09-28-2015 Council Work Session Packet

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TO: Mayor McMillan and Council Members FROM: Ron Olson, Finance Director DATE: September 28, 2015 SUBJECT: 2016 Enterprise Fund Budgets Attachments: 1. Enterprise Funds Summary 2. Enterprise Fund Line Items The enterprise fund budgets consist of the Water, Sewer, Stormwater, Recycling and Cable TV Funds. Unlike the General Fund, the accounting in the enterprise funds is similar to the accounting practices of private enterprise. The goal of the enterprise funds is to operate independent of tax support. 2012 was the first year that a formal budget was adopted for the enterprise funds. Prior to 2010, the enterprise funds did not attempt to cover depreciation expenses. Beginning with the completion of the 2009 rate study, the suggested rate increases were designed to cover depreciation. 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. Due to consolidations in the cellular industry and changing technologies, the lease revenue is not guaranteed to continue indefinitely. As part of the 2014 water rate/CIP discussions, it was determined that rates should increase 11% per year for the years 2014 – 2017. The budget is being presented with an 11% rate increase. As presented, the operating budget for 2015 will have an operating loss. The revenue amount is calculated using the four year average for consumption and an 11% rate increase. The expenditure budget is increasing by $15,253 (2.37%). $10,000 of the increase is in maintenance supplies and maintenance. The operating transfer of $158,000 is to the debt fund supporting the Casco Point Bonds ($55,000) and the 2014 Bonds Debt Service Fund ($103,000). 2016 capital expenditures as identified in the CIP include a monitoring software upgrade, The north water system extension, rehabilitation of the south water plant brine tank, well number one maintenance, and the West Lafayette main replacement. The 2016 capital expenditures total $760,000. The costs associated with the northern expansion ($600,000) will eventually be recovered as the properties being served are developed. The Water Funds’s current cash balance including the bond proceeds from the 2014 bonds is $2,100,000.