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General Fund Transfers This two year budget does not include any transfers to the Capital Improvement Program. During the past few years we were fortunate to have a level of funding in the Capital Improvement Program (CIP) that allowed the City to complete four of five City Council's high priority projects; the Alviso Adobe Community Park, renovation of the Veterans Memorial Building, phase I of the Bernal Community Park, and restoration of Kottinger Creek. The remaining high priority project, the downtown Firehouse Arts Center is fully funded and is under construction and is expected to be completed by spring of 2010. The CIA focus as presented in this budget will be on retaining our maintenance standards and continue active planning and design for new CIP projects. The CIP remains consistent with City Council priorities and, as an example, has some new projects, but in the design phase only: Phase II of the Bernal Community Park, Alamo canal extension, and Lyons Wayside Delucci Park improvements. Construction of these projects in the short term will be highly dependent on the economic recovery. The General Fund Transfers include operating subsidies for the Storm Drain, Cemetery, and Transit Enterprise Funds. A transfer of $200,000 for 2009 -10 and $500,000 for 2010 -11 is included to fund the Golf Debt Service reserve to ensure advance funding of 2 year of debt service payments. The Water Sewer utilities are currently undergoing rate studies. It is likely that staff will be bringing forward rate adjustments in the near future as it has been almost a decade since rates have been adjusted. In addition, we will take this opportunity to recommend some rate restructuring to make rates more equitable and to encourage conservation measures. This area is one of the City Council priorities and will need to be addressed to keep our municipal utilities in good operational order. This action also incorporates Community Development Block Grant (CDBG) allocations previously approved by City Council into the budget for 2009 -10. A more detailed discussion of the proposed two -year budget is contained in the attached Budget Message. CONCLUSION The proposed two -year Operating Budget is balanced. The budget funds mandatory increases and provides funding for the programs and goals identified as priorities by the City Council. Staff recommends that the Council adopt the budget plan as presented. Staff will continue to monitor the progress of the economy, review revenues and expenditures quarterly, and report back to the Council if and when additional decisions are required throughout the two budget years. Furthermore, a detailed mid -term update will be conducted and presented to Council in June 2010. Page 6 of 7