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CASE <br /> <br />STATUS OF EQUIPMENT REPLACEMENT FUND <br /> By: Jessie L. Hart, Finance Officer <br /> <br />BACKGROUND: <br /> <br />The City of Ramsey currently maintains the Equipment Revolving Fund and the Fire Department <br />Equipment Revolving Fund which were established to fund the future replacement of City equipment. As <br />of June 30, 1993, the Equipment Revolving Fund had a balance of $1,478,991 and the Fire Department <br />Equipment Revolving Fund had a balance of $55,759. The Equipment Revolving fund is currently being <br />funded through a percentage of tipping fees, transfers from the General Fund for current years <br />depreciation and interest earnings while the Fire Department Equipment Revolving Fund is currently <br />funded by only interest earnings. <br /> <br />While the nature of these funds is to replace equipment, the transfers for current years depreciation are <br />based on the original cost of the equipment. Future replacement costs most likely will be at a cost higher <br />than what the Fund is actually funded for. Therefore, even if the Fund is 100% funded, which at this <br />time it is not, it is necessary that a policy be established on how much and when these dollars can be <br />spent. With no policy in place, these Funds could be depleted in a matter of years. <br /> <br />Some options for policy development to be considered: <br /> <br />Implement a policy whereby only a specified percent of replacement cost, not to exceed the <br />original cost, will be funded from the Equipment Revolving Fund with the remainder of the cost <br />being funded through other sources such as current revenues. <br /> <br />Implement a policy whereby only a specified percent of replacement cost, not to exceed the <br />original cost and not to exceed the previous years actual or current years forecasted interest <br />earnings, will be funded from the Equipment Revolving Fund with the remainder of the cost being <br />funded through other sources such as current revenues. <br /> <br />With the way the prices of most equipment is escalating, it is necessary to have a plan for replacement. <br />The establishment of the two funds was a good beginning, but now the future of these funds must be <br />addressed so that in the future these items can be replaced without placing any undue hardships on other <br />funds, services or programs. <br /> <br />COMMITTEE ACTION: <br /> <br />Per discussion - direct staff to develop and present a "Financial Policy," for the management of the <br />Equipment Revolving Fund and the Fire Equipment Revolving Fund, to be presented to the Finance <br />Committee and then forwarded to the City Council for adoption. <br /> <br />Review Checklist: <br /> <br /> City Administrator <br /> Finance Officer <br /> <br /> <br />