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6.1 B - Attachment No. 4 MANAGEMENT'S DISCUSSION AND ANALYSIS investment pool due to the Lehman Brothers bankruptcy, along with declining cash balances of the City coupled with declining interest rates. Community development revenues decreased due to the decline in building permit revenue and other development related revenues resulting from the recession. Transportation revenues decreased due to the one-time revenues received in the prior fiscal year for traffic related improvements from developers for Costco and Sequoia Hospital. Environmental support and protection revenues declined due to the decrease in General Improvement District 1-64 facilities fee revenue as the District winds down. Leisure, cultural and information services decreased primarily due to a one-time increase in grant revenue for the construction of the new Redwood Shores Library in the prior year. Policy, development, and implementation revenues decreased primarily due to one-time revenues received from other outside sources for the City's general capital improvement program in the prior years. Key elements of the increase/decrease in expenses for governmental activities are as follows: Total expenses were up 11.2% or$11.5 million due mostly to increases in community development, public safety, transportation, leisure, and cultural and information services expenses, offset by a decline in policy, development and implementation expenses. Community development expenses increased $2.3 million due to the one-time increases in planning related expenses for the City's general plan and legal fees resulting from a lawsuit challenging the City's Downtown Precise Plan, increased expenses as the City expanded the downtown program events, and increased grant supported expenses for climate protection and community building. Public safety expenses increased $3 million primarily due to higher salary and benefit costs. Transportation expenses increased $3.3 million primarily due to increased expenses for the sidewalk replacement program and the street pavement management program. Leisure, cultural and information services expenses increased $3 million primarily due to the opening of the Redwood Shores Library, and the shift of the Downtown Courthouse Square maintenance expenses from Community Development Services to Parks, Recreation and Community Services. Policy development and implementation expenses declined $.8 million due to increased reimbursement from other funds for services provided by the general fund. BUSINESS-TYPE ACTIVITIES Business-type activities prior to transfers increased the City's net assets by $10.5 million in FY 2008/09. Key elements accounting for increases or decreases in revenues and expenses are as follows: Business-type revenues were higher in FY 2008/09 than the previous year as the increase in utility rates increased revenues. Parking fund revenues decreased due to changes to the hours of ineter enforcement and reduction in hourly rate on some meters. Port revenues increased$1 million due to the receipt of Grant revenue. The water utility's expenses were lower in FY 2008/09 primarily due to a decrease of$.5 million paid to the San Francisco Water Department for water purchases and greater recycled water contractual services in the prior year, net of increased depreciation expense related to the recycled water capital assets. Sewer utility expenses increased 1.9%due to the increased maintenance and supplies and services costs. The expenses of the parking fund increased 16.7% mainly due to the depreciation on the new downtown underground parking garage along with increased staffing related to downtown public safety, and management of the parking program. The Port of Redwood City experienced a minimal 1%decrease in expenses due to decreased operating expenses. FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier,the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The general government functions are contained in the general, special revenue, debt service, and capital project funds. The focus of the City's governmental funds is to provide infornation on near-term inflows, outflows, and 8