2006 budget ForeCast

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					2006 budget ForeCast




downtown yakima   FUTURES INITIATIVE
                           reinvigorating the heart ofYakima
                             2006 budget ForeCast



                                               Employee Benefit
            Equipment Rental 3.0%               Reserves 5.9%

         Water and                                                 Police and Fire 19.8%
    Operating Capital 8.2%                                            (Public Safety)




                                                                            General Admin 3.5%


                                                                            Other General Gov’t.
Wastewater Operating                                                               5.2%
 and Capital 15.9%
                                                                              All Other 4.3%



                                                                       Streets & Engineering 3.9%
       Refuse 2.3%

           Transit 5.1%                                             Parks & Recreation 2.5%

                                                                  Community Development
                                                                          1.4%
                                                                  Debt Service 3.1%
                       Capital Improvements,
                        General Gov’t. 15.9%




                                     $164 Million

                                                                                           Preface — 
 — Preface
                   Mission and Vision stateMents

The City of Yakima's goals and objectives are clearly emphasized in the Mission and Vision
Statements as amended on February 17, 2004.

The mission of the City of Yakima is to govern responsively with leadership that is committed
to: enhancing the quality of life; continually improving services; and embracing the diversity of
our community.

The vision for the City of Yakima is to: build a modern responsive government; provide coop-
erative, diverse leadership; promote a regional approach to services; focus on improving public
infrastructure; and act as a catalyst for economic development.

The following Critical/Strategic Priorities are an extension of the Mission and Vision for the City
of Yakima.



                        2006 YakiMa CitY CounCil
                   strategiC direCtion Priorities

Community image — Build, sustain and strengthen the City’s public image as a clean, safe, attrac-
tive and progressive community which is respected as a desirable place to live and work.

eConomiC improvement — Promote, stimulate and foster economic improvements, investments,
partnerships and job creation to revitalize our economy, maintain fiscal stability and enhance
our prosperity for the future.

regional government ServiCeS — Lead, pursue and encourage opportunities for greater
regionalization and coordination of public services and intergovernmental cooperation which
best serves all citizens.

inCreaSed Community involvement — Improve and strengthen community involvement, citizen par-
ticipation and the understanding and trust of City government through proactive communica-
tions, responsive actions and effective public relations/education programs.




                                                                                          Preface — 
 — Preface
                                      2006 budget ForeCast

                                                      table of Contents



SECTIOn
                    I.          InTRODuCTIOn
                    II.         WhAT YOu PAY AnD WhAT YOu GET
                    III.        GEnERAl GOvERnmEnT
                                a.        year 2005       in   review
                                B.        revenue trendS
                                C.        expenditure trendS
                                d.        revenue     and   expenditure CompariSon
                    Iv.         OThER OPERATInG AnD EnTERPRISE FunDS
                    v.          CAPITAl ImPROvEmEnT FunDS
                    vI.         2006 BuDGET SummARY



ExhIBIT
                    I.          ThREE-YEAR BuDGET COmPARISOn
                    II.         POlICY ISSuE SummARY
                    III.        SuPPlEmEnTAl InFORmATIOn




Cover: Selected images from the Downtown Yakima Futures Initiative, courtesy of Huibregtse, Louman Associates, Inc.




                                                                                                                      Preface — 
 — Preface
                                   mEmORAnDum

                                     October 18, 2005


to:           The Honorable Mayor and
              Members of the City Council

From:         Dick Zais, City Manager
              Rita M. Anson, Finance Director
              Cindy Epperson, Financial Services Manager

SuBjeCt:      2006 Budget Forecast



I-A. TRAnSmITTAl mEmO


We are pleased to present to the City Council and to the citizens of the City of Yakima
the 2006 Budget Forecast. The total proposed 2006 budget for the City of Yakima is $164
million or 3.1% more than the 2005 amended budget. Of that amount, the City’s 2006
General Government budget is $52 million.

The proposed budget is restrained and balanced within existing resources. However,
the 2006 General Government budget does include revenues and expenditures from
the November, 2004 voter approved increase in the sales tax of 0.3% for criminal justice
purposes. This increase will generate approximately $1.5 million dollars for the City’s
criminal justice services in 2006. Excluding the voter-approved sales tax increase, the
City’s General Government budget would be only 2.0% above the 2005 amended budget.

Preparing the annual budget for the City continues to be very challenging, because
current resources are falling short of the costs for delivering City services. The City
budget is significantly impacted from increases in unfunded mandates, higher public
safety/criminal justice costs, negotiated wage and benefit costs for labor, together with
unparalleled price increases for gas, private utilities, insurance, capital equipment and
health care.



                                                            Section I-A. Transmittal Memo — 
    In order to help offset the impact of these cost increases, City Management has
    maintained close supervision, discipline and control over City spending in addition
    to strengthening the efficiency and productivity of City operations. During the 2006
    budget development process, management eliminated $1 million from proposed
    departmental budgets, reprioritized services and implemented several recommendations
    made by the city’s Budget Strategy Team (BST).(1)

    The result of our efforts to keep City spending within existing resources is a fiscally
    conservative budget, which follows the City Council’s Strategic Priorities, maintains and
    enhances essential services to our citizens, invests in the City’s infrastructure and local
    economy and ensures fiscal stability for the next year.




    (1) Note: The Budget Strategy Team is a citizen committee appointed by the City Council to
    examine the City’s General Government budget and related contingency budget reduction
    plan and to provide input to Council regarding community service priorities, including which
    services, if any, should be reduced or eliminated. Their final report was issued to the Council
    and the public on September 30, 2005.

 — Section I-A. Transmittal Memo
ExPEnDITuRE OvERvIEW

The charts below compare the 2006 General Government and Citywide expenditure budgets
with the 2005 amended budgets and the 2005 year-end estimates. (Note: the Bureau of Labor
Statistics has calculated the 2005 rate of inflation (CPI) to be 3% as of August 2005.)




                         GEnERAl GOvERnmEnT ExPEnDITuRE OvERvIEW

                                         2005              2005                              2006 inCreaSe /
                                        year-end          amended             2006              (deCreaSe)
                                        eStimateS         Budget              Budget        over 2005 Budget

 General Government                    $49,651,983       $50,616,013        $52,188,475          3.1%


 00 General Government budget is approximately $52.2 million, compared to the 2005 budget of
 approximately $50.6 million (a 3.1% increase; comparable to the rate of inflation). This increase
 is primarily due to the full year implementation of the new 0.3% Criminal Justice sales tax.

 00 General Government Year-end expenditure estimate of $49,651,983 is approximately 1.9%
 below the amended budget of $50,616,013.




                                  CITYWIDE ExPEnDITuRE OvERvIEW

                                             2005             2005                           2006 inCreaSe /
                                            year-end         amended            2006            (deCreaSe)
                                            eStimateS        Budget             Budget      over 2005 Budget


 Total Citywide Expenditures              $137,502,060     $159,488,185      $164,468,752         3.1%

 Total 00 Proposed Citywide budget is approximately $164.5 million or 3.1% more than the 2005
 amended budget of $159.5 million (again, comparable to the rate of inflation).

 00 Year-end expenditure estimate of $137,502,060 is approximately 13.8% below the amended
 budget of $159,488,185. In addition to strict spending controls, this savings is primarily due to
 the deferral of some capital projects that will not be completed by year-end.

 (Refer to Exhibit I for budget information on each of the City’s funds.)




                                                                          Section I-A. Transmittal Memo — 
    FISCAl OBjECTIvES — The City Council’s Mission, Vision, and Strategic Priorities
    governed the preparation of the 2006 budget. These are the basis upon which fiscal
    plans and strategies for the new budget were developed. The City’s Mission, Vision
    and Strategic Priorities were updated in July 2004 by the City Council. (Refer to
    front section before the first tab for the City’s current mission, vision and strategic
    priorities.)

    in addition to addreSSing the CounCil’S prioritieS and oBjeCtiveS, the 2006 Budget:
    1. Presents a balanced spending plan for operating and capital budgets that follows municipal
       service levels and priorities set by the City Council and is in compliance with budget
       guidelines issued by City Management.

    2. Preserves minimum operating cash flow reserves and allocates necessary funds for non-
       discretionary fixed, mandated and contractual costs.

    3. Includes cost reductions and operational efficiencies to offset potential revenue shortfalls
       and maintain a balanced budget.

    4. Incorporates the City’s Six-Year Capital Facilities Plan for Utilities, Streets, Parks, Public
       Safety, and Community and Economic Development projects.




 — Section I-A. Transmittal Memo
I-B. CITY’S FISCAl COnDITIOn - OvERvIEW


thiS SeCtion iS Broken into the Following CategorieS:

                                        GEnERAl OvERvIEW
                                         FuTuRE OuTlOOk
                                      COnTInGEnCY PlAnnInG


GEnERAl OvERvIEW
The City has responded to the community’s many fiscal challenges in a focused, proactive man-
ner. In 2003 the City Council set a new Strategic Direction for the City; stating that the City’s
top four priorities are (1) Increased Community Involvement, (2) Economic Improvement, (3)
Community Image , and (4) Regional Government Services. In support of this new direction,
City management staff has placed significant emphasis on these four primary areas during the
budget planning process. And, of course, cost containment is a major consideration in all plan-
ning and budgeting decisions. (See following pages for information on each of these four areas
of focus.)

1. Budget FoCuS — inCreaSed Community involvement
In 2004, the City Council and staff formed a Budget Strategy Team (BST) and appointed resi-
dents and business owners from the Yakima community who volunteered to work together
in an effort to examine the City’s general government budget and related contingency budget
reduction plan and to provide input to the City Council and staff regarding community service
priorities, including which services should be reduced or eliminated, if necessary, to maintain
a balanced budget. Additionally, the team was asked to share the results of their study with the
community upon completion. (Note: the Contingency Budget Reduction Plan was prepared by
staff and identifies what services would be reduced or eliminated, and in what priority order,
should the City’s fiscal condition require an immediate and severe reduction in expenditures in
order to maintain a balanced budget.)

The BST held their first meeting in July of 2004 and continued to meet approximately once a
week through September of 2005. Their review of all general government divisions was an
important and extremely time intensive task. The BST met with every General Government
Department, reviewed numerous reports and other information, researched issues and options
on their own, studied the staff‘s contingency budget reduction plan of each department and
discussed and debated the impacts of each potential budget reduction. Additionally, during
their 15-month study, the BST explored alternative strategies to curtail expenses and/or increase
revenues. The team completed this formidable task and presented their findings and recom-
mendations to the City Council and to the public at a Council Study Session held on September
30, 2005.

The Budget Strategy Team’s final report stated:
      “The BST team has determined that the City is well managed, and is providing
      critical services to our community in an efficient and cost effective manner. We
      therefore recommend no large service or expenditure reductions at this time.
      However, it has also become clear to us that the City may be forced to eliminate

                                                        Section I-B. City’s Fiscal Condition - Overview — 
             services in the near future if the cost of providing those services continues to
             increase faster than does the related revenue.”
    The BST report to Council includes their recommendations (approved/ rejected/modi-
    fied) relative to staff’s budget reduction proposals as included in the Contingency Budget
    Reduction Plan as well as providing some additional recommendations to Council for
    both budget reductions and for revenue enhancements.

    (Refer to the “Budget Strategy Team Final Report and Recommendations” dated September 30,
    2005 for more information regarding their findings and recommendations to Council. A copy of
    staff’s Contingency Budget Reduction Plan and of the BST’s final report may be obtained from
    the City Clerk’s office upon request.)


    2. Budget FoCuS — eConomiC improvement
    The City is tackling Council’s economic improvement directive through many varied efforts
    including economic development, annexation, tourism, infrastructure investments and public/
    private partnerships. The City has made a strong commitment to assisting the private sector
    in revitalizing the local economy through supporting economic development, spurring growth,
    promoting tourism and by investing millions of dollars in the local economy. The City is con-
    tinually working on, and looking for, new ways to grow the economy and strengthen the City’s
    fiscal condition; some of the City’s significant , recent efforts are noted below.

    a. Economic Improvement — Economic Development/Downtown Revitalizion: In order for
       the City to continue to provide the existing level of basic and essential services, growth must
       occur, allowing for an expansion of the tax base. Without growth, taxes and/or charges for
       services would need to increase in order for the City to continue to provide today’s level of
       service in the future. Some of the City’s recent successes in growth through Economic Devel-
       opment include:

       •   During the 2005 legislative session, a dedicated group of community members, led by
           City Council , secured nearly $5 million for Phase 1 of the 4-year, $17.5 million “Down-
           town Yakima Futures Initiative”.

       •   Received the Federal designation of “Renewal Community” which encourages economic
           development by providing tax incentives for creating jobs in Yakima.

       •   Established a Housing and Urban Development (HUD) Section 108 loan program for job
           creation in the targeted area (primarily east of 16th Ave.)

       •   Developed Public/Private partnerships for economic development, examples include:

           •   Exhaustive negotiations with a Yakima developer in the Spring of 2005 resulted in
               the City Council approving a public/private investment package to fund construc-
               tion of the Downtown Yakima Hilton Garden Inn Hotel. A $3.5 million, low-interest
               “Section 108 HUD” loan is a key element to this funding package, which totals more
               than $11 million.

           •   Participated in Yakima County’s “Supporting Investment in Economic Development
               (SIED)” program to develop infrastructure for new business.


 — Section I-B. City’s Fiscal Condition - Overview
       •   In 2005, utilizing a portion of its Community Development Block Grant allocation as
           an incentive, the City played a key role in convincing Maytag Corporation to locate a
           customer service call center in Yakima.

b. Economic Improvement — Annexation: Since the 2004 State Supreme Court’s unanimous
   decision which upheld the City’s method of annexation, the City has re-emphasized growth
   through annexation as another tool for growing and strengthening the City’s economic base.

   •   The Englewood Annexation was completed in early 2005, adding more than 1,900 people
       and more than $170 million of assessed value to the City.

   •   The 96th Avenue Annexation was initiated in late summer 2005 and, when completed,
       will add about 1000 people and nearly $62 million of assessed valuation to the City.

c. Economic Improvement — Tourism: The City has also made a strong commitment to tour-
   ism, which brings dollars from outside the area into the Yakima Valley.

   •   The City partnered with business leaders, sports enthusiasts, service clubs and local
       citizens to acquire land and construct a new sports complex at Kiwanis Park in Southeast
       Yakima. Three ball fields at the Gateway Sports Complex are completed; during the 2005
       inaugural season, this facility was booked more than 90% of all weekends between mid-
       March and the end of October with tournaments and other softball activities. A fourth
       ball field is planned for construction in 2006.

   •   In 2004, the lodging industry petitioned the City to establish a Tourist Promotion Area to
       be funded by a fixed assessment per room night. These assessments are earmarked to be
       used exclusively to promote Yakima as a tourism destination.

   •   Phase I of the expansion to the Yakima Valley Sun Dome was completed in 2004; the City
       contributed approximately $1.4 million to this expansion effort. This expansion was a
       dedicated effort to continue – and increase – the draw of amateur sports tournaments to
       Yakima.

d. Economic Improvement - City’s Own Investments in the Community — Over the past few
   years the City has made several significant investments in the local economy:

   •   Investments in Infrastructure — The City has plans for several significant multi-million
       dollar construction projects over the next several years, including: over $12 million for
       wastewater capital projects (construction began in 2005); $9 million for water capital proj-
       ects; $10 million for the irrigation rebuild project (construction began in 2004); $30 mil-
       lion for the railroad underpass project; and over $12 million in several currently funded
       street projects (many in-progress.)

   •   The first phase of the expansion and improvement of Washington Avenue was complet-
       ed in 2005. The next phase of the project is in the design stage. Ultimately, an expanded
       and improved Washington Avenue will be a critical element of an East/West “beltway”
       that will spur economic development along its route and ease congestion for City resi-
       dents.

                                                  Section I-B. City’s Fiscal Condition - Overview — 
        Over $50 million of funding for current and planned projects comes from Federal or State
        Grants; thereby significantly lessening the burden on our local citizens who need these
        infrastructure upgrades but could not otherwise afford this level of investment. The mag-
        nitude of these investments will provide a substantial economic boost to the local economy
        — creating jobs and stimulating growth.


    3. Budget FoCuS — Community image
    The City has committed to build, sustain and strengthen the City’s public image as a clean, safe,
    attractive and progressive community which is respected as a desirable place to live and work.

    •   Plans are moving forward based on the City Council’s commitment to re-invest $250,000,
        made available through the closure of Miller Pool and Eisenhower Pool this year and Wash-
        ington Pool next year, to develop new basketball courts and a “sprayground” at Miller Park
        and to install a “sprayground” at Dr. Martin Luther King, Jr. Park in 2006.

    •   Significant strides have been made in 2005 that will ultimately result in the investment of
        nearly $900,000 in additional improvements to the Gateway Sports Complex at Kiwanis Park.
        The improvements will continue the substantial enhancement of a highly-visible area direct-
        ly adjacent to Interstate 82 and near one of the City’s primary freeway entrances.

    •   The Police Department’s “Gang Unit” was established in 2004 and has proven instrumental
        in solving several major gang-related crimes in 2005 and is helping to suppress gang activity
        in the community.

    •   In 2005, the City’s “Paint Out Graffiti” program has cleaned up more that 3,000 sites that had
        been hit with graffiti. The City has spent $9500 on this program this year; however a nearly
        equal amount in paint has been donated along with volunteer labor valued at more than
        $12,000, which has been critical to the success of this program.

    •   In 2004, the City Council passed a “boarded-up-buildings” ordinance and since that time 26
        dangerous buildings have either been torn down, rehabilitated or are currently being reha-
        bilitated.


    4. Budget FoCuS — regional government ServiCeS
    The City is committed to lead, pursue and encourage opportunities for greater regionalization
    and coordination of public services and intergovernmental cooperation which best serves all
    citizens of our community.

    •   A first–of-its-kind agreement was reached with West Valley Fire District No. 12 earlier this
        year under which the Yakima Fire Department and Fire District No. 12 will co-locate at the
        fire station on Tieton Drive and 77th Avenue. Through the cooperative agreement, optimum
        fire protection services are now provided in the most urban portions of West Valley area.

    •   In 2004 and 2005, the City and Yakima County worked together to identify and communi-
        cate the critical criminal justice needs within the community and to provide enhanced ser-
        vices to citizens through the utilization of funding from the November 2004 voter approved
        initiative to increase the sales tax rate for criminal justice purposes.

 — Section I-B. City’s Fiscal Condition - Overview
•   In August 2005, the City signed an agreement with the City of Union Gap to house Union
    Gap inmates in the Yakima Municipal jail. The cost of keeping inmates in Yakima’s jail is
    less expensive for Union Gap than housing inmates in the Yakima County jail.

•   Early in 2005, the City and Yakima County reached an agreement under which management
    and oversight of the City’s probation services is now provided by the County. Work is cur-
    rently underway to fully consolidate City and County probation services.

•   Early in 2005, the City Council authorized investment of $75,000 to evaluate the feasibility of
    a regional aquatics center, which would potentially be funded by the City and neighboring
    communities.




                                                  Section I-B. City’s Fiscal Condition - Overview — 
    ThE FuTuRE OuTlOOk
    While the 2006 Budget Forecast is balanced within existing resources, as required by law, the
    City will continue to be fiscally challenged in our ability to provide basic, core and essential
    services to our citizens within current revenues.

    The on-going depressed state of the local economy, which places increased pressure and de-
    mands for City services, coupled with continued restrictions in revenue growth from previ-
    ously approved voter initiatives seriously limit the City’s ability to continue to provide essential
    services into the future. The situation is further compounded by the expansion in new and
    existing unfunded mandates and contractual responsibilities and rising private sector expenses
    that continue to increase the City’s operating costs, (examples include: criminal justice, property
    and liability insurance, and environmental regulations, health care, financial reporting require-
    ments, equipment and higher labor, fuel and utility costs). These factors significantly affect the
    future financial stability of the City’s General Government funds.

    The following charts depict the impact on the City’s fiscal resources that these factors have had
    in the past few years and that they could have in the future, over the next three years, should no
    corrective action be taken.


    Assumptions underlying the charted projections on the next page:

    •   The 2006 projections are based on the City’s proposed 2006 budgeted revenues and expendi-
        tures.

    •   2007 and 2008 expenditures are estimated to increase by 3.5% annually (known changes
        were inserted, if applicable.)

    •   2007 and 2008 Property Tax Revenues are estimated to increase 1% annually (per maximum
        allowed under I-747) plus 1% growth. Additionally, Property tax revenue projections have
        been adjusted for recent annexations.

    •   2007 and 2008 General Government revenue growth is estimated to be (a) 2.5% sales tax rev-
        enue per year, (b) 3% Utility tax per year and (c) 2% for all other revenues.

    Note: In order to identify the fiscal impacts these factors would have on the City if left un-
    checked, this scenario assumes no action is taken to offset the above impacts on revenues and
    expenditures, even though the City would (and is required by law to) maintain a balanced an-
    nual budget.




0 — Section I-B. City’s Fiscal Condition - Overview
                                            City of Yakima

                              General Government
                               general government
                               History/Projection
                                   hiStory/projeCtion
                                       2002 - 2008 Forecast
                                    2002 - 2008 Forecast


                             A. Expenditures and Resources
$60,000,000
                                                                                         General Government
                                                                                         Revenue Projections
$55,000,000

                                                                                         General Government
$50,000,000                                                                              Expenditures

$45,000,000                                                                        Excludes Fund Balances

$40,000,000

$35,000,000
         2002       2003       2004     2005 YE      2006        2007        2008
         Actual     Actual     Actual   Estimate   Projected   Projected   Projected




                                  B. Ending Fund Balance
      $10,000,000
       $8,000,000
       $6,000,000
       $4,000,000
       $2,000,000
               $0
      -$2,000,000
      -$4,000,000
      -$6,000,000
      -$8,000,000
     -$10,000,000
     -$12,000,000
                    2002       2003      2004      2005 YE       2006         2007        2008
                    Actual     Actual    Actual    Estimate    Projected    Projected   Projected




                                                    Section I-B. City’s Fiscal Condition - Overview — 
    Future outlook Summary:
    You’ll note on the previous charts, that beginning in 2003, the City has relied on reserves to
    cover expenditures (i.e.: expenditures have exceeded revenues). Without intervention, this situa-
    tion is predicted to continue into the future, as depicted in the 2005 through 2008 projections.

    The impact of increased costs and reduced/restricted revenues becomes greater over time. As a
    result, in the absence of expenditure reductions in basic services, the City would need to utilize
    a greater portion of the general government reserves each year to pay for existing services. The
    City’s reserves have been built up over time and once they are spent, this funding source is
    gone. Once the reserves are depleted, if not before, the City would be forced to reduce costs by
    eliminating services. Part of the City’s current, and prudent, management practices includes
    the conscious efforts to maintain General Government reserves at an amount approximately
    equivalent to one month’s operating costs (e.g.: generally not less than 7%) in its endeavor to en-
    sure that sufficient funding is available to cover unexpected expenditures and/or emergencies,
    including unanticipated revenue shortfalls.

    Again, the future outlook, as depicted in the previous charts, reflects the forecasted outcome
    of the above-described situation in the event that no action is taken to reduce costs or increase
    revenues. Obviously, the City would, in fact, take the necessary actions to prevent a negative bal-
    ance from occurring.


    COST COnTAInmEnT AnD COnTInGEnCY PlAnnInG

    City management’s tight spending controls and conservative approach to fiscal expenditures
    has allowed the City to provide the citizens with the essential services they’ve enjoyed for many
    years, and accommodate the unfunded mandates that have been “levied” on the City by ex-
    ternal sources while funding many capital projects and service enhancements. Additionally,
    the City is investing heavily in the community and is promoting and stimulating growth and
    economic development through numerous and varied projects. This is evidenced by the Budget
    Strategy Team’s (BST) findings that the City is providing critical services to our community in
    an efficient and cost-effective manner.

    However, these efforts alone may not be sufficient to offset the combined effects of declin-
    ing and restricted revenue growth, voter approved elimination/reduction of revenues and the
    higher costs of meeting existing and new mandated and contractual obligations. The negative
    effects of all of these factors could impair the City’s ability to sustain the current level of essen-
    tial, basic City services in the near future. In light of this situation, City management has taken
    the following additional steps to address and prepare for this fiscal challenge:

    a. Staff has prepared for the possibility that a significant reduction in current expenditures
       may be necessary in the near future and has prepared – and previously submitted to Coun-
       cil – a Contingency Budget Reduction Plan.

    b. City management recognizes that significant reductions in general government expendi-
       tures – and therefore, staffing and service levels – are likely to be required in the near future
       in order to maintain a balanced budget and the fiscal stability of the City. To stave off dra-
       matic and painful reductions of staff and service levels, City management is recommending
       a freeze on wages and benefits for all employees in 2007.

 — Section I-B. City’s Fiscal Condition - Overview
These steps will help ensure that the City is prepared for - and is taking appropriate pro-active
steps to minimize - the fiscal challenges that await us in the near future.


SECTIOn 1-B — SummARY
The enclosed Budget Forecast is balanced and presents staff’s 2006 proposed budget of revenues
and expenditures. This Budget Forecast also identifies the City’s current and projected near-
term fiscal status, the significant financial pressures affecting the City’s ability to both maintain
a balanced budget and continue to provide the existing level of essential and customary services
our citizens have long enjoyed and come to expect. Additionally, the Budget Forecast identifies
and discusses the options available to, and the actions taken by, the City for addressing this
financial challenge.

This Forecast is provided to Council and the community as background and information to as-
sist you in your consideration, discussions and, ultimately, Council’s final decisions regarding
the City’s 2006 budget.




                                                  Section I-B. City’s Fiscal Condition - Overview — 
   I-C. 2006 BuDGET hIGhlIGhTS


   This 2006 budget proposal is the result of a process that spans several months and includes
   detailed, in depth reviews and budget discussions with employees in every department of the
   City. As part of this process the City Administration and Budget staff have carefully examined
   all major spending programs and obligations, and implemented cost savings and expenditure
   reductions wherever possible without severely jeopardizing essential services.

   City staff is continually assessing proposals from various legislative, regulatory and political
   bodies, citizen initiatives, citizen groups, etc. in an effort to identify, analyze and prepare the
   City for the impacts that may result should various proposals become a reality. Additionally,
   staff monitors changes in revenue and expenditure trends that, if continued over time, could re-
   duce the City’s ability to continue to provide existing basic and essential services to our citizens.
   This section incorporates an overview of the proposed 2006 budget with a discussion of known
   or anticipated significant changes in the City’s revenues and/or expenditures and the related
   impacts thereof on the City’s fiscal condition over the next few years.


   thiS SeCtion iS Broken into the Following CategorieS:

       1.   Resources
       2.   Expenditures
       3.   Major Capital Projects
       4.   Debt Service Costs
       5.   Changes in Funding (Budget) Authorization
            a. Proposed Staffing Changes
            b. Proposed Policy Issues


   NOTE: This section is meant to provide an overview only, subsequent sections of this document
   provide more detailed information on the 2006 proposed budget within each of the above areas
   (except for a detailed discussion of each policy issue, this will be included in the Preliminary
   Budget; which will be distributed in early November.)

   •   Total 2006 General Government Budgeted Revenues are $50,190,897; vs. 2005 year-end esti-
       mate of $48,544,666 – an increase of approximately $1.6 million or 3.4% over the prior year.

   •   Total City-wide 2006 Budgeted Revenues for all funds, are $148,297,845; vs. 2005 year-end es-
       timate of $133,609,014 - an increase of approximately $14.7 million or 11% over the prior year.

   •   Total General Government 2006 Beginning Cash Reserves are estimated to be $5,688,985 vs.
       the 2005 estimate of $6,796,302, a decrease of $1,107,317 or 16.3%.

   •   Total City-wide 2006 Beginning Cash Reserves are estimated to be approximately $51,865,778
       vs. 2005 actual beginning balance of $55,758,824, a decrease of approximately $3,893,046 or
       7%.



 — Section I-C. 00 Budget Highlights
1. RESOuRCES
The City’s Resources (resources include revenue and cash reserves) are broadly categorized in
the following groups:

    A.   Taxes — Unrestricted and Restricted/Dedicated
    B.   Intergovernmental
    C.   Charges for Services
    D.   Miscellaneous — Fines, Licenses and Permits, Other Revenue/Financing Sources
    E.   Cash Reserves

These resources are utilized to support all City functions and services, including: general gov-
ernment activities; capital projects; debt service requirements; water, wastewater, irrigation and
refuse services, etc. (However, some of these resources are restricted and can only be used on
specified projects/activities.)

Following is an overview of the 2006 budget projections for each of the above categories of re-
sources:


A. TAxES

SAlES TAx
The total of the proposed 2006 Sales Tax budget is $18,823,000; this includes General sales tax,
Criminal Justice sales tax and Transit sales tax revenues.

a. SaleS tax - general (unreStriCted) — This revenue is available for any City purpose; however,
it is primarily utilized to support General Government activities (e.g.: fire, police, municipal
court, finance, human resources, etc.) and is currently the largest revenue source for the City’s
General Fund.

•   2006 Budget is $12,160,000; approximately $240,000 or a 2% increase over the 2005 year-end
    estimate.

•   2005 Year-end Estimate is $11,920,000; approximately $472,173 or 4.1% over actual 2004 levels.

b. SaleS tax - Criminal juStiCe (reStriCted) — This revenue is dedicated to criminal justice related
services such as police officers and equipment, legal personnel and Municipal Court costs.

•   2006 Budget is $2,398,000; approximately $668,000 or a 38.6% increase over the 2005 year-end
    estimate of $1,730,000.

This increase is primarily due to the additional revenues generated by the 0.3% Criminal Justice
Sales Tax increase approved by voters in November 2005. This increase became effective on
April 1, 2005; and the City received its first distribution of these funds in June 2005. Thus 2005
year-end estimate includes seven months ($912,000) from this sales tax increase, while 2006
budget includes one full year, which is approximately $1.5 million.

c. SaleS tax - tranSit ServiCe (reStriCted) — Approved by the voters, this revenue is legally re-
stricted to providing transit services and related costs.

