What distinguishes enterprise fund activities from other governmental fund activities?

Enterprise fund activities are distinguished from other governmental fund activities primarily by their self-supporting nature, which is financed through charges for services. Unlike general governmental funds that may rely heavily on taxes and grants, enterprise funds are designed to operate like a business, generating revenue through fees charged for the services they provide. Common examples of enterprise funds include utilities (water, gas, electric) and transit systems, where the income generated from users should ideally cover the operating costs, maintenance, and even capital improvements.

This self-supporting characteristic is crucial because it aligns with the goal of enterprise funds to be financially sustainable without depending on taxation or external funding sources. In contrast, options that reference reliance on federal grants or funding through local taxes pertain more to governmental funds, which do not operate in a business-like manner. Long-term debt for capital improvements may apply to both governmental and enterprise activities, but it is not a distinguishing feature of enterprise funds specifically. Therefore, the key distinction of enterprise funds is their reliance on user fees for funding, solidifying the correct answer.