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• 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 will be presented to the Council in a separate future report. The following are the results from the four largest enterprise funds; Water, Sewer, Cemetery and Callippe Preserve. Water and Sewer Operating Funds Water/Recycled Water Operations and Maintenance (O&M) Fund. The Water Operating Fund ended FY 2018/19 with an operating fund balance of $14.7 million as shown in Table 6 which is $390,585 more than that included in the FY 2018/19 Midyear budget. The $14.7 million equals 66 percent of the Water Fund's FY 2018/19 actual operating expenses. The operating reserve policy adopted by City Council in November 2016 requires reserves equal to between 30 percent and 40 percent of operating expenses with a target of 35 percent. Thus, operating reserves exceed the maximum required reserves. However, it's important to note that excess reserves will be available to fund future CIP projects. The Operations Services Department (OSD) is embarking on a comprehensive asset management plan for the water and sewer system that should be complete in approximately four years. Staff expects that implementing the projects that the water asset management plan identifies will necessitate increasing CIP allocations beyond the current levels. Drawing down surplus reserves to cover those increased CIP expenses will mean lower future rate increases. Water revenues are $2.4 million less than projected due to reduced water sales than anticipated as a result of a long rainy season. Operating expenses including water purchases from Zone 7 were approximately $3.1 million less than budgeted of FY 2018/19. The savings include (1) $2 million from not purchasing water from Zone 7, (2) $267,000 from not purchasing recycled water, (3) $200,000 from using fewer contractual services, (4) $93,000 for using less electricity to pump water, (5) $99,500 from requiring less advertising than expected, (6) $89,000 less spent on supplies and equipment, (7) $26,000 using less postage and printing, (8) $45,000 in attrition savings from vacant positions and (9) approximately $317,000 in miscellaneous other smaller net savings. Page 6 of 11