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6.1 B - Attachment No. 4 MANAGEMENT'S DISCUSSION AND ANALYSIS balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular,unreserved fund balance may serve as a useful measure of the City's net resources available for spending at the end of the fiscal year. At June 30,2009,the City's governmental funds reported combined fund balances of$114.4 million,which reflects a decrease of$8.9 million from the beginning year balance. Governmental fund revenues decreased $6.5 million this year to $107.3 million. Decreases in the general fund, capital outlay fund, and redevelopment agency fund revenues were offset by increases in the transportation grants fund, the grants fund, and the low and moderate income housing fund. Expenditures, including capital outlay, increased $1.9 million this year to $115.2 million. Most of the increase was attributable to increased salary and benefit costs for public safety, and increased operating costs associated with the opening of the new Redwood Shores library. This increase was partially offset by decreased capital outlay expenditures for the Redwood Shores library project. The general fund is the primary operating fund of the City. At June 30, 2009, unreserved fund balance of the general fund was $34.5 million of which $18.8 million is available for subsequent years' expenditures while total fund balance decreased to$39.1 million from a beginning fund balance of$46 million. As a measure of the general fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 44% of total fund expenditures, while total fund balance represents 49%of that same amount. The City's general fund balance decreased by $7.4 million during the current fiscal year. The following are the major funds that qualified under the reporting criteria for major funds selection: General Fund - General fund revenues decreased approximately $2.3 million this fiscal year primarily due to decreases in sales t�, building related revenue, and the loss in investment with the San Mateo County investment pool. Sales taa�es decreased $2.6 million and building permits declined to $.6 million due to the recession. These decreases were offset by an increase in the amount of reimbursement from San Mateo County for prior year payments to the Education Revenue Augmentation Fund (ERAF). The general fund received $3 million from the county as its share of the ERAF rebate in FY 2008/09,an increase of$263,436. ERAF, which was created by state law in the early 1990's, allowed the state to shift on an ongoing basis a portion of each city, county, and special district's property taxes to school districts. This shift allowed the state to decrease the state's general fund support to schools throughout the state and concomitantly reduced state funding of schools. Within each county, ERAF revenues are allocated to schools based upon a formula that considers, among several factors, the average daily attendance and the amount of each school district's own property tax revenue. Within San Mateo County, the outcome of applying this formula was that the school districts did not require all of the funds shifted from the cities, county, and special districts. Consequently, these funds were returned to each entity in proportion to the amount that was initially collected. General fund revenue declines were offset by a$3.3 million increase in utility users' tax, offset by a$.6 million decrease in transient occupancy t�. General fund expenditures increased $5.2 million as a result of a$1 million increase in expenditures related to the City's General Plan, climate protection and community building. Additionally, law enforcement increased $1.1 million and fire safety increased $1.2 million due to increased salary and benefits. Parks and recreation increased $.8 million due to enhanced programs which were offset by increased user fees. Information services increased $1.8 million primarily due to increased expenditures related to the opening of the new Redwood Shores library. Also, policy, development, and implementation expenditures decreased$.9 million due to increased reimbursement from other funds for services provided by the general fund. Transfers out of the general fund increased $.9 million in FY 2008/09 primarily due to an increase in transfer to parking fund as the parking fund experienced a greater operating loss. 9