11-26-2018 Council Work Session Packet

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TO: Mayor Walsh and Council Members FROM: Ron Olson, Finance Director DATE: November 26, 2018 SUBJECT: 2019 Budget/CIP/Fee Schedule Attachments: 1. Draft Budget Book 2. Draft CIP 3. Draft Fee Schedule Budget General Fund - A draft 2019 budget book is attached for your review. The preliminary General Fund Budget that was adopted in September expenditures totaling $8,576,370; an increase in expenditures of $382,970 (4.7%). This increase is the result of a $95,000 increase in Personal Services, a $217,619 increase in Professional Services, and a $100,000 increase in Contingency. While minor changes have been made to some line items as more accurate numbers have become available, the total General Fund Budget and tax levy amounts have not changed since they were adopted in September. Water Fund - The water fund has historically been operating at a loss. Because depreciation is a non- cash expenditure, the fund has had a positive operating cash flow since 2009. In most years, the operating loss has been covered by the revenue received from antenna leases on the water towers. Effective in 2018, the tower revenue has been moved out of the Water Fund. The reduction of lease revenue and an increase in the administrative charge will need to be recovered in rates. Based on the staff's work on the rate study, rates will need to continue increasing at an 11 % rate for the next 5 years to reach profitability. The final structure of water rates is still being worked out as part of the rate study. The expenditure budget is increasing by $215,789 (31.2%). $60,329 of the increase is in Personal Services and is the result of allocating the Public Works staff to more accurately reflect their time. Depreciation is increasing $77,400 due to the addition of Well 4 and other additions to the system. The Administrative Charge is increasing by $86,660. These three areas account for $224,389 of the increase. The operating transfer of $55,000 is to the debt service fund supporting the Casco Point Bonds ($55,000). The non-operating interest expense is for the interest on the 2014 Water Bonds. A total of $474,855 of capital expenditures are identified in the 2019 draft CIP include: North Water Plant Painting ($21,000), South Water Plant Painting ($78,000), a screen at Well 3 ($92,000), Water Main Replacement at CSAH at Cty 15/19 ($169,855), annual Valve Replacements ($24,000) and water meter replacements ($90,000) for a total cost of $474,855. The Water Fund's current cash balance is $847,960. Sewer Fund — In recent years, the sewer fund has mostly operated at a loss. Non-operating revenues