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practice continues to erode the State's fiscal position and continues to expose local governments to the practice of diverting local revenues to address staggering State deficits. This has become a standard practice during every downturn in the economy since the early 1990s. Pleasanton has lost over $70 million to the State since 1992 -- funds which could have been earmarked for local services and/or capital improvements. Economic Recovery Although there are indications that the economy is recovering, it is doing so at a slow pace with emerging new obstacles to overcome, such as rising interest rates, sluggish job growth and higher oil prices. REVENUE AND EXPENDITURE HIGHLIGHTS Some significant revenue elements of the 2005-2007 budget include: · Sales tax revenues projected to increase 5% in each of the next two years. · Property tax revenues projected to increase 5.9% in 2005-06 and 5.3% in 2006-07. · Transient occupancy tax revenues projected to increase 9% in 2005-06 and 6% in 2006-07. The following are highlights of the expenditure elements in the 2005-2007 budget: · Total City appropriations for expenditures in 2005-06 are $158 million, a 1.6% increase as compared to the 2004-2005 fiscal period's $155 million. Appropriations in 2006-07 are $169 million, a 7% increase over 2005-06. · General Fund operating expenditures in 2005-06 total $76.8 million, a 0.3% increase from the prior budget period's $76.6 million. In 2006-07 the increase is $83.3 million, an 8.5% increase. · The 2005-2007 budget includes contributions to the Reserve for Economic Uncertainties that maintain it at 10% of annual revenues, which is consistent with the City's fiscal policies. The budget keeps the Temporary Recession Reserve intact with a balance of $5.1 million. Staff is recommending that this reserve be kept in place at least through the next two years, or as long as uncertainty exists in the State's budget and the economy. When appropriate, the funds can then be made available for one-time purposes such as capital improvements. · The Capital Improvement Plan budget totals $14.5 million and $15.5 million, in fiscal years 2005-06 and 2006-2007, respectively. A $5 million contribution from the General Fund occurs each year to fund capital projects. · Baseline staffing is increased by four full-time equivalent positions in the Police Department to address additional impacts from growth, both in Pleasanton and regionally. No other staffing increases are included in the budget. · Non-personnel costs remain flat, as compared to the previous budget cycle. b-3