                                                             Section I-C. 00 Budget Highlights — 
   •   2006 Budget is $4,265,000; approximately $85,000 or 2% increase over 2005 year-end estimate.

   •   ·2005 Year-end Estimate is $4,180,000; approximately $139,591 or 3.5% increase over 2004
        actual levels.

   SaleS tax iSSueS / CommentS
   1. Revenue Stability — Due to annexations over the past few years and strong construction
      activity during 2004 and 2005, the City has benefited from stronger than normal sales tax
      revenues. However, new construction has been slowing nationally and is not expected to
      continue at its current pace. Sales Tax revenue, although a critical revenue source for the
      City, is only approximately 28% of total General Government revenue. Thus, even strong
      growth in this significant revenue source would not be sufficient to sustain existing essential
      services in the future given the much weaker growth in other critical City revenues.

   2. Streamlined Sales Tax — There is a move underway in the State Legislature to change the
      basis on which local sales tax revenues are collected. The proposal, known as Streamlined
      Sales Tax (SST), would change sales tax from an origin to a destination based collection
      methodology. This means that taxes would be collected at the point of destination rather
      than at the point of sale, as is the method utilized within the State of Washington today.

       For the past eighteen months, the City has been working closely with other cities around the
       State who, like the City of Yakima, anticipate that their sales tax revenues could be severely
       and negatively impacted by the implementation of SST as it has been proposed during the
       past two legislative sessions. This group of “negatively impacted Cities” has been working
       diligently to ensure that any SST bill that is passed by the State of Washington includes full
       mitigation for any revenue losses that would otherwise occur to cities, counties and other
       impacted jurisdictions without protective language in the bill. After months of negotiations,
       representatives from both cities that anticipate winning and those that anticipate losing rev-
       enues under the previous SST proposals have reached an agreement, in principal, on an SST
       bill proposal that would provide for full mitigation and thus result in a win/win situation
       for all parties impacted by the sales tax sourcing changes inherent in any SST bill.

       There is much work left to be done in preparation for - and during – the 2006 legislative
       session to ensure that any SST bill that may be adopted by the State legislature includes
       protective mitigation language and a reasonable methodology for tracking and administrat-
       ing the necessary mitigation by individual jurisdiction. However, the process appears to be
       on track, at this time, for a positive outcome for the City of Yakima relative to protecting this
       significant and vital revenue source.


   hOTEl / mOTEl TAx (reStriCted/dediCated)
   Consists of a 2% distribution of State Sales Tax and 3% local option Hotel/Motel Tax; both dedi-
   cated for Tourist Promotion and related debt service.

   •   2006 proposed budget is $944,120; the same level as the 2005 year-end projection.

           Breakdown of 2006 revenue projection:
                 $377,648 - 2% State credit, and
                 $566,472 - 3% Local Option

 — Section I-C. 00 Budget Highlights
PROPERTY TAx
The total of the proposed 2006 Property Tax Levy (budget) is $14,141,554; this includes both Gen-
eral Purpose and Special Purpose Property Taxes.

a. property tax — general purpoSe (unreStriCted)
This is the second largest revenue source for the City’s General Fund (second only to general
sales tax revenues discussed above) and supports basic services such as Police, Fire, Streets,
Parks and the like.

•   The 2006 budget for general purpose property tax is approximately $13.8 million.

As allowed by law, City Administration is proposing a 1% increase in the property tax levy for
2006. Additionally, the budget estimate includes a 1% growth for new construction.

b. property tax — SpeCial purpoSe (reStriCted)
The 2006 proposed budget includes $300,000 in Special Purpose Property Taxes; previously ap-
proved by voters to pay the debt service on the 1995 Fire Bonds.


uTIlITY TAxES, FRAnChISE FEES AnD BuSInESS lICEnSE TAxES (Both unreStriCted               and
reStriCted)
This category includes revenues from Utility Taxes, Franchise Fees and Business License Taxes.
This is the third largest revenue source for the City’s General Government Funds.

•   2006 City-wide Budget is $11,207,400 (see break-out below.)

a. Unrestricted: Utility taxes and Franchise fees are imposed on private and public utilities
and make up the majority of this revenue (approx. $9.7 million); the balance of the unrestricted
revenues comes from the Business License Tax.

•   2006 General Government budget is $10,172,400; $297,438 or 3% above the 2005 year-end
    estimate of $9,874,962.

b. Restricted: This category includes Cable TV franchise fees and utility taxes.

•   2006 Proposed Budget is $1,035,000.
•   2005 Year-end estimate is $1,012,000.


GAmBlInG TAx REvEnuES (unreStriCted)
This category includes revenue from card rooms, bingo, punchboards and pull-tabs, and reflects
only a modest increase for 2006. It appears that gambling tax revenues have now leveled off, and
we do not expect to see the continuation of the significant growth in this revenue source that
was experienced over the past few years.

•   2006 Proposed Budget is $1,069,000.
•   2005 Year-end estimate is $1,064,000.



                                                           Section I-C. 00 Budget Highlights — 
   OThER TAxES
   This category includes revenues from Real Estate Excise Taxes (REET), from the Tourist Promo-
   tion fee and other minor miscellaneous tax revenues.

   •   2006 proposed budget is $1,568,340; a slight decrease from the 2005 amended budget of
       $1,569,451.

   a. real eState exCiSe tax (REET) (reStriCted): The City imposes a total of 0.5% tax on real estate
   sales. Low interest rates and strong real estate sales recently have boosted this revenue source;
   however, the growth in this area is not expected to continue due to rising interest rates and an
   anticipated slow down in residential sales in the near future.

   •   The 2006 proposed budget is $1,200,000 (each .25% excise tax is expected to generate approxi-
       mately $600,00); $100,000 over the 2005 budget of $1,100,000.

       •   The first 0.25% was imposed in 1986 and is restricted to use on Public Works capital proj-
           ects.
       •   The second 0.25% excise tax became effective January of 2004; these revenues are restrict-
           ed to capital projects included within the growth management plan.

   Note: the Streets Division has submitted a 2006 policy issue proposing a plan for funding, in
   part, an Arterial Street maintenance program utilizing the second quarter percent REET tax
   revenues. (Refer to the summary of 2006 policy issues at the end of this section for more infor-
   mation.)

   b. touriSt promotion area (TPA) (reStriCted): In late 2003 - at the request of the local hotel and
   motel organizations - City Council established a Tourist Promotion Area (TPA) and imposed
   additional nightly fees to guest stays. The revenue generated by this fee is restricted to tourist
   promotion activities and is expected to generate approximately $338,000 annually.


   SummARY – TAx REvEnuE
   General Government Funds receive approximately 72.2% of their unrestricted revenues from
   sales, property and utility taxes. Although the growth in the City’s sales tax and utility tax rev-
   enues in 2005 kept pace with inflation, the same is not true of property tax revenues; therefore,
   the overall growth in total revenue from these three primary and critical revenue sources is not
   keeping up with the rate of inflation. (August 2005 CPI is 3.0%, per the bureau of labor statistics)
   Additionally, the strength of the sales tax revenue growth is anticipated to diminish as inflation
   rises, as national economists predict.

   This situation – i.e.: costs, and the related service needs of our citizens, outpacing revenues - has
   been the trend for sometime now and if this trend continues, as expected, the City will be forced
   to either reduce or eliminate services in an effort to reduce costs, or find new revenue sources to
   fund these services in the future.


   B. InTER-GOvERnmEnTAl REvEnuES & STATE-ShARED REvEnuES
   This category includes revenues to the City from State and Federal grants; that portion of rev-
   enues collected by the State that are allocated to the City and restricted local government assis-
   tance funding.

 — Section I-C. 00 Budget Highlights
•   2006 Budget is $19,893,050; $4,383,150 or 28.3% over the 2005 amended budget of $15,509,900.
    This increase is primarily due to increased activity in 2006 on the railroad grade separation
    project.)

(Note: Due to the types of revenues included in this category, it tends to fluctuate from year to
year.)

The major revenue sources in this category include:

•   Federal Housing and Urban Development (HUD) Community Development Block Grant.
    (CDBG)

•   State Gas Tax: 2006 Budget is $1,660,358. This tax is dedicated to City streets and is distribut-
    ed by the State based on a predefined formula. (Note this budget does not reflect an increase
    relative to the 9.5 cent per gallon gas tax increase passed by the State legislature earlier this
    year as there is an initiative on the November ballot to repeal this increase. This revenue
    source will be reviewed once the election results are known, and adjusted accordingly.)

•   Liquor Profits /Excise Tax: Combined 2006 Budget is $930,000; $15,000 above the 2005 year-
    end estimate and $41,000 above the 2005 budget of $889,000. A portion of this revenue is re-
    stricted to substance abuse programs. As this is a per capita distribution, recent annexations
    positively affect this revenue source.

•   Federal Transit Administration: 2006 Budget is $1,330,000; virtually the same as 2004 and
    2005 year-end estimate. This money is operating assistance dedicated to the City’s Transit
    system.

•   State Transportation Improvement Board (TIB), Federal Highway Administration (FHA), and
    State Department of Transportation (WSDOT) funding.


C. ChARGES FOR SERvICES
This category of revenues includes charges for more than 100 services provided by the City that
are primarily supported by the users of those services, (example utility rates charged to utility
customers.)

•   2006 Budget is $33,345,329; up $757,794 or 2.3% over the 2005 amended budget of $32,587,535.

Note: the above revenues include a 2006 budgeted policy issue for an 8% refuse rate increase and
a budgeted water rate increase of 12%, previously approved by Council (this is year two of a five
year, phased in rate increase for water.)


D. mISCEllAnEOuS / OThER REvEnuES AnD FInAnCInG SOuRCES
Revenues grouped in this category include; inter-fund operating transfers (2006: $12.5 million),
debt proceeds (2006: $2 million), licenses and permit revenues (2006: $1.2 million), convention
center operating revenues, LID assessments, interest earnings, utility connection charges and
other miscellaneous revenues. (License / permit revenues include charges for building, plumb-
ing, mechanical and sign permits, dog licenses, wastewater discharge permits and other similar
miscellaneous revenues.)

•   2006 Budget is $33,819,119; $927,794 or 2.8% above the 2005 amended budget.

Due to the types of revenues included in this category, it tends to fluctuate from year to year.

                                                             Section I-C. 00 Budget Highlights — 
   CASh RESERvES
   Total City resources consist of revenues (discussed above) and reserves. Each year the City bud-
   get, as a whole, includes cash reserves, most of which are limited for a specific purpose(s); see
   further information, below, regarding restrictions and dedications of reserve funds.

   The City has endeavored to maintain operating reserves for General Government activities to an
   amount equal to approximately one month’s operating budget expenditure. The 2006 year-end
   reserves in General Government are projected at 7% of the 2006 General Government budget.
   Prudent fiscal management dictates that these reserves be budgeted to prepare the City for po-
   tential shortfalls in revenue projections, unbudgeted policy issues which Council may approve,
   unanticipated expenditure requirements during the budget year and/or other contingencies. On
   average, operating budgets outside the General Government maintain an operating reserve of
   one to three months of their operating costs, subject to some one-time expenditures, as neces-
   sary from time to time.

   The City’s dedicated reserves for all funds are projected to be $35.7 million at 2006 year-end.
   Projected 2006 year-end reserves, by category, are as follows:

       a.   General Gov’t Funds (incl.: public safety, streets, parks, etc.).................................$3,691,000
       b.   Other Operating & Enterprise Funds ............................................................................ $8,390,000
       c.   Capital Improvements ........................................................................................................ $12,942,000
       d.   Contingency/Operating .......................................................................................................$1,909,000
       e.   Employee Benefit .................................................................................................................... $4,675,000
       f.   Trust and Agency....................................................................................................................... $539,000
       g.   Debt Service .............................................................................................................................$3,554,000

   (Refer to Exhibit I for more information on reserve funds)


   RESERVE RESTRICTIONS / DEDICATIONS:
   The City maintains reserves for many different purposes; some reserve funds are available for
   emergencies and unanticipated expenditure needs during the year and other reserves are legally
   or contractually restricted and may only be used for a specific purpose (such as the repayment
   of debt; support of a specific construction project; payment of benefits/retirement expenses and
   so on.) The dedications and restrictions, if any, on reserves, are as follows:

   General Government Reserves — This category is made up of reserves for the general fund,
   parks fund and the street fund. General fund reserves are primarily unrestricted and main-
   tained to offset unanticipated reductions in revenues, unanticipated expenditures and other
   emergencies. Parks and Street funds reserves are restricted to operations and maintenance costs
   within these funds.

   Operating & Enterprise Reserves — (1) Operating reserve funds are special revenue funds,
   which, by law or legislation, are restricted to the operations, maintenance and capital costs for
   a designated purpose; (example, grants for economic development; assessments on local busi-
   nesses for parking and business improvements, etc.) (NOTE: there may be a small portion of
   funds in this category which are not legally restricted.); (2) Enterprise reserves are generated
   from revenues received from transit, refuse, water, wastewater, and irrigation utilities and are

0 — Section I-C. 00 Budget Highlights
restricted in use to the operation and maintenance needs of the specific utility from which they
were generated.

Capital Improvement Reserves — Capital funds are established, by law, to account for the receipt
and disbursement of moneys used for the acquisition of capital. Reserves are built up over time
to support capital improvements and are designated either for payments on past improvements
or to build a reserve to cover the cost of future improvements.

Contingency & Operating Reserves — These funds include (1) a general contingency fund (2006
budget of $300,000) which is available to cover emergencies and unanticipated expenditures in
any fund within the City; although they are primarily designated to cover contingencies in the
General Government Funds; (2) a Capitol Theatre reserve fund, which consists of a $1 million
endowment, the interest on which is restricted to operating and maintenance costs of the The-
atre; (3) a Risk Management reserve fund which covers the City’s stop loss insurance costs, ex-
cess costs of claims, insurance/professional services costs and other miscellaneous “risk related”
costs.

Employee Benefit Reserves — Funds in this category are designated for the payment of unem-
ployment compensation, employee health benefits, workers’ compensation, employee wellness,
and Firemen’s relief and pension costs. (NOTE: The City is self insured for the above costs and is
required to pay claims as they arise. Therefore it is prudent to keep reserves at a level adequate
to pay all claims as they become due.)

Trust & Agency Reserves — (1) Trust fund reserves are restricted to the purpose(s) for which the
trust or endowment was originally designated (for example, cemetery trust fund requires inter-
est on endowment to be used for operating and maintaining the cemetery (the principal may not
be utilized for any purpose); (2) agency fund reserves are established as “pass through funds”
for the purpose of providing payments to a third party and carry a zero balance.

Debt Service — These funds are restricted to the repayment of debt.


The State of Washington has a law which provides that “one fund cannot benefit” another fund.
State law also establishes the rule that a “fund” or a self-balancing set of records be established
if revenue sources are restricted for specific purposes. This rule enforces the concept that money
collected for a specific purpose be used for that purpose. (For example, only general govern-
ment resources may legally be spent on Police Officers or Firefighters; only General Government
reserves may be spent on police officers. Likewise, the utility funds are self-supporting based on
the rate structure designed to recover the cost of providing utility services. These funds may not
be used for police or firefighters.)

Reserves are generally built up over time; they are non-recurring, and once they’re spent they’re
gone (i.e., there is no revenue source that will automatically fund these reserves once they are
spent.)




                                                            Section I-C. 00 Budget Highlights — 
   2. ExPEnDITuRES

                                                                                                               taBle ii-1


                                                2006 vS. 2005
                                        ExPEnDITuRE BuDGET COmPARISOn

                                                                                                              ‘06 vs. ‘05
                                                           2005              2005                              Amended
                                                         Year-End          Amended              2006            Budget
    Fund                                                 Estimate           Budget             Budget          % Change

    General (1)                                          $40,860,063       $41,419,317       $42,852,594            3.5%
    Parks                                                  3,889,869         3,923,122         4,048,251            3.2%
    Street & Traffic                                       4,902,051         5,273,574         5,287,630            0.3%
    General Government Sub Total (1)                     $49,651,983       $50,616,013       $52,188,475            3.1%

    Community Development (2)                               3,435,525        3,535,709          2,065,736         (41.6%)
    Utilities/Other Operating                              46,656,032       47,341,194         49,453,604           4.5%
    Capital Improvement                                    19,825,354       39,442,765         41,826,879           6.0%
    Contingency/Operating Reserves                          2,106,444        2,254,000          2,464,173            9.3%
    Employee Benefit Reserves                              10,958,378       11,430,160         11,387,993          (0.4%)
    General Obligation Bonds                                1,909,227        1,909,227          2,108,824          10.5%
    LID Debt Service                                           72,000           72,000             72,000           0.0%
    Water/Sewer Revenue Bonds                               2,872,117        2,872,117          2,886,068           0.5%
    Trust and Agency Funds                                     15,000           15,000             15,000           0.0%

    Total City Budget                                   $137,502,060      $159,488,185      $164,468,752             3.1%


    Legend:
    (1) There is one major change in the 2006 budget that distorts the comparison with the 2005 budget: 2005 includes
        only six months of expenditures related to the new 0.3% criminal justice sales tax, 2006 has a full year of these
        expenditures. Without these additional Criminal Justice expenditures, the increase in the 2006 budget over 2005
        would be only 2.0%.
    (2) The 2006 budget includes an estimate of the 2006 grant awards only. The 2005 amended budget includes the
        2005 grant awards and awards carried forward from the previous years.
    * See Exhibit I for an expenditure detail by individual fund.



   General Government — The 2006 General Government expenditure budget is approximately
   3.1% above the 2005 amended budget.

   Citywide Expenditures — The Citywide Expenditure budget is approximately $5.0 million or
   3.1% above the 2005 amended budget.




 — Section I-C. 00 Budget Highlights
2006 BuDGET ITEmS OF InTEREST:

Criminal juStiCe — An increase in expenditures of approximately $665,000 related to the Novem-
ber 2004 voter approved initiative to increase sales tax to support criminal justice needs. (Note,
only seven months of revenues were received in 2005.)


perSonnel CoStS
the Budget Strategy Team recognized the significant impact that personnel costs place on the
City budget (employee compensation accounts for approximately 76% of general government
expenditures), and they made several recommendations in this area, including working with the
state legislature and the local unions to change the criteria utilized in binding arbitration to be
reflective of local community fiscal issues.

The Contingency Budget Reduction Plan includes the elimination of a number of positions
should it be necessary to implement these severe cost reduction measures. It should be noted
that the BST recommended that no staff reductions be made at this time. However, they ac-
knowledged that the city may be forced to eliminate services in the near future if the cost of
providing those services continues to increase faster than does the related revenue. In an ef-
fort to postpone for as long as possible the necessity to take such severe steps as implementing
significant staff and service reductions, City Management is recommending a salary and benefit
freeze in the 2007 budget.

For more information regarding the BST findings and recommendations, refer to the “Budget
Strategy Team Final Report and Recommendations” dated September 30, 2005.


liBrary
The BST and city management recommends that the City divest itself of its special relationship
with the Library and have City resident support the library directly through the Regional Li-
brary District. This recommendation includes the request to place this issue on the ballot in the
near future for voter approval.


annexationS
In 2005 the city completed the Englewood annexation, which added more than 1900 people and
more than $170 million of assessed value to the city. In late summer of 2005, the 96th Avenue
annexation was initiated; when completed, this annexation will add about 1,000 people and
nearly $62 million of assessed value to the city. Due to the addition of several annexations over
the past few years, the city added one planner and four staff to the streets division to assist with
the added work load.




                                                             Section I-C. 00 Budget Highlights — 
   3. mAjOR CAPITAl PROjECTS
   Capital project funds for 2006 are budgeted at approximately $41.8 million. The 2006 proposed
   budget includes new capital expenditures and a carryover of ongoing projects previously ap-
   proved by Council, as follows:

   Water and Wastewater Capital Projects ................................................................................. $10,790,000
      (Including Wastewater Facilities Improvement)
   Major Street Construction Project ........................................................................................................$17,254,000
      Includes:
          Nob Hill Blvd. 68th to 80th..........................................................................................$1,844,600
          Railroad Grade Separation...............................................................................$8,600,000
          Other Street Projects and Debt Service Payments ........................................ $6,809,000
   Transit Capital.............................................................................................................................. $2,180,000
   City Hall Rehabilitation/Contingency/Repairs/Assembly Hall Project
       (continuation) ...........................................................................................................................$550,000
   Parks Capital Improvements...................................................................................................... $1,140,000
   Fire Capital ......................................................................................................................................$928,500
   Capitol Theatre ............................................................................................................................... $447,000
   Criminal Justice/Capital Expenditures ....................................................................................... $913,000
   Convention Center Capital ..............................................................................................................$25,000
   Central Business District Improvements .................................................................................$4,602,200
   Irrigation System Improvements............................................................................................... $2,750,000
       (Planning and Capital Projects)
   Local Improvement District (LID) Construction ....................................................................... $247,000

   Total Capital Projects ...................................................................................................... $41.8 million (1)
   (1) Rounded.



   To fund these major projects, the City has:

   (1) Secured grant funding and ongoing, dedicated street funding resources for a significant por-
       tion of the street projects
   (2) Funded projects through the use of rates, reserves, grants and State loans and the issuance of
       debt.

   NOTE: The operational impacts of these projects have been included in the 2006 proposed
   budget.

   Refer to Section V, Capital Improvements, for more information on the above projects.




 — Section I-C. 00 Budget Highlights
4. DEBT SERvICE COSTS
Most municipal organizations must issue long term debt to finance capital projects and improve-
ments, and Yakima is no exception. This category includes the cost of principal and interest pay-
ments on the City’s outstanding bonded debt and capital leases.

2006 budget of $5,066,892; is $213,548 or 4.4% increase over the 2005 amended budget of
$4,853,344. This increase is primarily due to new G.O. Debt for Parks and Recreation (Kiwanis
Skate Park and 4th ball field, Aquatic Spray Toys and Aquatic study) and Line of Credit G.O.
Debt for Fire (West Valley Fire Station upgrade.)

Refer to Section V, Capital Improvements, for more information on the above projects.


5. ChAnGES In FunDInG AuThORIZATIOn
This section is broken into two categories:
   (a) an overview of proposed changes in staffing, and
   (b) an overview of policy issues for Council consideration.

(See Exhibit II for a more detailed summary of Policy Issues; the detailed information behind
each of the policy issues will be included in the Policy Issue document scheduled to be submit-
ted to Council in early November.)


ChAnGES In STAFFInG
In the 2005 amended budget, there were several positions that were included for only a partial
year. Council has already approved these positions, but the conversion from a partial year to a
full year will increase the respective budgets in 2006. Following is a summary of these changes:

•   New Criminal Justice Sales Tax — Council authorized the addition of 12.75 positions to be
    funded with revenues from the new 0.3% sales tax. These positions were hired in mid-2005,
    thus the full impact will be reflected in 2006.

•   New Annexations — Because of the increased workload related to the increased service
    areas resulting from recent annexations as well as general growth, City Council approved
    four new positions in the Streets and Traffic Division and one new Planner position. These
    positions were included in the 2005 budget for only a partial year. Adjusting the 2006 bud-
    get to include a full year’s personnel costs for these positions will have the following effect:
    (a) increase of approximately $90,000 in Streets / Traffic division and (b) increase of approxi-
    mately $25,000 in Planning.

•   Grant for Extended Transit Service—Transit was awarded a Congestion Mitigation/Air Qual-
    ity (CMAQ) grant to conduct a two-year pilot program extending Transit service to Selah
    and Union Gap. Three Transit Operators were added to accommodate these routes. The full
    year effect is an increase of about $75,000.




                                                             Section I-C. 00 Budget Highlights — 
                                  2006 Proposed Adjustments in Personnel


                                                          no of Base Salary
    Fund/Dept             Description                   Positions & Benefits Remarks
    General Fund:
     014-City Clerk       Public Records Officer           0.40        22,500 2006 budgeted policy issue (60%
                                                                              included in Risk Mgmt fund)

     032-Fire             Battalion Chief                 (1.00)    (135,000) Cost containment measure as rec-
                                                                              ommended by the BST (Includes
                                                                              $20,000 of overtime
     032-Fire             Fire Fighter                     3.00       200,000 2006 policy issue (overtime
                                                                              reduced by a similar amount)

     038-Probation        All personnel                   (6.00)     (377,000) Consolidation with County

     054-Customer      Utility Service Rep                 0.75        36,000 2006 policy issue (offset partially
          Services                                                            by reduction in temporary
    Total General Fund                                    (2.85)   ($253,500)

     131-Parks & Rec      Aquatic Specialist              (1.00)    ($49,500) 3 pools closed - resource trans-
     131-Parks & Rec      Recreation Activities Spec       1.00       44,500 ferred to other activities

     141-Street & Traffic Traffic Sign Specialist          0.75        41,200
                                                                              Continuation of Street program
     141-Street & Traffic Street Maint Specialist          1.00        51,100 approved by Council in May, 2005
    Total General Government                              (1.10)   ($166,200)

    Other Operating/Enterprise Funds:
     471-Refuse       Code Compliance Officer              1.00        51,900 2006 budgeted policy issue
     473-Wastewater       Pretreatment Technician          1.00        52,900 2006 budgeted policy issue
     474-Water            Water Quality Specialist         1.00        56,800 2006 budgeted policy issue
     515 Risk Mgmt        Public Records Officer           0.60        33,800 2006 budgeted policy issue
    Total Other Operating/Enterprise Funds                 3.60     $195,400

    Total City-wide Net Change                             2.50      $29,200
   * Salary and benefits shown reflect impact on 2006 budget.




   Management continues to focus on the City’s critical priorities in public safety, accommodate
   Federal and State mandates, and provide critical support services. In an effort to meet these
   goals and maintain the commitment to minimizing costs and increasing efficiencies, manage-
   ment has shifted personnel resources in the 2006 budget. The total net affect is an increase of
   $29,200.




 — Section I-C. 00 Budget Highlights
2006 POlICY ISSuES OvERvIEW
When staff proposes changes that include a policy component - not strictly administrative and
operational issues — we prepare a Policy Issue document for Council consideration. Addition-
ally, all funding for support to outside agencies (new and existing) and all proposed increases in
staffing require a Policy Issue. The Policy Issue document includes a description of the proposed
change, the consequence of making and not making the change, impacts, if any on the public
and on personnel, and the increase/decrease in funding requirements. If there is an increase
in funding requirements, the source of the additional funding must also be identified. Council
separately considers and approves or denies each policy issue as part of their review and ap-
proval of the annual budget.

Following   iS an overview oF the   2006   poliCy iSSueS
(Refer to Exhibit II for more information on each of the following items. A Policy Issue Docu-
ment with detailed information on each policy issue will be submitted to Council in early No-
vember.)

outSide agenCy requeStS — Total 2006 request is $161,213
1. Agencies requesting funds that have been included in the proposed budget at the same
   funding level as the prior year include: Yakima County Development Association; Yakima
   Chamber of Commerce; Fourth of July Committee; Yakima Sunfair Association; Allied Arts
   Van; and Retired Senior Volunteer Program (RSVP). These requests total $40,213.

2. Agencies requesting funds that have not been included in the proposed 2006 budget include:
   Black Rock Reservoir; Hispanic Chamber of Commerce; Yakima-Morelia Sister City Associa-
   tion; and Answers from Heaven. These requests total $121,000.

intergovernmental — A total of $93,972 has been requested and included in the proposed 2006
budget, allocated as follows: Clean Air Authority--$12,622 (2005 budget -$12,580); Yakima Coun-
ty Emergency Management--$42,000 (2005 budget - $40,813); and the Yakima Valley Conference
of Governments (COG) requested $39,130 (2005 budget - $38,532).

An additional Policy Issue pertaining to the City’s relationship with the Yakima Valley Regional
Library was discussed with the Budget Strategy Team (BST) during their review of City opera-
tions. The BST has recommended that the City divest itself of the current relationship/contract
with the Library, and ask the citizens to vote to annex to the regional library system. This
would not require a change in the 2006 budget, as the vote will likely be in 2006, and therefore
not effective until 2007. In subsequent years, the City would experience a slight net gain in rev-
enue from this action.

