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an effort to minimize the City's debt and reduce the City's fixed <br />annual costs. <br />One of the primary areas to be addressed in the next few years is <br />the Water Fund. The Fund has been operating at a deficit for years <br />and reserves are at a minimum level. As part of the rate studies <br />done in 1991 for the Water Fund, a plan was made to ensure the <br />financial health of the Fund. However, it is estimated that it <br />will take about three years of gradual rate increases, improvements <br />in operations, and phasing of asset replacement funding to get the <br />Water Fund in a position of breaking even financially, maintaining <br />adequate reserves, and ensuring the financial ability to replace <br />the components of the City's water system as it ages. <br />FISCAL IMPACT <br />The fiscal impact of Council adopting staff recommendations has <br />been described in detail in this report. <br />The result of Council taking theses actions will be to establish <br />reserves for the purpose of funding future obligations and <br />providing a cushion for economic uncertainty. <br />Respectfully submitted, <br />/ ~/ <br />Susan Rossi <br />Director of Finance <br />-~ <br />_- _ ~ <br />Deborah Acosta <br />City Manager <br />SR/cf(sr91448.cf2) <br />Appendices: <br />A Balances by Fund Types as of June 30, 1991 <br />B Allowable and/or Planned Uses of Reserves as of June 30, 1991 <br />C Budget vs. Actual 1990-91 for Selected Funds and Selected <br />Revenues <br />D Appropriations Carryovers from 1990-91 into 1991-92 <br />E Financial Trends <br />F Operating Debt Ratios and Debt Summary <br />SR 91:448 <br />10 <br />