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Letter of Transmittal Page 3 It is important that the most stable revenue sources be matched ', with the most consistent revenue uses or expenditures, and that I the least stable revenue sources be matched with the least ' consistent areas of expenditure. For example, the services ' provided through the general fund are generally accepted respon- sibilities of government that will continue into the foreseeable ' future. It is important that the funding sources for general government operations be very stable (property tax), or be tied ' directly to the level of service (fees) to ensure these services can be maintained at an adequate level through the years. ' This need to ensure strong financial support for general govern- ment operations requires efforts to identify additional non- property tax sources of financial support for current and new � programs such as license fees or user fees. These revenues enable the City to expand programs or services based on its ability to recover the progr.am costs through license fees or user fees. ' For example, the 1990 Budget includes a proposal to institute a hazardous materials license and fee to fund the development of a hazardous materials response capability. The hazardous materials response capability is a specialty service over and above the usual services provided to the general population. Because of the extraordinary level of service required, it is not fair that the cost of this service should be borne by the general population through the tax levy. Instead, this service should be supported by user fees. The major area of nonrecurring or inconsistent expenditures is in the capital area. Although a capital budget enables well planned capital expenditures, the level of these expenditures often increases or decreases significantly from year to year. A sound method of funding these expenditures is to create a reserve fund using the more inconsistent or uncertain revenue sources. Once these revenues have been allowed to accumulate to an adequate level, the reserve fund becomes, in essence, a consistent source of revenue capable of long-term funding of capital expenditures. In recent years, a transfer of Public Works overhead expenses related to street construction projects has been made from the special assessment fund to the general fund. This revenue source is not a stable source in that it is tied to the level of the street reconstruction projects. If the Council should choose to significantly reduce or eliminate the street reconstruction program in any one year, the source of revenue would be significantly reduced. For this reason, it is important that the general fund operating budget not become dependent on this source of revenue. The 1990 Budget includes a proposal to use this revenue to sup- port the permanent improvements fund, and create a reserve fund to be used to repair or replace the City's general fund capital facilities. A3