City manager diviSion — Finance is proposing that the City Manager’s car allowance be raised
from $250 to $300 per month. This reimbursement has been at $250 since 1997, and increases in
fuel and other vehicle operating costs are driving this adjustment. ($600, budgeted)

City Clerk diviSion — (2 Policy Issues)
1. Add one Public Records Officer position in response to statutory amendments to the Public
   Disclosure Act. ($56,300 , budgeted: 60% or $33,800 in Risk Management Fund, and 40% or
   $22,500 in General Fund)



                                                           Section I-C. 00 Budget Highlights — 
   2. Eliminate the Pension Records Clerk position and reinstate/upgrade the Deputy City Clerk
      position. Two of the three current employees in the City Clerk’s office are planning to retire
      in 2006. This prompted a review of the organizational structure of this small but critical
      division, and led to this recommendation ($9,400 net increase, budgeted)

   human reSourCeS diviSion — In response to the BST’s recommendation that “the City’s compensa-
   tion package, as a whole, be compared to that of (a) both public and private local employers – for
   comparable positions and (b) comparable positions of public and private companies doing busi-
   ness in the area where recruitment for these positions is likely to be focused”, a City-wide com-
   pensation study is being proposed. Depending on the scope of the analysis finally approved,
   the City may commit up to $75,000 for this study. ($75,000, unbudgeted)

   waStewater diviSion — The Wastewater utility is proposing the addition of one Pretreatment
   Technician position to implement activities associated with the Fat, Oil, and Grease (FOG) Pro-
   gram. ($52,900, budgeted)

   water diviSion — The Water utility is proposing the addition of one Cross Connection Control/
   Water Meter Crew Leader position to meet increasing Cross Connection rules and requirements
   for tracking water loss. ($56,800, budgeted)

   muniCipal Court — A new state law to improve trial courts around the state was approved in the
   2005 legislative session. This established a new revenue dedicated to courts (a $43 filing fee).
   The only way a Municipal Court can access this new revenue is to have elected judges and have
   their compensation set at between 95% and 100% of a district court judge salary. Therefore, a
   change in the Municipal Court Judge salary structure is proposed. Because of the revenue from
   the state, this proposal breaks even in the first year. (Revenue of $19,200; Expense of $19,200,
   budgeted)

   FinanCial ServiCeS — Another revenue option identified by the BST was to raise the cap on out-
   side utility taxes (i.e. electric, natural gas, and telephone). Currently 4% of the tax is capped
   at a maximum of $4,000 per account per month. The proposal is to phase the changes in over
   three years—to $5,000 in 2006; to $7,500 in 2007, and remove the cap in 2008. This is estimated
   to raise from $57,600 in the first year to over $500,000 when the cap is totally removed. Since the
   Parks Capital reserves are virtually depleted, one option for use of these revenues is to have the
   first $130,000 be directed to the Parks Capital program, with the balance available for General
   Fund. If the choice is to use this additional revenue solely for General Fund, then it would still
   be desirable to research another dedicated revenue stream to be used for Parks Capital (such as
   the policy issue by Parks to increase the internal utility tax by ½ %). ($57,600 revenue in 2006,
   unbudgeted)

   inFormation SyStemS — (Two policy issues)
   1. Replace computers in the Patrol cars to increase reliability of computer performance, to be
      funded from the Law and Justice Capital Fund. ($210,000, budgeted)

   2. Continue last year’s policy issue to implement an integrated utility and permitting manage-
      ment system. Since this will be a major system replacement that will be funded by all of the
      utilities, it was determined to account for the project in the Cumulative Reserve for Capital
      Improvement Fund. The current status of the project is that a Request for Proposal has
      been distributed. However, final bid award is anticipated to be in 2006. The utilities have

 — Section I-C. 00 Budget Highlights
   contributed $65,000 for this project in 2005, and are programmed to contribute $210,000 in
   2006. As the project costs/schedule are identified, a more comprehensive plan for funding
   the project will be developed and brought to Council for approval. ($210,000, budgeted)

utility ServiCeS — Utility Services is proposing to reduce temporary funding in order to add one
¾-time Utility Service Specialist (office) position. ($22,000 net increase, budgeted)

Community  and eConomiC development — A proposal is being made to upgrade the Economic and
Community Affairs Specialist to Deputy Director of Economic Development and Intergovern-
mental Relations, and change its funding allocation. The current position is funded 90% by
ONDS, and 5% each from Water and Wastewater utilities. 30% of the portion allocated to ONDS
is being transferred to the Economic Development Fund in this proposal. ($14,500 net increase,
budgeted)

planning — Because of the direct costs associated with land use/development issues, a proposal
is being made to increase Land Development Fees to the fee structure currently charged by
Yakima County. ($13,000 revenue, unbudgeted)

Code adminiStration — (Three policy issues)
1. An increase of 2% in the Humane Society annual contract. ($1,100, budgeted)

2. Implement a BST recommendation to begin charging a $25 annual Fire Inspection Fee for
   all commercial businesses to reduce the General Fund subsidy for this program. ($100,000,
   unbudgeted)

3. Upgrade the Department Assistant III position to a Permit Technician. ($3,000, budgeted)

yakima Convention Center/touriSt promotion — Continue funding for the Visitor Information Cen-
ter to enhance and stimulate positive economic growth through tourism funded by Hotel/Motel
Tax. ($40,000 budgeted)

Capitol theatre — Increase the annual management fee paid to the Capitol Theatre Committee
to cover increased costs in day to day operations of the theatre and stabilize the CTCs revenue
base, to be funded by the Cable TV utility tax enacted in 2005. ($70,000, budgeted)

engineering — Increase Professional Services to assist with design and development of capital in-
frastructure projects, to be reimbursed 100% by project budgets. ($30,000 of both General Fund
revenue and expenditure, budgeted)

poliCe — (Two policy issues)
1. Increase overtime parking fines from $10 to $20 in response to a BST recommendation.
   (General Fund revenue of $55,000, unbudgeted)

2. Accommodate a 24.5% or $206,000 increase in Yakima County Jail rates—the total cost is
   estimated to go from $840,000 to $1,046,000. A 10.7% or $90,000 increase was budgeted
   using the new .3% Criminal Justice Sales Tax. However, if the final increase is more than
   this, other expenditure reductions will need to be examined. ($90,000, budgeted; $116,000
   unbudgeted)

                                                             Section I-C. 00 Budget Highlights — 
   Fire — (Two policy issues)
   1. Add three entry-level Firefighter positions to provide more personnel available for response
      and emergency call-back. Preliminary estimates indicate that adding 3 additional personnel
      will completely pay for itself by the corresponding reduction in overtime. The Fire Depart-
      ment applied for a grant to help cover the cost of the additional three people, however, it was
      extremely competitive, and grant revenue is not expected at this time. ($200,000 for new
      personnel, offset by a $200,000 reduction in overtime, budgeted)

   2. During the BST’s review of the Fire Department budget, they noted that capital reserves are
      minimal. In order to establish a steady revenue stream to fund capital replacement, and
      other operational needs, they recommended that the citizens vote on an increase in the EMS
      Property Tax levy of $0.10/$1,000 Assessed Valuation (AV). This is estimated to raise approx-
      imately $400,000 (or $10 per year on each $100,000 of AV). Staff is recommending that this be
      referred to the Council Public Safety Committee to develop an expenditure plan and ballot
      proposal in collaboration with Fire Management and union leadership. ($400,000 revenue,
      unbudgeted).

   puBliC workS — The Yakima County Department of Corrections Crew (DOC) experienced a
   contract price increase. Even with the price increase, this program still represents a good value
   for the taxpayers. Therefore, Parks and Recreation, Streets and Traffic Engineering, and Transit
   Divisions are proposing to include the price increase in their respective budgets. ($51,170, bud-
   geted)

   parkS and reCreation — (Three policy issues)
   1. Continue funding for Central Business District (CBD) landscaping, a contribution of $7,500
      is included from the PBIA, leaving about $43,300 to be subsidized by Property Tax ($50,800
      - budgeted

   2. To stabilize funding for the additional parks recently placed in service and create a revenue
      stream for ongoing capital needs, an increase of Parks Utility taxes on Water, Wastewater
      and Refuse of 0.5% (from 3.5% to 4.0%) is being proposed. This is estimated to generate
      $130,000 annually, and was included as a revenue enhancement option in the BST report.
      (Refer to the Finance policy issue raising the utility tax cap) (unbudgeted)

   3. Study the formation of a Regional Parks Authority, to be done by staff in cooperation with
      the Parks Commission, as recommended by the BST. (No additional cost is anticipated—
      would require a redirection of staff time/resources)

   StreetS   and   traFFiC operationS — Streets has updated the recommendation on the use of the 2nd
   quarter % Real Estate Excise Tax (REET 2) to set forth a plan to fund an Arterial Street mainte-
   nance program, to be phased in as revenue becomes available. Revenue sources could include
   the new gas tax (if not repealed), and a portion of the Property Tax generated from future an-
   nexations or the retirement of existing debt. ($400,000, budgeted in 2006)

   tranSit — Transit is proposing to purchase six new 35-foot heavy-duty replacement busses, us-
   ing capital reserves ($1,980,000, budgeted)




0 — Section I-C. 00 Budget Highlights
reFuSe — In order to keep on track with the transition to automated refuse service and cover
other operating cost increases (such as fuel, landfill, equipment, etc.), a rate adjustment is being
proposed. There are 2 options to consider: a) includes a 5% rate increase for current operational
needs and an additional 3% rate increase to add one new Code Compliance Officer position to
enforce Refuse Division ordinance violations. (Revenue $230,000 in 2006, Expenditures (in-
cluding equipment) $66,900, budgeted) or b) a 5% rate adjustment for current operational needs
(Revenue $130,000 in 2006, unbudgeted)




                                                             Section I-C. 00 Budget Highlights — 
                               (This page intentionally contains no information.)



 — Section I-C. 00 Budget Highlights
II. WhAT YOu PAY AnD WhAT YOu GET


OvERvIEW — This section is presented to assist the reader in understanding the taxes they pay,
what governmental entity receives those tax revenues and how the City spends their allocated
portion. Enclosed, you’ll find charts and graphs which identify how much of the taxpayers’ dol-
lar comes to the City and what percentage of the City’s total revenues each type of tax/charge
represents. Also included is (a) an outline of the City taxes and utility charges collected from a
typical Yakima household; (b) a depiction of how those revenues are then distributed between
the various City services/functions and (c) the amount a typical four-person household pays for
these services.

SAlES AnD uSE TAxES

SaleS   and   uSe tax — There is a 8.2% sales tax charged on the sale of goods within the City. The
vast majority of this revenue is allocated to the State, not the City. The State receives 6.5% while
the City receives .85% for the general fund and an additional 0.3% that is restricted for transit
services, and .15% goes to the County, and .40 represents county wide taxes for Criminal Justice
that is allocated between Cities and the County. (Refer to chart below for a complete detailed
listing of how this revenue is allocated.)

Following is an example of how the sales taxes paid by the consumer are allocated between the
City and the State. Based on the assumption that a family with a taxable income of $40,000 will
spend $10,000 on items on which sales tax will be applied, they will pay approximately $820 in
sales taxes annually. Of this amount, 1.15% or approximately $115 goes to the City ($85 or .85% for
general fund and $30 or 0.3% for transitCity of Yakima
                                         services).

The following chart depicts how much of each dollar of sales tax revenue is allocated to the
                      Allocation of Sales Tax Collection
State, the City and the County.
                                                                                                Figure ii-1
                                     alloCation   oF   SaleS tax ColleCtion
                                 State of Washington                                    Yakima Transit
                                             ¢                                                         ¢
                                      79.3                                                       3.7




                                                                                 City of Yakima
                                                                                 (General Fund)            County
                                                                                            ¢                     ¢
                                                                                     10.3                   6.7


                                                         Section II. What You Pay & What You Get Back — 
                                   Sales Tax Rates Within Yakima City Limits
                                     (In descending order by total allocation)
                                               SaleS     tax rateS within    yakima   City limitS
                                                  (in descending order by total allocation)

                                                                        rate               %   oF total         example   ($100   Sale)

      State of Washington                                              6.50%                   79.3%                  $6.50
      City of Yakima (General Fund) (1)                                0.85%                   10.3%                  $0.85
      Yakima Transit                                                   0.30%                   3.7%                   $0.30
      Yakima County (Current Expense Fund)                  (1)
                                                                       0.15%                   1.8%                   $0.15
      Yakima County Criminal Justice             (2)
                                                                       0.40%                   4.9%                   $0.40
      Total sales tax rate in city limits                              8.20%                   100%                   $8.20
     (1) The City charges 1%, however, the county receives .15% of the cities’ sales tax collections.
     (2) This tax is allocated among the cities and the county to support Criminal Justice uses.


     property taxeS — The total property taxes paid by property owners within the City of Yakima
     includes taxes levied by several governmental entities; the State, School Districts, Special County
     wide voted levies and the City’s general and special voter approved levies. The percentage of the
     total property taxes levied by, and allocated to, each individual governmental entity will change
     slightly from year to year. The City’s portion is generally under 30% of the total amount collect-
     ed. (Refer to the graph and chart below for how the 2005 property taxes were allocated between
     these governmental entities.)             City of Yakima

                                      2004 Property Tax Distribution                                                         Figure ii-2
                                                       2005 property tax diStriBution
                                                                                                                                  Emergency
                                                                                                                                   Medical
                 Yakima School District                                               City of Yakima                               Services
                                 ¢                                                               ¢                                         ¢
                           .36                                                             .27                                       .02




                                                State of Washington Schools                                     Yakima County
                                                                  ¢
                                                            .21                                                      .14¢



        0%                             25%                             50%                                75%                         100%


        City of Yakima Property Tax — In 2005, a typical City resident pays approximately $13.30 per
        thousand of assessed value on property taxes. Only $3.52, or about 27% goes to the City, with the
klm Budget Forecast Dollars 10/13/2005
        balance divided between the County, schools, and other special districts.



   — Section II. What You Pay & What You Get Back
Description of how property taxes are levied:

The following explanation is included to help the reader understand how property taxes are as-
sessed to the individual property owners. To aid in this explanation three commonly used terms
must be understood, they are Property Tax Levy, Property Tax Rate and Assessed Value.

Property Tax Levy —- is the total amount of money that is authorized to be collected.

Assessed Value —- is the total value, as determined by the County Assessor’s Office, of all prop-
erty within the City.

Property Tax Rate — is the property tax amount that will be applied to every $1,000 of assessed
value; the rate is determined by simply dividing the levy amount by the total assessed value
amount and dividing that number by 1000.

In other words, an increase in assessed value does not affect the total amount levied or collected
by the governmental entity. Nor does it automatically affect the amount the property owner
must pay. The dollar amount of the levy is restricted by law — the assessed value is simply the
means to allocate the total dollars among the property owners. A change in one property own-
er’s assessed value will affect his/her property tax bill only if the change is significant enough
to change that property owner’s percentage of the total assessed value of all property within the
taxing districts. (Example: if the amount of property tax levied does not change from one year
to the next, and every property owner’s assessed value goes up 3%, there will be no change in
the property tax owed by any of the property owners. This is due to the fact that everyone’s as-
sessed value increase by the same amount, therefore, every property owner’s percentage of the
total tax levy remained the same.)

                                                                                                taBle ii-1
             property tax Code area #333 (yakima SChoolS) - ConSolidated levy   and   rateS
                              2004 aSSeSSed valuation - 2005 tax year
                                         2004 rate/                                           perCent   oF
property tax levy                         thouSand              2005 levy                        levy
General Fund                                $1.4476              $5,749,404
Library                                      0.3560               1,414,107
Parks & Recreation                           0.4638               1,841,985
Street & Traffic Operations                  0.8181               3,249,357
Firemen's Relief & Pension                   0.3540               1,405,779
Total Operating Levy                        $3.4395            $13,660,632                     26.4%
Total Bond Levies                           $0.0763               $300,000                     0.6%
Total City Levy                             $3.5158             $13,960,632                    27.0%
Other Levies
School District #7                                                                             36.0%
Operation & Maintenance                      2.9402              $11,560,181
Bond Redemption                              1.7966                7,063,813
State Schools                                2.7364               10,868,072                   21.0%
Yakima County                                1.6717                6,639,437                   14.2%
Yakima County Flood Control                  0.0972                  386,046
Juvenile Justice Bond                        0.0772                  306,613
EMS Levy                                     0.2440                  969,087                    2.0%
Total Other Levies                          $9.5633             $37,793,249                    73.0%
Total Levy Code #333                       $13.0791            $51,753,881                    100.0%

                                                 Section II. What You Pay & What You Get Back — 
   SummARY - CITY TAxES AnD uTIlITY ChARGES — The taxes and utility charges shown in the
   following charts are only those directly levied by the City. In the cases of sales and property
   taxes, the 2 major taxes paid directly by Washington residents, only a small portion of the total
   tax belongs to the City.

   For example, the total local tax and charges for all municipal services provided to a typical
   household in Yakima in 2005 is approximately $160 a month, or $1,924 a year, as depicted in the
   following charts.

                                                                                                                                                              taBle ii-2
                                                            annual taxeS and utility ChargeS
                                                              levied By the City oF yakima
                                                           on the typiCal houSehold For 2005



   PropertyTaxes-General………………………………………………………………………$3.4395/1,000……………$344

   Special Levy Property Taxes………………………………………………………………$3.4395/1,000……………                                                                                                     8
      (Assumes $00,000 home)

   Sales Taxes - General ............................................................................................................................................... 115

   Transit Sales Tax ....................................................................................................................................................... 30
      (Assumes $0,000 taxable purchases on $0,000 taxable income)

   Tax on City-owned Utilities - General .................................................................................................................. 118

   Tax on Private Utilities - General ........................................................................................................................... 209
       (Assumes electricity and gas of $,0, telephone of $0 and Cable TV of $00)

   Water, wastewater & refuse Utility Charges (excluding Utility Tax) ..................................................................906
      (Refuse:  gallon can; Water/Wastewater: ,00 cubic foot consumption)

   Irrigation Assessment............................................................................................................................................. 194
        (Assumes ,000 square footage)


   Total Annual City Taxes, Utilities and Assessment Charges …………………………………………………$1,924




 — Section II. What You Pay & What You Get Back
                                                                                                                       Figure ii-3
                                                       City taxeS and utility ChargeS
                                     CoSt         to   typiCal houSehold — $1,924 annually




                                $194
                                                                   $167

                                     Irrigation
         $214                                             Refuse                 $98

                        Water
                                                                     Gen Gov't
                                                                                         $69       Capital Projects      $32
                                                                            Streets
                                                                                          $50
                                                                                 Parks

                                                                                                        Transit          $30
                                                                               Others      $110

                                                                                                     Other Special
                Public Safety
                                                                                                    Revenue Funds        $25

     $497                                                                                                                $15
                                                                                                  Debt Service Funds

                                                           Wastewater                              Special Debt Levy     $8


                                                                        $525




revenue alloCation BaSed        on    2006 Budget
Assumptions — Typical 4 person household: Property tax based on $100,000 home; Sales tax based
on $40,000 annual income and $10,000 taxable purchases; Utilities based on 96 gallon can for
Refuse, 1300 cubic foot monthly consumption for Water/Sewer; Irrigation for 7,000 square foot lot;
Storm Water based on impervious surface; Gas/electricity $2,160, telephone $720, cable television
$600.


SummARY - GEnERAl GOvERnmEnT REvEnuE
The total 2006 proposed General Government Revenue Budget is approximately $50.2 million.

The following chart breaks this dollar amount down by the source of the revenue. You’ll note that
three revenue sources — sales tax, property tax and franchise and utility taxes — generate over
72% of the total general fund revenues.




                                                                          Section II. What You Pay & What You Get Back — 
                                                                 City of Yakima
                                                                                                                                         Figure ii-4
                                                    general government r Revenue
                                            General Government evenue
                                                  (BaSed on 2006 Budget oF $50.2 million
                                                (Based on 2005 Budget of $46.6 Million) )
                                     ¢                                                  ¢                               ¢                   ¢
                               28.3                                                  19.3                            6.2              3.8
                             Sales Tax                                           Franchise &                 Intergovernment &       Other
                                                                                  Utility Tax               State Shared Revenue   Revenue
                          ($14.2 Million)                                       ($9.7 Million)                  ($3.1 Million)   (1.9 Million)




                                                             ¢                                                ¢                 ¢
                                                         24.6                                             11.1               6.7
                                                      Property Tax                                 Licenses, Permits       Fines &
                                                    ($12.3 Million)                                    & Charges         Other Taxes
                                                                                                      for Services      ($3.4 Million)
                                                                                                     ($5.6 Million)


                   0%                         25%                      50%                            75%                                100%

          Due to changes in population resulting from annexations, City revenues fluctuate considerably
klm Budget Forecast Dollars 10/12/2005
          over time, making revenue comparisons very difficult in absolute dollars. The following chart
          compares the changes in the City’s general government revenues and expenditures to changes in
          the Consumer Price Index (CPI) between 2000 and 2004. You’ll note that while the City’s general
          government revenues decreased an average of 0.8% and expenditures decreased an average of
          0.1% on a per capita basis over this four-year period, the CPI increased an average of 1.3%. This
          indicates that the increase in the City’s revenue and expenditures have fallen below the consumer
          price index by approximately 3.5% on a per capita basis.

                                                                                                                                            taBle ii-3
                                                                  City oF yakima
                                                          Summary oF general government
                                             revenueS   and expenditureS per Capita Compared                 to   Cpi
                                                                                                                                                 average
                                                         2000           2001              2002                2003             2004             annual %
                                                        amount         amount            amount              amount           amount             Change
           Revenues
           Total General Government                 $39,444,330       $41,154,269      $42,827,719          $44,045,258     $46,439,661           4.4%
           Population                                    65,262            73,040           79,120               79,220          79,480           5.4%
           Revenue per capita                              $604             $563             $541                 $556            $584           (0.8%)
           Expenditures
           Total General Government                 $38,962,339       $39,647,044      $42,374,664          $44,673,857     $47,224,547           5.3%
           Population                                    65,262            73,040           79,120               79,220          79,480           5.4%
           Expenditures per capita                         $597             $543              $536                $564             $594          (0.1%)

           Consumer Price Index (CPI)                       172.8            181.3               184.1            185.7             190.4        2.5%

    — Section II. What You Pay & What You Get Back
Note: The term “General Government” refers to basic tax-supported functions. The
major functions included in this category are: Police, Fire, Streets and Traffic Operations,
Parks and Recreation, Library and Code Administration services. These functions use
about 73.3% of General Government revenues. Other administrative services include
Information Systems (i.e. computer support), Legal, Finance, and Human Resources
— services necessary for any organization to function.




                                             Section II. What You Pay & What You Get Back — 
            ExPEnDITuRES — GEnERAl GOvERnmEnT
            The following chart depicts the breakdown of the proposed 2006 general government expen-
            diture budget. This breakdown identifies that the City spends over 62.3% (or approximately
            $33.5 million) of its available resources on providing public safety services (Police, Municipal
            Court, Fire, 9-1-1 Calltaker and Dispatch services). Additionally, the City allocates over 9.8% of its
            resources to maintaining and operating the Streets and Traffic Systems and another nearly 7.5%
            to provide Parks and Recreation programs and services. Providing the existing services in these
            four basic categories takes nearly 79.6% of all the City’s available general government resources.

            Providing the services in these four critical areas is labor intensive; approximately 69.3% of these
            costs are personnel related. Therefore, any significant budget reductions in these areas will
            require a reduction in personnel and the related services these individuals perform. Conversely,
            any significant reductions in the overall general government budget that does not include these
            four largest areas of the budget will severely limit the services the remaining departments will
            be able to provide (i.e.: Finance and Legal, Community Planning and Project Engineering; Ad-
            ministration and the Library).

            Breaking down the City’s general government budget by these major service areas and identify-
            ing the percentage of each available dollar that the City allocates to each of these areas provides
            the reader with a visual picture of where the focus and priorities of the City have been placed.
            Additionally, this chart will assist the reader in understanding the difficult challenges facing
            the City should it become necessary to implement a significant reduction in the City’s proposed
            budget without affecting the public safety budget and services.
                                                                 City of Yakima
                                                                                                                                            Figure ii-6
                                                   general government e Expenditures
                                         General Government xpenditureS
                                              (BaSed on 2006 Budget oF $53.8 million)
                                                 (Based on 2005 Budget of $48.6 Million)
                                   40.4¢                                                9.8¢                     7.5
                                                                                                                     ¢
                                                                                                                                     3.3¢
                                  Police &                                           Streets &                Parks &        Community Planning
                                   Courts                                             Traffic               Recreation       Project Engineering
                                $21.7 Million                                       $5.3 Million            $4.1 Million         $1.8 Million




                                                                                                                                                      2.4¢

                                                                                                                                                     Library

                                                                                                                                                   $1.3 Million




                                                                     21.9¢                             7.7¢                  7.0
                                                                                                                                 ¢

                                                                  Fire / Code                       Financial            Governance/
                                                                 Enforcement                        & Legal              Administration
                                                                 $11.8 Million                      Services              $3.7 Million
                                                                                                   $4.1 Million


            1) Includes Fire pension and benefit costs (of 1.6 million) which are not classified as general government expenditures but are in-
            cluded here to reflect the full costs of fire services.
          0%                             25%                       50%                              75%                                   100%


        — Section II. What You Pay & What You Get Back
klm Budget Forecast Dollars 10/10/2005
AllOCATIOn OF ExPEnDITuRES
Following is a detailed analysis of the City of Yakima’s local tax structure. This analysis shows
the various sources of City revenue and identifies what type of services these revenues will fund
in 2006. Additionally, this analysis reflects the cost of each of these services to a typical house-
hold.

The non-tax funding sources identified include all sources except directly levied taxes (shown in
the adjacent column) which are property, sales and utility taxes. The non-local tax amounts are
made up of direct charges for services, state shared revenues, grants, interfund charges, begin-
ning balances, and other miscellaneous sources.

Municipal public safety services consume the greatest share of local taxes, $497 per household
per year, or 63.1% of the total general taxes paid. Other General Government services cost $98
per household annually, or 12.5%. Streets and Parks together cost $119 per household annually,
or 15.2% of general taxes paid.

The utilities combine to cost approximately $3,480 annually per household. (Many of the costs
included in the budgets of the utilities fund State and Federal mandates that local citizens must
pay.)
                                                                                                                       taBle ii-4
                                 AllOCATIOn OF TAxES AnD uTIlITY ChARGES
                                       (BaSed on 2006 propoSed Budget)
                                                  2006                non-tax                                             2006
                                                propoSed              Funding       loCal     alloCation   houSehold    permanent
                                                 Budget               SourCeS       taxeS      oF taxeS     typiCal     Budgeted
                                                 (000’S)              (000’S)      (000’S)    ColleCted     CoSt (1)    poSitionS
      Local Direct General Purpose Tax Supported Functions
 1    Public Safety                               $32,535                $4,967    $27,568        63.1%         $497        302.7
      (Police Fire & Pensions)
 2    General Government                           15,502                10,029       5,473     12.55%            98        132.6
 3    Streets Department                            5,288                 1,456       3,832      8.77%            69         39.7
 4    Parks Department                              4,048                 1,255       2,793      6.39%            50         25.5
 5    Other Special Revenue Funds                   3,231                 1,823       1,408      3.22%            25         21.2
 6    Debt Service Funds                            1,711                   883         828       1.9%            15          0.0
 7    Capital Project Funds                        12,764                10,968       1,796      4.11%            32          0.0
   Local Direct Special Purpose Tax Supported Functions
 8 Special Levy Debt                               470                      170        300                         8         0.00
 9 Transit Division                              8,468                    4,203      4,265                        30         48.2
      Non-Local Tax Supported Functions
      Street Construction                                  $16,166      $16,166
 10   Refuse-17,030 Residential accts                        3,723        3,723                                  167         20.5
 11   Sewer-22,411 Residential accts                        28,476       28,476                                  525         66.5
 12   Water-16,704 Residential accts                         8,421        8,421                                  214         30.0
      Equipment Rental                                       4,810        4,810                                              11.8
      Public Works Administration                            1,101        1,101                                               9.1
      Self-insurance Reserve                                 3,520        3,520
      Employee Benefit Reserve                               8,517        8,517
 13   Irrigation-10,591 Residential accts                    5,653        5,653                                  194          8.9
 14   PBIA                                                      65           65

      Totals                                             $164,469     $116,206     $48,263                    $1,924       716.7

(1) Based on 2004 cost for a typical four-person household: Property tax based on $100,000 home; sales tax based on $40,000 annual
income and $10,000 taxable purchases; utilities based on 96 gal can for refuse, 1300 cu ft monthly consumption for water/sewer;
irrigation for 7000 sq ft lot; gas/electricity $2,160, telephone $720, and cable tv $600.


                                                                Section II. What You Pay & What You Get Back — 
   TAx BuRDEn — FEDERAl vS. lOCAl
   The Tax Foundation of Washington D.C. publishes a Special Report each April, called “America
   Celebrates Tax Freedom Day.” This is when Americans will have earned enough money to pay
   off their total tax bill for the year. Taxes at all levels of government are included, whether lev-
   ied by the federal government or state and local governments. Tax Freedom Day in 2005 fell on
   April 17th, two days later than it did in 2004, but still considerably earlier than in 2000, when if
   fell on May 3rd. On average in 2005, Americans will work 70 days to afford their federal taxes,
   and 37 more days to afford state and local taxes..

   According to the Foundation’s report, “The federal government cut taxes every year for the last
   four years, and because the bubble in 1999 and 2000 boosted tax collections to artificially high
   levels, the drop since then is all the more dramatic. Now the tax burden has resumed its more
   typical upward course.”

   Since 1990, state and local tax burdens have slowly decreased from 11.2% in 1990 to 10.0% in
   2005. The report indicates that Washington State is ranked 8th in the nation for federal per
   capita taxes paid in 2005. However, it is ranked 24th in the nation for state and local taxes per
   capita. This demonstrates that Puget Sound, with a higher cost of living and commensurately
   higher salaries, generated high federal income tax payments. (Some of the wealthiest people in
   the world live in Washington State.) It also demonstrates how small the state and local tax bur-
   den is in comparison to the total taxes paid – at exactly one third of the total tax burden.

   For the most part, local taxes cost the least and provide citizens with the services they need
   and care about the most – they have the most direct bearing on their quality of life. This
   is also the level where citizens are most empowered to affect government policy and monitor
   accountability. There are per capita comparisons presented in the Budget, which contrasts the
   City of Yakima with other similar cities in Washington State. Yakima is consistently below the
   average in per capita taxes.




0 — Section II. What You Pay & What You Get Back
III. GEnERAl GOvERnmEnT COnDITIOn: 2005 in review


General Government is the term used to describe basic tax-supported activities, which are in-
cluded in three funds:

1. General Fund: services provided include; police, fire, code enforcement, planning, library,
   legal, municipal and district courts, financial services, purchasing, information systems, etc.

2. Parks and Recreation Fund: programs and maintenance.

3. Street Fund: Street & Traffic Operations and maintenance.

Below is an overview of General Government revenue and expenditure estimates for year-end
2005.

