Description                                          2010        2011       2012       2013        2014        2015        2016        Total     REET       Street       Utilities General      Fees       Contrib's Grants       Other       Total

   Funded - No Changes
          70 Neighborhood Drainage Improvements                                 Neighborhood Drainage Improvements            60      70         70             80          80          90          90      480           0            0        480           0          0          0           0           0      480
   Funded - Modified
          71   Storm Water System Replacements                                  Other Storm Drainage System Projects          70      65        251             0            0          0            0      316           0            0        316           0          0          0           0           0      316
          72   Conveyance System Improvements (2013-2016)                       Other Storm Drainage System Projects           0          0          0          70      380             20      480         950           0            0        950           0          0          0           0           0      950
          73   Storm Water Basin Improvements (2013-2016)                       Watercourse Projects                           0          0          0      819         475         890         442        2,626          0            0      2,626           0          0          0           0           0     2,626
          74   Medium/Large Basin and Conveyance System Impvmts.                Watercourse Projects                           0      70        713             0            0          0            0      783           0            0        783           0          0          0           0           0      783
          75   Sub Basin 6.3 Watercourse Stablization Project                   Watercourse Projects                          75     995             0           0           0           0           0      995           0            0        995           0          0          0           0           0      995

Total Storm Drainage Utility costs                                                                                       205        1,200      1,034       969         935        1,000       1,012       6,150           0            0      6,150          0           0          0       0               0    6,150



Water Utility                                                                                                                                    Project Costs (in thousands)                                                                         Source of Funds (in thousands)

                                                          Project Description                                          2010        2011       2012       2013        2014        2015        2016        Total     REET       Street       Utilities General      Fees       Contrib's Grants       Other       Total

   Funded - No Changes
          76 Water Model Updates/ Fire Flow Analysis                            Other Water System Projects                    0          0      20             0           25          0           20       65           0            0         65           0          0          0           0           0       65
          77 Water System Plan Update                                           Other Water System Projects                    0          0          0          60          60           0           0      120           0            0        120           0          0          0           0           0      120
          78 Hydrants and Other Water System Components                         Water System Improvements                     55      60         60             65          65          65          65      380           0            0        380           0          0          0           0           0      380
   Funded - Modified
          79   Meter Replacement Program                                        Other Water System Projects                   25      40         40             45          45          45          45      260           0            0        260           0          0          0           0           0      260
          80   First Hill Water System Improvements                             Undersized Main Replacement Program            0     200       1,200            0            0          0            0     1,400          0            0      1,400           0          0          0           0           0     1,400
          81   88th Ave. SE & 86th Ave SE Water System Impvmts.                 Undersized Main Replacement Program            0          0          0      100         471              0           0      571           0            0        571           0          0          0           0           0      571
          82   Sandy Cove Water System Improvement                              Undersized Main Replacement Program           0      348             0          0            0          0            0      348           0            0        348           0          0          0           0           0      348
          83   ICW/SE 40th to 86th Ave Water System Impvmts.                    Water System Improvements                     0           0     112         528             0           0           0       640           0            0        640           0          0          0           0           0      640
          84   EMW 5400 to 6000 Block Watermain & PRV Stations                  Water System Improvements                      0          0          0      129         723              0           0      852           0            0        852           0          0          0           0           0      852
          85   Mercerwood Drive Water Main Replacement                          Water System Improvements                     0           0          0          0       138         785              0      923           0            0        923           0          0          0           0           0      923
   Funded - New Project
          86   97th Ave SE 2-in Galvanized Watermain Replacement                Undersized Main Replacement Program            0      39             0          0            0          0            0       39           0            0         39           0          0          0           0           0       39
          87   Mercerwood Neighborhood Water System Improvements                Undersized Main Replacement Program           0           0          0          0            0      198       1,113        1,311          0            0      1,311           0          0          0           0           0     1,311
          88   93rd Ave and SE 72nd St Water Main Replacement                   Undersized Main Replacement Program           0           0          0          0            0          0       155         155           0            0        155           0          0          0           0           0      155
          89   Watermain Replacement Projects (2013-2016)                       Undersized Main Replacement Program           0           0          0          0            0      335         381         716           0            0        716           0          0          0           0           0      716
          90   85th Ave SE Watermain Replacement                                Water System Improvements                     0           0          0      481              0          0            0      481           0            0        481           0          0          0           0           0      481
          91   ICW/86th Ave to 53rd Pl Water System Impvmts.                    Water System Improvements                     0      302             0          0            0          0            0      302           0            0        302           0          0          0           0           0      302
          92   Street Related Water CIP Projects                                Water System Improvements                     0      148         65             0       128         250         250         841           0            0        841           0          0          0           0           0      841

