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Attachment B TNF ('ITV (1F MEMORANDUM Date: May 25, 2007 To: Mayor and City Council From: Nelson Fialho, City Manager Subject: Capital Improvement Program for Fiscal Years 2007-08 to Fiscal Years 2010-11 I. INTRODUCTION AND OVERVIEW OF CIP PROCESS This Capital Improvement Program (CIP) has been prepared to provide the City Council and the community with information necessary to identify capital improvement needs, projects and reserves for the next four years. Consistent with the City's two-year Budget, it is recommended that the first two years of the CIP be adopted and that funds be appropriated to cover the projects included in these two years. The projects included in the final two years of the CIP are tentative based on currently identified needs and are subject to revision to accommodate changes in priorities and/or expected funding levels. As part of the ongoing budget-monitoring program, staff will conduct a thorough review of the Capital Improvement Program at the end of fiscal year 2008-09 (as part of the Mid-Term Budget process) and will provide the City Council with any recommended changes to projects and revenues. Because a portion of the total revenue available to the CIP is derived from development related fees assessed on new development and other sources not directly related to ongoing City revenue, the status of the economy, state and federal programs and policies and the amount of local development activity during the next several years will play a major role in the City's ability to finance projects included in this program. As a result, revenue from projected development fees collected in calendar year 2007 are being used to fund projects in fiscal year 2008-09. Likewise, development fees projected for calendar year 2008 will be used to fund projects in 2009-10. This conservative approach assures that funds are on hand prior to beginning any significant work on a project. To assure that there is adequate funding for the recommended 2008-09 projects, staff will refrain from incurring significant costs on these projects until after approval of the Mid-Term Budget when any revenue adjustments are approved. Staff will continue working on existing projects that have received partial funding and approvals in previous years. By utilizing the above method, the City avoids project funding shortfalls resulting from less than anticipated revenues and minimizes the impact of having to stop a project due to lack of funding. PL~~AS~4NTONa