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FC#2 REVIEW AND ADOPT 2004 ENTERPRISE FUND BUDGETS By: Diana Lund, Finance Officer Background: Enclosed for your review are the Proposed 2004 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. We are 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 we have attempted to do in preparing the attached Proposed 2004 Enterprise Fund Budgets. Water Utility Fund It is estimated that total revenues for 2004 will be qpproximately $849,500 which includes interest earnings of $100,000. Residents will be charged $24.15/quarter for water sales in 2004, which is a 5% increase over the 2003 rate of $22.95/quarter. Expenditures are estimated to be at $727,723 which includes depreciation (non-cash) of $341,863. This results in a budgeted operating income for 2004 of $121,777 and would increase the retained earnings accordingly. Sewer Utility Fund It is estimated that total revenues for 2004 will be $789,372 which includes interest earnings of $35,000. Rates remain at $60.50/quarter per residential account per quarter. Expenditures are estimated to be at $655,112 which includes depreciation (non-cash) of $279,775. Street Light Utili ,ty 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 street lights that are required in all new urban subdivisions. During 1997 the City Council approved the installation of additional priority. 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 as well as depreciation.