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PUBLIC HEARINGS AND OTHER MATTERS 14. Consider adoption of a resolution accepting the 2012/13FY Year-end Financial Report for the Capital Improvement Program Budget (CIP) and amend the 2012/13FY CIP Budget Finance Director Wagner presented the 2012/13FY Year-end Financial Report for the CIP Budget ending June 30, 2013, which is used to fund capital improvements including repair and maintenance of the city's water and sewer utilities, parks, streets and buildings. Unlike the Operating Budget, funds in the CIP Budget follow the project rather than the budget cycle and often carry forward to subsequent fiscal years until project completion. Ms. Wagner reviewed the Sewer Fund, which started with a fund balance of approximately $8.5 million. Revenues totaled $3.36 million, which is comprised of about $160,000 in sewer connection fees and a transfer of $1.2 million from the operating budget, and exceeded projections by nearly $44,000. Expenditures, which were budgeted at $7.8 million, totaled only a little over $500,000 due to outstanding projects which is quite typical of a CIP. Staff is requesting budget adjustments to account for a decrease in expenditures related to the closing out of the Utility Billing Software project, an increase in the projection of city staff time spent on sewer replacement projects, and budget carryovers of $7.2 million. Of note is the Sanitary Sewer Pump Project and Upgrade of S-6, which was completed and approved by the Council in July. Staff was able to save about $1 million allocated to the project that will go to the fund balance and be available for appropriation towards new projects in the 2013/14 FY. Councilmember Pentin asked whether savings such as this are restricted to the Sewer Fund CIP or can be appropriated to something like a streets project. Ms. Wagner explained that the revenues are from rate payer monies and therefore must be spent on sewer functions. Ms. Wagner continued her review of the Sewer Fund. She explained that while the Comprehensive Annual Financial Report will show an ending fund balance of $9.3 million, the $7.2 million in project carryovers leaves an unencumbered or adjusted fund balance of slightly over $2 million. Taking the $1 million savings on the S-6 project into account, the 2013/14 FY will really begin with a balance of $3 million. She noted that the city's current sewer connection fees of$500 per home, compared to $14,000 for DSRSD, are relatively low and will need to be increased in order to work towards an adjusted fund balance somewhere between $10 million and $20 million. Vice-Mayor Cook-Kallio asked how that recommendation was established. Ms. Wagner assured her there is a methodology which takes into account the infrastructure value of nearly $500 million as well as critical repair and replacement costs. Ms. Wagner reviewed the Water Fund, which began the year with a fund balance of $13.3 million. Connection fee revenues totaled $526,000, approximately $100,000 more than projected. As with sewer connection fees, the city's average fee of $1,500 is significantly lower than the $30,000 charged by Zone 7 and staff will be coming forward with a recommendation to increase fees. Both revenues and transfers in exceeded expectations due to the PG&E solar rebate, water connection fees, Recycled Water Grant subsidy and recycled water revenues. Expenditures, budgeted at $3.4 million, totaled only about $1.5 million, again due to outstanding projects. Staff is requesting budget adjustments to account for reduced expenditures related to the Utility Billing Software and El Charro Road Improvement projects, several small increases in project budgets and expenditures, and $1.9 million in project carryovers. If approved, the adjusted net fund balance totals almost $13 million which is much more in line with the recommended CIP fund balance than in the Sewer Fund. City Council Minutes Page 3 of 6 December 3, 2013