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City Administrator Schroeder stated that the current hauler has been pretty amenable to the City's confusion as to how it was going to handle the recycling contract plus if the City went out for bids now, it would put ACE at a competitive disadvantage. Councilmember Beyer felt that ACE had been receiving the "cash" for four years and that another company should be given the chance to bid this service. Motion by Councilmember Beyer and seconded by Councilmember Zimmerman to go out for competitive bids with regard to the recycling contract to show the public that Council is looking for the best price. Further discussion: Mayor Gilbertson felt that Council should abide by what it initially directed Staff to do. Councilmember Hardin felt opening this up for bids now would cause problems for ACE as the bidding would be unfair at this point since ACE's bid is now public. Councilmember Zimmerman inquired why Council should be concerned if someone submits a lower bid than ACE. Motion failed: Voting Yes: Councilmembers Beyer and Zimmerman. Voting No: Mayor Gilbertson, Councilmembers Hardin and Peterson. Motion by Councilmember Peterson and seconded by Mayor Gilbertson to recommend City Council approve the proposed contract for the curbside recycling, with the pick-up to be every other Monday, and direct Staff to develop an option to provide funding for the continuation of the recycling services. Motion carried. Voting Yes: Mayor Gilbertson, Councilmembers Peterson and Hardin. Voting No: Councilmembers Beyer and Zimmerman. Case g7: Review Proposed 1994 Enterprise Fund Budgets Finance Officer Hart reviewed the proposed 1994 Enterprise Fund Budgets which cover the Water Utility Fund, Sewer Utility Fund and Street Light Utility Fund. She explained that this is a first year attempt at developing budgets that are representative of the actual activity levels in the various utilities. She stated that in order to establish fair rates for all of the utilities that the City operates, it is necessary to determine the actual cost of providing those utilities to the residents. Due to the "young age" of the City's utility system, it is extremely difficult to immediately realize profits, but it is important that any losses in the first years of operation be representative of what the system actually costs. Ms. Hart stated that an important factor in these costs is the recovery of depreciation through the rate structures. We are required to keep the accounting for these funds on the full accrual method which means recognizing total depreciation. She explained that it was budgeted in the General Fund that 252 new urban homes would be built and come on-line to utilities during 1994. Costs that can be attributable to both the Water and Sewer Utility Funds are being split 80 percent to the Water Utility Fund and 20 percent to the Sewer Utility Fund. All of the budget projections have been modified to reflect the change to AEC preparing the City's billings and the method in which the properties in the special districts are billed. Ms. Hart stated that the budgeted operating loss for 1994 would be $11,210 which is considerably less than the actual operating losses for 1993 and 1992 or $26,944 and $29,363 respectively. Ms. Hart added that the revenue projections also estimate water permit sales (sales to contractors and developers) to be somewhat higher than in the past. It is anticipated that the rates and charges for 1994 be amended to include the permit sales at $2.20 per 1000 gallons. This is twice the rate water is sold to the residents and property owners. Ms. Hart informed Council that the estimated total revenues for 1994 for the Sewer Utility Fund will be $166,300 which includes interest earnings of $7,500. Finance Committee/March 22, 1994 Page 4 of 5