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taken into account the actual budget gap is $4,429,198. Table 3 listed later in this report highlights the source of revenue reductions and the recommended adjustments. To address the $4,429,198 budget shortfall, staff is recommending four specific actions for rebalancing the General Fund budget. In addition, staff is recommending an increase in operating reserves to help assure the City is in a position to address future financial issues, should they occur. The recommended actions are as follows: • Re-prioritize and extend Replacement Plan expenditures thereby reducing the required annual General Fund contributions in 2008-09. • Maintain a position vacancy target by not automatically filling positions when they become vacant but by analyzing each vacancy to determine if it is critical to maintain core service levels. • Update overhead charges from the General Fund to the Enterprise Funds to ensure the cost of providing services to Enterprise Funds is fully recovered • Departmental operating budget reductions that do not impact core service levels. Details of this action are listed in Table 1 below. Ta Fund Budget In addition to the above, staff is also recommending an adjustment to the Ciry Capital Improvement Program (CIP). Since FY 1997-98, the General Fund's contribution to the CIP has been divided into two components. The first component is an annual ongoing contribution intended to remain somewhat constant through build-out. The goal of this component is to eventually create a stable contribution to reflect capital needs. However, as new major capital projects are brought on-line and the City approaches facility build-out, it is anticipated that this contribution will be reduced to cover the cost of operating the new facilities. The second General Fund component comes from the availability of "one-time" revenues. The current CIP includes $3 million from this source which was placed in the Capital Improvement Reserve (CIPR). The CIPR was established by the City Council in FY 2006-07 as a funding source for high priority projects. As a result, this funding is not encumbered to a specific project. Currently the CIPR has a balance of $4,973,266 before taking this action. To address staff concerns regarding future financial impacts, staff is recommending that the $3 million transferred from the General Fund to the CIPR as part of the Mid-Term budget, be redirected back into the Temporary Recession Reserve which will increase this reserve from $7.9 million to $10.9 million. This is a preventative measure to Page 3 of 10