Agenda - Council - 07/14/1992 - Laserfiche WebLink

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I I ! I I City Council an~ ReSidents May 14, 1992 Page 2 These losseS have resulted in a negative retained earnings of $95,959 at December 31, 1991. Because of the amount of contributed equity, the fund still has total positive equity of $4,280,152. Almost alI ~f this equity represents the City's investment in the fixed asset distribution and collection system. The cash and i~vestment balance in the Sewer and Water Fund at December 31, 1991 is $264,027 which !represents more than 100% of the fund's expenditures in 1991. Because this cash and inv~estrnt~nt balance is currently more than sufficient, the losses incurred to date have not yet caused ~y~.isruption in the fund's operations. However, the losses should not continue indefinitely intoi the future. We understand that it is the City's intention to continue to fund sewer and water ~,sts entirely through user charges. We recommend that the City continue to monitor its sewer anld wa~er rate structure both on a short-term and long-term basis. Designation of General Fund Balance In the Gerieral FUnd, it has been the City's policy to designate for working capital the portion of fund balance equal to the current year intergovernmental revenue. Because of wide swings in State aid, n~Yst recently a large reduction in Local Government Aid, the amount designated for working ~al~ital ~as also fluctuated widely. The working capital designation decreased from $1,783,415 fat D~cember 31, 1990 to $865,672 at December 31, 1991. We feel that th~ City should consider changing its policy for designating fund balance for working capital, i The most widely used method involves taking a certain percentage of the next year's budggted ~xpenditures. This is the most accepted method because it recognizes that the amount of ~Xpefiditure requirements is established regardless of the timing or mix of revenue sources (prOperty taxes, licenses and permits, State and Federal aid, charges for services, and interest carryings). Although the amount is usually based on annual budgeted expenditures, the percentag~ {lesignated is generally based on an estimate of the timing of receipt of revenue. Because the.~sing!e largest source of revenue, property taxes, is not received until June, 50% of annual budgeted iexpenditures is commonly used. We recommend lhat the City consider using the following year's budgeted expenditures as a basis for determi9ing/.he amount of fund balance that is designated for working capital. CommentS On Selected Prior Year Management Letter Recommendations The following recommendations made in the prior year should continue to receive your consideration: . ° conSider~a policy change to charge a fee for water meter installation rather than holding a deposit on meters. o Establish separate Special Revenue Funds for each Tax Increment Development District.