Total Water Utility costs                                                                                                 80        1,137      1,497      1,408       1,655       1,678       2,029       9,404           0            0      9,404          0           0          0       0               0    9,404


Total Capital Reinvestment Plan                                                                                         3,713       5,948      7,480      8,499       8,447       8,699       8,671      47,744     7,549      10,077       20,969       1,508      5,583        202       45        1,811      47,744




_____________________________
City of Mercer Island 2011-2012 Budget                                                                                                                                                                                                                                                                                    H-15
Capital Improvement Program
Capital Facilities Plan

Parks, Recreation and Open Space                                                                                                                  Project Costs (in thousands)                                                                         Source of Funds (in thousands)

                                                           Project Description                                          2010        2011       2012       2013        2014        2015        2016        Total     REET       Street       Utilities General      Fees       Contrib's Grants       Other       Total
   Funded - No Changes
          93 Regional Trail Connections (KC Prop 2 Levy)                         Parks Improvements                            72      72         73             75           0           0           0      220           0            0          0           0          0          0           0      220         220

Total Parks, Recreation and Open Space costs                                                                               72          72         73         75              0           0           0       220           0            0         0           0           0          0       0          220         220



Streets, Pedestrian and Bicycle costs                                                                                                             Project Costs (in thousands)                                                                         Source of Funds (in thousands)
                                     Project Description                                                                2010        2011       2012       2013        2014        2015        2016        Total     REET       Street       Utilities General      Fees       Contrib's Grants       Other       Total

   Funded - No Changes
          94 Safe Route to School                                                Pedestrian and Bicycle Facilities              0     100             0      100              0           0           0      200           0       200             0           0          0          0           0           0      200
   Funded - Modified
          95 Guardrail Development                                               Other Transportation Projects                 25          0      25             0           25           0           0       50           0        50             0           0          0          0           0           0       50
          96 Pedestrian and Bicycle Facilities Plan Implementation               Pedestrian and Bicycle Facilities             35      45         45             45          45          45          45      270           0       270             0           0          0          0           0           0      270
          97 East Mercer Way Shoulders, Phase 7 - 9                              Pedestrian and Bicycle Facilities         263        305             0      326              0      353              0      984           0       984             0           0          0          0           0           0      984
   Funded - New Project
          98 SE 53rd Place PBF Improvement                                       Pedestrian and Bicycle Facilities              0          0          0           0           0           0      260         260           0       260             0           0          0          0           0           0      260
   Unfunded or Partially Funded
          99 Pedestrian and Bicycle Facilities Plan Implementation               Pedestrian and Bicycle Facilities              0          0     100             0           0           0           0       100           0            0          0           0          0          0           0      100         100

Total Streets, Pedestrian and Bicycle costs                                                                               323         450        170        471          70         398         305        1,864           0     1,764            0           0           0          0       0          100       1,864



General Government                                                                                                                                Project Costs (in thousands)                                                                         Source of Funds (in thousands)
                                                           Project Description                                          2010        2011       2012       2013        2014        2015        2016        Total     REET       Street       Utilities General      Fees       Contrib's Grants       Other       Total

   Funded - No Changes
        100 Small Technology/Equipment Items                                     Small Technology/Equipment                    50      50         50             50          50          50          50      300           0            0          0        300           0          0           0           0      300
   Funded - Modified
        101 City Information via Web Based GIS                                   Technology                                    30      10             0          10           0          10           0       30           0            0          0          30          0          0           0           0       30
   Funded - New Project
        102 South End Emergency Shelter                                          Public Buildings                               0      80             0          0           0           0           0        80           0            0          0          45          0         35           0           0       80
   Unfunded or Partially Funded
        103 Fire Station 92 Replacement                                          Public Buildings                              20          0          0      460       4,140              0           0     4,600          0            0          0           0          0          0           0     4,600       4,600

Total General Government costs                                                                                            100         140         50        520        4,190         60          50        5,010           0            0         0         375           0         35       0        4,600       5,010



Storm Drainage Utility                                                                                                                            Project Costs (in thousands)                                                                         Source of Funds (in thousands)
                                                           Project Description                                          2010        2011       2012       2013        2014        2015        2016        Total     REET       Street       Utilities General      Fees       Contrib's Grants       Other       Total

   Funded - Modified
        104 Low Impact Development Opportunity Projects                          Other Storm Drainage System Projects           0      50        250             0           0           0           0       300           0            0         75           0          0          0      225              0      300


Total Storm Drainage Utility costs                                                                                             0       50        250             0           0           0           0       300           0            0        75           0           0          0     225               0      300


