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REVIEW AND ADOPT 2000 ENTERPRISE FUND BUDGETS By: Diana Lund, Finance Officer Background: Enclosed for your review are the Proposed 2000 Enterprise Fund Budgets which cover the Water Utility Fund, Sewer Utility Fund, Street Light Utility Fund and the Recycling 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 2000 Enterprise Fund Budgets. Water Utili~ Fund It is estimated that total revenues for 2000 will be qpproximately $591,615 which includes interest earnings of $125,000. These revenue projections include a 5% rate increase for water sales in 2000 from $19.85/quarter to $20.85/quarter. Expenditures are estimated to be at $426,761 which includes depreciation (non-cash) of $218,776. This results in a budgeted operating income for 1998 of $164,854 and would increase the retained earnings accordingly. Sewer Utili~ Fund It is estimated that total revenues for 2000 will be $602,098 which includes interest earnings of $47,200. These revenue projections do not incorporate a rate increase effective January 1, 2000. An increase could be calculated at a later period in 2000 due to Met Council's sewer rates increasing due to a tremendous increase in actual flow in the southwest section of the City. Expenditures are estimated to be at $596,468 which includes depreciation (non-cash) of $179,000. This results in a budgeted operating profit of $5,630, which is a bit more than break even, and continues to slowly decrease the deficit in retained earnings.