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General Fund Reserves. Table 5 presents the proposed changes to the General Fund Reserves. As shown, the overall operating reserves of almost $22.6 million are $1.8 million greater than the Amended Budget as a result of staffs recommended allocation of the excess year-end funds. The $22.6 million represents 22.4% of FY 2016/17 actual General Fund operating expenses. The City's policy is to maintain General Fund reserves equal to a minimum of 20% of operating expenses with target reserves equal to 25% of operating expenses. The proposed $1.8 million allocation from the FY 2016/17 General Fund surplus to General Fund reserves moves the City closer to its reserve target. Table 5. General Fund — Fund Balance Reserve Designations Year-End Recommended General Fund-.Fund Balance _ Budget. , Ending Fund ReservelDesignations " .Ame.nde.d:iudget' -Adjustments ' Balance General Fund Reserve $20,755,064 $1,831,729 $22,586,793 Total $20,755,064 $1',831,729 $22;586,793 Enterprise Funds The City currently has six' Enterprise Funds as follows: • Water/Recycled Water O&M Fund • Sewer O&M Fund • Callippe Preserve Golf Course Fund • Storm Drain Fund • ParaTransit Fund • Cemetery Fund The Operating Budget only includes the Operations & Maintenance (O&M) and Debt Service expenses of these enterprises. Capital improvements and replacements for the Water, Sewer and Storm Drain funds are accounted for in the Capital Improvement Program (CIP). The financial results of the CIP are being presented to the Council in a separate report. Water and Sewer Operating Funds Water Operations and Maintenance (O&M) Fund. The Water Operating Fund ended FY 2016/17 with an operating fund balance of$8.9 million as shown in Table 6 which is $4.2 million less than that included in the FY 2016/17 Amended Budget. The $8.9 million equals 38.6% of the Water Fund's operating expenses. The operating reserve policy adopted by City Council in November 2016 targets the Water Fund operating reserves equal to 35% of operating expenses. Thus, operating reserves exceed the target. Water revenues are approximately $3.8 million less than projected as a result of transferring the $7.1 million proceeds from the bonds issued in February 2017 for the recycled water treatment plant to a special fund. This $7.1 million transfer is off set by water sales revenues exceeding the budget by $4.3 million or 23% as a result of lifting ' The Water and Recycled Water Fund are two funds that are combined for presentation purposes. Page 6 of 12