                                                                                          taBle iii-1
                                      2005 SummARY
                           ESTImATED REvEnuES AnD ExPEnDITuRES

                                                          parkS and
                                                          reCreation       Street
                                         general Fund        Fund           Fund          total
Actual Beginning Balance                   $5,175,976       $472,283    $1,148,043      $6,796,302
Estimated Revenue                          39,865,636       3,871,594     4,807,436     48,544,666
Total Estimated Resources                  45,041,612      4,343,877      5,955,479     55,340,968
Less: Estimated Expenditures             (40,860,063)     (3,889,869)   (4,902,051)    (49,651,983)
Estimated Ending Balance 2005              $4,181,549       $454,008    $1,053,428      $5,688,985


general Fund
•   2005 year-end revenue estimate is $39,865,636 — $1,608,147 or 4.2% over actual levels for 2004.
    ($640,000 represents the new Criminal Justice Sales Tax -- if this is factored into the calcula-
    tion, the increase is 2.5%)

•   2005 year-end expenditure estimate is $40,860,063 — $559,254 or 1.4% under the authorized,
    amended budget of $41,419,317.

parkS Fund
•   2005 year-end revenue estimate is $3,871,594 — $141,624 or 3.8% over the actual levels for
    2004.

•   2005 year-end expenditure estimate is $3,889,869 — $33,253 or 0.8% under the 2005 amended
    budget.

Street Fund
•   2005 year-end revenue estimate is $4,807,436 — $355,233 or 8% more than actual levels for
    2004. (2005 includes County Road tax for the Englewood annexation of about $192,000,
    which represents more than half of this increase

•   2005 year-end expenditure estimate is $4,902,051 — $371,523 or 7% under the 2005 amended
    budget.

                                    Section III. General Government Condition: 00 in Review — 
   taBle iii-2 below provides a breakdown of the anticipated actual performance of General Gov-
   ernment budgets by category for 2005. Most of the positive variances and expenditures savings
   relate to position vacancies and general cost containment measures, (i.e. Police, Fire, Parks and
   Streets) or timing of project completion (i.e. Information systems). The negative variance in the
   Legal department is due to the departure of one Assistant City attorney and the corresponding
   increase in the use of outside Legal Counsel.
                                                                                           taBle iii-2
                                        CITY OF YAkImA
                                GEnERAl GOvERnmEnT COmPARISOn
                               2005 BuDGET vS. YEAR-EnD ESTImATE

                                          2005            2005                        year-end eSt.
                                         amended         year-end                     aS perCent oF
      Fund                                Budget         eStimate       varianCe         Budget
      Police                            $16,234,851     $16,031,711      $203,140             98.7%
      Fire                                 7,371,671      7,302,522          69,149            99.1%
      Information Systems                 2,602,902       2,532,369         70,533             97.3%
      Transfers                           1,974,000       1,964,000         10,000            99.5%
      Legal                               1,430,269       1,466,004       (35,735)           102.5%
      Library                              1,414,107       1,414,107              0          100.0%
      Code Administration                  1,363,152      1,351,149         12,003             99.1%
      Police Pension                      1,255,672        1,207,111        48,561             96.1%
      Financial Services                   1,131,766      1,120,735          11,031           99.0%
      Engineering                          1,087,687      1,087,218             469          100.0%
      Municipal Court                     1,030,356         969,536         60,820             94.1%
      Utility Services                       910,596         911,352          (756)          100.1%
      City Manager                           587,043         558,186        28,857             95.1%
      Environmental Planning                 571,252         533,017        38,235            93.3%
      Human Resources                        459,506         449,166        10,340             97.7%
      Probation Center                       411,771        402,269           9,502            97.7%
      City Hall Maintenance                  371,016        364,601           6,415           98.3%
      Records                               286,544         280,399           6,145            97.9%
      Purchasing                             219,128         218,428            700           99.7%
      Intergovernmental                      176,853         180,923        (4,070)          102.3%
      City Council                           163,878        163,863              15          100.0%
      SunDome                                150,697        150,697               0          100.0%
      State Examiner                         103,000        103,000               0          100.0%
      Hearings Examiner                       66,000          66,000              0          100.0%
      District Court                          45,600          31,700        13,900             69.5%
       Total General Fund               $41,419,317    $40,860,063       $559,254            98.6%

      Parks & Recreation                  3,923,122       3,889,869        33,253             99.2%
      Street & Traffic Operations         5,273,574      4,902,051        371,523            93.0%
      Total General Government          $50,616,013    $49,651,983       $964,030            98.1%




 — Section III. General Government Condition: 00 in Review
                                                                                                                       taBle iii-3

                                    GEnERAl FunD ThREE YEAR COmPARISOn

                                                          2003                      2004                    2005 year-end
                                                          aCtual                    aCtual                     eStimate
          Beginning Balance                             $6,375,216                $5,893,638                   $5,175,976
          Revenues                                       36,011,118               38,257,489                   39,865,636
          Total Resources                              $42,386,334               $44,151,127                  $45,041,612
          Expenditures                                  36,492,696                38,975,151                   40,860,063
          Ending Balance                                $5,893,638                $5,175,976                   $4,181,549



GEnERAl GOvERnmEnT COnDITIOn — revenue trendS
The City receives revenue from many different sources; some revenue is available for any
government purpose and some revenue is restricted in use to a specific fund(s) and/or a specific
purpose. The sources of revenue that are available for use within the General Government Funds
(for general purposes or for a restricted purpose within General Fund, Parks or Street Funds) are
listed in Figure III-1 below along with a three year comparison of the amount of revenue received
from each source (Table III-4).

For 2006, total General Government revenues are budgeted to be $50,190,897, $1,646,231 or 3.4%
more than the 2005 year-end estimate of $48,544,666, and total beginning cash reserves are
estimated to be $5,688,985, ($1,107,317) or (16.3%) less than the 2005 estimate of $6,796,302.


                                                                                                                       taBle iii-4
                     GEnERAl GOvERnmEnT ThREE YEAR COmPARISOn, 2006                                   vS.   2005

                                2004       2005     perCent     2006     % oF 2006 inCreaSe                                 perCent
SourCe                         aCtual     eStimate  Change     Budget      total   (deCreaSe)                               Change
General Sales Tax           $11,447,827 $11,920,000     4.1% $12,160,000     24.2% $240,000                                     2.0%
Crim. Justice Sales Tax*         691,182 1,383,000 100.1% 2,048,000           4.1%    665,000                                  48.1%
Property Tax                 11,900,238 12,094,342     1.6% 12,336,329       24.6%     241,987                                  2.0%
Franchise & Util. Taxes        9,164,149  9,374,962    2.3% 9,672,400        19.3%     297,438                                  3.2%
Charges for Services          5,104,562   5,132,952    0.6% 4,990,989         9.9% (141,963)                                  (2.8%)
State Shared Revenue          2,275,327   2,433,175    6.9% 2,399,879         4.8%    (33,296)                                 (1.4%)
Fines and Forfeitures         1,363,565   1,233,100  (9.6%) 1,295,200         2.6%      62,100                                  5.0%
Other Taxes                   1,540,680   1,759,088  14.2% 2,087,200          4.1%     328,112                                 18.6%
Other Revenue                    875,401  1,022,711  16.8%       854,320      1.7% (168,391)                                 (16.5%)
Transfers from other Funds    1,055,695 1,012,000     (4.1%) 1,061,000        2.1%      49,000                                  4.8%
Other Intergovernmental          491,268    573,636  16.8%       693,580      1.4%     119,944                                 20.9%
Licenses and Permits             529,767    605,700  14.3%       592,000      1.2%    (13,700)                                (2.3%)
Total Revenue              $46,439,661 $48,544,666     4.5% $50,190,897    100.0% $1,646,231                                     3.4%
Beginning Fund Balance         7,581,188 6,796,302   10.3% 5,688,985               (1,107,317)                               (16.3%)
Total Resources            $54,020,849 $55,340,968     2.4% $55,879,882              $538,914                                   1.0%

* Some Criminal Justice sales tax is allocated to the Law & Justice capital fund (a non-general Governmental fund) for capital needs.
(See section IV 1b. for details.)




                                                Section III. General Government Condition: 00 in Review — 
                                                                                                                                                    Figure iii-1

                                                2005 YEAR-EnD ESTImATE AnD YEAR 2006 BuDGET
                                                        2005 Year-End Estimate and Year 2006 Budget
                                                       GEnERAl GOvERnmEnT RESOuRCES
                                                                           General Government Resources


                 Sales Tax/Crim. Justice Sales Tax                                                                                               $14,208,000


                                     Property Tax                                                                                  $12,336,329


                          Franchise & Util. Taxes                                                                  $9,672,400


                             Charges for Services                                    $4,990,989


                            State Shared Revenue                       $2,399,879
                                                                                                  2006 vs. 2005 Est.
                                                                                              Increase in Total Resources
                             Fines and Forfeitures            $1,295,200
                                                                                                  Amount $538,914
                                                                                                     Percent .97%
                                     Other Taxes                      $2,087,200


                                   Other Revenue            $854,320

                                                             $1,061,000
                       Transfers from other Funds                                      2005 Y/E Estimate                    2006 Budget

                          Other Intergovernmental          $693,580


                             Licenses and Permits          $592,000


                      Beginning Fund Balance (1)                                         $5,688,985


                                                    $0      $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000



               general SaleS tax (Single                 largeSt revenue SourCe For        general Fund)
               •     2006 revenue projection is $12,160,000 — $240,000 or approximately 2.0% more than the 2005
                     year-end estimate of $11,920,000. This modest growth is being projected as a function of
                     inflation.

                 With the exception of 2005, the General Sales Tax rate of growth has been at 2% to 3% annually
                 since 1997. In 2005, this rate is anticipated to be approximately 4.1%. This increase is based on
                 robust new construction and durable goods purchases spurred by historically low interest rates.
                 The effects of this bubble are expected to be transitory and revenue estimates for this important
                 source for 2006 have been returned to past year growth levels of two percent for 2006. In 1997
                 inflation Res Chart dollars, Sales Tax receipts are
10/10/2005 9:02 AM Gen Gov adjustedDZ 2002 GEN GOV RES CHART projected to be lower in 2005 than they were in
                 1997 (see Figure III-7 for 1997 constant dollars). There are several factors contributing to this
                 trend:

               •     Low agricultural commodity prices combined with a slow growth of non-agricultural
                     diversification.

               •     The full effects of welfare reform reducing transfer payments and thus — disposable in-
                     come.

               •     Double-digit unemployment for much of the year.

               •     The departure of major retail stores from within the City limits to a neighboring community.
             — Section III. General Government Condition: 00 in Review
•   The distress in the national economy and diminished consumer confidence.

•   The growing impact of untaxed internet and catalog sales.

Should this important revenue source not improve, it could contribute to greater reductions in
services to our citizens.

Of the 8.2% sales and use tax collected within the City, the City of Yakima receives 0.85% (or
about 10.36% of the total). The General Government Funds receive the full amount of the City’s
share of general sales tax revenues. (Note: the City also receives 0.3% sales tax revenues which
are restricted for transit purposes and a portion of 0.4% sales tax revenues which are restricted
for criminal justice purposes. The State receives 6.5% and Yakima County receives .15% of the
remainder — refer to Section II for more information.)

The following chart identifies Yakima’s sales tax revenues as they relate to the total General
Fund operating revenues (excluding inter-fund transfer revenues). This revenue source is very
sensitive to economic conditions. As the graph below (Figure III-2) shows, eight years of flat
sales tax receipts has slightly reduced dependence on this source of revenue for General Fund,
as other revenue sources such as utility and property tax have grown only slightly. Additionally,
the passage of I-745 has severely restricted Property Tax revenues, requiring more dependence
on other revenue sources, which are scarce. General Fund cannot continue to operate at current
service levels and current inflation rates without growth in its Sales Tax revenue.

                                                                                                Figure iii-2

                                           Percent of SAlES TAx
                                         PERCEnT OF Sales Tax
                                      Compared to Operating REvEnuE
                                    COmPARED TO OPERATInGRevenue
                                              General FunD
                                            GEnERAl Fund

        50.0%

        45.0%

        40.0%

        35.0%

        30.0%
                1996     1997      1998       1999      2000    2001     2002   2003   2004   2005

CompariSon   oF per Capita   SaleS tax   with other   waShington State CitieS
The City’s sales tax per capita is compared with 11 other similar sized cities throughout the State
(see Figure III-3 below). The data was compiled from the State Auditor’s Office statistics. Although
sales tax revenue is the City’s largest single source of General Government revenue, the City’s
collections are the fourth lowest out of the 12 comparable cities. The City of Yakima’s per capita
sales tax is $199; lower than 66% of the cities compared. Additionally, Yakima is the only community
listed that has a voter approved Transit sales tax. The revenues generated from the Transit Sales
Tax are restricted to providing transit and related services within the City of Yakima. If Transit
revenues are excluded from the comparison with other cities (to provide a better comparison of
unrestricted revenues), Yakima’s sales tax rate drops to approximately $149 per capita, the second
lowest of the 12 cities compared.

                                            Section III. General Government Condition: 00 in Review — 
                                                                                                                                                                                                       Figure iii-3

                                                                                                         Comparable Cities between 25,000 and 85,000 in population


                                                             $450                                    2003 PER CAPITA SALES & USES TAXES
        Per Capita Revenue (rounded to the closest dollar)



                                                             $400                 Yakima s per capita sales tax is $199, which is $52                                                                   $375
                                                                                  LESS than the average per capita city sales tax of                                                       $354
                                                             $350                 $251.
                                                                                                                                                                         $308     $313
                                                                                                                                                              $297
                                                             $300

                                                                                                               Yakima $199                $241   $243
                                                             $250
                                                                                                                              $209
                                                             $200                                      $175
                                                                                           $160
                                                             $150   $133


                                                             $100
                                                                    Walla Walla




                                                                                                                                                 Bellingham
                                                                                                                              Kennewick




                                                                                                                                                                                                         Redmond
                                                                                          Richland




                                                                                                                                                              Kirkland




                                                                                                                                                                                           Olympia
                                                                                                                                                                         Auburn



                                                                                                                                                                                  Renton
                                                              $50
                                                                                                       Pasco




                                                                                                                                          Kent
                                                               $0
                                                                                             Data compiled from the State Auditor s Local Government Comparative Statistics




   1. Criminal juStiCe SaleS tax

   A. 0.1% Sales Tax A special 0.1% Criminal Justice Sales Tax was approved by the voters of Yakima
   County in the November 1992 General Election and became effective January 1, 1993. The State
   allocates this 0.1% criminal justice sales tax revenues between the City and the County, based on
   a predefined formula. The General Fund and the Law and Justice Capital Fund receives the full
   amount of the City’s share of these sales tax revenues; these revenues are restricted to providing
   criminal justice related services, and are allocated based on operating vs. capital needs.

   This tax is expected to generate $2,398,000 for the City in 2006, and is allocated in the City’s budget
   forecast as noted on the next page:


                                                                                                                 0.1% Criminal justice Sales Tax

                                                                                                                                                               2005                                   2006
                                                                                                                             2004                             year-end                                Budget
   Fund                                                                                                                      aCtual                           eStimate                               ForeCaSt
   General Fund                                                                                                               $691,182                          $743,000                                $760,000
   Law & Justice Capital                                                                                                       100,000                            75,000                                  75,000
        Total                                                                                                                $791,182                          $818,000                                $835,000



   Since population is a component of the tax distribution, annexations have a positive influence
   on this revenue. This tax revenue is affected by the same regional economic factors that affect
   the General Sales Tax revenue, as outlined above.

   B. 0.3% Sales Tax
   Another special sales tax of 0.3% dedicated to Criminal Justice expenditures was approved by
   the Yakima County voters in November, 2004 and took effect on April 1st of 2005. The tax is on

 — Section III. General Government Condition: 00 in Review
sales inside the County only and the proceeds are divided between the County and Cities on
a predefined formula. The City received the first distribution of the tax on June 30th of 2005.
Anticipated revenue is depicted in the table below. (Note: Public Safety Communications and
Law and Justice Capital Finds are not part of General Government). This tax is expected to
generate $1,563,000 in 2006, and is allocated in accordance with the chart below.

                                 0.3% Criminal justice Sales Tax

                                                                        2005               2006
                                                     2004              year-end            Budget
Fund                                                 aCtual            eStimate           ForeCaSt
General Fund (for Criminal Justice Expenditures)              $0        $640,000           $1,288,000
Public Safety Communications                                   0           37,000              75,000
Law & Justice Capital                                          0          235,000             200,000
     Total                                                    $0        $912,000          $1,563,000


2. property tax
The 2006 projection includes a proposed 1% increase in the property tax levy, plus a conservative
1% growth factor for new construction and enhanced tax collections. There was one annexation
of approximately $175 million in assessed valuation that occurred in 2005. This annexation in-
cluded about 2,000 residents in the Englewood area of Yakima. This revenue will not be realized
until the 2007 budget cycle.

The 2006 request complies with the levy limit restrictions contained in Initiative 747; limiting
property tax levy increases to the maximum of 1% or the rate of inflation, whichever is less (note:
the initiative defines the rate of inflation as measured by the Implicit Price Deflator for consumer
goods). Under the initiative, the City could increase the levy by more than 1% if approved by the
majority of voters.

As a point of clarification, the property tax levy is limited to a 1% increase in the dollars levied
(about $136,000 for 2006) - it does not limit growth in assessed value. The 1% limit affects the total
dollars levied by the government, while assessed valuation is the mechanism used to allocate the
levy ratably among the property owners.

Negotiated wage and benefit settlements for public safety employees for 2005-2006 totaled more
than $525,000, far surpassing the legally allowed increase in the property tax levy. This % re-
striction on growth will have an adverse effect on all of General Government functions that will grow
exponentially worse as time passes. Coupled with the depressed economy and constraints on
other revenue sources that are directly related to economic activity, further City budget reduc-
tions might be necessary, causing diminished capacity of the City to deliver critical services to its
citizens.

Since most consumer activity (i.e., wages, equipment, etc.) is more closely tied to the Consumer
Price Index (CPI), and CPI is greater than 1% in almost all years, the future effect of 1% or less
growth in Property Tax is restrictive to the City since Property Tax is one of General Government’s
primary revenue sources.

Property taxes provide for 25% of all General Government revenue in 2006, which excludes the
Firemen’s Relief and Pension costs. The graph below depicts the allocation of the City’s property
tax revenues.
                                     Section III. General Government Condition: 00 in Review — 
                                                                                                      Figure iii - 4
                               PROPERTY TAx AllOCATIOn BY FunCTIOn
                                       2006 GEnERAl lEvY
                                       Property Tax Total — $,,


                                                                                      Fire and Police
                               General Fund                                              Pensions
                                $4,552,937                                              $2,811,851
                                  32.9%                                                    20.3%




                                                                                                  Library
                                                                                                $1,314,107 (1)
                                                                                                    9.5%
                            Streets
                          $3,314,344
                            24.0%                                                    Parks
                                                                                  $1,841,985
                                                                                    13.3%
             (1) Reflects 7% decrease from 2005.




                                                                                                        taBle iii - 5

                                            2006 PROPOSED
                                       GEnERAl PROPERTY TAx lEvY

                                                                      2005             2006              2005
                                                      2004          year-end           Budget              vS.
                                                      aCtual         eStimate        projeCtion          2006
      General                                       $5,558,502      $5,588,893       $5,865,893           5.0%
      Library                                          1,414,107      1,414,107        1,314,107         (7.1%)
      Parks & Recreation                              1,741,985       1,841,985        1,841,985          0.0%
      Streets/Traffic                                 3,185,249       3,249,357        3,314,344          2.0%
      Sub-Total — General Government                 11,899,843     12,094,342       12,336,329           2.0%
      Firemen’s Relief and Pension                    1,378,215       1,405,779        1,498,895          6.6%
      Total                                        $13,278,058     $13,500,121      $13,835,224          2.5%



   The City has compiled data from the State Auditor’s Office that identifies per capita property
   tax for comparable cities throughout the State. The following chart (Figure III - 5) compares the
   City’s per capita property tax income for 2003 (the last year information is available). It shows

 — Section III. General Government Condition: 00 in Review
the City of Yakima’s property tax per capita is $150, which is $61 less than the average of all the
comparable cities. Yakima ranks fourth lowest in tax per capita of the 12 comparable cities (see
chart next page).

                                                                                                                                                                                                           Figure iii - 5

                                                                                                             Comparable Cities between 25,000 and 85,000 in population

                                                                                                         2003 PER CAPITA PROPERTY TAXES
                                                                 $400
     Per Capita Property Taxes (rounded to the closest dollar)




                                                                                  Yakima s per capita property tax is $150, which is $61                                                                       $357
                                                                 $350             LESS than the average per capita city property tax of
                                                                                  $211.
                                                                 $300                                                                                                                            $286
                                                                                                                                                                                 $273     $278

                                                                                                                                                                      $245
                                                                 $250
                                                                                                                      Yakima $150                          $215
                                                                                                                                                 $203
                                                                 $200                                                               $175


                                                                 $150                                     $135
                                                                          $108             $111

                                                                 $100
                                                                                           Walla Walla



                                                                                                          Kennewick




                                                                                                                                    Bellingham




                                                                                                                                                                                                 Redmond
                                                                                                                                                           Richland
                                                                                                                                                 Olympia




                                                                                                                                                                      Kirkland



                                                                                                                                                                                 Auburn




                                                                                                                                                                                                               Renton
                                                                  $50
                                                                          Pasco




                                                                                                                                                                                          Kent
                                                                   $0
                                                                                          Data compiled from the State Auditor s Local Government Comparative Statistics




3. FranChiSe                                                            and   utility taxeS
Franchise and utility taxes are collectively the third largest category of General Government
revenues. They comprise 19.2% of 2006 projected General Government revenues and 23.4% of
projected 2006 General Fund Revenues.

2006 projection is $9,672,400 — $297,438 or 3.2% above the 2005 year-end estimate of $9,374,962.

These revenues are largely a function of weather conditions and utility rates in the Valley. Fran-
chise and utility taxes are the only major revenue source currently keeping up with the rate of
inflation.

Figure III-6 (per capita business and occupation/utility tax) represents business license fees,
Business and Occupation (B & O) tax, and utility taxes on private and public utilities. Note:
Yakima does not impose a general-purpose business and occupation tax, which is generally charged on the
gross volume of sales incurring in applicable cities.

Yakima's $122 per capita B & O/Utility Tax ranks second lowest of the twelve cities in this com-
parison. This is $29 below the $151 average per capita revenue.




                                                                                                                           Section III. General Government Condition: 00 in Review — 
                                                                                                                                                                                              Figure iii - 6

                                                                                                  Comparable Cities between 25,000 and 85,000 in population


                                                                                         2003 PER CAPITA B&O/UTILITY TAXES
                                                              $250
                                                                            Yakima s per capita B&O/Utility tax is $122, which is $29 LESS
         Per Capita Revenue (rounded to the closest dollar)



                                                                            than the average per capita B&O/Utility tax of $151.

                                                              $200
                                                                                                                                                                                        $175       $180
                                                                                                                                                                              $171
                                                                                Yakima $122                                                                $156    $156
                                                                                                                                    $153        $155
                                                                                                         $141         $144
                                                              $150                            $137
                                                                      $120


                                                              $100




                                                                                                                      Walla Walla
                                                               $50                                       Bellingham




                                                                                                                                    Kennewick




                                                                                                                                                                              Redmond




                                                                                                                                                                                        Richland
                                                                                                                                                                    Olympia
                                                                                                                                                Kirkland
                                                                       Auburn




                                                                                                                                                                                                   Renton
                                                                                                                                                           Pasco
                                                                                               Kent




                                                                $0

                                                                                   Data compiled from the State Auditor s Local Government Comparative Statistics




   4. ChargeS                                                 For    ServiCeS
   This revenue category consists of revenues from probation program fees, various parks and se-
   nior citizen programs, plan checking fees, and street and traffic engineering fees, etc. However,
   the largest component (about half), are fees paid by other City funds for General Fund services
   (legal, administration, purchasing, etc.); these charges for 2006 reflect a decrease due to the
   transfer/consolidation of Probation Services to Yakima County.

   •   2006 projection is $4,990,989. This is a 2.8% or $141,963 decrease from the 2005 estimate.


   5. State-Shared revenue
   State-shared revenues are the fifth largest category of revenues received for General Govern-
   ment Operations.

   •   2006 projection for all revenues within this category is $2,399,879; a decrease of $33,296 from
       the 2005 year-end estimate of $2,433,175.

   State funding of certain criminal justice programs is based on a predefined State formula which
   is updated at least once each year.

   •   Liquor excise and liquor profits taxes are budgeted at $930,000 for 2006 — $15,000 above the
       2005 year-end estimate of $915,000.

   •   Gas tax in the Street Fund is budgeted at $1,140,358 for 2006. This is $23,942 or 2.1% below
       the 2005 year-end estimate of $1,164,300. This tax is calculated by the State using population
       figures from counties. Trends of this tax have historically been fairly flat. In 2005 the State
       Legislature increased gas taxes by 9.5 cents per gallon to fund transportation projects and
       road and street maintenance. However, there is an initiative on the November ballot which
       would repeal the increase. Until after the outcome of the election in November, no revenue
       enhancement has been budgeted in this line item.
0 — Section III. General Government Condition: 00 in Review
6. FineS   and   ForFeitureS
These revenues come primarily from criminal and non-criminal fines assessed in the City of
Yakima’s Municipal Court, and parking violations. This revenue source is still estimated to be
behind 2004 levels for several reasons:

•   The City has had only one Parking Enforcement Officer for the last three years instead of the
    two used in prior years.
•   A drivers license re-licensing program has been available for the last two years to defen-
    dants who have lost their drivers license for certain offenses. Through the program, fines
    must be called back for the collection agency in favor of a $25 per month time pay agreement
    with the Court. This program has slowed the collection of receivables due to the Court.
•   Employment and economic conditions in the area leave many offenders with fewer options
    available to them to pay fines and violations.

As long as these programs exist and economic conditions in Yakima remain distressed, fines
and forfeitures revenue will most likely not show significant growth.

The State Legislature approved a new filing fee in the 2005 session. Because the City intends
to meet the criteria to receive a portion of these fees from the State, an additional $19,200 was
added to this revenue for 2006. (See Policy Issue Summary - Exhibit II)

•   2006 projection is $1,295,200, up $62,100 or 5.0% from 2005 estimates, (but still below 2004
    actuals.)


7. other taxeS
This category includes Business Licenses, Gambling Taxes and County Road Tax from annexa-
tion. The 2006 projection is $2,087,200, up 18.6% or $328,112 from 2005 year-end estimate because
of Road tax from the Englewood annexation and the proposed 96th Avenue annexation.


8. other revenueS
The balance of revenues supporting the general government funds consists of transfers from
other funds, licenses and permits, and other miscellaneous sources. For 2006, $854,320 is expect-
ed to be generated in this category.

The largest revenue sources in this category include:

•   Interest income — 2006 projection is $586,000; up approximately $25,000 from 2005 budget
    estimates due to anticipation of market recovery in 2006.

•   Business Licenses, and Permits represent most of the remainder of this category.


9. other intergovernmental
This category includes revenue received from Government units other than the State of Wash-
ington. The 2006 budget of $693,580 is up $119,944 or 20.9% from the 2005 estimate. This is
mainly due to the new Union Gap Jail contract estimated to generate $90,000 in 2006.


                                    Section III. General Government Condition: 00 in Review — 
          revenue trend - Summary
          •                 2005 projection for all General Government revenue is $50,190,897; an increase of $1,646,231
                            or 3.4% from the 2005 year-end estimate of $48,544,666. Based on current expenditure projections
                            a modest use of City reserves of less than .% is allocated to balance the 00 General Government
                            Budgets.

          This minimal increase in General Government revenues is reflective of a depressed economy, a
          shrinkage of elastic revenues and existing tax limitations. Flat revenue growth, particularly in
          elastic revenues like sales tax, continues to be one of the City’s greatest challenges in meeting
          the ongoing service demands of our citizens.

          The chart on the next page depicts trends over the past nine years (in 1997 Constant Dollars) in
          sales, property and utility tax revenues; the City’s three largest General Government revenue
          sources. Sales tax has exhibited consistent losses from 1997 through 2002. The City boundaries
          were expanded by a major annexation in 2002, which resulted in some rebound of this line item.
          In 2005, Sales tax is performing better due to the transitory effects of new construction spurred
          by low interest rates. With the passage of Initiative 747, property tax levy growth will be con-
          strained to 1%, which is generally below inflation, although the chart does show an increase in
          2003 as a result of the annexation, which brings its constant dollar value back to 2000 levels. The
          constant dollar trend for utility taxes is the only General Government revenue source keeping
          pace with inflation. This means two of the three major General Government resources are not keeping
          pace with inflation even after realizing the growth in tax base from the West Valley annexation area. Ac-
          cordingly, General Government services will have been reduced to stay within existing resources, and in
          the absence of new revenues, will continue to be reduced.

                                                                                                                        Figure iii - 7

                                            COnSTAnT DOllAR SAlES, PROPERTY AnD Utility TAxES
                                            Constant Dollar Sales, Property and uTIlITY Taxes

                          $11,000


                          $10,000


                           $9,000
  1997 Dollars in 000's




                           $8,000


                           $7,000


                           $6,000


                           $5,000


                           $4,000
                                     1997      1998       1999         2000        2001       2002       2003        2004     2005 Est.


                                                           Sales Tax          Property Tax Levy      Utility Taxes


          The following information is illustrated in Table III-6.


 — Section III. General Government Condition: 00 in Review
general Fund
•    2006 projected beginning balance is $4,181,549 — $994,427 or 19.2% under the 2005 beginning
     balance, meaning there is dependence on reserves in 2005 to balance the Budget based on
     year-end estimates.

•    2006 projected revenue is $41,303,765 — $1,438,129 or 3.6% over the 2005 year-end estimate.
     Much of this increase (about $648,000) is the annualized effect of the new Criminal Justice
     Sales Tax. Existing resources are estimated to grow by about 2%.

parkS   and   reCreation Fund
•    2006 projected beginning balance is $454,008 — $18,275 or 3.9% under the 2005 beginning
     balance of $472,283, again meaning it is necessary to use reserves in 2005 to balance the Bud-
     get if year-end estimates stay at current projections.

•    2006 projected revenue is $3,886,880 — $15,286 or 0.4% over the 2005 year-end estimate.

