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CITY OF RAMSEY, MINiNESOTA ANNUAL BUDGET <br />BUDGET COMMENTS <br />ADDITIONAL BUDGET INFORMATION <br />Account 605-4874 <br />Equip'ment Revolving :Fund <br />Background: The Equipment Revolving Fund will be funded through the <br />funded depreciation method on each piece of equipment that the City <br />set up in this fund. Consequently, each year the City will levy the <br />appropriate amount of dollars to cover depreciation costs. The in- <br />terest earned in this fund will hopefully cover "annual inflation <br />costs. <br />It should be also noted that this fund will provide for only re- <br />placement of equipment that is set up in the Equipment Revolving Fund. <br />Any additional equipment will have to be purchased outside of this <br />fund. <br />Fonnula for Depreciation: The City established the following method <br />for its funded depreciation: Original purchase price of each piece <br />of equipment minus estimated trade-in value of each piece of equip- <br />ment (trade-in 'value is artifically established baied on life expect- <br />ancy of each piece of equipment) equals estimated City total cash re- <br />placement costs for piece equipment (excluding normal costs and in- <br />flation increases) divided by number of years life expectancy equals <br />yearly depreciation costs. The investment of fund money should cover <br />normal cost increases. <br />Coments: The funded depreciation method will alle'viate peaks and <br />valleys in the City budget and it also provides for a more efficient <br />method in replacement of City equipment. It is a practice that <br />Ci't:ies have not engaged in the past but are doing it because of the <br />tight 'money situation. Mainly, it is :i better money management <br />total which is now being recognized by Cities. The City of Ramsey <br />did set up in their 1978 budget $5,200 for funded depreciation. <br />However, in the 1979 budget the City has actually established a <br />funded depreciation fund.