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Ms. Wagner explained that one change relates to GASB 54, which will require jurisdictions to record their unfunded liabilities on the books and enable the city to reflect the $3 million set aside thus far as a deferred payment. Mr. Fialho summarized a previous conversation he had with the Mayor on the matter, which relates to modifications CaIPERS has made to their assumptions that will increase the employer rates. As a result, more money will be budgeted to CaIPERS to reflect the true cost of the benefit and the unintended consequence of that is that there may be a lesser fund balance at year end because those increased payments have already been budgeted into the fiscal year. Mayor Thorne agreed, also noting that the cost of those increases is anticipated to be approximately equal to what the city has been setting aside in the PERS Stabilization Fund. Ms. Wagner agreed that they are anticipating some sizable increases. The hope is that these additional payments will help to stabilize that growth in the long-term, with the difference being that they will now be more required than voluntary. Councilmember Narum requested clarification on the Management Employees Performance Adjustment. Ms. Wagner explained that staff is proposing to transfer the amount into the fund balance now because the adjustments are made sometime between now and the next budget discussion in March 2014. She also explained that while staff is requesting authorization now, they expect there will actually be excess monies in the 2013/14FY budget to cover the adjustment. Councilmember Brown asked if the adjustment is a cost of living increase of bonus and whether it would come back to the Council for final approval. Mr. Fialho explained that managers are evaluated each year and as part of that, may be eligible for performance adjustments based on recommendations from department heads that are ultimately approved by him. Councilmember Narum asked when they last received performance raises. Mr. Fialho said the last true performance adjustment was issued in 2007. He noted that the Council authorized a onetime bonus of 3% last year. Ms. Wagner reviewed the Water Operating Fund which started the fiscal year with just over $6 million in the fund balance. Revenues totaled $21.7 million versus the $20.9 million that was projected, primarily due to a gain in water sales. Transfers totaled almost $1.9 million, approximately $41,000 over what was originally estimated, and expenditures totaled $19.44 million versus the $19.42 million that was projected. The year ended with a fund balance of $6.4 million, approximately $700,000 more than the $5.7 million anticipated. She called particular attention to the ending fund balance of $6.4 million which essentially meets the goal of maintaining a $6.5 million fund balance, as identified in the 2010 rate study. Water rates are next due for review in September 2015. She reviewed the Sewer Operating Fund which began the year with a fund balance of $3.8 million. Revenues of $12.9 million exceeded projections by $64,000, transfers totaled a little over $1 million, and expenditures of $11.8 million exceeded projections by approximately $150,000. While the fund experienced a slight loss of$16,572, it continues to meet the goal of maintaining a fund balance of$3.5 million and is considered stable. Sewer rates are also due for review no later than September 2015. The Golf Course Enterprise Fund started the year with a little less than $1.2 million, which was ultimately transferred out to assist with paying off the outstanding bonds. Revenues slightly exceeded City Council Minutes Page 4 of 6 November 19, 2013