Street Fund
•    2006 projected beginning balance is $1,053,428 — $94,615 or 8.2% under the 2005 beginning
     balance of $1,148,043, meaning there is dependence on reserves in 2005 to balance the 2006
     budget if estimates stay at current projections.

•    2006 projected revenue is $5,000,252 — $192,816 or 4% over the 2005 year-end estimate.

Total General Government Revenues for 2005 are estimated to be about 4.5% more than 2004 actuals.

Total General Government Revenues for 2006 are projected to increase by only 3.4% over 2005
estimates.

These increases are primarily a function the new Criminal Justice Sales Tax and annexation
activity.
                                                                                                   taBle iii - 6

                                        GEnERAl GOvERnmEnT
                                   ThREE YEAR RESOuRCE COmPARISOn

                                                       2005
                                        2004          year-end        2005             2006          2006
                                        aCtual        eStimated      vS.2004          Budgeted     vS.2005 %
                                       reSourCeS      reSourCeS      % Change        reSourCeS       Change
    General Fund Revenues              $38,257,489    $39,865,636         4.2%       $41,303,765          3.6%
    General Fund Balance                 5,893,638       5,175,976     (12.2%)         4,181,549       (19.2%)
    Total General Fund                  44,151,127     45,041,612         2.0%        45,485,314          1.0%

    Parks & Recreation Revenue           3,729,970      3,871,594            3.8%     3,886,880             0.4%
    Parks Balance                          482,724        472,283          (2.2%)       454,008           (3.9%)
    Total Parks                          4,212,694      4,343,877            3.1%     4,340,888           (0.1%)

    Street & Traffic Fund Revenue        4,452,203      4,807,436            8.0%      5,000,252            4.0%
    Street & Traffic Beg. Balance        1,204,826      1,148,043          (4.7%)      1,053,428          (8.2%)
    Total Street & Traffic               5,657,029      5,955,479            5.3%      6,053,680            1.6%

    Total Gen. Gov. Revenue             46,439,662     48,544,666            4.5%     50,190,897            3.4%
    Total Gen. Gov. Beg. Balance          7,581,188     6,796,302          (10.4%)     5,688,985         (16.3%)
    Total Gen. Gov. Revenue            $54,020,850    $55,340,968            2.4%    $55,879,882            1.0%


                                       Section III. General Government Condition: 00 in Review — 
   The largest revenue source for the General Government Funds is sales tax. Yakima is in the
   lowest third of per capita sales tax compared with similar cities in the State. (Refer to Figure
   III-3) However, Yakima is also in the lower 1/3 of rankings in all other revenue comparisons
   per capita and is the lowest out of the twelve cities compared in combined per capita revenue.
   Yakima’s $990 per capita taxes is $608 below the average of $1,598 based on 2003 actual data, as
   demonstrated in Figure 8, below. The most important conclusion from this analysis is that the
   City of Yakima has a very limited revenue/tax base compared with most cities of its size in the state, and yet
   provides similar or enhanced services and programs to its citizens.
                                                                                                                                                                                                                     Figure iii - 8
                                                                                                             Comparable Cities between 25,000 and 85,000 in population

                                                                                                    2003 PER CAPITA TOTAL REVENUES
                                                                               (This includes state and federal grants, taxes and charges for services, and excludes debt proceeds.)
      Per Capita Total Revenue (rounded to the closest dollar)




                                                                 $2,500                                                                                                                                                 $2,369
                                                                              Yakima s per capita total revenue is $990, which is
                                                                              $608 LESS than the average city per capita revenue of                                                          $2,018       $2,032
                                                                              $1,598.                                                                                             $1,953
                                                                 $2,000
                                                                                                                                                                      $1,789
                                                                                                                                                          $1,625
                                                                          Yakima $990                                                       $1,497
                                                                 $1,500                                                         $1,376
                                                                                                                 $1,292
                                                                                                    $1,145
                                                                                        $1,037
                                                                 $1,000
                                                                                                                  Walla Walla




                                                                                                                                             Bellingham
                                                                                        Kennewick




                                                                  $500




                                                                                                                                                                                                           Redmond



                                                                                                                                                                                                                         Richland
                                                                                                                                                                                   Olympia
                                                                                                                                                           Kirkland




                                                                                                                                                                       Auburn




                                                                                                                                                                                             Renton
                                                                                                     Pasco




                                                                                                                                 Kent




                                                                    $0

                                                                                         Data compiled from the State Auditor s Local Government Comparative Statistics




                                                                                                                                                                                                                       taBle iii-7
                                                                                   GEnERAl GOvERnmEnT RESOuRCES BY mAjOR CATEGORY

                                                                                                                                                            2005                 2005                  2006             2006 Chg.
                                                                                                                2003                     2004              amended              year-end              ForeCaSt          From 2005
                                                                                                                aCtual                   aCtual            Budget               eStimate               Budget            eSt. (%)
  general Fund                                                                                                 1          2           3            4           5                                                            4-5
  Property Tax                                                                                             $6,455,914 $6,972,609 $6,956,000 $7,003,000 $7,180,000                                                          2.5%
  Sales Tax                                                                                                11,101,740 11,447,827 11,475,000 11,920,000 12,160,000                                                          2.0%
  Criminal Justice Sales Tax                                                                                  517,715    691,182   1,292,069   1,383,000 2,048,000                                                        48.1%
  Franchise Tax                                                                                               417,480    420,791     425,000      424,362    364,000                                                     (14.2%)
  Utility Tax                                                                                               8,282,786  8,743,358   8,855,000   8,950,600   9,308,400                                                       4.0%
  Other Taxes                                                                                               1,490,534  1,532,201   1,554,700    1,567,390  1,569,200                                                       0.1%
  Licenses and Permits                                                                                        469,716    529,767     584,500      605,700    592,000                                                      (2.3%)
  Intergovernmental Revenue                                                                                 1,739,409  1,605,395   1,636,541    1,722,419   1,867,501                                                      8.4%
  Charges for Services                                                                                      3,861,959  4,201,981   4,228,710   4,260,790   4,176,364                                                      (2.0%)
  Fines and Forfeitures                                                                                     1,396,796  1,363,565   1,462,200    1,233,100  1,295,200                                                       5.0%
  Miscellaneous Revenue                                                                                       165,927    455,365     598,500      604,275     632,100                                                      4.6%
  Other Financing Sources                                                                                        1,143        779    101,000      101,000        1,000                                                   (99.0%)
  Capital Lease Financing                                                                                            0    147,669          0            0            0                                                     N/A
  Transfers From Other Funds                                                                                  110,000    145,000     110,000       90,000     110,000                                                     22.2%
  Total Revenue                                                                                          $36,011,119 $38,257,489 $39,279,220 $39,865,636 $41,303,765                                                       3.6%
  Beginning Fund Balance                                                                                  $6,375,216 $5,893,638 $4,676,281 $5,175,976 $4,181,549                                                         (19.2%)
  Total General Fund                                                                                     $42,386,335 $44,151,127 $43,955,501 $45,041,612 $45,485,314                                                       1.0%

 — Section III. General Government Condition: 00 in Review
                                                                                              taBle iii-7 (Continued)

                                                                     2005        2005           2006         2006 Chg.
                                           2003         2004        amended     year-end       ForeCaSt      From 2005
                                           aCtual       aCtual      Budget      eStimate        Budget        eSt. (%)
general Fund                                 1            2           3            4              5            4-5
parkS & reCreation Fund
Property Tax                   $1,841,750 $1,741,985 $1,841,985                  $1,841,985 $1,841,985          0.0%
Intergovernmental Revenue          61,680     49,519     51,506                      84,506     85,100          0.7%
Charges for Services              702,346   794,244     825,520                     806,662    797,625         (1.1%)
Miscellaneous Revenues            110,549   134,087     130,700                     159,031    163,670          2.9%
Other Financing Sources            31,487     99,439     50,000                       57,410    47,500        (17.3%)
Transfers From Other Funds        858,955    910,695   900,000                      922,000    951,000          3.1%
Total Revenue                 $3,606,767 $3,729,969 $3,799,711                  $3,871,594 $3,886,880           0.4%
Beginning Fund Balance           442,959    482,724    422,812                     472,283    454,008         (3.9%)
Total Parks & Recreation Fund $4,049,726 $4,212,693 $4,222,523                  $4,343,877 $4,340,888         (0.1%)


Street   and   traFFiC operationS Fund
Property Tax                               $3,185,249 $3,185,644 $3,249,357     $3,249,357     $3,314,344       2.0%
County Road Tax                                 1,101      8,479    191,698         191,698        518,000    170.2%
Fuel Tax Street                             1,125,915  1,111,681  1,138,000      1,164,300       1,140,358     (2.1%)
Other Intergovernmental                             0          0     35,586          35,586            500    (98.6%)
Charges for Services                           75,556    108,337     57,000          65,500         17,000    (74.0%)
Miscellaneous Revenue                          21,580     14,442     20,050          11,295         10,050    (11.0%)
Other Financing Sources                        17,971     23,620          0          89,700              0      N/A
Total Revenue                             $4,427,372 $4,452,203 $4,691,691      $4,807,436    $5,000,252        4.0%
Beginning Fund Balance                     1,391,612 1,204,826     726,394       1,148,043      1,053,428     (8.2%)
Total Street and Traffic
Operations Fund                           $5,818,984   $5,657,029 $5,418,085    $5,955,479    $6,053,680       1.6%


Total General Government                 $52,255,045 $54,020,849 $53,596,109 $55,340,968 $55,879,882           1.0%


Total Revenue                            $44,045,258 $46,439,661 $47,770,622 $48,544,666 $50,190,897           3.4%
Total Beginning Fund Balance               8,209,787    7,581,188   5,825,487    6,796,302     5,688,985     (16.3%)
Total Resources                          $52,255,045 $54,020,849 $53,596,109 $55,340,968 $55,879,882           1.0%




GEnERAl GOvERnmEnT COnDITIOn — expenditure trendS
Figure III-9 and III-10, which follow, depict the major effect on the General Fund of the increase in
criminal justice costs compared to all other cost increases from 1996 to 2006.

Criminal justice costs continue to consume an ever-increasing share of total General Fund resources. In
order to pay these costs other General Fund programs are necessarily limited to remain within
available resources. See Exhibit III for more information.



                                              Section III. General Government Condition: 00 in Review — 
                                                                                                         Figure iii - 9
                               Percentage Increase of Criminal juSTICE COSTS
                             PERCEnTAGE InCREASE OF CRImInAl Justice Costs
                                  vs. GEnERAl GOvERnmEnT FunCTIOnS AnD
                           vS. OThER Other Gen Govt Functions and CPI CPI
                                        1996 Budget to 2006 Budget
                                       1996 BuDGET TO 2006 BuDGET



    Criminal Justice (1)                          $9,289,538                           70.7%




    All Other Gen Govt             $7,726,990             37.6%




                    CPI                                34.3%




                       0.0%           20.0%             40.0%            60.0%             80.0%           100.0%

           (1) Includes Police Operations; Pensions; Public Safety Communications; Jail Costs/Security; District and
                     Municipal Court; Prosecution and Indigent Defense; and 40% of Information Systems.




   Cumulatively, over the past eleven years Criminal Justice budgets have increased over 70.7%. By
   comparison, all other General Government expenses have increased by only .% During this same
   ten year period the Seattle-Tacoma Consumer Price Index also increased by 34.3%. Accordingly,
   City Criminal Justice spending has nearly doubled the increase in the CPI over the past eleven years.

   When the increase in population and boundaries are considered over this same time frame, the
   fact that other services are just slightly above the rate of inflation demonstrates a real reduction
   in service costs per capita.


   Criminal juStiCe Funding — As of January 2000 the City no longer receives State Motor Vehicle
   Excise Tax revenues for Law and Justice programs, and State Criminal Justice funding is slowing.
   Even with the new 0.3% Criminal Justice sales tax just passed, this stretches all other “General
   Revenue” to pay for these programs. Table III-8 on the next page depicts the growth in Law and
   Justice operations costs for 2004, 2005 estimate and 2006 budget.




 — Section III. General Government Condition: 00 in Review
                                                                                                             taBle iii - 8
                           Schedule of Criminal justice Expenditures
                  For the Years Ended December 31, 2004 thru 2006 Forecast
                                                                                                                 %Change
                                                   2004                   2005                 2006              2006 from
Description                                       Actual                Estimate             Forecast              2005

Police Operations & Administration               $12,953,120              $13,747,178        $14,250,607              3.66%

Outside/Inside Jail Costs                           1,997,926                 2,085,550        2,203,500              5.66%

District Court/Municipal Court
  & Probation                                       1,331,637                 1,403,505        1,348,652             (3.91%)

Prosecution Costs/ Indigent Defense                    744,213                 796,368           830,893              4.34%

Other Related Expenses
  Police Pension                                    1,287,904                 1,207,111        1,312,956              8.77%
  Emergency Dispatch Transfer                         405,000                  405,000           415,000              2.47%
  Transfer-Law & Justice Center *                     130,099                  132,000           136,000              3.03%
      Total                                         1,823,003                 1,744,111        1,863,956              6.87%

Totals                                           $18,849,899             $19,776,712         $20,497,608              3.65%

*Utility Tax transfer from General Fund.


                                                                 line chart
                                                                                                           Figure iii - 10

         CRImInAl juSTICE ExPEnDITuRES AS A PERCEnTAGE OF TOTAl GEnERAl FunD
                                 Criminal Justice Expenditures
                            as a Percentage of Total General Fund
     60.0%

     55.0%

     50.0%

     45.0%

     40.0%

     35.0%

     30.0%
          1996     1997      1998     1999     2000        2001          2002        2003     2004      2005        2006
         Actual   Actual    Actual   Actual   Actual      Actual        Actual      Actual   Actual   Estimate     Budget


                                              Criminal Justice                All Other



The following chart (Figure III-11) compares per capita criminal justice expenditures with com-
parable cities based on 2003 data. Yakima has the highest per capita percentage of revenue spent
on Criminal Justice among the 12 comparable cities; Yakima has been first for the last six out of
seven years.

                                       Section III. General Government Condition: 00 in Review — 
                                                                                                                                                                         Figure iii - 11
                                                       Comparable Cities between 25,000 and 85,000 in population

                         PERCENT OF PER CAPITA TOTAL REVENUE SPENT ON
    30%
                                    CRIMINAL JUSTICE IN 2003
                The percentage of Yakima s total revenue spent on criminal justice is 20.1%, which is                                                                 Yakima 20.1%
    25%
                3.8% MORE than the average percentage of cities total revenue spent on criminal
                justice.
                                                                                                                                                      18.9%      19.0%
    20%                                                                                                                                    18.0%
                                                                                                                        16.5%
                                                                                        15.1%          15.5%
                                         14.0%            14.6%              14.7%
    15%

                             9.4%
    10%        7.4%
                                         Walla Walla




                                                                                         Bellingham




                                                                                                                        Kennewick
                            Redmond
              Richland




                                                           Kirkland




                                                                                                       Olympia
        5%




                                                                                                                                            Auburn
                                                                             Renton




                                                                                                                                                                 Pasco
                                                                                                                                                      Kent
        0%

                                      Data compiled from the State Auditor s Local Government Comparative Statistics




   Figure III-12 below depicts City-wide staffing levels per 1,000 population. There are 4 major
   events that have had significant effect on City Staffing levels:

   1.          In 1996 and 1997 the City started its own Municipal Court, Probation Services and began
               operating its own jail for misdemeants - 32 FTE’s.
   2.          In 2000 33.21 positions were deleted as a cost containment measure associated with the
               City’s loss of MVET Revenue.
   3.          2002 through 2004 36.35 FTE’s were added in Police, Fire, Streets and Transit to support
               services to a large newly annexed area.
                                                   City of Yakima
   4.          In 2005, 12.75 FTE’s in Police, Courts and legal were added as a result of voter approval of
                                          General Government
               a 0.3% increase in the sales tax rate for Criminal Justice.
                                 Budgeted Positions Comparisons*                               Figure iii - 12
                                                                                 For the Last Ten Years
                                 GEnERAl GOvERnmEnT BuDGETED POSITIOnS COmPARISOnS*
                                                                               For the Last Ten Years
                                                                         Employees Per Capita (1,000)

                                                6.88                  7.07              7.01
                           8.00
                                                                                                                 5.87                                  5.78
                                                                                                                                      5.67
                           6.00

                           4.00

                           2.00

                           0.00
                                       1995                      1997                 1999             2001                         2003             2005


                                                                        1995                    1997                1999                     2001             2003           2005
             Number of Employees                                       424.19                449.00                457.22                  428.96            448.94        471.07
             Employees Per Capita                                        6.88                  7.07                  7.01                    5.87              5.67          5.78
             Square Miles                                               17.43                 19.26                 19.26                   24.08             24.23         25.20
             Population                                                61,650                63,510                65,260                  73,040            79,220        81,470
         *   Does not include temporary employees (number of employees are stated in Full Time Equivalents).

 — Section III. General Government Condition: 00 in Review
SAlARY AnD BEnEFIT COSTS
The following graph is based on information gathered by the State Auditor's Office. It identifies
the per capita salary costs. This analysis indicates that the City of Yakima spends, on the aver-
age, $133 less per capita on salaries than other comparable cities. Yakima employs fewer people
per capita than other cities. To maintain levels of service during periods of peak workload de-
mands, the City uses contract and temporary labor when possible.

                                                                                                                                                                                                                                                              Figure iii - 13
                                                                                                                                                Comparable Cities between 25,000 and 85,000 in population

                                                                                                  $1,000                 2003 PER CAPITA EXPENDITURES ON PAYROLL
                                                                                                                   The average cities per capita expenditure on payroll is
                                                                                                                   $553, which is $133 MORE than the City of Yakima.                                                                                               $777
                                                                                                                                                                                                                                                    $733
 Per Capita Expenditures on Payroll




                                                                                                                                                                                                                                     $708
                                          (rounded to the closest dollar)




                                                                                                                                                                                                             $589         $600
                                                                                                                                                                                                   $569
                                                                                                                                          Yakima $420                     $547         $549

                                                                                                   $500                                                   $441
                                                                                                                             $379
                                                                                                           $326
                                                                                                                                                           Walla Walla




                                                                                                                                                                                                             Bellingham
                                                                                                                              Kennewick




                                                                                                                                                                                                                                                                   Redmond
                                                                                                                                                                                                                          Richland
                                                                                                                                                                                        Kirkland




                                                                                                                                                                                                                                                    Olympia
                                                                                                                                                                                                   Auburn




                                                                                                                                                                                                                                     Renton
                                                                                                            Pasco




                                                                                                                                                                            Kent




                                                                                                     $0

                                                                                                                             Data compiled from the State Auditor s Local Government Comparative Statistics



Finally, total City expenditures per capita are the second lowest of the 12 cities compared,
$563 below the average (Figure III - 14). Yakima does offer full services (i.e. Police, Fire, Water,
Wastewater, Irrigation, Refuse, and Transit) to its citizens. Even though we provide services that
many other cities do not provide, we are still next to last in cost per citizen, proving Yakima
does “more with less” in delivering important services to our constituency.

                                                                                                                                                                                                                                                              Figure iii - 14
                                                                                                                                                    Comparable Cities between 25,000 and 85,000 in population
                                                                                                  $3,000
                                                                                                                              2003 PER CAPITA TOTAL CITY EXPENDITURES
                                  Per Capita Total Expenditures (rounded to the closest dollar)




                                                                                                                                                                                                                                                                   $2,569
                                                                                                  $2,500                The average cities per capita total expenditure
                                                                                                                        is $1,768, which is $563 MORE than the City of                                                                              $2,240
                                                                                                                                                                                                                                     $2,173
                                                                                                                        Yakima.                                                                              $2,050       $2,074

                                                                                                  $2,000                                                                                           $1,801
                                                                                                                                                                          $1,619       $1,652
                                                                                                                        Yakima $1,205
                                                                                                                                                          $1,477
                                                                                                  $1,500
                                                                                                                                              $1,238
                                                                                                           $1,113

                                                                                                  $1,000
                                                                                                                                                                                                                                      Walla Walla
                                                                                                                                                            Bellingham
                                                                                                            Kennewick




                                                                                                   $500
                                                                                                                                                                                                                                                        Redmond



                                                                                                                                                                                                                                                                      Richland
                                                                                                                                                                                                                Olympia
                                                                                                                                                                         Kirklan




                                                                                                                                                                                                    Auburn




                                                                                                                                                                                                                            Renton
                                                                                                                                                Pasco




                                                                                                                                                                                        Kent
                                                                                                                                                                                   d




                                                                                                     $0

                                                                                                                                          Data compiled from the State Auditor s Local Government Comparative Statistics




                                                                                                                                                            Section III. General Government Condition: 00 in Review — 
   general government: impaCtS   oF   Fixed, mandated, ContraCtual CoStS
   Total General Government Fixed, Mandated or Contractual net cost increases equal
   $1,893,826, an increase of 4.6%. However, as stated previously, the total General Government op-
   erating budget for 2006 is 3.1% more than 2005 budget. This means that the 2006 budget had to
   restrain non-mandated spending in order to balance the budget within existing resources.

   Notable 2006 mandated and contractual cost adjustments compared with the 2005 amended
   budget are as follows:
   •   2006 projected labor costs increases (includes: known and estimated labor settlements,
       reclassifications, merit increases, and salary and wage adjustments); increases for all General
       Government labor groups total $1,418,632. Public Safety pay increases accounted for nearly
       half of the total pay increases in General Government. The 2006 budget also contains the
       annualized impact of the 0.3% Criminal Justice Sales tax implementation, three entry-level
       Firefighters (see Policy Issue) and 1.75 Streets positions due to annexation.
   •   Retirement/termination cash-outs reflects an increase of $129,582. This is variable depend-
       ing on anticipated retirements for 2006. The cash-out for Probation Services personnel as
       they transition to the County program is also going to occur in 2006.
   •   Fringe benefits such as social security, special pay and industrial insurance for General Gov-
       ernment employee groups accounted for a decrease of $63,319. The decrease was in Industrial
       Insurance premiums which were reduced $124,747.
   •   Overtime is reduced by $265,375 or 16.8%, primarily due to a reduction in overtime for the
       Fire Department. As mentioned above, a Policy Issue for 3 Firefighters is budgeted for 2006
       to reduce overtime.
   •   The total State Retirement cost increased from $845,928 in 2005 to $1,104,174 in 2006, an
       increase of $258,246 or 30.5%. This is because employer contributions to State Retirement
       Systems for both PERS and LEOFF systems are proposed to increase (effective July 1, 2006).
       The other cause that drives State retirement cost to go up is the PERS Excess Compensation
       ($137,929) for PERS I employees that are anticipated to retire in 2006.
   •   Medical and Dental costs have increased $243,568 or 7.0%, based on the City's group his-
       tory and expected medical cost trends (of about 4%), coupled with the additional employees
       mentioned above.
   •   The Library contribution has been decreased by $100,000 or 7%, as a cost containment mea-
       sure.
   •   Yakima County, Sunnyside, Toppenish and Wapato Jail costs are budgeted at $1,000,000 for
       2006. (Note: Jail cost proposal from Yakima County on detention services could result in
       $116,000 more than budgeted, negotiations are pending. Year-end estimates for 2005 are
       $850,000, less than the amended budget by $150,000 due to effective prisoner management
       between facilities.
   •   Liability insurance coverage is scheduled to increase $73,984 or 15%. Claims and purchased
       insurance premiums are driving this cost.
   •   Election costs fluctuate based on the number of City issues on the ballot. These costs are
       projected to increase by $115,664 as 2006 is an election year.

   •   Overall, Fixed, Mandated or Contractual Costs have increased $,, or .% from 2005
       to 2006. (See Table III-9 next page.)
0 — Section III. General Government Condition: 00 in Review
                                                                                                                  taBle iii-9

                                                CITY OF YAkImA
                                             GEnERAl GOvERnmEnT
                                   FIxED, mAnDATED, AnD COnTRACTuAl COSTS
                                           2005 vS. 2006 COmPARISOn

                                                               2005               2006          projeCted
                                                              amended           preliminary     inCreaSe       perCent
                                                              Budget              Budget       (deCreaSe)      Change
    Salary Increase*                                         $25,706,731        $27,125,363     $1,418,632           5.5%
    Overtime                                                   1,578,825          1,313,450      (265,375)        (16.8%)
    Special Pay                                                  162,222            179,006           16,784        10.3%
    Retirement/Termination Cash-Outs                             133,295            262,877         129,582         97.2%
    Social Security                                            1,109,938          1,154,582          44,644          4.0%
    State Retirement                                             845,928          1,104,174        258,246          30.5%
    Industrial Insurance                                         783,228            658,481      (124,747)        (15.9%)
    Life Insurance                                                48,112              60,699         12,587         26.2%
    Medical and Dental Insurance                               3,496,336          3,739,904        243,568            7.0%
    Unemployment Compensation                                    102,522            103,750            1,228         1.2%
    Police Pension                                             1,255,672          1,312,956           57,284          4.6%
    Utility Costs: Telephone                                     136,210            135,827            (383)       (0.3%)
                     Electricity                                 586,136            611,254           25,118         4.3%
                     Natural Gas                                 143,977            133,466         (10,511)        (7.3%)
    Fuel                                                         436,618            450,033           13,415          3.1%
    Vehicle/Equipment Maintenance                                509,562            484,355       (25,207)         (4.9%)
    Vehicle Rentals/Replacement                                  228,496            245,496           17,000          7.4%
    Liability Insurance Coverage                                 493,227             567,211          73,984        15.0%
    State Examiner                                               103,000            103,000                0         0.0%
    Library                                                    1,414,107          1,314,107      (100,000)          (7.1%)
    Yakima County Emergency Mgmt                                  40,813             42,000            1,187         2.9%
    Clean Air Authority                                           12,580              12,622              42         0.3%
    Alcoholism                                                     17,180             18,600           1,420         8.3%
    Jail Costs - Yakima County                                   840,000            930,000          90,000         10.7%
    Jail Costs - Sunnyside                                        25,000              15,000       (10,000)       (40.0%)
    Jail Costs - Toppenish                                        30,000              25,000         (5,000)      (16.7%)
    Jail Costs - Wapato                                          105,000             30,000       (75,000)        (71.4%)
    SunDome Debt Service                                         151,934            150,697          (1,237)       (0.8%)
    District Court Costs                                          45,600              25,800       (19,800)       (43.4%)
    Public Defense*                                              219,000            229,701           10,701         4.9%
    Election Costs                                                55,000            170,664         115,664       210.3%
    Total Fixed, Mandated Costs                             $40,816,249        $42,710,075     $1,893,826            4.6%

    % of Total General Government
    Amended Budget                                               80.6%                81.8%
*    Salary costs only. Does not include benefits listed elsewhere in this exhibit.




                                                 Section III. General Government Condition: 00 in Review — 
                                                                                                                                         taBle iii-10

                                                 COmPOnEnTS OF GEnERAl GOvERnmEnT BuDGET

                                                                                    2005                               Projected
                                                                                 Amended             2006              Increase            Percent
                                                                                  Budget           Budget             (Decrease)           Change
    General Government Budget                                                    $50,616,013      $52,188,475           $1,572,462             3.1%
    Less: Fixed, Mandated and Contractual Costs                                  (40,816,249)     (42,710,075)         (1,893,826)             4.6%
    Balance (Discretionary Costs)                                                  $9,799,764       $9,478,400          ($321,364)           (3.3%)

   Figure III-15, below, graphically depicts that increases in fixed, mandated and contractual costs
   in the General Government Funds must be compensated for by reductions in other discretionary
   costs to maintain a balanced budget.                        Chart
                                                                                        Figure III-15

                                                   Annual Budgeted Percentage Cost Increases-
                                                    Fixed, Mandated and Contractual Costs (1)
                                                             versus All Other Costs

                           20.0
                                                                                          Fixed, Mandated & Contractual Cost % Increases
                           15.0                                                           All Other Cost % Increases/Decreases
       Increase/Decrease




                           10.0
                                         6.2
           Percentage




                                                        3.8     3.8                       4.6
                             5.0                                        2.7        2.4
                                                 1.3

                             0.0
                                         2000    2001   2002    2003    2004      2005    2006
                            (5.0)                 0.8                                     (3.3)
                                                        (2.5)                                       Fixed Mandated Increase - $ 1, 893,826
                           (10.0)                                                                     Other Budget Decrease - ($321,364)
                                                                                  (7.3)
                                                                (7.2)                                           Net Change - $1,572,462
                           (15.0)        (8.7)                          (10.5)

        (1) Fixed, mandated, and contractual costs include salaries and benefits; medical insurance costs; public safety pension expenses;
        utility costs; liability insurance; jail/ security contract expenses; library services; election expenses; debt service and other expense




   general government expenditure Summary

   taBleS iii-11                   and    iii-12 illustrate that the total 2006 General Government budget is $52,188,475,
   $1,572,462 or 3.1% more than the 2005 amended budget of $50,616,013.

