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services, costs. revenues and other factors will change over 20 years. Instead it evaluates the fiscal impact of the City as it is currently conducting business under the present budget. The following major assumptions regarding the fiscal methodology should be noted. 1. Marginal, Growth.Related Costs and Revenues For this analysis, costs and revenues which are directly attributable to new development are included. Some costs are not expected to be impacted by demographic changes, and may be fixed in this analysis, such as some administrative functions. In other cases, there is a realization that the costs are semi-variable. A best estimate was then made by the Department personnel and T A using proxy percentages. Both personnel and other operating costs are projected. In addition to operating expenses, capital costs are also included. Projections of capital costs are based on discussions with City personnel and, in most cases, are accounted for as one-time lump sum costs incurred at particular population or employment threshold levels. 2. Level of Service The cost projections are based on the assumption that the current level of spending, as provided in the FY99 budget, will continue through 2020. The current level of spending is referred to as the current level of service (LOS) in this type of analysis. Given this methodology, any services that are currently insufficient, although they will increase based on growth, will remain at their "insufficient" level in the future. Increasing service levels are not a part of this analysis. This "snapshot" approach is necessary to maintain consistency for all City Departments. Furthermore, speculation of what the "proper" service level is for particular departments is avoided and a more realistic picture is presented based on actual services provided and funded by elected officials. Should the fiscal results show net revenues, then a judgment can be made of how and to what extent existing deficiencies may be reduced in various departments. 3. Cost and Revenue Structure Costs and revenues are projected assuming that the current budget structure, as defined by the FY99 budget, will not change during the analysis period. 4. Inflation Rate The rate of inflation is assumed to be zero throughout the projection period, and cost and revenue projections are in constant 1999 dollars. This assumption is in accord with current budget data and avoids the difficulty of forecasting as well as interpreting results expressed in inflated dollars. In general, including inflation is very complicated and unpredictable. This is particularly the case given that some costs, such as salaries, increase at different rates than other operating and capital costs such as contractual and building construction costs. And these costs, in turn, almost always increase in variation to the appreciation of real estate. Using constant 1999 dollars reinforces the snapshot approach and avoids these problems. Page 3 Tischler & Associates, Inc.