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Fire Protection Service Contract Page 5 6.4 The Fire Department agrees to submit to the Cities a quarterly budget report and a copy of the Fire Department's annual financial report, as prepared by its certified public account- ant, no later than June 15 of each year. 6.5 Since the operating expenses of the Fire Department are largely a function of the number and magnitude of fire calls which cannot be accurately predicted, and since unexpected or increased expenses can result from emergencies and other unforeseen circumstances causing expenditures in excess of anticipated and budgeted amounts, it is agreed that if it is determined at any time by the Fire Department and confirmed by the Cities that budgetary appropriations are or will not be sufficient to cover such unexpected or increased expenses, the Cities shall pay to the Fire Department each City's pro rata share (according to 5.1) of the funds necessary to meet the unexpected expenses. 6.6 It is agreed that continuity of fire protection services constitutes a top priority for the allocation of the Cities' financial resources. In the event of any annual revenue shortfall in one or more of the Cities, it is agreed that the Fire Department operating budget may be reduced on the same basis as budgets for other services involved in exercise of the safety services of the Cities; provided that (i) the Fire Department's basic financial needs will be met by the Cities and (ii) the application of any operating budget reductions will be determined by the Fire Department. ARTICLE 7 Term and Renewability 7.1 This contract she replace all previous fire protection service contracts between the respective Cities and the Fire Department. The term of this contract shall be for 10 years from January 1, 1994 to December 31, 2003. The contract shall be effective upon execution and shall be automatically renewed for successive 10 -year periods on the same terms and conditions contained herein unless either party gives a six-month written notice to terminate this contract or renegotiate any portion thereof within the last year of any 10 -year increment of this contract. In the event the term of this contract expires prior to the execution of a subsequent contract and during the time in which negotiations between the parties are proceeding there shall be a 90 -day grace period commencing on the date of such expiration during which this contract shall continue in full force and effect. -5-