                                                                                                                                         taBle iii-11

                                                           2005          2005 Est.             2006                                 Change 2006
                                                         Amended         Year-End            Projected                                vs. 2005
                                                          Budget        Expenditure           Budget
                                                                                            Page 1                 Dollars            Percent
      General                                           $41,419,317       $40,860,063        $42,852,594          $1,433,277                   3.5%
      Parks & Recreation                                  3,923,122         3,889,869          4,048,251             125,129                   3.2%
      Street & Traffic Operations                         5,273,574         4,902,051          5,287,630              14,056                   0.3%
      Total                                             $50,616,013       $49,651,983        $52,188,475          $1,572,462                   3.1%



 — Section III. General Government Condition: 00 in Review
                                                                                                                                                taBle iii-12
                                                                               Kathy 1
                                               2006 GEnERAl GOvERnmEnT BuDGET


                                                                                                                                                           % of
                          2006 Forecast                                                                                                                    Total
Organizational Unit          Budget                                                  Dollars in Millions                                                   Budget
                                           0   0.5 1     2    3    4     5     6     7    8     9      10      11    12    13   14    15   16    17   18


Police                      $17,146,146                                                                                                                     32.85%

Fire                           7,558,242                                                                                                                    14.48%

Streets & Traffic Op           5,287,630                                                                                                                    10.13%

Parks                          4,048,251                                                                                                                     7.76%

Information Systems            2,474,685                                                                                                                     4.74%
            (1)
Transfers                      2,017,000                                                                                                                     3.86%

Legal                          1,557,150                                                                                                                     2.98%
                                                                                          Personnel
Code Administration            1,423,327                                                  Non-Personnel                                                      2.73%

Library *                      1,314,107                                                                                                                     2.52%

Police Pension *               1,312,956                                                                                                                     2.52%

Financial Services             1,192,393                                                                                                                     2.28%

Municipal Court *              1,149,292                                                                                                                     2.20%

Engineering                    1,130,121                                                                                                                     2.17%

Utility Services                 980,333                                                                                                                     1.88%

Planning                         617,413                                                                                                                     1.18%
                                                                         All other                               Streets
Records                          534,325                                 22.32%                                  10.13%                                      1.02%
                                                                                                                            Library
                                                                                                                            2.52%
City Manager                     499,079                                                                                              Parks                  0.96%
                                                                                                                                      7.76%
Human Resources                  477,583                                                                                                                     0.92%

City Hall Maint.                 380,208                                                                                                                     0.73%

Purchasing                       230,125                                                                                                                     0.44%

City Council                     180,475                                                                                                                     0.35%
                                                                                              Police, Fire, Courts
                                                                                                    57.27%
Intergovernmental *              180,100                                                                                                                     0.34%

Probation                        173,560                                                                                                                     0.33%

Sundome *                        149,174                                                                                                                     0.29%

State Examiner *                 103,000                                                                                                                     0.20%

Hearings Examiner *               46,000                                                                                                                     0.09%

District Court *                  25,800                                                                                                                     0.05%

Total General Gov’t         $52,188,475                                                                                                                    100.00%
                     (2
Fire Pens. & Bens*            $1,644,552



*Fixed, Mandate or Contractual Costs
(1) Includes $830,000 transfer to Public Safety Communications.
(2) Fire Pension, although classified as an operating reserves fund, is included here because it is supported primarily with
    General Government resources.
(3) 57.27% of General Government resources is spent on Public Safety, including police, fire, municipal and districts courts,
    transfers to public safety communications, and police and fire pensions

                                                        Section III. General Government Condition: 00 in Review — 

                                                                                Page 1
   GEnERAl GOvERnmEnT COnDITIOn — revenue            and   expenditure CompariSon
   Table III-13, which follows, depicts the City’s projected composite ending balance for the year
   2006 for General Government funds. This reflects that the General Government budgets are
   balanced utilizing $1,997,578 of the estimated beginning fund balance for year 2006. Further, it
   projects the General Government ending cash for the year 2006 to be $3,691,407.

   The City’s budget guidelines for each operating fund are:
   (1) Dependency on beginning cash balances should not exceed 5% of annual operating expen-
   ditures and (2) reserves should be 7% or more of annual operating expenditures. Note: the City
   maintains reserves to meet potential revenue shortfalls, emergencies, cash flow, and unforeseen
   contingencies.

   Total General Government dependency on beginning cash for 2006 is 3.8% and end-
   ing cash reserves are projected to be 7.1%. Both are within the established guidelines,
   as noted above. However, as mentioned earlier in this message and in the BST report,
   General Government reserves are at minimum levels, and could be exhausted by the
   end of 2007 unless additional cost reductions and/or revenue enhancements are at-
   tained.


                                                                                                 taBle iii-13

                                                                                  2006
                                      2006          2006                        eStimated           2006
                                    projeCted     projeCted                     Beginning     eStimated ending
                                     revenue     expenditureS    diFFerenCe      BalanCe           BalanCe
   General Fund                    $41,303,765    $42,852,594    ($1,548,829)   $4,181,549         $2,632,720
   Parks & Recreation                3,886,880       4,048,251      (161,371)       454,008           292,637
   Street & Traffic Operations       5,000,252       5,287,630      (287,378)    1,053,428            766,050
   Total General Government        $50,190,897    $52,188,475 ($1,997,578)      $5,688,985         $3,691,407



   COnTInGEnCY BuDGET REDuCTIOn PlAnnInG
   The Budget Strategy Team presented its findings and recommendations to the City Council on
   September 30, 2005. These recommendations were the result of 15 months of study and analysis
   by the Budget Strategy Team (BST) of the City’s General Government budget and related Contin-
   gency Budget Reduction Plan. The BST recommended that the City not implement any signifi-
   cant budget or service reductions until such severe actions were required in order to balance the
   budget.

   For more information regarding the BST findings and recommendations refer to the “Budget
   Strategy Team Final Report and Recommendations” dated September 30, 2005.




 — Section III. General Government Condition: 00 in Review
Iv. OThER OPERATInG AnD EnTERPRISE FunDS


2005 year-end estimates for the City's Other Operating and Enterprise Funds are summarized
below (Table IV-1):

                                                                                            taBle iv-1

                                     2005 BuDGET STATuS

                                                      2005                                     2005
                                        2005         eStimated                  2005         eStimated
                                       amended        aCtual                  eStimated       ending
Fund                                   Budget          exp.       varianCe    reSourCeS       BalanCe
Economic Development                     $80,950        $80,771       $179      $431,576      $350,805
Neighborhood Dev. (Housing)             3,535,709     3,435,525    100,184     3,738,948        303,423
Community Relations                       614,458       533,988     80,470     1,220,585        686,597
Growth Mgmt/Com. Trip Red. Fund            77,576        52,576     25,000        52,576                 0
Cemetery                                 313,797        311,671      2,126       357,273         45,602
Emergency Services                       980,632        960,322     20,310     1,196,832        236,510
Public Safety Communications            2,537,936     2,515,371     22,565     2,602,931         87,560
Parking & Business Impr. (PBIA)          108,027         68,920     39,107       169,852        100,932
Trolley (Yakima Interurban Lines)         14,400         13,950        450         17,974         4,024
Front Street Business Improvement          3,000          3,000          0         6,042          3,042
Tourist Promotion/Convention Ctr.       1,178,006     1,148,906     29,100      1,167,412        18,506
Capitol Theatre                           210,136       188,683     21,453       308,850        120,167
Public Facilities District               679,000        679,000          0       811,808        132,808
Tourism Promotion Area                   409,511        338,000     71,511       340,440          2,440
Transit                                 5,724,491     5,652,635     71,856      5,807,948       155,313
Refuse                                  3,575,278     3,503,287     71,991     3,588,849         85,562
Wastewater                             16,020,643    15,932,052     88,591     18,787,871     2,855,819
Water                                   6,662,571     6,620,975     41,596      8,497,733     1,876,758
Irrigation                              2,586,074     2,577,494      8,580      3,067,905       490,411
Equipment Rental                        4,372,322     4,284,888     87,434     7,680,062      3,395,174
Environmental Fund                       142,950        142,950          0       433,163        290,213
Public Works Administration             1,049,436     1,046,593      2,843      1,207,674       161,081
Total                                $50,876,903    $50,091,557   $785,346   $61,494,304    $11,402,747



All Operating and Enterprise Funds are anticipated to end 2005 with positive fund balances.
Appropriation requests approved by Council through September are included in this analysis.
At this time, all operating funds are anticipating actual expenditures within authorized levels.


                                                 Section IV. Other Operating & Enterprise Funds — 
   2006 projections for Other Operating and Enterprise Funds expenditures and resources are
   reflected below in Table IV-2. (Resources include the beginning fund balance plus current year
   revenue, to arrive at a total available to spend.)


                                                                                          taBle iv-2

                                      PROPOSED 2006 BuDGET

                                                      2006               2006              2006
                                                     projeCted         projeCted         projeCted
   Fund                                              reSourCeS          expenSe           BalanCe
   Economic Development                                 $441,805          $187,034         $254,771
   Neighborhood Development (Housing)                  2,469,698          2,065,736         403,962
   Community Relations                                 1,240,767           658,452          582,315
   Growth Mgmt/Commute Trip Reduction Fund                25,000            25,000                   0
   Cemetery                                              340,402           295,204            45,198
   Emergency Services                                   1,174,510          999,906          174,604
   Public Safety Communications                        2,584,466          2,524,528           59,938
   Parking & Business Improvement (PBIA)                 128,532            62,075           66,457
   Trolley                                                 7,799              3,707           4,092
   Front Street Business Improvement Area                  5,417             3,000             2,417
   Tourist Promotion/Convention Center                 1,240,306          1,168,589          71,717
   Capitol Theatre                                       397,714           264,878          132,836
   Public Facilities District                            762,808           664,000           98,808
   Tourism Promotion Area                                340,440           338,000            2,440
   Transit                                             6,460,528          6,288,107         172,421
   Refuse                                              3,838,062          3,723,456         114,606
   Wastewater                                          17,865,102        16,552,456        1,312,646
   Water                                               8,235,708          6,990,487        1,245,221
   Irrigation                                          2,934,891         2,580,208          354,683
   Equipment Rental                                     7,739,650         4,810,102        2,929,548
   Environmental Fund                                    425,213           212,950          212,263
   Public Works Administration                         1,245,385          1,101,465         143,920
   Total Other Operating and
                                                     $59,904,203       $51,519,340       $8,384,863
   Enterprise Funds



   See Exhibit I for additional detail of Other Operating and Enterprise Funds.

   The following graph (Table IV-3) depicts resources and expenditures for Major Operating and
   Utility Fund Operations for 2006. (See Exhibit III for policy issues impacting Operating/Enter-
   prise Budgets.)




 — Section IV. Other Operating & Enterprise Funds
                                                                                                                       taBle iv-3

                            2006 RESTRICTED OPERATInG & RESERvE FunDS

                                 2006
                               Forecast                                         Dollars in Millions
 Division                       B ud g e t   0   1     2    3   4   5   6   7    8 9 10 11 12 13 14 15 16 17 18 19 20


 Reserves                     $13,867,166
  Risk Mgmt, Emp Benefits      20,989,637    Reserves, Charges
  Cap Theatre & Cemetery
  Trust Reserves

 Wastewater                   16,552,456
                              17,865,102     Sewer Rates, Operating Reserves


 Water/Irrigation              9,570,695
                              11,170,599     Water Rates, Irrigation Fees, Reserves


 Transit                        6,288,107
                                6,460,528                                   Transit Sales Tax, Operating Grants, Fare Box


 Refuse                         3,723,456
                                3,838,062    Refuse Rates


 Equipment Rental               2,731,521
                                2,754,504    Charges


 Special Purpose              10,574,524
  Housing, Emer. Svcs,        12,830,262     Charges, Grants, Taxes, Reserves
  Public Works Admin,
  Cable TV, Misc

 Total Expenditures          $63,307,925
 Total Resources             $75,908,694


a. the eConomiC development Fund reflects resources of $441,805 and expenditures of $187,034 for
2006. These funds are planned to be used to spur economic development, and include 30% of the
proposed Deputy Director of Community and Economic Development position (see budgeted
Policy Issue Summary - Exhibit II). The City’s match for a planning program related to down-
town revitalization and downtown manager is also contemplated in the fund.

B. the neighBorhood development Fund contains programs funded by Housing and Urban Develop-
ment (HUD), including the Community Development Block Grant (CDBG) and Homeownership
(HOME) grants. Expenditures are budgeted at $2,065,736 and are subject to the public hearing
process. Because of the programmatic nature of the Community Development Budget, along
with differences in reporting time frame for Federal programs, from time to time the City bud-
get must be adjusted to reflect the final outcome of prior year programs. The 2006 ending bal-
ance is now projected to be $403,962.

C. the Community relationS Fund expects resources of $1,240,767 for 2006. Expenditures are estimat-
ed to be $658,452, leaving the balance estimated at $582,315 for year-end, earmarked primarily
for capital expenditure on production equipment/cable TV facilities. The 2006 budget includes
an allocation of $100,000 for leasehold improvements, should the City decide to lease space for
an expanded Assembly Hall.
                                                           Section IV. Other Operating & Enterprise Funds — 
   d. the growth management/Commute trip reduCtion Fund has special projects/grants related to
   growth management issues that have been accounted for in this fund. For 2006, $25,000 is car-
   ried forward for the contract to integrate the State Environmental Policy Act (SEPA) into the
   updated Comprehensive Plan, funded by the Department of Community Trade and Economic
   Development.

   e. Cemetery Fund resources for 2006 are projected at $340,402, expenditures are estimated to be
   $295,204, and the estimated ending balance is projected at $45,198. The Cemetery Fund is de-
   pending on a $130,000 operational subsidy from the Parks and Recreation Fund.

   F. the emergenCy ServiCeS Fund reflects resources of $1,174,510 and expenditures of $999,906 related
   to the provision of Emergency Medical Services, and is supported by the Special EMS Property
   Tax Levy, which was renewed by the voters in September 2002. The 2006 ending balance is pro-
   jected to be $174,604.

   g. the puBliC SaFety CommuniCationS Fund expects resources of $2,584,466 and expenditures
   of $2,524,528 for 2006, leaving a balance of $59,938 at year-end. This fund accounts for 9-1-1
   Calltakers, supported by Yakima County 9-1-1 resources in the amount of $1,183,152. General
   Fund expenditures include a transfer of $830,000 for dispatch.

   h. parkingand BuSineSS improvement (pBia) Fund resources are projected to be $128,532, while
   expenditures are projected at $62,075. The ending balance for 2006 is projected at $66,457. This
   fund includes a budgeted policy issue to transfer $7,500 to the Parks and Recreation Fund to
   supplement the City’s downtown beautification program. Much of the 2006 budget is targeted
   toward downtown revitalization efforts.

   i. the trolley Fund projects resources of $7,799 and expenditures of $3,707 for 2006. The year-end
   balance is projected at $4,092.

   j. the Front Street BuSineSS improvement area Fund projects resources of $5,417 and expenditures of
   $3,000 — leaving an ending balance of $2,417 for 2006.

   k. the touriSm promotion/yakima Convention Center Fund budget anticipates resources of $1,240,306
   (this includes a transfer of $150,000 from the Public Facility District) and expenditures of
   $1,168,589, and thus is expected to end 2006 with a balance of $71,717. The 2006 budget includes a
   policy issue to continue operations and maintenance of the Yakima Visitor’s Center.

   l. the Capitol theatre Fund is expected to have resources of $397,714 and expenditures of $264,878
   for 2006, and an ending balance of $132,836. The expenditure budget includes a policy issue to
   increase the Capitol Theatre Committee’s management fee. (See Policy Issues Summary — Ex-
   hibit III.)

   m. the puBliC FaCilitieS diStriCt Fund was established in 2002 to account for the revenues received
   from the newly formed Public Facilities District. For 2006, resources are estimated to be $762,808.
   Expenditures are estimated to be $664,000, primarily for debt service on the Convention Center
   bonds issued in 2002 and supplemental support for Convention Center operations. This leaves a
   fund balance of $98,808 at the end of 2006.


 — Section IV. Other Operating & Enterprise Funds
n. the touriSt promotion area is a new fund established in 2004, the result of a self-assessment im-
posed by the lodging industry to promote tourism. Resources are estimated to be $340,440, with
expenditures programmed at $338,000, leaving a balance at the end of 2006 of $2,440.

o. tranSit Fund expenditures are estimated to be $6,288,107 and resources are projected to be
$6,460,528 for 2006. Total Transit sales taxes for 2005 are forecast to be $4,180,000, and are esti-
mated to be slightly more in 2006—the 2006 budget includes a total of $4,265,000 with $4,205,000
allocated to operations and $60,000 to capital. The operating fund also includes an operating
grant of $1,330,000 and a $225,000 grant from the Congestion Mitigation for Air Quality (CMAQ)
to continue a two-year pilot program to provide public transportation/transit services to the cit-
ies of Selah and Union Gap. An ending balance of $172,421 is currently projected for 2006.

p. the reFuSe Fund expenditure budget for 2006 is $3,723,456, Total resources are estimated to be
$3,838,062, and an ending balance is currently projected at $114,606. The 2006 projected resourc-
es include an 8% rate adjustment to fund a Code Compliance Officer and to cover increased
operating expenses. (See Policy Issue Summary -— Exhibit III.)

q. waStewater Fund resources for 2006 are expected to total $17,865,102. Expenditures are budget-
ed at $16,552,456 and the 2006 year-end balance is currently projected to be $1,312,646. Transfers
of $3,506,198 to Wastewater Construction Funds, $120,000 for Utility Systems, and $2,949,691 to
provide for Wastewater Bond redemption and repayments of Public Works Trust Fund Loans
are currently programmed in this budget. The proposed 2006 Sewer budget includes continued
implementation of the Sewer Comprehensive Plan, the Wastewater Facilities Plan, and the cost-
of-service rate study to meet mandated costs, including a budgeted policy issue for an additional
full time position (Pretreatment Tech) (See Policy Issue Summary -— Exhibit III.)

r. water Fund resources of $8,235,708 are projected for 2006. Expenditures are estimated to be
$6,990,487, leaving $1,245,221 at the end of 2006. These costs include $900,000 transfer to the
Capital Fund, $609,455 to provide for Water Bond Debt Service and repayments of Water Public
Works Trust Fund Loans, $75,000 for the Utility Service System and one additional personnel
for the Cross Connection Control program. (See Policy Issue Summary -— Exhibit III.) The 2006
projected resources include the rate adjustment of 12% that was approved by Council in 2005.

S. irrigation Fund resources for 2006 are projected to be $2,934,891 and expenditures are estimated
to be $2,580,208, which includes a transfer of $881,000 to the Irrigation Capital Fund, $356,415 to
provide debt service for Irrigation bond and Public Works Trust Fund loan, and $15,000 for the
Utility Services System. The 2006 ending fund balance is projected to be $354,683.

t. the equipment rental Fund budget for 2006 is $4,810,102 of which $2,731,521 is the maintenance
and operations budget, and $2,078,581 is the Equipment Replacement budget. Resources are
expected to be $7,739,650 while the ending fund balance for 2006 is expected to be $2,929,548. Of
this amount, approximately $2.9 million represents capital equipment replacement reserves.

u. the environmental Fund was created to provide for cleanup of environmental hazards. Fund-
ing for the program is from a surcharge on vehicle fuel sales in the Equipment Rental Fund. For
2006, $425,213 in resources are expected to be generated and $212,950 is expected to be spent. A
year-end balance of $212,263 is projected.

v. puBliC workS adminiStration Fund expenditures for 2006 are expected to be $1,101,465. Resources
for 2006 are expected to be $1,245,385 generated from operating funds located in the Public
Works complex, resulting in a year-end balance of $143,920.

                                                 Section IV. Other Operating & Enterprise Funds — 
   RESERvE FunDS


   A. EmPlOYEE BEnEFIT RESERvES

   1. the unemployment CompenSation reServe Fund is estimated to end 2006 with a balance of $371,011.
   Resources are projected to be $514,302 and expenditures for claims and other related expenses
   are estimated at $143,291. Because the reserve has grown even without a rate change in 2005 and
   is adequately funded, rates were reduced by 10% in 2006.

   2. employeeS health BeneFit reServe Fund expenditures for 2006 are projected to be $8,408,426,
   while resources are $10,992,981; leaving an ending balance projected to be $2,584,555. The 2006
   budget includes an adjustment in rates of approximate 4% overall to cover projected claim costs
   and medical inflation, while maintaining adequate reserves. In 2003 the insurance board imple-
   mented a cost containment plan regarding co-payments for prescription drugs (the fastest grow-
   ing component of medical costs.) In the fall of 2004 the plan changed to a different preferred
   provider network to realize greater cost savings. Both of these measures combined to slow down
   the rampant rate of increase of plan expenses. The insurance board continues to monitor the
   plan and review potential cost containment measures, with a goal of reducing the magnitude of
   future annual premium increases. For 2006, rates noted above have been set based on the prior
   18th month usage, i.e. January 2004 through June 2005.

   3. the workerS CompenSation reServe Fund estimates a year-end balance of $1,155,874, the result of
   resources totaling $2,239,502 and expenditures of $1,083,628. Concentrated efforts in plan man-
   agement and safety training has resulted in a slowdown of claims/costs. Therefore, the Indus-
   trial Insurance Rate was able to be decreased by 15% across the board. The adjusted rates are
   projected to adequately fund projected claims and maintain reserves.

   4. wellneSS/employee aSSiStanCe program (eap) Fund projected total resources for 2006 are $220,671
   and expenditures are $108,096 with a projected year-end balance of $112,575.

   5. the Firemen’S relieF   and   penSion Fund for 2006 projects resources of $2,095,145 and projected ex-
   penditures of $1,644,552, leaving an estimated 2006 year-end balance of $450,593.

   The Fire Pension property tax allocation for 2006 of $1,498,895, is 6.6% greater than the 2005
   allocation of $1,405,779. The City is mandated to increase property tax contributions to fund
   pension and LEOFF I medical and long-term care requirements regardless of whether the al-
   lowable levy actually increases.


   B. OPERATInG RESERvES

   1. riSk management reServe — 2005 saw a continued trend of high insurance costs and continued
   litigation liability defense costs. Coverage concerns related to the Transit Van Pool program
   precipitated a review of this operation’s insurance. In September of 2005, the Transit insurance
   program was converted to Washington State Transit Insurance Pool (WSTIP), with an additional
   premium of about $40,000. At the same time, the possibility of joining an insurance pool for the
   balance of liability program was being researched. Even though the final decision has not been
   made, the 2006 budget was developed assuming a lower deductible/retention of $100,000, which

 — Section IV. Other Operating & Enterprise Funds
translates into higher premiums. The 2005 budget was administratively adjusted by $70,000,
primarily because of additional liability insurance premiums.

For 2006, Risk Management Fund departmental contributions totaling $1,801,373 are pro-
grammed from City departments. This is up $191,324 or 12% over 2005 departmental contri-
butions of $1,610,049. The increase helps pay for liability and other insurance coverages and
increased claims costs and to meet reserve requirements. These charges, along with interest
earnings, combine for projected 2006 revenues of $1,951,373.

Total resources to the Risk Management Reserve for 2006 are expected to be $2,982,725. Based
on personnel costs, claims experience and other insurance/ professional services costs, expen-
ditures are estimated to be $2,080,246, and the year-end 2006 reserve balance is estimated to be
$902,479. These reserve levels are still considered marginal in comparison to the existing liability
for incurred claims , however, the possible reduction in the deductible level would limit future
liability. The reserve balance in this fund will continue to be monitored for adequacy.


2. general ContingenCy reServe Fund — The Contingency Reserve Fund is estimated to end 2005
with a balance of $333,775. For 2006, $100,000 is programmed to be transferred from the General
Fund to this fund, providing total resources of $433,775, and $300,000 is appropriated for contin-
gency purposes during 2006.


3. Capitol theatre reServe — The Capitol Theatre Reserve projects resources for 2006 of $956,326.
Interest earnings on this balance support an annual transfer to the Capitol Theatre Operating
Fund Reserve of $83,927. The projected 2006 ending balance is $872,399.


4. general Fund CaSh Flow reServe — General Fund cash flow resources for 2006 are estimated at
$2,632,720. This source is a contingency for unbudgeted policy issues, results of negotiations for
unsettled bargaining units, other unknown expenses and potential revenue shortfalls.


In summation, the City's 2006 General Reserve position is estimated to be as follows:


                                                                                        taBle iv-4

                                     2004 aCtual       2005 eStimated      2006 projeCted
       Contingency Fund                  $370,934            $333,775             $133,775
       General Fund Cash Flow            5,175,976           4,181,549           2,632,720
       Capitol Theatre Reserve            985,253              926,326             872,399
       Risk Management Reserve            888,429            1,031,352             902,479
       Total                           $7,420,592          $6,473,002          $4,541,373



Exhibit I contains additional detail of Operating Reserves.



                                                 Section IV. Other Operating & Enterprise Funds — 
                              (This page intentionally contains no information.)



 — Section IV. Other Operating & Enterprise Funds
v. CAPITAl ImPROvEmEnT FunDS


For 2005, a number of capital improvements were programmed for an amended capital budget
of $39.4 million. However, capital improvement expenditures for 2005 were estimated to be $19.8
million, a spending level approximately $19.6 million below budgeted levels. These projects are
rebudgeted in 2006 along with additional capital improvements. An example of the projects be-
ing rebudgeted are the Railroad Grade Separation; Washington Avenue expansion; Downtown
revitalization/pedestrian improvements and wastewater facility improvements. (See Exhibit I.)

The following (Table V-1) describes the relationship of resources and expenditures for major
capital budgets of the City.




                                                                                                 taBle v-1
                          2006 RESTRICTED CAPITAl & DEBT SERvICE FunDS



                             2006
                           Forecast                    Dollars in Millions
Division                    Budget      0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20



Streets                   $18,075,309
                           19,705,458   Reserves, Grants, 1/2¢ Gas Tax, Real Estate Excise Tax


Wastewater                 11,923,047
                           18,526,403   Reserves, Charges, Loans


Water / Irrigation          4,503,021
                           10,340,041   Reserves, Charges, Loans


Transit                     2,180,000
                            3,162,300                    Reserves, Taxes


Equipment Rental            2,078,581
                            4,985,146   Reserves, Charges


Special Purpose Capital    10,212,394
 Misc. G.O. Debt           11,655,698   Reserves, Grants, Taxes, Loans


Total Expenditures        $48,972,352
Total Resources           $68,375,046




                                                                     Section V. Capital Improvement Funds — 
   For 2006, Capital Fund expenditures of $41,826,879 are estimated as follows, inclusive of car-
   ry-over projects from 2005:

   Street/other inFraStruCture improvement projeCtS — Total projects of $17,043,818 (including carryover
   projects and Debt Service):

   •   2006 Street Projects -— Real Estate Excise Tax II (REET 2) Program — $816,300 (See Policy
       Issue Summary - Exhibit II for updated street maintenance program.)
   •   Washington Avenue Expansion, 48th Ave. to 64th Ave — $2,581,815 (State and Federal grants)
   •   Nob Hill Blvd. Expansion, 68th Ave. to 80th Ave. — $1,844,600 (Private contributions, State
       and Federal grants)
   •   River Road N. 16th Ave. to Fruitvale — $1,780,000 (State and Federal grants)
   •   Railroad Grade Separation — $8,600,000 (State and Federal grants)
   •   Debt Service — $624,775
   •   Other miscellaneous projects — $1,006,328.

   Arterial Street Gas tax and the Real Estate Excise Taxes are the primary local revenue sources for
   street projects. These revenues are used to match state and federal grants to maximize funding
   for projects.

   irrigation improvement Fund — 2006 projects of $2,550,000:
   •   W. Yakima irrigation system replacement — $700,000
   •   MacClaren Reservoir — $100,000
   •   Design/Rebuild Irrigation General System — $1,750,000 (bond proceeds).

   domeStiC water improvement Fund — 2006 projects of $1,140,000:
   •   2nd level Reservoir Pipe — $700,000
   •   State Route 24 pipeline — $200,000
   •   Water main replacement — $100,000
   •   Other Water Capital Projects — $140,000

   Fire Capital Fund — Total projects of $928,500:
   •   $565,000 — Fire Station 92 facility upgrade in West Valley (Line of Credit)
   •   $90,000 — Debt service
   •   $273,500 for other miscellaneous upgrades to equipment and fire stations.

   waStewater Capital expenditureS — Facility projects and other sewer improvements, including
   sewer line extension rehabilitation and other costs, total $9,650,000:
   • Wastewater trunk lines in conjunction with Washington Avenue improvements $435,000
   • 2006 facilities improvements — $5,500,000 (bond proceeds)
   • Speedway Interceptor — $700,000
   • River Road Interceptor — $1,560,000 (PWTL)
   • Engineering studies/design cost for future projects and other miscellaneous projects —
      $350,000 (bond proceeds).
   • Other miscellaneous projects — $1,105,000

   tranSit Capital — The 2006 budget of $2,180,000 which is for miscellaneous capital needs and
   vehicle replacement.
   • Six new busses — $1,980,000 (See Policy Issue Summary - Exhibit II)
   • Other capital needs — $200,000

 — Section V. Capital Improvement Funds
inFormation SyStemS — $210,000 to continue implementation of an integrated customer service/
utility billing/permitting system. (See Policy Issue Summary - Exhibit II)

parkS improvementS projeCtS total — $1,140,000 for various project/capital needs.
•     Kiwanis Skate Park — $225,000 (new bond proceeds)
•     Aquatic study and spray toys — $325,000 (new bond proceeds)
•     Kiwanis Park 4th ball field — $500,000 (State grant and bond proceeds)
•     Other capital needs — $90,000


City hall rehaBilitation/reFurBiShment/ContingenCy — $550,000 for continued refurbishment projects
and professional services for the Assembly Hall project.

law   and juStiCe   Capital Fund — $913,000 for the Police Station/Legal Center related equipment and
projects including:

•     Vehicle Replacement — $275,000
•     Remodel/equipment for Crime Lab — $120,000 (0.3% Criminal Justice sales tax)
•     Replacement of mobile computers — $210,000 (See Policy Issue Summary - Exhibit II)
•     Other miscellaneous projects and equipment — $308,000.

Convention Center Capital improvementS — $25,000 is programmed for ongoing capital needs of the
Center for 2006.

lid ConStruCtion — $247,000 for local improvement district at Englewood Terrace.

CBd Capital improvement — $4,602,216 for Downtown revitalization/pedestrian improvements
funded by State grants.

Capitol theatre ConStruCtion — $447,345 for next phase of capital improvements. (Federal grant)


SummARY
Overall, Capital Fund expenditures in the 2006 Budget Forecast are $41,826,879; $2,384,114 or
6% more than the 2005 amended levels of $39,442,765. While the Railroad Grade Separation is
gearing up for a major capital investment, other areas, such as LID construction and Water are
completing major capital projects, while other areas, such as Wastewater, Arterial Streets and
Irrigation are in the midst of capital programs, budgeting similar amount from 2005 to 2006. All
of these changes net to an overall increase in the capital fund expenditures for this budget cycle.




