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Page 8 of 16 the City Council approved the reallocation of over $8.0 million in General Fund funded projects to support higher priority capital projects. The operating budget, due to limited financial resources, also excluded/underfunded many program areas such as liability insurance and repair and replacement (facilities, parks, storm drain systems, etc.). The long- term financial forecast also indicates expense growth will outpace revenue growth (see the Long-range Financial Planning section of this report for more detail). In short, additional resources are needed to sustain City services and programs in the future and/or service levels will have to be reduced so that costs are not exceeding revenue on an ongoing basis. The following discussion sections outline the key areas for consideration in developing the next two-year budget. Infrastructure and “State of Good Repair” Needs The draft 10-year infrastructure plan, discussed above, showed a $900 million funding gap for both the General Fund and Enterprise Funds over 10 years. This plan shows an approximate “state of good repair” need for City infrastructure and facilities, which would require the City to invest approximately $90 million per year. For example, the City’s Repair and Replacement Program is significantly underfunded (see table below for program areas). With additional one-time contributions to the Facilities Renovation and Park & Median Renovation Funds at the end of FY 2023/24, the fund balances are only $3.8 million and $1.0 million, respectively. Considering there are more than 100 City buildings and structures and more than 40 parks to repair and maintain, these amounts are insufficient. The City also had to purchase a new police communications system during FY 2023/24 through a lease arrangement due to insufficient funds in the IT Replacement Fund, and purchase a fire engine with borrowed funds because replacement funds have not been set aside over the years due to the lack of available resources. Capital funding for the City’s stormwater systems comes solely from the General Fund. Stormwater systems, like water and sewer systems, require significant infrastructure investments over time; the General Fund does not have the needed resources to set aside for this program. While the Asset Management Plan is under development, the Water System Management Plan has been completed and shows more than $260.0 million in infrastructure funding needs over 20 years. Of this amount, more than $100.0 million represents needed Page 10 of 109