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5 <br /> <br />time. If the City starts to withdraw funds from these accounts, the funded ratio will not <br />continue to improve at the current rate. <br /> <br />General Fund Reserve <br />The purpose of the City’s General Fund Reserve is to ensure financial stability and <br />maintain operations in the event of economic uncertainty or emergency. The City’s <br />unassigned General Fund reserve is currently at about 21.0% of the Operating Budget. <br />This is 1.0% above the City’s policy target of 20.0%. While drawing down on the reserve <br />could yield $1.5 million in one-time money, this is not a sustainable practice. As <br />expenses continue to rise, the current 21.0% reserve will drop below the 20.0% reserve <br />target in FY 2025/26. At this time, staff does not recommend drawing down on the City’s <br />General Fund unassigned reserve during the upcoming two-year budget. <br /> <br />Capital/Facilities/Repair and Replacement Funds <br />The City’s General Fund Capital needs for a “state of good repair” (just taking care of <br />the assets that the City has today) over the next 10 years is estimated to average about <br />$50 million per year. The City is currently investing less than $4 million per year in <br />capital investment. The City’s assets and facilities are in need of significant investment; <br />continuing to underfund capital, facilities, repair and replacement needs is only <br />increasing costs and liability for the City in years to come. In certain instances, deferring <br />maintenance and replacement is also creating additional risk and liability. As assets <br />deteriorate, they become unusable and unable to serve the community. At this time, <br />staff does not recommend any reduction in suggested investments in capital funding in <br />the upcoming two-year budget. (Refer to the Capital Improvement Plan (CIP) Agenda <br />Report, which is published as part of the April 8, 2025, City Council Agenda, for <br />additional information about capital funding needs that rely on the General Fund). <br /> <br />Preliminary Program and Service Reduction Recommendation <br />The Preliminary Reduction Recommendation outlined below is derived from a list of 28 <br />potential General Fund program and service reduction options developed with input <br />from every City department. These reduction options were vetted with the BAC and the <br />community (via Town Hall, online engagement, farmer’s market pop-up), and that <br />feedback was considered when developing the preliminary recommendation. The <br />recommendation also considers City Council priorities that were established through a <br />Strategic Plan discussion earlier this year and operational factors, such as where there <br />are current vacancies/frozen positions or where data shows that programs are <br />underperforming. <br /> <br />The ten-year financial forecast presented to the City Council in March 2025 was used to <br />prepare the Preliminary Reduction recommendation, using the original target reduction <br />amounts of $10.4 million in FY 2025/26 and $12.0 million in FY 2026/27. As discussed <br />above, the reduction target will continue to change as new inputs are received. For <br />purposes of this reduction exercise, staff is assuming a target reduction consistent with <br />the previous forecast and will adjust up or down as necessary before the final proposed <br />budget is presented at the May 20 City Council workshop/meeting. It is important to <br />Page 7 of 40