                                                              Section V. Capital Improvement Funds — 
                              (This page intentionally contains no information.)



 — Section V. Capital Improvement Funds
vI - A. SummARY - deBt CapaCity


GEnERAl OBlIGATIOn DEBT — The City is allowed by State statute to issue general obligation
debt either by Council approval (Councilmanic) or by a vote of the people. The amount of debt
outstanding is restricted by State law to certain percentages of the property tax assessments
(called the limitation of indebtedness). In most instances, Councilmanic debt issues have dedi-
cated sources of revenue for repayment, while voted debt is serviced by an additional property
tax levy.

As of December 31, 2004 the City had $24,030,097 of Councilmanic debt issued; of which
$17,380,097 was outstanding. Of the amount outstanding, all have a dedicated revenue source
(such as cable TV utility tax, hotel/motel tax, Public Facilities District (PFD) (revenues, etc.)

The amount of voted debt issued as of the above date, was $3,700,000; of which $2,450,000 was
outstanding.

•   The tax levy on voted debt for 2005 is $.0763 per $1,000 of assessed valuation; for a total levy
    of $300,000.

•   The levy on voted debt for 2006 is projected to be $300,000, to cover scheduled debt service.


For 2004, the ratio of net general bonded debt to assessed value is .48%, and the net bonded debt
per capita is $240. These numbers indicate a General Obligation debt burden for Yakima that
is well within industry standards. This is appealing to potential investors. The remaining debt
capacities (from the limitation of indebtedness calculation) are:

•   $41.7 million for Councilmanic general obligation debt;
•   $37.5 million for voted general obligation debt (in addition to above)
•   $99.3 million for utilities; and
•   $99.3 million for parks and open space.


The chart below summarizes the general purpose debt available to the City.

                                                                   limit By      Cumulative
                                                                   SeCtion         limit
       I.   General Purpose
            Without a Vote (Includes Capital Leases)   1.50%
            With a vote                                1.00%        2.50%         2.50%
       II. Utilities Purpose                                        2.50%         5.00%
       III. Open Space and Parks Facilities                         2.50%         7.50%
            Total Legal Limit                                       7.50%



The basic percentages for Section I, above, are the maximum levels of General Obligation in-
debtedness those sections may incur. However, utility or parks indebtedness may each exceed

                                                                     Section VI. Budget Summary — 
  2.5% and reduce the general indebtedness margin. The percentages are applied to the taxable
  assessed value (regular levies) of $3.97 billion.


  REvEnuE BOnDS — Revenue bonds are issued for construction projects or other legal purposes
  in the water, sewer and irrigation utilities. Repayment of these debt issues is built into the rate
  structures charged by the utilities.

  At December 31, 2004, the amount of revenue bonds issued was $39,305,000 of which $29,675,000
  was outstanding, $24,460,000 for the Wastewater/Water Utility and $5,215,000 for the Irrigation
  Utility. The revenue bond coverage ratio (net revenues available for debt service/debt service
  requirements) is 3.04 for 2004. Note: The first revenue bond for the Irrigation Utility was issued
  in 2004 for the Wastewater/Water Utility. Therefore, the coverage calculation for Irrigation will
  be made in 2005 -- the first year of debt service. It is expected to be within the established limits.
  The City’s general policy is to maintain a minimum coverage ratio of between 1.4 and 2.0 times
  debt service; therefore, 3.04 is a very healthy coverage ratio and provides a high level of assur-
  ance that the City will be financially able to repay its outstanding revenue bonds.


  PuBlIC WORkS TRuST FunD lOAnS — The City also utilizes Public Works Trust Fund Loans
  to fund capital projects for street, wastewater, and water divisions. These loans are obtained by
  competitive process from the State of Washington’s Department of Community and Economic
  Development. Interest rates range from .5% to 3% depending on amount of available matching
  funds, and are more favorable than bonded debt. The other advantage to using this program is
  that these loans are not considered to use debt capacity for G.O. debt nor do they have coverage
  or reserve requirements in the case of utility debt.

  At December 31, 2004, the City had $21,576,195 of Public Works Trust Funds issued, with
  $11,442,826 outstanding.


  vi - B. Summary - State   and   Federal mandateS

  In establishing the budget levels for all of the funds of the City, the cost of complying with State
  and Federal mandates is factored in. The cost of mandate compliance continues to be a heavy
  burden on City budgets, particularly City operating budgets. The cost of compliance is very
  high while the revenues received from State and Federal agencies which enact these mandates
  is minimal. The most significant impacts from State and Federal mandates is the expense of
  implementing:

  •   Health Insurance Portability and Accountability Act (HIPAA),
  •   GASB 34 Financial Statement/Reporting Model,
  •   Safe Drinking Water Act,
  •   Endangered Species Act (4(d) Rules for Salmon Recovery),
  •   National Fire Protection Association apparatus manning standard,
  •   Americans’ with Disabilities Act,
  •   Fair Labor Standards Act,
  •   State Ecology Stormwater Regulations,
  •   State and Federal Retirement Laws,
  •   Growth Management Act (on-going), and

 — Section VI. Budget Summary
•   State mandate which shifted cost to cities for domestic violence, prosecution, adjudication,
    and incarceration of State charge misdemeanant and gross misdemeanant offenses.

To fulfill recent Stormwater mandates, a new utility was proposed. During the course of re-
searching funding options, there have been discussions with other governments about region-
alizing this function. Minimum expenses required to obtain a NPDES permit in 2006 for the
Stormwater program is included in the Wastewater budget, to be reimbursed when the utility is
established. The cooperating agencies are targeting 2007 to begin the utility.

All of the above have had far reaching impacts on most City budgets. Again, few State or Federal
funds have been granted to support implementation of these mandates. Additionally, the Legis-
lature continues to consider measures to preserve and recover northwest salmon stock. Most of
the measures discussed carried multi-million dollar price tags. This is a potential future man-
date that could have dramatic impacts on local governments throughout Washington State.

It should also be noted that while mandates and regulatory requirements continue to be a heavy
burden on the City, the City's ability to collect revenues to meet those requirements has been
legislatively diminished. New State laws often impair the City's ability to collect revenue for City
programs and services. Recent initiatives have reduced the City’s ability to meet requirements.
It’s important for the citizenry to weigh the cost of compliance (i.e. taxes and fees to meet the
laws) versus the cost of non-compliance (for example: quality of life issues, fines for non-compli-
ance, and other “hidden” costs such as increased fire insurance rates, loss of grant revenue, etc.)



vi - C. Summary - BalanCed Budget

the 2006     Budget iS planned to Be BalanCed aS FollowS:


a. general Fund — $1,548,829 of the total 2006 beginning balance of $4,181,549 is allocated to meet
the current difference between estimated revenues and expenditures. The estimated $2,632,720
General Fund ending balance will be used as a minimum operating reserve for cash flow needs
for unbudgeted policy issues, final bargained settlements and as a general contingency reserve
against potential revenue shortfalls. The proposed 2006 budget includes a 1% property tax levy
increase in compliance with Initiative 747 plus a 1.5% increase for new construction and in-
creased tax collections.

B. parkS    and   reCreation Fund — Projected 2006 Parks expenditures are $4,048,251. The budget in-
cludes $3,886,880 in revenues, along with $454,008 of the beginning 2006 cash balance to balance
the 2006 budget. This will leave a projected operating reserve of $292,637 for year-end 2006. Even
though the Parks Division has recently completed a major capital campaign, adding new parks
and facilities, its operating budget is remaining flat relative to inflation. To adequately support
the new facilities, a new dedicated revenue source is desirable. Options include raising of the
$4,000 cap on outside utilities or an increase in utility taxes on Water, Wastewater and Refuse.

C. Street   and   traFFiC operationS Fund — Beginning balance projection for 2006 is $1,053,428. Rev-
enues of $5,000,252 along with $287,378 of the beginning balance will be used to balance the 2006
budget. Total expenditures of $5,287,630 are programmed for 2006. The year-end balance is pro-

                                                                        Section VI. Budget Summary — 
  jected at $766,050. Additional personnel were added by Council in 2005 to accommodate growth
  in the miles of city streets added by recent annexations.

  d. waStewater operationS Fund — Expenditures for 2006 are budgeted within projected resource
  levels. Because of the large volume of piping projects (i.e. Washington Avenue, 96th Avenue,
  Speedway interceptor, River Road, etc.) the operating transfer to the Sewer Construction fund
  was expanded for 2006, and the operating reserve balance is being reduced from $2,855,819 to
  $1,312,646. This balance is still about 8% of the expenditure budget, and is within guidelines. The
  facility capital projects necessary to maintain the operating permit are scheduled to be done using
  revenue bond proceeds.

  e. water rateS — Water recently developed a cost of service study tied to operating costs and
  identified capital needs. Council approved a rate adjustment to be phased in over 5 years, start-
  ing in 2005. The adjustment included in the 2006 budget is 12%.

  F. reFuSe rateS — As Refuse transitions to automated pick-up, two separate factors have com-
  bined to create stress on its fund balance — 1) Revenues were difficult to estimate because of the
  difference in the size of bins and charges per bin vs. can. 2) Transition requires capital invest-
  ment (although some operating cost savings are being realized.) Balancing the 2006 budget was
  difficult because of the escalation in several of the “big ticket” expenses such as fuel, landfill and
  equipment costs. A 5% rate adjustment is budgeted to cover these basic cost increases. Addi-
  tionally, City Council has requested that a new Code Compliance Officer position to enforce Re-
  fuse division ordinance violations be proposed. Therefore, the budgeted policy issue for Refuse
  includes an 8% rate adjustment to fund continuation of the transition to automated pick-up, the
  basic cost increases and a new Code Compliance position


  COnCluSIOn
  The City's projected Operating, Enterprise, and Capital Fund expenditures for 2006 are bal-
  anced within anticipated revenues and projected cash balances.

  The total 2006 Budget is estimated at $164,468,752 — an increase of $4,980,567 or 3.1% above
  the 2005 amended budget level of $159,488,185. The full year effect of the new Criminal Justice
  sales tax, escalation in operating costs such as fuel and utilities and a growth in the capital bud-
  gets combined for this modest increase.

  The overall 2006 Budget addresses, within resource limitations, the Critical/Strategic Issues of
  the City in an ongoing effort to meet citizen needs for municipal services; address the City’s
  Mission and Vision for the future; and satisfy Federal and State mandated responsibilities.
  (See Exhibit IV for a graphic portrayal of total City budget resources and expenditures.)




 — Section VI. Budget Summary
                                                                                                       CITY OF YAkImA
                                                                                          2006 BuDGET BY CITY FunCTIOnAl GROuPInG

                                                                                   2004          2005            2005             2006           2006            2006          2006             2006
                                                                                  Actual       Amended         Year-End        Preliminary     vs. 2005        Beginning     Projected        Est Ending
                                                                               Expenditures     Budget         Estimate          Budget        Amended       Fund Balance     Revenue       Fund Balance
                                              General Government
                                               City Council                        $159,309        $163,878        $163,863        $180,475         10.1%
                                               City Manager                          455,498         587,043         558,186        499,079      (15.0%)
                                               State Examiner                         89,137        103,000         103,000         103,000          0.0%
                                               Records                               367,425        286,544         280,399         534,325        86.5%
                                               Financial Services                 1,089,685        1,131,766      1,120,735       1,192,393          5.4%
                                               Human Resources                       409,686        459,506          449,166        477,583          3.9%
                                               Legal                              1,331,951       1,430,269       1,466,004       1,557,150          8.9%
                                               Municipal Court                       885,698      1,030,356         969,536       1,149,292        11.5%
                                               Purchasing                            197,789         219,128         218,428        230,125          5.0%
                                               Hearing Examiner                       31,361          66,000          66,000         46,000      (30.3%)
                                               Environmental Planning                493,572         571,252         533,017         617,413         8.1%
                                               Code Administration                1,273,528       1,363,152       1,351,149      1,423,327           4.4%
                                               Police                            14,951,047      16,234,851      16,031,711      17,146,146          5.6%
                                               Fire                               6,902,844       7,371,671       7,302,522       7,558,242          2.5%
                                               Police Pension                      1,287,904      1,255,672        1,207,111     1,312,956           4.6%
                                               Probation Center                     400,350          411,771        402,269         173,560       (57.9%)
                                               Engineering                         1,101,617      1,087,687       1,087,218       1,130,121          3.9%
                                               City Hall Maintenance                 351,360         371,016        364,601         380,208          2.5%
                                               Information Systems                2,611,860       2,602,902       2,532,369      2,474,685         (4.9%)
                                               Utility Services                      854,178         910,596         911,352        980,333          7.7%
                                               Library                             1,414,107       1,414,107       1,414,107      1,314,107         (7.1%)
                                               Intergovernmental                     173,145         176,853         180,923        180,100          1.8%
                                               Sun Dome                              151,934         150,697        150,697          149,174       (1.0%)
                                               District Court                         45,589          45,600          31,700         25,800      (43.4%)
                                               Transfers                          1,960,794       1,974,000       1,964,000       2,017,000          2.2%
                                              Total General Fund                $38,991,368     $41,419,317    $40,860,063     $42,852,594           3.5%       $4,181,549    $41,303,765     $2,632,720
                                               Parks & Recreation                  3,740,411      3,923,122       3,889,869      4,048,251           3.2%          454,008      3,886,880        292,637
                                               Street & Traffic Operations        4,508,986       5,273,574       4,902,051       5,287,630          0.3%        1,053,428      5,000,252        766,050
                                              Total General Government Funds    $47,240,765    $50,616,013     $49,651,983     $52,188,475           3.1%      $5,688,985    $50,190,897      $3,691,407




Exhibit I. Three-Year Budget Comparison — 
                                                                                        2004           2005           2005            2006          2006           2006          2006             2006
                                                                                       Actual        Amended        Year-End       Preliminary    vs. 2005       Beginning     Projected        Est Ending
                                                                                    Expenditures      Budget        Estimate         Budget       Amended      Fund Balance     Revenue       Fund Balance
                                              Other Operating/Enterprise
                                               Economic Development                        $99,740       $80,950         $80,771       $187,034      131.0%        $350,805         $91,000       $254,771
                                               Community Development                    2,284,268      3,535,709       3,435,525      2,065,736     (41.6%)         303,423       2,166,275         403,962
                                               Community Relations                        405,727         614,458        533,988        658,452         7.2%        686,597         554,170         582,315
                                               Grth Mgmt/Com. Trip Red. Fund                     0         77,576         52,576         25,000      (67.8%)               0         25,000               0
                                               Cemetery                                    313,411        313,797        311,671        295,204       (5.9%)          45,602        294,800          45,198
                                               Emergency Services                          987,476       980,632         960,322        999,906         2.0%        236,510         938,000         174,604
                                               Public Safety Communications             2,366,021       2,537,936      2,515,371      2,524,528       (0.5%)          87,560      2,496,906          59,938
                                               Parking & Business Impr. Area                48,074        108,027         68,920         62,075     (42.5%)          100,932         27,600          66,457
                                               Trolley (Yakima Interurb. Lines)             13,281         14,400         13,950          3,707     (74.3%)            4,024          3,775           4,092
                                               Front Street Business Impr. Area              7,318          3,000          3,000          3,000         0.0%           3,042          2,375           2,417
                                               Tourist Promotion                        1,085,037      1,178,006       1,148,906      1,168,589       (0.8%)          18,506      1,221,800          71,717
                                               Capitol Theatre                            168,375         210,136        188,683        264,878        26.1%         120,167        277,547         132,836




 — Exhibit I. Three-Year Budget Comparison
                                               Public Facilities District Revenue         628,989         679,000        679,000        664,000       (2.2%)        132,808         630,000          98,808
                                               Tourist Promotion Area                      129,797        409,511        338,000        338,000      (17.5%)           2,440        338,000           2,440
                                               Transit                                  5,201,707      5,724,491       5,652,635      6,288,107         9.8%         155,313      6,305,215         172,421
                                               Refuse                                   3,278,596      3,575,278       3,503,287      3,723,456         4.1%          85,562      3,752,500         114,606
                                               Sewer Operating                         14,065,083     16,020,643      15,932,052     16,552,456         3.3%      2,855,819      15,009,283       1,312,646
                                               Water Operating                           5,707,158     6,662,571       6,620,975      6,990,487         4.9%      1,876,758       6,358,950       1,245,221
                                               Irrigation Operating                     2,473,170      2,586,074       2,577,494      2,580,208       (0.2%)         490,411      2,444,480         354,683
                                               Equipment Rental                         4,181,057      4,372,322       4,284,888      4,810,102       10.0%        3,395,174      4,344,476       2,929,548
                                               Environmental Fund                           39,493        142,950        142,950        212,950       49.0%         290,213         135,000         212,263
                                               Public Works Administration              1,035,466      1,049,436       1,046,593      1,101,465         5.0%         161,081      1,084,304         143,920
                                              Total Other Operating/Enterprise       $44,519,244     $50,876,903    $50,091,557    $51,519,340          1.3%    $11,402,747    $48,501,456      $8,384,863

                                              Capital Improvement
                                               Arterial Street                         $5,406,810      $6,367,013    $4,073,844      $6,887,624        8.2%        $218,778     $6,794,771        $125,925
                                               Transportation Improvement                 120,000          90,000        60,000          30,828     (65.7%)          30,828              0               0
                                               C.B.D. Capital Improvement                  75,727       5,087,205       602,205       4,602,216      (9.5%)          96,348      4,560,500          54,632
                                               Capitol Theatre Construction               472,577         479,424        28,923         447,345      (6.7%)         100,000        447,345         100,000
                                               Parks & Recreation Capital               1,019,266         221,771       218,697       1,140,000     414.0%          812,719        400,000          72,719
                                               Fire Capital                               671,480         926,350       353,000         928,500        0.2%         257,965        827,607         157,072
                                               Law & Justice Capital                    1,342,291        963,344        822,992         913,000      (5.2%)         623,348        525,000         235,348
                                                                                     2004          2005           2005            2006          2006           2006          2006             2006
                                                                                    Actual       Amended        Year-End       Preliminary    vs. 2005       Beginning     Projected        Est Ending
                                                                                 Expenditures     Budget        Estimate         Budget       Amended      Fund Balance     Revenue       Fund Balance
                                              Capital Improvement (Cont.)
                                               Public Works Trust Construction         455,061       920,807        800,807         821,566     (10.8%)       1,224,478         675,000       1,077,912
                                               REET 2 Capital Construction            200,000        885,000        885,000         816,300       (7.8%)        371,670         666,300         221,670
                                               L.I.D. Construction Control              25,655     1,365,574        903,000         247,000     (81.9%)               0         247,000               0
                                               Transit Capital Reserve               1,129,792       781,804        750,000       2,180,000     178.8%        3,062,300         100,000        982,300
                                               Convention Center Capital Impr.         386,602       111,069        111,069          25,000     (77.5%)         135,262               0         110,262
                                               Cum. Reserve for Capital Impr.          492,105     4,250,000        508,000       9,247,500      117.6%          64,645       9,256,100          73,245
                                               Wastewater Facilities Cap. Re-
                                                                                       70,467        116,604        100,000         150,000      28.6%          601,118        152,000          603,118
                                               serve
                                               Sewer Construction                   2,206,397      4,005,000       3,499,800     3,900,000       (2.6%)       1,696,845       4,155,000       1,951,845
                                               Domestic Water Improvement           3,306,628      2,131,800       2,028,017      1,140,000     (46.5%)       1,170,056         908,000         938,056
                                               Wastewater Facilities                 1,129,341      7,725,000     2,715,000      5,600,000      (27.5%)       6,791,935         455,919       1,647,854
                                               Irrigation System Improvement           910,176     3,015,000      1,365,000      2,750,000       (8.8%)       6,418,854         921,000      4,589,854
                                              Total Capital Improvement           $19,420,375    $39,442,765    $19,825,354    $41,826,879        6.0%      $23,677,149    $31,091,542     $12,941,812

                                              Contingency/Operating Reserves
                                               Contingency Fund                       $213,433      $312,032       $192,159       $300,000       (3.9%)        $333,775       $100,000        $133,775
                                               FRS/Capitol Theatre Reserve             171,927        83,927         83,927         83,927        0.0%           926,326         30,000        872,399
                                               Risk Management                       1,896,936     1,858,041      1,830,358      2,080,246       12.0%         1,031,352      1,951,373        902,479
                                              Total Contingency/Operating Res.     $2,282,296    $2,254,000      $2,106,444     $2,464,173        9.3%       $2,291,453     $2,081,373      $1,908,653

                                              Employee Benefit Reserves
                                               Unemployment Compensation              $127,698      $160,382       $140,382        $143,291     (10.7%)        $370,302        $144,000       $371,011
                                               Employees Health Benefit              7,172,920     8,333,438      8,182,648       8,408,426        0.9%       2,553,291       8,439,690      2,584,555
                                               Workers’ Compensation                 1,089,104     1,300,898       1,047,551      1,083,628     (16.7%)        1,190,002      1,049,500       1,155,874
                                               Wellness/EAP Fund                        66,655       101,352          94,064        108,096        6.7%          120,671        100,000         112,575
                                               Firemen’s Relief & Pension            1,561,757     1,534,090      1,493,733       1,644,552        7.2%          538,250     1,556,895         450,593
                                              Total Employee Benefit Reserves     $10,018,134    $11,430,160    $10,958,378     $11,387,993      (0.4%)      $4,772,516    $11,290,085      $4,674,608

                                              Trust and Agency Funds
                                               Cemetery Trust                         $11,966        $15,000        $15,000        $15,000        0.0%         $533,210        $21,000        $539,210
                                              Total Trust and Agency Funds            $11,966        $15,000        $15,000        $15,000        0.0%         $533,210        $21,000        $539,210




Exhibit I. Three-Year Budget Comparison — 
                                                                                  2004          2005            2005           2006          2006         2006         2006             2006
                                                                                 Actual       Amended         Year-End      Preliminary    vs. 2005     Beginning    Projected        Est Ending
                                                                              Expenditures     Budget         Estimate        Budget       Amended    Fund Balance    Revenue       Fund Balance
                                              Debt Service
                                               L.I.D. Guaranty                     $35,000              $0             $0             $0       0.0%        $28,669           $300         $28,969
                                               PFD Debt Service                     474,020        473,470        473,470        475,545       0.0%        122,611        480,000         127,066
                                               General Obligation Bonds           1,465,174      1,435,757      1,435,757      1,633,279      13.8%        601,554      1,638,100         606,375
                                               L.I.D. Debt Service                   30,733         72,000         72,000         72,000       0.0%         41,758        112,500          82,258
                                               Water-Irrigation/Sewer Bonds      2,541,666       2,872,117      2,872,117      2,886,068       0.5%      2,705,125      2,890,592       2,709,649
                                              Total Debt Service                $4,546,593     $4,853,344     $4,853,344      $5,066,892       4.4%     $3,499,717     $5,121,492     $3,554,317

                                              Total City Budget               $128,039,373    $159,488,185   $137,502,060   $164,468,752       3.1%    $51,865,777   $148,297,845    $35,694,870




 — Exhibit I. Three-Year Budget Comparison
                                                2006 budget Preparation


                                        PoliCY issue suMMarY

* NOTE: Policy proposal figures may be rounded.




I. OuTSIDE AGEnCY AnD InTERGOvERnmEnTAl REQuESTS

OuTSIDE AGEnCY REQuESTS
            dept./div. poliCy iSSue                                 propoSed Funding SourCe     non-perSonnel Budgeted/
            requeSt/juStiFiCation                                                                             unBudgeted

      —     Yakima County Development Association (1)               General Fund                        $19,913 Budgeted



      —     Yakima Chamber of Commerce (1)                          General Fund                         $5,900 Budgeted



      —     Fourth of July Committee (1)                            General Fund (Fire)                 $5,000 Budgeted



      —     Sunfair Association (1)                                 General Fund                         $1,000 Budgeted



      —     Allied Arts ArtsVan (1)                                 General Fund                         $5,333 Budgeted


                                                                    Parks and Recreation
      —     Retired Senior Volunteer Program (RSVP) (1)                                                 $3,000 Budgeted
                                                                    Fund

                                                                    Water Reserves (60%)               $36,000
            Continue to support study of the proposal to
  —                                                                 Irrigation Reserves                $24,000 Unbudgeted
            construct a reservoir in the Black Rock region.
                                                                    (40%)                              $60,000


  —         Hispanic Chamber of Commerce (new request)              General Fund                       $10,000 Unbudgeted


            Yakima-Morelia Sister City Association (new
  —                                                                 General Fund                         $1,000 Unbudgeted
            request)


  —         Answers from Heaven (new request)                       General Fund                       $50,000 Unbudgeted


(1)
      These Outside Agency Requests are included in the 2006 Preliminary Budget at the same levels as approved in the 2005 budget.



                                                                                      Exhibit II. Policy Issue Summary — 
   intergovernmental agenCieS
         dept./div. poliCy iSSue                                                                      Budgeted/
                                        propoSed Funding SourCe                   non-perSonnel
         requeSt/juStiFiCation                                                                        unBudgeted

     — Clean Air Authority              General Fund                                        $12,622           Budgeted

         Yakima County Emergency
     —                                  General Fund                                       $42,000            Budgeted
         Management

                                                                                                             Budgeted
       Yakima Valley Conference                                                                          (Approved by
     — of Governments (COG)             General Fund                                        $39,130      Council at the
       Membership Assessment                                                                           October 18, 2005
                                                                                                             meeting)

       Yakima Valley Regional
                                                                                 2006 — no change
       Library — Vote to annex
     —                                  General Fund                            2007 — net revenue            Budgeted
       to Regional System (BST
                                                                                    gain of $88,000
       Recommendation)




   II. CITY mAnAGEmEnT

   CITY mAnAGER
         dept./div. poliCy iSSue        propoSed                                                      Budgeted/
                                                                  perSonnel       non-perSonnel
         requeSt/juStiFiCation          Funding SourCe                                                unBudgeted

         Increase City Manager car
    —    allowance from $250 to         General Fund                                           $600 Budgeted
         $300 per month



   RECORDS/CITY ClERk
         dept./div. poliCy iSSue        propoSed                                                      Budgeted/
                                                                  perSonnel       non-perSonnel
         requeSt/juStiFiCation          Funding SourCe                                                unBudgeted
         Add one Public Records
                                        Risk Mgmt — 60%               $33,800
         Officer position in response
    —                                   General Fund —                 22,500                         Budgeted
         to statutory amendments to
                                        40%                            56,300
         the Public Disclosure Act

         Eliminate the Pension
         Records Clerk position and                                    $9,400
    —                                   General Fund                                                  Budgeted
         reinstate and upgrade the
         Deputy City Clerk position


   humAn RESOuRCES
         dept./div. poliCy iSSue        propoSed                                                      Budgeted/
                                                                  perSonnel       non-perSonnel
         requeSt/juStiFiCation          Funding SourCe                                                unBudgeted

         Implement a City-wide
                                                                                 Unknown — Up to
    —    compensation study —           To be determined                                         Unbudgeted
                                                                                         $75,000
         (BST) recommendation




 — Exhibit II. Policy Issue Summary
WASTEWATER/PRE-TREATmEnT
     dept./div. poliCy iSSue        propoSed                                                Budgeted/
                                                       perSonnel        non-perSonnel
     requeSt/juStiFiCation          Funding SourCe                                          unBudgeted

     Add one Pretreatment
     Technician position to         Wastewater
 —   implement activities associ-   Operating Fund —       $52,900                          Budgeted
     ated with the Fat, Oil and     Wastewater rates
     Grease (FOG) Program.



WATER/IRRIGATIOn
     dept./div. poliCy iSSue        propoSed                                                Budgeted/
                                                       perSonnel        non-perSonnel
     requeSt/juStiFiCation          Funding SourCe                                          unBudgeted

     Add one full-time Cross
     Connection Control/Water
     Meter Crew leader position     Water Operating
 —   to meet increasing Cross       Fund — Domestic        $56,800                          Budgeted
     Connection rules and           Water Rates
     requirements for tracking
     water loss




III. munICIPAl COuRT
     dept./div. poliCy iSSue        propoSed                                                 Budgeted/
                                                        perSonnel         non-perSonnel
     requeSt/juStiFiCation          Funding SourCe                                           unBudgeted

     Change Municipal Court
     Judges salary structure in
     response to a new state law
                                 General Fund (new                               Revenue
 —   (Breaks even in the first                               $19,200                         Budgeted
                                 state filing fee)                                $19,200
     year. Could gain as much as
     $30,000 annually in future
     years.)




