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Thus, as the spreadsheet shows, to reduce the tax levy from the 10% increase I recommended to the 5% you want to see requires a reduction of $531,900 in my proposed budget. Option A: Cutting All New Operational Spending in Tax-Supported Programs Except for Inflationary Increases. Option A in the spreadsheet shows the effect of cutting all the non-inflationary spending increases in my recommended operating budget. Almost all of the new, non- inflationary spending I proposed in my recommended budget is in the Police Department. However, as you will see, cutting all this spending does not get you to a 5% levy. There simply isn't enough non-inflationary, new spending in my recommended budget to get to a 5% levy. Option B: Delay Replacing Capital Items in Tax-Supported Programs. Thus, under Option B the spreadsheet shows the financial effect of delaying the replacement of certain capital items that are in my recommended budget. These are not all the capital items in my recommended budget. You asked me to produce a budget with a 5% tax levy and one that doesn't reduce city staf£ That requires cutting items that are funded by the tax levy. There are more capital items in my recommended budget than are included in the attached spreadsheet, but they are funded by fees, usually utility fees, and not by the tax levy. So cutting them would not reduce the tax levy to 5% as you requested. Just as we discussed with personnel and other operating expenses, the capital that "counts' for purposes of reducing the tax levy is capital in the tax-levy supported programs: Police, Fire, Streets, and Parks & Recreation. Delaying the scheduled replacement of capital items in these departments has several important impacts. First there are program and community impacts. I urge you to ask these Department Heads to describe the impact of delaying these capital items on their ability to maintain existing service levels. The second impact is on our maintenance expenses. One reason these items are scheduled to be replaced in 2006 is because they are at the end of their useful life and are significant maintenance problems. ff we don't replace these items as scheduled in 2006, we need to increase our budgeted maintenance expenses for 2006. Increasing maintenance expenses partially offsets the "savings" from delaying the replacement of these capital items. That, too, is shown on the attached spreadsheet and in the attached maintenance memo from Duane Schwartz. Third and finally, delaying the purchase of scheduled replacement items in 2006 just delays the inevitable. All these items that were scheduled to be replaced in 2006 will have to be replaced in 2007 or sometime soon. We have a rolling 5-year capital improvement budget; that means we already have other items scheduled to be replaced 2