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Observations: 42% of the fundinm 25% of the vote The Joint Powers Agreement to Establish the Lower Rum River Watershed Management Organization was adopted and executed by the four cities in 1985; it is this Agreement that assigns one vote to each member city. A change in the assessment formula or assignment of votes would require a change in this Agreement. The LRRWMO 92/93 budget included funds to update this Agreement, but no action was taken. Funds for updating are again included in the 93/94 budget and Council may want to provide direction to staff or appoint one of their members to participate in this update process. ~2 - LF~O fund b,~mc~ Generally accepted working capital requirements for Minnesota local governments is six months of the next year's budgeted expenditures. These funds become a designated part of the fund balance and are intended to allow the unit to meet cash flow requirements until the first settlement of property taxes and state transfer payments are received. In the absence of sufficient working capital, the governmental unit may be subjected to borrowing to meet their payroll and bill payments with a resulting inteav, st expense. The LRRWMO has structured the due dates for member city contributions to be one half of the annual contribution due on the first day of the new year and the remainder on the first day of the second half of the year. Theoretically, if ali members paid promptly, no working capital designation of fund balance would be required. But this would leave the organization somewhat at risk in meeting their cash requirements ff contributions are not received timely or a significant expenditure occurs in the ftrst half of the year. Therefore, working capital requirements should be established and specifically provided for. A fund balance beyond working capital should not be necessary for this Organization. In the event an expenditure of non-budgeted funds is deemed essential by the LRRWMO, the Organization has the ability to assess member cities for an additional contribution. But with this ability comes an obligation to first discuss the needs with the contributors. If the LRRWMO established a six month working capital rule, the required fund balance at January 31, 1993 would be $9,100. The actual fund balance is $14,213 or $5,113 more than the six-month rule. #3 - LRRWMO Annual O~rating Budget As our City Engineer has discussed previously, liability insurance budgeted at $3,000 beginning in the 92/93 year has contributed to the increased.operating budgets. But it is also u'ue that the budget increases have not been re-ali?~l in actual expenditures; yet, the Cities are assessed at this new level. This is not to say the dollars should be spent as they are budgeted, but rather, the budget should more closely reflect the actual administrative projects or tasks to be undertaken. It is recognized the Organization has little historical data to assist in financial planning, but there are several projects that were funded in 92/93 and for hck of action again funded in 1993. These projects include updatirtg the Joint Powers, engineering studies and surveys, a management plan and developing/publishing a newsletter for a funding allocation of $7,800 plus a contingency of $1,000. These same projects are again included in the 93/94 budget at $7,800 plus a contingency of $1,000. Basically this means the member cities have been assessed twice for the same projects and the unspent portion of the 92/93 assessment served to increase the Organizatioffs fund balance. The City of Ramsey has not yet paid the 93/94 assessment bill. Challenging the budget at this time may cause misunderstandings with the other cities that have paid their assessment. But it is reasonable for Ramsey to reduce the 93/94 contribution by Rarnsey's share of the excess fund balance; this would reduce Ramsey's contribution from $7,666 to $5,512. If the City pays the first half as billed by the LRRWMO and notifies them of our intent to reduce the second half payment by our share of the fund balance surplus, the Organization would have sufficient time to review and react before the second payment is due on August 1, 1993. Staff Recommendation: Concern #1 and #3 It is recommended the Council initiate discussion regarding the LRRWMO with the Anoka City Council at the upcoming joint meeting.