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CASE # 7 REVIEW PROPOSED 1994 ENTERPRISE FUND BUDGETS r By: Jessie L. Hart, Finance Officer Background: Enclosed for yor Utility Fund, Se'~ and adopted anm been the case wi budgets that are attempted to alloC The Water Utiliv This fund has time, the cost being borne in r review are the Proposed 1994 Enterprise Fund Budgets which cover the Water er Utility Fund and Street Light Utility Fund. While formal budgets are prepared _~tly for the General Fund and certain other goVernmental type funds, this has not h the various utility enterprise funds. This is a fn'st year attempt at developing representative of the actual activity levels in the various utilities. We have rte all costs that are identifiable and directly related to the functions. Fund has been the main fund for both water and sewer activities since inception. ~rbed virtually all costs associated with both utilities. Those costs included staff the billing function, and most supplies. There were also numerous expenses e General Fund, such as vehicles and related costs, that the Water and Sewer Utility Funds basic never been charged for. Because of the "loading" of these expenses into one fund, it has often iappeared that the Water Utility Fund was not in sound financial position while the Sewer Utilit~ Fund, which was charged with only the MWCC charges, lift station expenses and system depre+qafion, appeared quite healthy. In order to establish fair rates for all of the utilities that the City operates, it is necessary to determine the ac~al cost of providing those utilities to the residents. Due to the "young age" of the City's utility system, it is exn'emely difficult to immediately realize profits, but it is important that any losses in the fa'st years of operation be representative of what the system actually costs. An important factor ~ these costs is the recovery of depreciation through the rate structures. We are required to keeg the accounting for these funds on the full accrual method which means recognizing total ~.epreciation, whether on City or developer installed systems. This is what we have attempted toido in preparing the attached Proposed 1994 Utility Fund Budgets. General Budee[ Information Some assumpfion!~ have been made that effect the manner in which we have prepared the attached budgets. It was b~dgeted in the General Fund that 252 new urban homes would be built and come on line to utilitie~l during 1994. This is the number that was utilized in preparing the attached budgets. Costs that can be attributable to both the Water and Sewer Utility Funds are being split 80% to the WateriUtility Fund and 20% to the Sewer Utility Fund. All of the budget projections have been modifie~l to reflect the change to AEC preparing our billings and the method in which we bill the properties tn the special dismct. Water Utility Fund Utilizing 252 newtadditions to the system for 1994, it is estimated that total revenues for 1994 will be approximatel~ $144,150 which includes interest earnings of $28,000. These revenue projections also ix4,corporate the rate increases that were adopted September 14, 1993 and became effective Januarys. I, 1994. Expenditures are estimated to be at $155,360 which includes depreciation (non-~:ash) of $84,204. This results in a budgeted operating loss for 1994 of $11,210 which is considerl~bly less than the actual operating losses for 1993 and 1992 of $26,944 and $29,363 respecfiv4Iy. The revenue proje4fions also esdmate water permit sales (sales to contractors and developers) to be somewhat higher t~an the past. It is anticipated that the rates and charges for t994 be amended to include the permitisales at $2.20 per 1000 gallons. This is twice the rate that water is sold to the residents and property owners.