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6.1.F. - Page 62 , Notes to the Basic Financial Statements For the year ended June 30, 2012 NOTE 1—$UMMARY OF$IGNIFICANT ACCOUNTING POLICIES�CONTINUED� Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from non-exchange transactions or ancillary activities. Operating expenses for proprietary funds are those expenses that are essential to the primary operations of the funds. All other expenses are reported as non-operating expenses. C. Major Funds GASB Statement No. 34 defines major funds and requires that the City's major governmental and business-type funds be identified and presented separately in the fund financial statements. All other funds, called non-major funds, are combined and reported in a single column, regardless of their fund- type. Major funds are defined as funds that have assets, liabilities, revenues, or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The general fund is always a major fund. The City may also select other funds it believes should be presented as major funds. The City reported the following major governmental funds in the accompanying financial statements: General fund is to account for all financial resources except those to be accounted for in another fund. It is the general operating fund of the City. Housin� Le�al Aid Society fund is to account for revenues previously deposited in the former redevelopment agency low and moderate income housing fund pursuant to an agreement with the Legal Aid Society. Capital outlay fund is to account for all miscellaneous capital improvement projects that are financed by the general fund. Redevelopment A�ency fund accounted for funds to be provided by loans and/or property tax increment from specific redevelopment areas for redevelopment projects within those areas, until the February 1, 2012 dissolution of the Redevelopment Agency. Low and Moderate Income Housin�fund accounted for redevelopment property tax increment revenues which was used strictly for low and moderate income housing until the February 1, 2012 dissolution of the Redevelopment Agency. The City reported all its enterprise funds as major funds in the accompanying financial statements: Water utilitv fund is to account for the provision of water services to the residents of Redwood City. Sewer utility fund is to account for the provision of sewer services to the residents of Redwood City. 34