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General Fund Budget needs to be reduced by $630,000 and the Adopted 2003 General Fund Budget needs to be increased by $630,000. Motion by Councilmember Kurak, seconded by Councilmember Strommen, to recommend that the City Council adopt the resolution amending the 2002 General Fund Budget, and adopt the Resolution authorizing the transfer of $630,000 from the 2002 Adopted Budget to the 2003 Adopted Budget. Motion carried. Voting Yes: Mayor Gamec, and Councilmembers Kurak, Strommen, Elvig, Pearson, and Zimmerman. Voting No: None. Absent: Councilmember Cook. Case #2: Review and Adopt 2003 Enterprise Fund Budgets Finance Officer Lund presented the Committee the proposed 2003 Enterprise Fund Budgets, which cover the Water Utility Fund, Sewer Utility Fund, Street Light Utility Fund, Recycling Utility Fund, and Storm Water Utility Fund. While formal budgets are required to be prepared and adopted annually for the General Fund, this is not the case for Enterprise Funds. 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 relatively "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. An important factor in these costs is the recovery of depreciation through the rate structures. The City is required to keep the accounting for these funds on the full accrual method, which means recognizing total depreciation, whether on City or developer-installed systems. This is what staff has attempted to do in preparing the Proposed 2003 Enterprise Fund Budgets. Water Utility Fund It is estimated that total revenues for 2003 will be approximately $702,750, which includes interest earnings of $120,000. Residents will be charged $22.95/quarter for water sales in 2003, the same as 2002. Expenditures are estimated to be at $619,291, which includes depreciation (non-cash) of $323,790. This results in a budgeted operating income for 2003 of $83,459 and would increase the retained earnings accordingly. Sewer Utility Fund It is estimated that total revenues for 2003 will be $668,165, which includes interest earnings of $35,000. Rates remain at $60.50/quarter per residential account. Expenditures are estimated to be at $642,300, which includes depreciation (non-cash) of $245,000. This results in a budgeted operating profit of $25,865. Street Light Utility Fund The Street Light Utility Fund was established late in 1992, and meant to account for billings to property owners and payment of electrical service charges for subdivision streetlights that are required in all new urban subdivisions. During 1997, the City Council approved the installation of additional priority lights. The amount incorporated into this budget is based on $5.16 per year for each residential property. The associated costs include the cost of operation and maintenance Finance Committee/January 28, 2003 Page 2 of 5