Total Capital Facilities Plan                                                                                             495         712        543       1,066       4,260        458         355        7,394           0     1,764           75         375           0         35     225        4,920       7,394


Grand Total                                                                                                              4,208       6,660      8,023      9,565      12,707       9,157       9,026      55,138     7,549      11,841       21,044       1,883      5,583        237      270        6,731      55,138




                                                                                                                                                                                                                                                                              _____________________________
H-16                                                                                                                                                                                                                                                                          City of Mercer Island 2011-2012 Budget
CAPITAL
IMPROVEMENT PROGRAM
Individual Project Sheets
Capital Improvement Program




H-18                          _________________________________
                                  City of Mercer Island 2011-2012 Budget
                                                               Capital Improvement Program
                        Open Space - Vegetation Management
  Project Manager: P. West                          Approved ID      WP122R           Total Exp (thousands): $ 2,799


  Project Description: Provide vegetation management and minor trail improvements in existing open space areas
                       consistent with 2004 Open Space Vegetation Plan and Pioneer Park Forest Management Plan
                       (updated in 2009). Revenues and expeditures reflect the 2008 Parks Levy which contributes
                       $142,000 each year for these programs.




   Project Image/Map:




         Business Need: Meet plan goals for removal of invasive species and restoration of parks and open spaces;
                        improve recreation; address tree liabilities.



   Existing Conditions: Forty-three percent (43%) of open space is heavily invaded by non-native plants that will cause
                        loss of the forest. Tree canopy is declining in certain areas because of competition from invasive
                        plants, root disease and normal attrition.

  Prior Council Review: AB 3818 12/15/03, AB 3922 10/4/04, AB 4053, AB 4399


 Expenditure ($1,000's)
 Description                                 2010       2011      2012        2013       2014     2015       2016       Total
 Parks Repairs                                357        315       268          346       360      374        389       2052
 Project Management                            87        107       110          125       130      135        140        747
 Total                                        444        422       378          471       490      509        529       2799
 Revenue ($1,000's)
 Description                                2010        2011      2012         2013      2014     2015       2016       Total
 Other                                        142        142       142          142       142      142        142        852
 REET 1                                       302        280       236          329       348      367        387       1947
Project Duration
Staff Responsible: Paul West                        Start Date: 01/03/2011                  End Date: 12/31/2012
Labor Hours: 1,560                                                           Public Involvement:      As Needed



City of Mercer Island 2011-2012 Budget                                                                                  H - 19
Capital Improvement Program
                    Luther Burbank Minor Park Improvements
 Project Manager:        J. Kintner                 Approved ID XP710R                Total Exp (thousands): $ 660


  Project Description: Repairs and minor improvements to Luther Burbank Park infrastructure, equipment and amenities
                       consistent with the 2008 Parks Levy, and the 2006 Luther burbank Park Master Plan.




   Project Image/Map:




         Business Need: On a recurring basis equipment, facilities and amenities must be repaired or replaced as they
                        reach the end of their useful lifecycle.



   Existing Conditions: Roads, sports courts, turf areas, restrooms, off-leash area, facilities, parking lots, trails and
                        shoreline have suffered from extended deferred maintenance. These areas need ongoing minor
                        repair.

 Prior Council Review: AB 3796 (9/2/03); 2009 - 2010 Budget


 Expenditure ($1,000's)
 Description                                 2010       2011      2012        2013      2014       2015      2016       Total
 Parks Repairs                                100        100       100          100       100       100       100           600
 Project Management                            10         10        10           10        10        10        10            60
 Total                                        110        110       110          110       110       110       110           660
 Revenue ($1,000's)
 Description                                 2010       2011      2012         2013      2014      2015      2016       Total
 Other                                        110        110       110          110      110        110       110           660
Project Duration
Staff Responsible: Jason Kintner                    Start Date: 01/01/2011                  End Date: 12/31/2012
Labor Hours: 200                                                             Public Involvement:      Not Applicable




H - 20                                                                                City of Mercer Island 2011-2012 Budget
                                                               Capital Improvement Program
                                       Recurring Park Projects
  Project Manager: J. Kintner                       Approved ID      WP720R           Total Exp (thousands): $ 720


  Project Description: Construct kiosks, replace signage, perform emergency repairs, purchase park furnishings, and
                       make trail improvements, building and other repairs.




   Project Image/Map:




         Business Need: Park infrastructure must be maintained to ensure safety and functionality.




   Existing Conditions: On a recurring basis equipment, facilities and amenities must be repaired or replaced as they
                        reach the end of their useful lifecycle.


