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While historically funded through transfers from the General Fund, certain categories such as parks are funded by development fees. Street maintenance has traditionally relied on Proposition 1b, Gas Tax, and Measure B monies. The lack of transfers from the General Fund really hits what could be classified as the "amenity list," things like expansion of the library and Phase 2 Bernal. Councilmember McGovern requested information on the Urban Forestry Fund and staff agreed to return with that on June 7m Ms. Wagner noted two new General Fund transfers to the Water Discount and Sewer Discount Funds, both of which support the low-income and senior discounts approved by the Council. She reviewed General Fund reserves, noting again that the budget presented is balanced and that reserves will be maintained at the current level of approximately $25.4 million. The Temporary Recession Reserve is the largest at $10.8 million, followed by the Economic Uncertainties, Undesignated, and Golf Course Debt Service Reserves. She discussed various scenarios that would cause the City to look to its reserves, the most notable of which is the state's contemplation to realign certain services to the local level. Councilmember McGovern asked how long the reserves would be capable of carrying the City in the event of something significant and unforeseen. Ms. Wagner stated that most agencies believe the appropriate reserve level to be 15% of the General Fund budget, which would $12.5 to $15 million for Pleasanton. She noted that due to the timing of property tax payments, the City is carrying that portion of the cash flow for the first 6 months. Councilmember Thorne asked if the City would benefit from a formalized contingency plan to deal with these potential scenarios. Mr. Fialho said yes, though cautioned that the state strategies lack the clarity needed to prepare a successful plan at this point. Ms. Wagner has attempted to set aside roughly $500,000 for unexpected impacts and the Temporary Recession Reserve remains intact to cover those scenarios initially. Councilmember Sullivan asked if any thought has been given to what would happen if the Governor fails to realize the tax extensions he is seeking. Mr. Fialho said in his experience, the ramifications of the state budget process are generally unclear until the budget is adopted in the September/October timeframe. Once adopted, staff can translate that in terms of local impacts. Ms. Wagner reviewed the Enterprise Funds. Water Operation and Maintenance revenues are projected to increase 5.5% annually due to an anticipated Zone 7 rate increase and growth in the number of residential consumers and water sales. Expenditures are balances by the same Zone 7 increase and the Water Fund tentatively ends with a positive net income. Sewer Operation and Maintenance revenues are anticipated to grow 3% for the same reason, with a corresponding increase in expenditures related to supplies, energy costs and DSRSD fees. She discussed the Golf Course Operating Fund's revenues and expenditures. Staff anticipates a slight growth in fund revenues based on a modest increase in the number of rounds played and price of goods sold. Expenses also increase modestly and the fund is expected to end each fiscal year with a net income of$500,000. Added to the General Fund subsidy used to make the debt service payment, the beginning fund balance of roughly $1.2 million is maintained. This beginning balance, combined with General Fund monies, provides the two years of debt service reserves required by the City's fiscal debt policies. City Council Minutes Page 6 of 10 May 17, 2011