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Ms. Wagner reported that General Fund expenditures were $1.3 million less than anticipated in the amended budget. The savings were realized in the categories of materials, supplies and services but the majority is related to the transfer into the General Fund Contingency that was approved by the Council at the mid-year review. Councilmember McGovern said her impression was that the savings related more to holding back on capital project or replacement type of expenditures. Ms. Wagner said that would be reflected more in the enterprise, rather than operating funds. Ms. Wagner reviewed General Fund transfers. Transfers in increased largely due to the Benefit Expense Fund, which is an internal service fund that receives transfers from the General Fund to pay for health, dental and vision benefits. Two years ago, the Benefit Expense Fund closed with a surplus that was not transferred back to operating funds due to the projected increase in healthcare costs. Staff has now decided after two years that it truly is a surplus and should be distributed back to operating funds, resulting in a transfer back to the General Fund of approximately $432,000. The General Fund also received an unanticipated transfer in against the Happy Valley Specific Plan loan in the amount of $520,000. The loan balance, which started at $10 million and is reduced as specific plan fees are collected from new development, is $7.5 million at present. Ms. Wagner stated that as a result of the $2.1 million increase in the budgeted General Fund balance, staff is recommending the Council authorize the following transfer and expenciture adjustments: $1 million to the PERS Stabilization Fund, $561,000 to the CIP Program for Phase 2 of Bernal Park, and additional funding for the Repair and Replacement Fund. General Fund Reserves will remain at $25.3 million, comprised of the 10% Reserve for Economic Uncertainties, Unassigned Reserves (approximately $3.3 million), and Reserve for Debt Service on the golf course, and the Temporary Recession Reserve (approximately $11 million). She provided a brief General Fund comparison with past years, noting the highest budgeted year from an operating standpoint was 2007/08FY at $94 million. This year at slightly under $90 million is $4 million less than that, though still largely improved over the largest decrease in 2009-10FY to $85 million. Property tax has remained relatively constant even through the recession and Hotel-Motel Tax revenues have actually increased slightly. Sales Tax revenues however are $2 tr illion less than at their high point and interest earnings are approximately $1 million less than four years ago. Ms. Wagner reviewed the Water Fund, which started the year with a $6.3 million balance and ended with a balance just over $6 million. The majority of the loss is a result of water conservation, which staff anticipated in setting the latest water rates and tiers. This loss is somewhat offset by the ability to purchase less water from Zone 7 as result of conservation, however the greatest level of conservation is occurring in the 6,100 plus cubic feet tier which is responsible for the majority of the fund's fixed operating costs. Staff is working to increase efficiency in terms of personnel and overhead costs, and hopes to overcome this disparity over the next couple of years. Staff is also recommending the transfer of funds earmarked for recycled water infrastructure to the Repair and Replacement fund in anticipation of utilizing some of those monies once the Recycled Water Feasibility Study is complete. She reviewed the Sewer Fund, which started with a $3.7 million balance and ended the year at $3.8 million. She noted that while sewer revenues were higher than projected, the majority of that is a pass through of regional rates from the City to DSRSD. The Golf Course fund started the year with a $1.1 million fund balance in addition to the $2 million debt service reserve in the General Fund. Ms. Wagner noted that while the golf ccurse appears to have broken even for the year, it actually experienced an operational gain of $334,000 prior to making the annual debt service payment. City Council Minutes Page 5 of 9 November 20, 2012