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Historically, the City has been able to use the Replacement Funds to help smooth out challenging budget periods that resulted primarily from economic factors and State impacts. This smoothing was accomplished by temporarily reducing annual contributions to the Funds in very lean years, and then making additional contributions in better years. Should the City again be impacted by a weak economy or State budget impacts, these Funds could be used as a temporary source to help maintain service levels until appropriate budget adjustments could be made. Obviously, these Funds are not adequate to sustain prolonged budgetary problems, but as part of the City's focus on long term financial sustainability, the Funds are a valuable tool in helping smooth the highs and lows of economic cycles over time. The budget for Replacement Plan accruals (contributions) was reduced from $5.6 million to $1.7 million resulting in a decrease in revenues of $3.9 million. Reducing the contributions to the Replacement Plan was an important part of General Fund rebalancing efforts in the Mid -Year update. The original budget for Replacement Plan expenses was $10.9 million. However, only $5.0 million was actually expended, although $3.5 million will be carried over into FY 2009 -10. The Replacement Plan will continue to allow for the replacement of assets as needed by revising timelines for replacement, updating the useful lives of assets, and reprioritizing scheduled replacements. Employee Benefit Fund The Employee Benefit Fund (EBF) is used to account for non -salary employee benefit costs. The departments' budgets are charged for benefit expenses as a percent of salary, and the dollars then flow to the EBF, where the actual costs are recorded. For FY 2008 -09, expenditures were below budget by $807,339 and revenues exceeded budget by $509,950. ALL OTHER OPERATING FUNDS For the most part, budget variances are small for the other Operating Funds. Most of the Landscape District Funds and Geologic Hazard District Funds were slightly under budget, with expenditures less than budgeted. The Lower Income Housing Fund had revenue exceed the budget estimate by $128,161. Expenditures were below budget by $556,387. The Recycling and Waste Management Fund actual revenue exceeded budget by $8,478 and expenditures were below budget by $243,659. For all other Operating Funds, budget to actual variances were positive. Therefore staff is recommending only a few minor budget changes, as outlined in Attachment 2A. REVOLVING LOAN FUND The status of the Housing Loan Fund is outlined in Attachment 4. Page 7 of 8