Recommendation
Staff recommends that the Mayor and Council review and file the Fourth Quarter FY 2009 Financial Report.

Discussion
This report represents FY 2009 revenue and expenditure data for the City's General and Enterprise funds. This report includes the FY 2009 adopted budget, FY 2009 amended budget, and FY 2009 actual expenditures and revenues as of September 21, 2009. Notes are included with the items that are unclear or that have significant variances from the FY 2009 amended budget. Please note that the numbers in this report are unaudited, and are subject to final year end adjustments.

ESTIMATED FUND BALANCE / WORKING CAPITAL
Page A-2 of the attached report details the audited beginning and estimated ending fund balances (and in the case of an enterprise fund, working capital as defined as current assets less current liabilities) for each of the City’s major funds. Each fund in the report is in compliance with the City's Financial Management Policies (FMP) in regards to ending balance reserve levels, with the exception of the RedGate Golf Course Fund which has an estimated ending balance of ($1,126,701). After three complete years of the five-year RedGate Business Plan (Plan), the results suggest that the Plan will not succeed, and a different course of action must be considered by the Mayor and Council. Staff will return to the Mayor and Council with a full report on options with a recommendation for the RedGate Golf Course Fund during the FY 2011 budget preview in December.

GENERAL FUND
One of the City’s FMP is to maintain the fund balance in the General Fund at or above 15 percent of annual adopted revenue. The chart on A-2 shows the audited FY 2008 fund balance of $15.05 million and the estimated FY 2009 fund balance of $13.18 million. The $13.18 million is $3.91 million more than the target minimum FY 2009 fund balance of $9.28 million. Of the $3.91 million, over $909,000 will be reserved for purchase orders that carried over from FY 2009 to FY 2010, and an additional $37,000 will be reserved in order to meet the target minimum FY 2010 reserve requirement of $9.31 million.

Factoring in the adjustments for the purchase orders and FY 2010 reserve requirement, the City's reserve fund will contain approximately $2.96 million more than the 15 percent target minimum. It is the City’s policy to appropriate these surplus funds for one-time Capital Improvement Program projects or other one-time expenditures. It is the City's practice to appropriate these funds through a mid-year budget amendment.

Since additional General Fund revenue reductions are possible during FY 2010, and to prepare for FY 2011, staff recommends delaying the appropriation of General Fund surplus funds until the second half of the fiscal year. During the second half of the fiscal year staff will have more information about how the State of Maryland plans to close their current operating deficit, and what, if any, major revenue sources will be impacted. City revenue sources that could be further reduced by the State include Highway User Revenue, State Aid for Police Protection and Income Tax Revenue.

Approximately $2.38 million in operating and CIP reductions have already been recommended to the Mayor and Council in order to re-balance the FY 2010 budget as a result of the State's recent reduction of Highway User Revenue by 90 percent and State Aid for Police Protection by 35 percent.

Staff will have more information on the projected FY 2011 revenues and expenditures for the Mayor and Council FY 2011 Budget Preview which is currently scheduled for December 7, and December 14, 2009.

Mayor and Council History
The First Quarter FY 2009 Financial Report was presented to the Mayor and Council on November 17, 2008, the Second Quarter Report on February 23, 2009, and the Third Quarter Report on May 4, 2009.

Fiscal Impact
This report summarizes the FY 2009 revenue and expenditures for the City's General and Enterprise funds as of September 21, 2009. Please note that these numbers are unaudited, and are subject to final year end adjustments.

Attachments
Attachment A - Fourth Quarter FY 2009 Financial Report

Department Head:



Gavin Cohen, Director of Finance
Approved on: 10/01/2009

City Manager:

Scott Ullery, City Manager
Approved on: 10/02/2009