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assessment charged to each developed and undeveloped parcel within the City (including City-owned parcels), based upon formulas that approximate each parcel's runoff. The General Fund pays for 50% of the storm drain maintenance costs. Projected revenues are $667,126 in 2005-06, and $674,868 in 2006-07. As was mentioned earlier and discussed in the last two-year budget, with the assessments capped, and unless additional funding sources can be found, the General Fund will need to contribute an increasing share to the Storm Drain Fund over time. Beginning in 2004-05 and through this two-year budget, staff has included in the budget an additional transfer of $100,000 to subsidize the operations of this Fund. D. INTERNAL SERVICE FUNDS Internal charges (accruals) are costs reflected in the operating budgets that represent accumulating liabilities. These liabilities may not result in actual expenditures in the short term, but they will result in future expenditures. There are several examples of future expenditures for which we charge ourselves now, as the liability is accruing. These include accruals for the future replacement of equipment we are now using (similar to charges for depreciation). They also include accruals for renovation of parks and City facilities that age with usage, and employee costs that are accruing now but will be paid out later, such as unused vacation and retiree medical costs. In accordance with the City's adopted Financial Policies and the City's General Plan, the City recognizes these costs as they accrue, and sets the money aside to fund the future expenditures, rather than allowing these costs to accumulate and become a burden on future generations. In accordance with its financial policies and the General Plan, the City maintains various Replacement/Renovation Funds. The purpose of these Funds is to provide ongoing replacement of City equipment, vehicles, and streetlights, and to make major repairs and renovations to City facilities, parks and medians in order to extend their lives. The funding sources are interest earnings and replacement accrual charges placed on the departments for their existing equipment, vehicles and facilities. These replacement charges are determined by the replacement cost and estimated life (similar to depreciation) of the capital involved. In June 1999, the City completed its first formal "Replacement Plan" and has continued to update it on a regular basis. Staff has once again completed a major bi-annual update of the Replacement Plan as part of the Operating Budget preparation process this spring. Updated estimates were made of the timelines and costs for replacing/renovating each City asset in the program, over a twenty-year time frame. The cash flow analysis was then updated using this information, and assuming inflation and interest income. From the cash flow analysis, the base annual accrual rate was updated, to ensure it would be adequate to fund the long term plans, without allowing the replacement/renovation fund balances to become negative or to build excessive reserves. As was mentioned earlier, as part of this update, staff reviewed and eliminated a number of carryover expenditure appropriations, updated and reduced estimated costs in a number of areas and reviewed asset replacement cycles both in the short term and over b-25