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6.1 B MANAGEMENT'S DISCUSSION AND ANALYSIS Page 35 Governmental Activities The 9.6% decrease in Construction in Progress is driven by the completion of construction projects in connection with the Courthouse Plaza, Library building improvements, park facilities, and major street improvements which translated into increases in buildings, streets, and improvements. Equipment increased primarily due to the I purchase of a fire engine. Business-Type Activities The $1.6 million increase in Construction in Progress resulted primarily from the recycled water project. Buildings increased due to the increase in boating facilities at the Port. Equipment increased primarily due to the purchase of a new accounting system for the Port. The increase in improvements was related to the water and sewer system replacement and the recycled water distribution system. The increase in Harbor improvements was related to road and storm drain improvements at the Port. long-Term Debt - Issues described in detail in Notes 6 and 7 to Financial Statements. Outstanding Debt (in Millions) Governmental Business-Type Activities Activities Total 2010 2009 2010 2009 2010 2009 Variance $ $ $ $ $ $ Revenue bonds 9.808 20.228 78.236 80.141 88.044 100.369 -12.280% Tax increment bonds 43.423 46.133 43.423 46.133 -5.874% Loans 0.127 0.169 1.848 1.876 1.975 2.045 -3.423% Accrued sick leave and vacation 9.644 9.693 0.851 0.955 10.495 10.648 -1.437% Total long term debt 63.002 76.223 80.935 82.972 143.937 159.195 -9.584% SPECIAL ASSESSMENT DISTRICT DEBT Special assessment districts in different parts of the City have also issued debt to finance infrastructure and facilities construction in their respective districts. At June 30, 2010, a total of $23.2 million in special assessment district debt was outstanding, issued by two special assessment districts. This debt is secured only by special assessments on the real property in the district issuing the debt, and is not the City's responsibility, although the City does act as these Districts' agent in the collection and remittance of assessments. ECONOMIC OUTLOOK AND NEXT YEAR�S BUDGET Redwood City continues to be impacted by the recession that enveloped the nation in late 2007. Although the recession officially ended in June 2009 the affects continue to impact local governments in California. Redwood City, like many cities, is heavily dependent upon property taxes and sales taxes with these revenues accounting for 42% and 18% of general fund revenues respectively. Both of these revenue sources are heavily reliant on the consumer who has pulled back in the recent recession due of the massive job losses, continued high unemployment, and stock market declines. Until we see a decline in unemployment to levels seen before the onset of the most recent recession we are not optimistic that annual increases in property tax and sales tax revenues will rebound to healthy levels. With very slow growth expected for property taxes and sales taxes in the coming years along with higher expected contributions to the California Public Employees Retirement System, staff is projecting annual deficits in the general fund in the coming years that top out at $5 million (or 6% of general fund revenues) in FY 2014/15 despite the City Council approving more than $6 million of expenditure reductions in FY 2010/11. 12