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Ms. Ayala asked if the City knew, or thought, there was going to be a period of time of less money coming in, and money is put aside for each of the Capital Improvement projects, but there are not enough funds to be able to build them, then wouldn't the City be smarter to say we are not going to be able to build ail of the capital improvements that we want, and we will have to narrow it down so that at least we can provide some of the Improvements. Ms. McKeehan said this is the process that the City will go through in looking at the next Capital Improvement Project budget. Mr. Pico said that is done every year and it is Important to realize, that unlike the Generai Fund Revenues being set for what we think we will collect, the Capital spending is after the fact, after we have collected the money. We are spending this year what was received last year. Ms. McKeehan said that as soon as the City gets any indication that would impact the City, we will begin making contingency plans. The deptahnants are already looking at what can be done now to get ourselves as much prepared as we can if there is going to be any significant downward cut this year. Our process is very different from the State. Ms. Ayaia felt she thought the public would admire an agency that would start to cut back before they have to. Ms. McKeehan replied that the City already does that. That is why the City uses limited term positions. Some are not presently filled and every time there is a vacancy it is looked at and held open. There is no hiring freeze, but as vacancies occur, they are looked at as they come aiong. We determine if this is something we need right now or can we do it later. It is difficult to guess which source of revenue is ultimately going to be attacked and at what level. She is concerned with honest and factual information. There is talk every year about saies tax changes and the loss of vehicle license revenues. The financial policy that the City now has is that the City invests so much in the replacement accounts and looks at the long term view for the City. This positions the City with giving ourselves time to work our way through it. The reserves are there for the long term. She said the community expects certain things done in good times and bad times - police services, fire services, library services and recreation programs. Ms. Hosterman asked Ms. McKeehan to quickly summarize the 20 year replacement program that the City uses. Ms. McKeehan said the City has a financiai system where we have a replacement account, like a private business depreciation account, for vehicles, equipment, park renovation, etc., so that when the City gets to build out, the City would be able to sustain itself. Those accounts ailow us to have the cash when the time comes to replacement equipment. Ms. Rossi said it is the general philosophy that we recognize costs as we go along, rather than pushing them off to future generations. What we actually do is to charge our department operating budgets for the things they are using up, whether vehicles, facilities, parks, etc. This money is taken and set aside in a replacement fund. There are schedules that are 20, 30 and even 50 years long, projecting what future costs will be. This lets us level our budget. Pleasanton City Council 15 01/07/03 Minutes