  Prior Council Review: 2009 - 2010 Budget


 Expenditure ($1,000's)
 Description                                 2010       2011      2012        2013       2014        2015   2016        Total
 Parks Repairs                                110        110       110          110       110        110     110         660
 Project Management                            10         10        10           10        10         10      10          60
 Total                                        120        120       120          120       120        120     120         720
 Revenue ($1,000's)
 Description                                 2010       2011      2012         2013      2014        2015   2016        Total
 REET 1                                       120        120       120          120       120        120     120         720
Project Duration
Staff Responsible: Parks Maintenance                Start Date: 01/01/2011                  End Date: 12/31/2012
Labor Hours: 270                                                             Public Involvement:      Not Applicable




City of Mercer Island 2011-2012 Budget                                                                                  H - 21
Capital Improvement Program
                           Homestead - Minor Improvements
 Project Manager:       J. Kintner                 Approved ID WP106R                Total Exp (thousands): $ 318


  Project Description: Replace playground equipment. Make minor upgrades to facility that are consistent with
                       Homestead master plan.




   Project Image/Map:




         Business Need: Replace worn equipment or park amenities, make repairs to pathways and tennis court area and
                        make additions to the ballfield that are consistent with the master plan.



   Existing Conditions: Increased ballfield use and requests for added amenities. Equipment is worn and outdated.



 Prior Council Review: None


 Expenditure ($1,000's)
 Description                               2010        2011      2012        2013      2014       2015      2016      Total
 Construction                                  0          0        60          225         0         0         0        285
 Project Management                            0          0         8           25         0         0         0         33
 Total                                         0          0        68          250         0         0         0        318
 Revenue ($1,000's)
 Description                               2010        2011      2012         2013      2014      2015      2016      Total
 REET 1                                        0          0        68          250         0         0         0        318
Project Duration
Staff Responsible: Jason Kintner                   Start Date: 01/01/2012                  End Date: 09/30/2012
Labor Hours: 100                                                            Public Involvement:      As Needed




H - 22                                                                               City of Mercer Island 2011-2012 Budget
                                                                 Capital Improvement Program
                        Island Crest Park Minor Improvements
  Project Manager: J. Kintner                         Approved ID     WP107R            Total Exp (thousands): $ 68


  Project Description: Replace playground equipment that is at the end of its useful life cycle and make improvements to
                       meet existing demand at the park.




   Project Image/Map:




         Business Need: Playground equipment is at the end of its useful life cycle.




   Existing Conditions: Playground equipment no longer in compliance with American Society for Testing Standards
                        (ASTM) and Consumer Product Safety Commission (CPSC) guidelines.


  Prior Council Review: None


 Expenditure ($1,000's)
 Description                                  2010        2011      2012        2013       2014     2015     2016     Total
 Construction                                     0          0        59            0         0        0        0          59
 Project Management                               0          0         9            0         0        0        0           9
 Total                                            0          0        68            0         0        0        0          68
 Revenue ($1,000's)
 Description                                  2010        2011      2012         2013      2014     2015     2016     Total
 REET 1                                           0          0        68            0         0        0        0          68
Project Duration
Staff Responsible: Jason Kintner                      Start Date: 02/01/2012                  End Date: 06/30/2012
Labor Hours: 100                                                               Public Involvement:      As Needed




City of Mercer Island 2011-2012 Budget                                                                                H - 23
Capital Improvement Program
                                      Minor Park Improvements
 Project Manager:        J. Kintner                 Approved ID WP721R                Total Exp (thousands): $ 1,487


  Project Description: Make minor repairs to the childrens wading pool at Clarke Beach.




   Project Image/Map:




         Business Need: The childrens wading pool at Clarke Beach needs minor repairs for safety.




   Existing Conditions: Worn and outdated equipment which requires repair and improvements. Hardened bulkheads
                        at street ends could be improved for recreation and habitat.


 Prior Council Review: None


 Expenditure ($1,000's)
 Description                                2010        2011      2012        2013      2014       2015      2016      Total
 Design Services                                0          0         0           85        20        10        20        135
 Parks Repairs                                  0          0         0          440       448        85       228       1201
 Project Management                             0          8         0           59        52         5        27        151
 Total                                          0          8         0          584       520       100       275       1487
 Revenue ($1,000's)
 Description                                2010        2011      2012         2013      2014      2015      2016      Total
 REET 1                                         0          8         0          584      520        100       275      1487
Project Duration
Staff Responsible: Jason Kintner                    Start Date: 01/01/2011                  End Date: 11/15/2011
Labor Hours: 50                                                              Public Involvement:      Not Applicable




H - 24