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7.1.A. - Page 40 , <br /> Management's Discussion and Analysis <br /> For the year ended June 30, 2014 <br /> At June 30, 2014, the City's governmental funds reported combined fund balances of $111 million, which <br /> reflects an increase of $15 million from the beginning year balance. <br /> Governmental fund revenues increased $11.8 million this year to $123.4 million. Significant increases <br /> occurred in the general fund, the capital outlay fund, and the traffic mitigation fees fund, offset by <br /> decreases in the Public Financing Authority bonds fund and the parks impact and in lieu fee fund. <br /> Expenditures, including capital outlay, decreased $5.2 million this year to $104.7 million. Most of the <br /> decrease was attributable to the $5.8 million expenditure in the prior year for the payoff of the Public <br /> Financing authority bonds, and decreased expenditures in the capital outlay fund partially offset by <br /> increased expenditures in the general fund. <br /> The general fund is the primary operating fund of the City. At June 30, 2014, unassigned fund balance of <br /> the general fund was $21.5 million, while total fund balance increased to $23.8 million from a beginning <br /> fund balance of $21.8 million primarily due to an increase in revenues. As a measure of the general fund's <br /> liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund <br /> expenditures. Unassigned fund balance represents 24.8% of total fund expenditures, while total fund <br /> balance represents 27.6% of that same amount. <br /> The following are the major funds that qualified under the reporting criteria for major funds selection: <br /> General Fund — General fund revenues increased approximately $12.7 million this fiscal year primarily due <br /> to increases in property taxes, sales and other taxes, and building permits, and charges for current <br /> services. Sales taxes increased $1.5 million and transient occupancy tax increased $0.7 million due to the <br /> continued recovery from the recession. Property taxes increased $3.3 million. The increase in property <br /> tax resulted primarily from an increase in assessed value along with an increase in revenue received in the <br /> general fund from the county as its share of the Education Revenue Augmentation Fund (ERAF) refund in <br /> FY 2013 -14. ERAF increased by $428,790 to a total of $4.7 million. <br /> ERAF, which was created by state law in the early 1990's, allowed the state to shift on an ongoing basis a <br /> portion of each city, county, and special district's property taxes to school districts. This shift allowed the <br /> state to decrease the state's general fund support to schools throughout the state and concomitantly <br /> reduced state funding of schools. Within each county, ERAF revenues are allocated to schools based upon <br /> a formula that considers, among several factors, the average daily attendance and the amount of each <br /> school district's own property tax revenue. Within San Mateo County, the outcome of applying this <br /> formula was that the school districts did not require all of the funds shifted from the cities, county, and <br /> special districts. Consequently, these funds were returned to each entity in proportion to the amount <br /> that was initially collected. <br /> Licenses and permits increased $0.66 million due to an increase in building permits related to increased <br /> building activity. <br /> Charges for current services increased $5.3 million primarily due to revenue received from City of San <br /> Carlos for fire services provided. <br /> General fund expenditures increased $5.1 million over the prior fiscal year. The increase primarily <br /> resulted from the net added expenditure related to the fire services provided to the City of San Carlos. <br /> 12 <br />