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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 will be presented to the Council in a separate 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 2019/20 with an operating fund balance of $13.3 million as shown in Table 6 which is $1.4 million more than that included in the FY 2019/20 Midyear budget. The $13.3 million equals 51 percent of the Water Fund's FY 2019/20 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 $112,175 or 0.4 percent greater than projected due to additional water sales than anticipated. Operating expenses including water purchases from Zone 7 were approximately $1.2 million less than budgeted of FY 2019/20. The savings reflect (1) an $843,894 increase from purchasing more water from Zone 7 than expected due to taking Wells 5 and 8 out of service, (2) $1.7 million less expenditures for Repair and Replacement activities, (3) $236,138 from using fewer contractual services, (4) $89,000 reduced travel and training expenses, (5) $281,682 from reduced purchased recycled water, (6) $30,000 net over-expenditure for supplies and service charges, (7) a $100,000 increase in inter-fund expenses, and (8) $85,427 in miscellaneous other net savings. 1 The Water and Recycled Water Fund are two funds that are combined for presentation purposes. Page 7 of 13