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ENTERPRISE FUNDS The City currently has six Enterprise Funds as follows: • Storm Drain Fund • Callippe Preserve Golf Course Fund • Para Transit Fund • Water O&M Fund • Sewer O&M Fund • Cemetery Fund Only the Operations & Maintenance (O&M) and Debt Service portions of these enterprises are reflected in the Operating Budget. Capital improvements and replacements for the Storm, Water and Sewer funds are accounted for in the Capital Improvement Program (CIP). The financial results of the CIP will be presented to the Council in December 2011. WATER AND SEWER OPERATING FUNDS Water O&M Fund The Water Operating Fund ended 2010-11FY with a deficit of $960,541 as shown in Table 5. In July 2010 when staff discussed the proposed water rate increase with Council, staff knew that expenditures in the Water Operating Fund were exceeding revenues by a considerable amount. The adopted water rate increase effective September 1, 2010 was designed to maintain the Water Operating Fund in a balanced operating position with a minimum fund balance of$6.5 million. The reason for the slight difference ($6.2 million actual as shown in Table 5 and $6.5 million desired) is that the City paid off (defeased) the 2004 Water Revenue Bonds (2004 Bonds) using $646,655 of current year revenues. The benefits of doing this will be realized in future years by not having to make debt service payments. Also, staff over estimated the revenues from water sales by $2.3 million and possibly will need to adjust the revenues for 2011-12FY at Midyear. Staff anticipates that with the defeasance of the 2004 Bonds and, therefore; no future bond debt payments and a full year of the water rate increase, the City will end the 2011-12FY with a positive balance in the Water operations and achieve the minimum fund balance of $6.5 million. Table 5. Water Operations and Maintenance (O&M) and Debt Service Funds — Amended Budget vs. Actual Amended %Actual vs Water O&M/Debt Service Funds Budget Actual Variance Budget Beginning Fund Balance 7,246,459 7,246,459 - Plus Revenues 19,486,335 17,160,842 (2,325,493) -11.9% Less Net Transfers (1,320,285) (1,429,644) (109,359) 8.3% Less Expenditures (17,616,600) (16,691,739) 924,861 -5.2% Ending Fund Balance 7,795,909 6,285,918 (1,509,991) Change in Fund Balance 549,450 (960,541) (1,509,991) Page 5 of 10