                                                                       Exhibit II. Policy Issue Summary — 
   Iv. FInAnCE

   FInAnCIAl SERvICES
         dept./div. poliCy iSSue          propoSed                                              Budgeted/
                                                                perSonnel   non-perSonnel
         requeSt/juStiFiCation            Funding SourCe                                        unBudgeted
         Raise cap on outside
         utility taxes (i.e., electric,
         natural gas and telephone)
         currently at $4,000 per
         account per month to
         reduce dependency on cash
         reserves and/or contribute
         to capital funding
         (BST option)

         Phase in over three years                                                 Revenue
                                          General Fund —
         2006 to $5,000                                                        2006 $57,600
   —                                      major utility                                         Unbudgeted
         2007 to $7,500                                                       2007 $130,000
                                          customers
         2008 cap removed                                                     2008 $510,000

         Options for use:
         a) First $130,000 dedicated
          to Parks Capital, balance
          to General Fund
         b) General Fund receives
          100% — research other
          dedicated Parks Capital
          Revenue stream (see Parks
         Policy Issue — BST Option)


   InFORmATIOn SYSTEmS
         dept./div. poliCy iSSue          propoSed                                              Budgeted/
                                                                perSonnel   non-perSonnel
         requeSt/juStiFiCation            Funding SourCe                                        unBudgeted

                                          Law and Justice
                                                                                     $210,000
         Replace Patrol Car comput-       Capital Fund
                                                                            (Approximately
         ers to increase reliability of   (50% new Criminal
    —                                                                              $6,000 per Budgeted
         computer performance on          Justice (CJ) Sales
                                                                               patrol car for
         patrol cars.                     Tax, 50% CJ dedi-
                                                                             thirty-five cars)
                                          cated Utility Tax)


                                          Centralized in
                                          Cumulative
                                          Reserve for Capital
         Continue to implement
                                          Improvement
         an integrated Utility and
    —                                     Fund — 392                                            Budgeted
         Permitting Management
                                          2006 Utility Cont.                     a) $120,000
         System
                                          a) Wastewater                             b) 75,000
                                          b) Water                                  c) 15,000
                                          c) Irrigation                             $210,000




 — Exhibit II. Policy Issue Summary
uTIlITY SERvICES
     dept./div. poliCy iSSue       propoSed                                                  Budgeted/
                                                          perSonnel          non-perSonnel
     requeSt/juStiFiCation         Funding SourCe                                            unBudgeted
                                                               $36,000
     Add one ¾-time Utility                                permanent
                                   General Fund
     Service Specialist (office)                              ($13,800)
                                   (Utility Services) —
—    position to handle projects                          reduction in                       Budgeted
                                    Reimbursed by
     previously completed with                              temporary
                                   Utility funds
     temporary staffing.                                   $22,000 net
                                                              increase




v. COmmunITY AnD ECOnOmIC DEvElOPmEnT

ECOnOmIC DEvElOPmEnT
     dept./div. poliCy iSSue       propoSed                                                  Budgeted/
                                                          perSonnel          non-perSonnel
     requeSt/juStiFiCation         Funding SourCe                                            unBudgeted

     Upgrade the Economic
     and Community Affairs         2006 funding
     Specialist to Deputy          allocation:
     Director of Economic          ONDS — 60%
 —                                                             $14,500                       Budgeted
     Development, and              Water — 5%
     Intergovernmental             Wastewater — 5%
     Relations. Change             Ec. Dev. — 30%
     funding allocation



PlAnnInG
     dept./div. poliCy iSSue       propoSed                                                  Budgeted/
                                                          perSonnel          non-perSonnel
     requeSt/juStiFiCation         Funding SourCe                                            unBudgeted

     Increase Land Development
                               General Fund                                         Revenue
 —   Fees to match the County                                                                Unbudgeted
                               revenue                                               $13,000
     fee structure



CODE ADmInISTRATIOn
     dept./div. poliCy iSSue       propoSed                                                  Budgeted/
                                                          perSonnel          non-perSonnel
     requeSt/juStiFiCation         Funding SourCe                                            unBudgeted
     Increase of 2% in the
—    Humane Society annual         General Fund                                        $1,100 Budgeted
     contract

     Implement a $25 annual
     Fire Inspection Fee for all
                                   General Fund —                                   Revenue
—    Commercial Businesses in                                                                Unbudgeted
                                   reduce subsidy                                   $100,000
     the City of Yakima (BST
     recommendation)

     Upgrade Department
—    Assistant III position to     General Fund                 $3,000                       Budgeted
     Permit Technician




                                                                          Exhibit II. Policy Issue Summary — 
   YAkImA COnvEnTIOn CEnTER
        dept./div. poliCy iSSue       propoSed                                          Budgeted/
                                                            perSonnel   non-perSonnel
        requeSt/juStiFiCation         Funding SourCe                                    unBudgeted

        Continue funding for the
        Visitor Information Center    Tourism Promotion
    —   to enhance and stimulate      Fund — Hotel/                             $40,000 Budgeted
        positive economic growth      Motel Tax
        through tourism.



   CAPITOl ThEATRE
        dept./div. poliCy iSSue       propoSed                                          Budgeted/
                                                            perSonnel   non-perSonnel
        requeSt/juStiFiCation         Funding SourCe                                    unBudgeted
        Increase Annual               Capitol Theatre
    —   Management Fee from           Operating Fund —                          $70,000 Budgeted
        $76,000 to $146,000           Cable Utility Tax


   EnGInEERInG
        dept./div. poliCy iSSue       propoSed                                          Budgeted/
                                                            perSonnel   non-perSonnel
        requeSt/juStiFiCation         Funding SourCe                                    unBudgeted
         Increase Professional                                              Expenditure
         Services to assist with      General Fund —                            $30,000
    —    design and development       (to be reimbursed                        Revenue Budgeted
         of capital infrastructure    by project budgets)                     ($30,000)
         projects                                                                Net $0




   vI. POlICE

   PARkInG SERvICES
        dept./div. poliCy iSSue       propoSed                                          Budgeted/
                                                            perSonnel   non-perSonnel
        requeSt/juStiFiCation         Funding SourCe                                    unBudgeted

        Increase overtime parking
                                      General Fund —                           Revenue
    —   fines from $10 to $20 (BST                                                      Unbudgeted
                                      Revenue                                   $55,000
        recommendation)



   DETEnTIOn SERvICES
        dept./div. poliCy iSSue       propoSed                                          Budgeted/
                                                            perSonnel   non-perSonnel
        requeSt/juStiFiCation         Funding SourCe                                    unBudgeted
        Accommodate 24.5% or
        $206,000 increase in Yakima
                                      General Fund —
        County Jail rates — from
                                      a) New .3%
        $840,000 to $1,046,000.                                               a) $90,000 Budgeted/
                                       Criminal Justice
        An increase of 10.7%                                                  b) 116,000 Unbudgeted
    —                                  Sales Tax
        or $90,000 is budgeted.                                                $206,000
                                      b) Other
        Increases greater than this
                                       expenditure
        will need to be funded
                                       reductions
        by other expenditure
        reductions.


 — Exhibit II. Policy Issue Summary
vII. FIRE

OPERATIOnS
      dept./div. poliCy iSSue       propoSed                                                     Budgeted/
                                                             perSonnel          non-perSonnel
      requeSt/juStiFiCation         Funding SourCe                                               unBudgeted
      Add three entry-level                                       $200,000
      Firefighter positions to                              new positions
                                    General Fund
      provide more emergency                                    ($200,000)
 —                                  (Possible SAFER                                              Budgeted
      personnel available for                                    overtime
                                    Grant cost-sharing)
      response and emergency                                       savings
      call-back.                                            net change $0

                                                                                                Unbudgeted —
                                                                                                refer to Council
                                                                                                Public Safety
      Increase the EMS Property
                                                                                                Committee
      Tax Levy by .10¢ per $1,000   Voted increase to
                                                                                                to develop an
      Assessed Valuation (AV) to    EMS Property Tax                                   Revenue
—                                                                                               expenditure plan
      fund Capital Replacement/     Levy ($10 per year                                 $400,000
                                                                                                and ballot proposal
      Reserve for Fire and EMS      per $100,000 AV)
                                                                                                in collaboration
      (BST recommendation)
                                                                                                with Fire
                                                                                                Management and
                                                                                                union leadership




vIII. PuBlIC WORkS

PARkS AnD RECREATIOn, STREET AnD TRAFFIC OPERATIOnS, TRAnSIT
      dept./div. poliCy iSSue       propoSed                                                     Budgeted/
                                                             perSonnel          non-perSonnel
      requeSt/juStiFiCation         Funding SourCe                                               unBudgeted

                                    a) Parks and                                       Increase
      Funding for County
                                     Recreation Fund                                  a) $31,000
      Department of Corrections
 —                                  b) Street and Traffic                              b) 17,750 Budgeted
      Crew (DOC) contract price
                                     Operations Fund                                     c) 2,420
      increase
                                    c) Transit Fund                                      $51,170



STREET AnD TRAFFIC OPERATIOnS
      dept./div. poliCy iSSue       propoSed                                                     Budgeted/
                                                             perSonnel          non-perSonnel
      requeSt/juStiFiCation         Funding SourCe                                               unBudgeted
      Funding for Arterial
      Maintenance Program to
                                    REET 2 and
 —    be phased in as revenue                                                          $400,000 Budgeted
                                    Property Tax
      becomes available $400,000
      in 2006 to $600,000 in 2008


TRAnSIT
      dept./div. poliCy iSSue       propoSed                                                     Budgeted/
                                                             perSonnel          non-perSonnel
      requeSt/juStiFiCation         Funding SourCe                                               unBudgeted
                                    Transit Capital
      Purchase six 35-foot heavy-
 —                                  Reserves —Transit                                 $1,980,000 Budgeted
      duty replacement buses
                                    Sales Tax


                                                                             Exhibit II. Policy Issue Summary — 
   REFuSE
        dept./div. poliCy iSSue         propoSed                                                   Budgeted/
                                                            perSonnel        non-perSonnel
        requeSt/juStiFiCation           Funding SourCe                                             unBudgeted

        Two alternatives offered:

        a) Refuse rate                                                                 Revenue
         increase of 8%                                                               first year
                                                                                      $230,000
         1) Operating cost                                                 annualized $260,000
         increase of 5% (for fuel,
         landfill, equipment                                                                       Budgeted
    —                                   Refuse Rates
         costs, etc.)
                                                                                    equipment
         2) Increase of 3% to add                                $51,900               $15,000
         one new Code
         Compliance Officer
         position to enforce
         Refuse Division
         ordinance violations.

        OR:                                                                           Revenue
                                                                                      first year
    —   b) Refuse Rate increase         Refuse Rates                                  $130,000 Unbudgeted
         of 5% for operating cost                                                   annualized
         increases                                                                    $175,500


   PARkS AnD RECREATIOn
        dept./div. poliCy iSSue         propoSed                                                   Budgeted/
                                                            perSonnel        non-perSonnel
        requeSt/juStiFiCation           Funding SourCe                                             unBudgeted
                                        a) PBIA Fund
        Funding for Central
                                         Transfer                                     a) $7,500
        Business District
   —                                    b) Parks Fund —                               b) 43,300 Budgeted
        Landscaping to support
                                         Property Tax                                  $50,800
        downtown beautification
                                         subsidy
        Increase of Parks Utility
        Taxes on Water, Wastewater
        and Refuse of .5% (from
                                        Parks and                                     Revenue
   —    3.5% to 4.0%) — (BST                                                                   Unbudgeted
                                        Recreation Fund                               $130,000
        option) — also see Policy
        Issue raising the Utility Tax
        Cap

        Study formation of regional
        park authority — to be done Parks and                                                      N/A (no
   —    by staff in cooperation with Recreation                                                    additional cost
        the Parks Commission (       (existing resources)                                          anticipated)
        BST recommendation)




 — Exhibit II. Policy Issue Summary
A. Criminal Justice Costs

       0.3% Criminal Justice Sales Tax

B. Salary and Benefit Costs


C. Resource and Expenditure Breakdown

     Total Resources
     Taxes Distributed
     Intergovernmental Revenue
     Charges for Services
     Borrowings
     Operating Reserves
     Capital Reserves
     Other Resources
     Total Resources
     Total Expenditures




                                         Exhibit III. Supplemental Information — 
                                             Criminal juStiCe CoStS vS.
                                        other general government FunCtionS
                                                   2006 Budget
                Criminal Justice Costs vs. Other Gen Gov Functions
                                     2006 Budget

                              Streets/Traffic
                                   10%


                                            $5,287,630
       Parks & Recreation
              8%


                               $4,048,251

                                                                 $22,433,184     Criminal Justice
                                                                                      44%




                                        $18,953,410




         Other General Fund
                38%




   This analysis compares Criminal Justice expenditures to other General Government costs.
   Criminal Justice costs include: Police Department (including jail costs); Police Pension; Court and
   Probation costs; Prosecution and Indigent Defense (included in the Legal Department budget)
   and forty percent of Information Systems budget (the amount dedicated to Law and Justice sup-
   port). This category also includes one-half of the transfer from the General Fund to the Public
   Safety Communications Fund for Dispatch and the transfer from the General Fund to Debt Ser-
   vice funds to repay debt borrowed for Criminal Justice purposes. This graph reflects the City’s
   efforts to meet Council’s Strategic Priorities; Law Enforcement/Public Safety and Well Being
   was Council’s Highest Priority through most of the 1990’s, and is now second only to Economic
   Development. This is further elaborated in the following table.




 — Exhibit III. Supplemental Information
                                                                                                                      City oF yakima
                                                                                                               general government BudgetS*

                                                                     1996         1997         1998         1999         2001         2002         2003          2004        2005           2006        2006
                                                                   Amended       Amended      Amended      Amended      Amended      Amended      Amended      Amended      Amended      Preliminary     vS    10 Year
                                                                    Budget       Budget       Budget       Budget       Budget       Budget       Budget       Budget       Budget         Budget       2005   Increase
                                            General Fund:
                                              Criminal Justice     $13,143,646 $15,244,842 $16,504,899 $17,462,994 $17,477,709 $18,992,948 $19,702,698 $20,061,761 $20,721,950           $22,433,184    8.3%    70.7%


                                              All Other            $13,994,789 $14,505,199 $15,120,012 $15,429,647 $14,914,045 $15,571,751 $16,913,032 $17,476,192 $17,862,426            $18,953,410   6.1%    35.4%


                                            Parks & Recreation     $3,244,288    $3,295,957   $3,434,761   $3,629,742   $3,456,199   $3,504,423   $3,620,410   $3,832,816   $3,905,396    $4,048,251    3.7%    24.8%


                                            Street/Traffic          $3,323,224   $3,462,529   $3,741,754   $3,936,319   $4,218,454   $4,826,542   $5,192,894   $4,883,030   $4,705,035     $5,287,630 12.4%     59.1%


                                              Total                $33,705,947 $36,508,527 $38,801,426 $40,458,702 $40,066,407 $42,895,664 $45,429,034 $46,253,799 $47,194,807 $50,722,475              7.5%    50.5%




                                                                      june         june         july         july         june         june         june         june         june          june               10 Year
                                                                     1995         1996         1997         1998         2000         2001         2002          2003        2004           2005               Increase
                                            Consumer Price Index
                                            Seattle/Tacoma
                                              Wage Earners/          148.3        152.6        158.2        162.1        172.8        181.3        184.1        185.7        190.4          199.2               34.3%
                                              Clerical Workers




                                            * Excludes double budgeted transfers between general government funds.




Exhibit III. Supplemental Information — 
       Criminal justice Sales Tax - .3% Proposed Allocations for 2006 Budget

   General Fund:

        Police Department
              5 Police Patrol Officers                              $343,299
              1 Detective                                             82,034
              1 Forensic Laboratory Specialist                        59,955
              Liability Insurance                                      5,750
              Overtime                                                56,000
              Miscellaneous (uniform/fuel/travel)                     55,000
              Yakima County Jail Cost (see policy issue summary)      90,000
              Contribution to 2006 Labor Settlement                   84,414     $776,452

        Municipal Court
            1 Court Commissioner                                     $86,372
            2 Court Clerks                                            84,008
            Overtime                                                   5,000
            Professional Services                                     45,000     $220,380

        Legal Dept
             1 Assistant City Attorney II                            $82,398
             1 Legal Assistant II                                     51,857
             Miscellaneous (office supplies/travel/dues)               3,500     $137,755

        Information Systems
             Temporary Employee                                      $28,741
             Repair & Maintenance                                      2,000
             Data Processing Equipment                                50,000      $80,741

        Animal Control
            1 Animal Control Officer                                 $51,913
            Overtime                                                   3,000
            Miscellaneous (uniforms/supplies/fuel/cellular phone)      2,550      $57,463

        Human Resources
           Professional Services for employee recruitment)           $10,000      $10,000

   General Fund Total Expenditures                                             $1,282,791

   Other Funds:

        Public Safety Communication
             Temporary Employee                                      $14,009
             R & M Supplies                                            4,000
             Small Tools & Equipment                                   2,200      $20,209

        Law & Justice
            Small Tools & Equipment                                 $135,000
            Vehicle Replacement                                       25,000
            Crime Laboratory                                         100,000     $260,000

   Total Proposed Allocations                                                  $1,563,000
   Projected Revenue                                                           $1,563,000


 — Exhibit III. Supplemental Information
(This page intentionally contains no information.)



                                      Exhibit III. Supplemental Information — 
   SAlARY AnD BEnEFIT COSTS TO TOTAl BuDGET — The following chart represents the rela-
   tionship of the City's salary and benefit costs to total budget for General Government and other
   funds of the City. The City's General Fund ranks the highest with salary and benefit costs, repre-
   senting 73% of total fund expenditures. However, employee compensation and benefit costs for
   an individual department within the General Fund as a percentage of its total costs range from
   45% to 94%. In several departments (including Police, Legal and Information Systems) if con-
   tracted services were excluded, the percentage of salary and compensation costs as a percentage
   of the division total costs would be considerably higher than what is depicted on the following
   chart.

   Parks, Streets and other operations for the most part are more capital-intensive, and the ratio of
   salary and benefits to total costs are representative of that type of operation.

   Page two of this analysis is based on information gathered by the State Auditor's Office. It identi-
   fies the per capita salary costs and indicates that:

   •   The City of Yakima spends, on the average, $133 less per capita on salaries than other compa-
       rable cities.

   •   Yakima employs fewer people per capita than other cities.

   To minimize the number of regular employees and to maintain service levels during periods of
   peak workload demands, the City uses contract and temporary labor when possible.




 — Exhibit III. Supplemental Information
                                                 operating FundS
                         SalarieS   and   BeneFitS vS. total department/Fund Budget
                                                                                2006
                                                             2006             Salaries &
General Government                                          Budget             Benefits        Percentage

Police                                                       $17,146,146        $14,328,835     83.57%
Fire                                                           7,558,242          6,983,293     92.39%
Information Systems                                           2,474,685           1,496,612     60.48%
Legal                                                          1,557,150          1,097,739     70.50%
Code Administration                                           1,423,327            1,217,108    85.51%
Financial Services                                             1,192,393          1,065,434     89.35%
Engineering                                                    1,130,121          1,031,443     91.27%
Municipal Court                                                1,149,292            939,825     81.77%
Utility Services                                                 980,333            800,071     81.61%
City Manager                                                     499,079            473,323     94.84%
Environmental Planning                                            617,413           507,689     82.23%
Human Resources                                                  477,583            405,698     84.95%
Probation                                                        173,560            133,488     76.91%
City Hall Maintenance                                            380,208            189,408     49.82%
Records                                                          534,325             326,911    61.18%
Purchasing                                                       230,125             199,179    86.55%
City Council                                                     180,475              82,625    45.78%
Other General Fund Departments                                 5,148,137                   0     0.00%
Total General Fund                                          $42,852,594        $31,278,681      72.99%
Parks & Recreation                                             4,048,251          1,984,897     49.03%
Street & Traffic Operations                                    5,287,630          2,706,459     51.18%
Total General Government                                    $52,188,475        $35,970,037      68.92%

Economic Development                                            $187,034            $26,083     13.95%
Community Development                                          2,065,736            838,220     40.58%
Community Relations                                              658,452            376,457     57.17%
Cemetery                                                         295,204            190,929     64.68%
Emergency Services                                               999,906            706,094     70.62%
Public Safety Communications                                   2,524,528          1,948,613     77.19%
Transit                                                        6,288,107          2,934,910     46.67%
Refuse                                                         3,723,456          1,272,384     34.17%
Sewer Operating                                               16,552,456          4,451,466     26.89%
Water Operating                                                6,990,487          2,053,492     29.38%
Irrigation Operating                                           2,580,208            585,167     22.68%
Unemployment Comp Reserve                                        143,291              26,302    18.36%
Employment Health Benefit Reserve                              8,408,426              90,453     1.08%
Workers Compensation Reserve                                   1,083,628            100,645      9.29%
Risk Management Reserve                                        2,080,246            285,846     13.74%
Equipment Rental                                               4,810,102             777,113    16.16%
Public Works Administration                                    1,101,465            582,202     52.86%
Other Funds (Capital/Debt Service, etc.)                      51,787,545                   0    0.00%
Total City-wide Budget                                     $164,468,752        $53,216,413      32.36%

                                                                  Exhibit III. Supplemental Information — 
   GRAPhIC PORTRAYAl OF CITY RESOuRCE COnSumPTIOn — The purpose of this section is to
   graphically present total City resources by category, and distribute them by function and type
   of expenditure (object) for the 2006 budget year. This “flow of resources” concept is designed
   to give the taxpayer a basic understanding of how tax dollars and other revenues are spent in
   the City. We have eliminated interfund transactions (i.e., those items that flow out of one fund
   and into another; we refer to these as double budgeted items) in order to portray only external
   revenue sources available to the City.

   The broad revenue categories are based upon the State of Washington’s mandated accounting
   structure. A definition of the terms is included below:

   BorrowingS — Proceeds from long-term debt issued by the City. In 2006 this includes Capital
   Leases and Potential Local Improvement District (LID) debt issuance.

   Capital reServeS — Accumulated fund balances set aside for specific capital projects.

   ChargeS   For   ServiCeS — Fees charged to outside users to cover the cost of providing services (e.g.
   utility rates, golf course and swimming pool fees, transit fare box revenues).

   intergovernmental revenueS — Revenues received from other governmental agencies (i.e. federal,
   state, and county). This category includes primarily grants and state-shared revenues (such as
   gas and liquor tax revenues).

   operating reServeS — Accumulated fund balances in operating funds. Prudent reserves generally
   are 8% of annual operating budgets.

   other — All revenue sources which are not included in other categories. This includes primarily
   investment income, program income, fines and forfeitures, and licenses.

   taxeS — Tax assessments are levied for the support of the governmental entity. Sales tax is the
   largest item in this category. It is followed by property tax, utility and franchise taxes, and vari-
   ous other business taxes.

   The first graph identifies the total revenue picture. The following seven graphs display how each
   individual revenue category is applied to City functions. The final revenue graph depicts the
   relationship of the various revenue sources to each function.

   Lastly, included is a graphic by major object (or type) of expenditure, net of double budgeted
   expenditures.

   The following graphs specifically identify how much outside revenue is collected and precisely
   what services it provides, across “fund” lines.




 — Exhibit III. Supplemental Information
                          total reSourCeS By Category
                               City of Yakima
                                 2006 Budget
                         Total Resources by Category
                                 2006 Budget


                                                 Total Resources = $157,965,612
                                                 (Excludes Internal Service Funds
                                                    and other double budgeted
                                                    resources of $42,198,010)




                                    $6,616,350
           $26,382,274                Other
          Cap Reserves                 4.2%                                    $48,264,784
             16.7%                                                               Taxes
                                                                                 30.5%


$16,371,417
Op Reserves
  10.4%


      $2,007,000
     Borrowings                                                        $30,239,713
         1.3%        $28,084,074                                        Intergovt
                     Chg for Serv                                         19.1%
                       17.8%




                                                      Exhibit III. Supplemental Information — 
                                                             Taxes by Fun




                                                  City of Yakima
                                           Taxes Distributed by Function
                                                      taxeS
                                                   2006 Budget
                                                diStriButed By FunCtion
                                                     2006 Budget


       Police & Fire                                                                              $23.9



           Gen Govt                                      $10.3



        Parks & Rec               $1.8



          Street Ops                     $3.8
                                                                                 Other
                                                              Cap Reserves                                Taxes

        Street Const         $1.2
                                                         Op Reserves

                                                             Borrowings
     Gen Govt Const        $0.4
                                                                 Chgs for Serv               Intergovt


      G.O. Debt Serv         $1.1



         Special Rev         $1.4



             Transit                      $4.3



            Utilities


                    $0.0                 $5.0        $10.0           $15.0           $20.0       $25.0            $30.0
                                                             (Dollars in Millions)




                                                                Page 1
0 — Exhibit III. Supplemental Information
                                          City of Yakima
                                    Intergovernmental Revenue
                                      Distributed by Function
                                    intergovernmental revenue
                                            2006 Budget
                                      diStriButed By FunCtion
                                           2006 Budget

                                                                              Other
  Police & Fire                        $3.3               Cap Reserves
                                                                                             Taxes


     Gen Govt             $0.9                       Op Reserves
                                                       Borrowings

   Parks & Rec     $0.1                                     Chgs for Serv
                                                                                                  Intergovt


    Street Ops            $1.1


   Street Const                                                                                      $15.0


Gen Govt Const                                $5.4


G.O. Debt Serv     $0.0


   Special Rev                      $2.7


        Transit              $1.6


       Utilities   $0.0


               $0.0         $2.0       $4.0   $6.0        $8.0        $10.0       $12.0   $14.0       $16.0
                                                 (Dollars in Millions)




                                                                   Exhibit III. Supplemental Information — 
                                               City of Yakima
                                            Charges for Services
                                           Distributed by Function
                                           ChargeS For ServiCeS
                                                 2006 Budget
                                           diStriButed By FunCtion
                                                2006 Budget


        Police & Fire    $0.3


           Gen Govt         $0.4


         Parks & Rec         $0.8


          Street Ops                                                        Other
                                                          Cap Reserves
                                                                                            Taxes

         Street Const                               Op Reserves
                                                    Borrowings


      Gen Govt Const                                                                     Intergovt
                                                        Chgs for Serv

      G.O. Debt Serv


         Special Rev     $0.2


              Transit       $0.4


             Utilities                                                                               $26.0


                     $0.0           $5.0        $10.0           $15.0            $20.0      $25.0            $30.0
                                                         (Dollars in Millions)




 — Exhibit III. Supplemental Information
                                City of Yakima
                                BBorrowings
                                  orrowingS
                           Distributed by Function
                                 2006 By FunCtion
                          diStriButed Budget
                              2006 Budget

  Police & Fire



     Gen Govt
                                                                      Other
                                                    Cap Reserves
                                                                                 Taxes

   Parks & Rec                                  Op Reserves


                                         Borrowings
    Street Ops                                        Chgs for Serv           Intergovt




   Street Const    $0.0



Gen Govt Const                           $0.9



G.O. Debt Serv



   Special Rev



        Transit



       Utilities                                        $1.2


               $0.0                         $1.0                                      $2.0
                                     (Dollars in Millions)




                                                  Exhibit III. Supplemental Information — 
                                                     City of Yakima
                                                   Operating reServeS
                                                   operating Reserves
                                                 Distributed By FunCtion
                                                 diStriButed by Function
                                                       2006 Budget
                                                      2006 Budget




        Police & Fire                                                           $3.5


            Gen Govt                                $1.5


         Parks & Rec               $0.5

                                                                                               Other
           Street Ops                        $1.1                          Cap Reserves
                                                                                                                 Taxes


         Street Const                                           Op Reserves
                                                                          Borrowings
                                                                                                              Intergovt
                                                                               Chgs for Serv
      Gen Govt Const


       G.O. Debt Serv                     $0.8


          Special Rev                                                           $3.6


              Transit       $0.2


             Utilities                                                                                        $5.3


                     $0.0                 $1.0         $2.0          $3.0           $4.0               $5.0          $6.0
                                                              (Dollars in Millions)




 — Exhibit III. Supplemental Information
                                                       City of Yakima
                                                       Capital Reserves
                                                       Capital reServeS
                                                   Distributed by Function
                                                   diStriButed By FunCtion
                                                         2006 Budget
                                                                 2006 Budget



  Police & Fire


     Gen Govt                                                        Cap Reserves                         Other
                                                                                                                                      Taxes

   Parks & Rec

                                                                        Op Reserves
                                                                          Borrowings
    Street Ops
                                                                                   Chgs for Serv                                 Intergovt


   Street Const                     $1.9


Gen Govt Const                      $2.0


G.O. Debt Serv


   Special Rev


        Transit                                $3.1


       Utilities                                                                                                                                      $19.4

                   $0.0   $1.0   $2.0   $3.0    $4.0   $5.0   $6.0   $7.0   $8.0   $9.0   $10.0 $11.0 $12.0 $13.0 $14.0 $15.0 $16.0 $17.0 $18.0 $19.0 $20.0 $21.0

                                                                              (Dollars in Millions)




                                                                                                   Exhibit III. Supplemental Information — 
                                                  Other Res




                                             City of Yakima
                                            Other Resources
                                           other reSourCeS
                                         Distributed by Function
                                               2006 By FunCtion
                                        diStriButed Budget
                                            2006 Budget



       Police & Fire                                                 $1.2


           Gen Govt                                                               $1.4


        Parks & Rec              $0.2
                                                                                         Other
                                                                              Cap
          Street Ops    $0.0                                                Reserves
                                                                                                            Taxes

                                                                  Op Reserves
        Street Const                                $0.8
                                                                     Borrowings
                                                                                                         Intergovt
     Gen Govt Const            $0.1                                                    Chgs for
                                                                                        Serv

      G.O. Debt Serv           $0.1


         Special Rev                                              $1.1


             Transit       $0.1


            Utilities                                                                             $1.7


                    $0.0                                   $1.0                                            $2.0
                                                  (Dollars in Millions)




                                                   Page 1
 — Exhibit III. Supplemental Information
                                       City of Yakima
                           Total Resources by Category & Function
                                      total reSourCeS
                                        2006 Budget
                                      By    Category & SourCe
                                             2006 Budget

  Police & Fire


     Gen Govt


   Parks & Rec


    Street Ops


   Street Const


Gen Govt Const


G.O. Debt Serv


   Special Rev


        Transit


       Utilities


               $0.0           $10.0           $20.0           $30.0            $40.0    $50.0       $60.0
                                                       (Dollars in Millions)

                   Taxes                   Intergovt               Chgs for Serv       Borrowings
                   Op Reserves             Capital Reserves        Other




                                                                      Exhibit III. Supplemental Information — 
                                      City of Yakima
                               Total Expenditures by Object
                                       2006 Budget
                                   total expenditureS
                                            type
                                             By
                                       2006 Budget
                                                  Total Expenditures = $130,873,738
                                                     (Excludes double budgeted
                                                            expenditures
                                                           of $33,595,014)




                                  $6,817,428
                                 Debt Service                             $42,143,525
                                     5.2%                                   Salaries
     $40,276,000                                                             32.2%
       Capital
       30.8%




              $3,172,066                                                $12,464,321
                             $20,366,669                   $5,633,729    Benefits
              Intergovt
                            Other Services                  Supplies       9.5%
                 2.4%
                               15.6%                          4.3%




 — Exhibit III. Supplemental Information

				
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