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General Fund Reserves and Fund Balance —General Fund reserves are $32.6 million. Staff is not proposing to change General Fund reserves. The City's reserve policy requires a minimum reserve equal to 20 percent of operating expenses, a target of 25 percent and a maximum of 30 percent. The General Fund reserve of$32.6 million equals 26 percent of the General Fund operating expenses. As previously noted, staff recommends using $600,850 of the COVID Response and Recovery Reserve to cover various expenses and recommends reinstating the $400,000 Reserve for Crisis Response Program to be available in FY 2022/23 when staff plans to initiate the program. Table 4. General Fund Reserves Initial Year-End Ending General Fund Balances at Recommended Fund Fund Balance 6130/2022 Adjustments Balance General Fund Reserve $32,589,420 - $32,589,420 COVID Respone & Recovery 1,000,000 (600,850) 399,150 Reserve for Crisis Response Program 400,000 400,000 800,000 Total General Fund Reserves $33,989,420 ($200,850) $33,788,570 Enterprise Funds Water Operations and Maintenance Fund — As shown in Table 5 on the following page, recommended changes to the Water Operations and Maintenance Fund include a net decrease of $1,390,666 in expenditures described in more detail below and reduced revenues of $3.2 million related to drought water conservation. The net decrease in expenditures includes $1.9 million reduced Zone 7 purchased water, $195,000 for increased electricity to pump water, $155,000 for increased recycled water purchases, and $159,334 for strategic plan consultant services, mailings, supplies and postage for drought notices. The result of these adjustments is a decrease of the net income of $1.8 million and an estimated ending fund balance of $9.7 million which equals 34 percent of the total operating expenses. The City's policy requires reserves equal to a minimum of 30 percent, a maximum of 40 percent and a target of 35 percent. While not part of the operating budget, staff is also allocating the $1 million allocated to the Water CIP reserve for the PFAS project to the PFAS project account. Page 5 of 8