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Page 8 of 15 Table 6. General Fund – Fund Balance Enterprise Funds The City currently has six enterprise funds: ▪ Water/Recycled Water O&M Fund ▪ Sewer O&M Fund ▪ Callippe Preserve Golf Course Fund ▪ Storm Drain O&M 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 presented to the City Council in a separate report. Each enterprise fund should generate adequate revenues to fully cover operating costs, as well as supplemental costs to maintain and update its facilities and infrastructure. However, both Storm Drain and Cemetery operations currently do not generate adequate revenues and receive a subsidy from the General Fund as a result. Staff will explore options to address this funding issue and present recommendations to the City Council at a later date for consideration. Water and Sewer Operating Funds Water/Recycled Water Operations and Maintenance (O&M) Fund. As shown in Table 7, the Water Operating Fund ended FY 2022/23 with an operating fund balance of $8.4 million. The $8.4 million equals 23.4% of the Water and Recycled Water O&M Fund’s FY 2023/24 budgeted operating expenses. The operating reserve policy adopted by the City Council on June 6, 2023, requires reserves equal to between 30.0% and 40.0% of operating expenses with a target of 35.0%, so this 23.4% reserve level is well below the recommended target. On November 7, 2023, the City Council approved a two-year rate increase, effective January 2024, that will enable the City to continue maintaining and providing high quality water/recycled Page 260 of 270