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Capital Improvement Program (CIP). The financial results of the CIP will be presented to the Council in December 2012. WATER AND SEWER OPERATING FUNDS Water O&M Fund The Water Operating Fund ended 2011/12FY with a deficit of $256,567 as shown in Table 6; this was lower than the $960,000 deficit incurred in this fund in the prior year. 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 ($6.0 million actual as shown in Table 6 and $6.5 million desired) is that with the increase in water rates, water customers are implementing water conservation efforts. While the City strongly encourages water conservation by its customers, it does have a negative impact on the City's water revenue. Staff will continue to monitor the revenues and expenditures of the Water operations. Staff is projecting a positive balance from operations in the 2012/13FY. Finally, the year-end recommended budget adjustments are due to transferring recycled water surcharges collected in fiscal years 2011 and 2012 to the Repair and Replacement Fund for the construction of Recycled Water infrastructure in the future. The City is currently preparing a Recycled Water Feasibility Study. Table 6. Water O&M and Debt Service Funds —Amended Budget vs. Actual Year-End Recommended Amended Budget Water 08M/Debt Service Funds Budget Adjustments Actual $Variance %Variance Beginning Fund Balance 6,285,919 6,285,919 - Plus Revenues 20,021,339 19,367,723 (653,616) -3.3% Less Net Transfers (1,480,000) (398,021) (1,850,143) 27,878 -1.5% Less Expenditures (18,212,164) (17,774,147) 438,017 -2.4% Ending Fund Balance 6,615,094 (398,021) 6,029,352 (187,721) Change in Fund Balance 329,175 (398,021) (256,567) (187,721) Sewer Operations and Maintenance (0 & M) and Debt Funds The Sewer Operating Fund ended 2011/12FY with a positive balance from operations of $353,523 as shown in Table 7. This amount was slightly higher than the $289,402 balance that staff projected at Midyear. Sewer rates charged to our customers include both a local collection fee and a regional fee (passed on to either the City of Livermore (Ruby Hills area) or Dublin San Ramon Services District (DSRSD for the remainder of the City) for sewer treatment services and to the Livermore-Amador Valley Water Management Agency (LAVWMA) for export services). The year-end recommended budget adjustment is for the transfer of the excess funds from the Employee Benefit Fund. The results of the 2011/12FY sewer operations are shown in Table 7. Page 6 of 11