The budget of the urban settlement, adopted by the city municipal council, stipulated that at least 7% of the budget expenditure should be allocated for repairing the pavement. However, a group of city residents, who considered that these funds were clearly not enough, decided to organize a city referendum to increase the size of the appropriations for these purposes, as well as to introduce an additional local tax for this. An initiative group of citizens collected signatures from 5% of city residents with active suffrage, and appealed to the election commission of the city settlement with a request for a referendum.
Describe this situation in terms of its compliance with the law.

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