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HomeMy WebLinkAboutWTR ENT CASH FLOW 02-19-85TO: FROM: SUBJE~: HONORABLE MAYOR AND MEMBERS OF TH~TY COUNCIL D~Ii RONALD A. NAULT, FINANCE DIRECTORShip. WATER ENTERPRISE CASH FLOW ANALYSIS Attached are two documents prepared by the CPA firm of Simonis Moreland Accountants Incorporated, detailing the flow of cash tn the Water Enterprise Fund for the period November 1980 through February of 1984. The source for this information was the schedules and other documents prepared or reviewed by the firm during the course of their annual audit and preparation of the City's Comprehensive Annual Financial Reports. The basis for the £nterprise's obligation to the General Fund can be found in the first eight months of operations, 11-01-80 to 06-30-81. The cash available, transferred from TWW accounts to the City, was only $7,914. Adjustments were made in the purchase price for $278,000 of billed receivables as of [0-31-80 and $395,000 of accounts payable for the same period. Cash flow wise we received $100,000 less in revenues than we had to expense in assumed payables. Other significant cash disbursements during this period were .the $86,000 to the former stockholders for unbilled receivables a~ of 10-31-80; the $[42,000 developer advance refunds; and the $300,000 TWW Bond principal payment. These three items alone make up gg% of the cash overdraft as of 05-30-8[. The only way to abate this situation would have been to significantly raise the water consumption rates effective 11-01-B0. The second document itemizes the elements of the $713,000 obligation as of 06-30-83. In February of 1984 $300,000 was repaid to the General Fund, $94,000 from the Water Enterprise Fund and $206,000 from Debt Surcharge Fund, leaving a balance of $413,000. The auditors have done a commendable job of showing the detail and verbally summarizing a rather complex issue. It may be easier to respond to individual questions rather than trying to anticipate and contributing to the complexity. At this point I would strongly recommend that annual interest continue to be accrued and paid to the General Fund for this obligation. The basis of interest will be the average annual investment yield for any fiscal year that the debt, or any part thereof, is still outstanding. The interest expense should Page 2 Honorable Mayor and Members of The City Counctl February [3, 1985 be Jncluded in the rate structure as a cost of operations and should be reflected in any rate change. A significant reason for the paying of tnterest ts to avoid utility users who also pay property taxes to the City subsidizing non-resident utility users for the lost income to the General Fund. RA~:skr Attachments c imonis oreland February 1, 1985 610 NEWPORT CENTER DRIVE, SUITE 500 NEWPORT BF.~CH, CALIFORNIA 92660 (714) 640-1333 The Honorable City Council of the City of Tustin, California 300 Centennial Way Tustin, California 92680 The Honorable City Council: In connection with our compilation of the statement of cash receipts, cash disbursements and cash balances of the City of Tustin Water Enterprise Fund for the periods November 1, 1980 to June 30, 1981, the year ended June 30, 1982, the year ended June 30, 1983 and the period July 1, 1983 to February 29, 1984, we were asked to comment on the more significant matters affecting the flow of cash. Our comments are included below. The cash transactions for the period November 1, 1980 to June 30, 1981 resulted in a cash deficit of $(531,731). The deficit resulted primarily from required disbursements for debt and related costs of $1,029,908, while cash and accounts receivable at the date of acquisition were only $466,877. During the year ended June 30, 1982, cash disbursements exceeded cash receipts by $31,144. During the year ended June 30, 1983, the General Fund advanced cash of $534,263 to the Water Enterprise Fund to cover its cash deficit of $210,763 and the required debt surcharge balance of $323,500. The cash deficit was reduced due to an increase in water rates effective January 1, 1983. At June 30, 1983, the amount due the General Fund was as followst Interest on the cash overdraft for the year ended June 30, 1982 Interest on the cash overdraft for the year ended June 30, 1983 Admxnistrative charges for the year ended June 30, 1983 Cash advance at June 30, 1983 Total $ 69,732 47,267 62,303 534t263 $713t565 The Honorable City Council of the City of Tustin, California February 1, 1985 Page two By February 29, 1984, the Water Enterprise Fund bad. paid $300,000 of the balance due the General Fund at June 30, 1983, leaving a balance due the General fund of $413,565. The Water Enterprise Fund had generated an overall cash balance of ~$1,756,002 at February 29, 1984. We would be pleased to discuss with you at your convenience the contents of this letter or any questions you may have about the cash transactions of the Water Enterprise Fund for the period November 1, 1980 to February 29, 1984. Very truly yours, monls oreland 610 NEWPORT CENTER ORIVE, SUITE 500 NEWFORT BEACH, CALl FORNIA 92660 (714) 640-1333 February 1, 1985 The Honorable City Council of the City of Tustin, California We have compiled the accompanying statements of cash receipts, cash disbursements and cash balances of the City of Tustin Water Enterprise Fund, for the ~eriod November 1, 1980 to June 30, 1981, the year ended June 30, 1982, the year ended June 30, 1983, and the period July 1, 1983 to February 29, 1984, in accordance with standards established by the American Institute of Certified Public Accountants. A compilation is limited to presenting, in the form of financial statements, information that is the representation of management. We have not audited or reviewed the accompanying statements of cash receipts, cash disbursements and cash balances and, accordingly, do not express an opinion or any other form of assurance on them. However, the City of Tustin Water Enterprise Fund is included in the annual examination of the Financial Section of the Comprehensive Annual Financial Report of the City of Tustin. Management has elected to omit substantially all of the disclosures ordinarily included with financial statements. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the financial condition of the City of Tustin Water Enterprise Fund. Accordingly, these financial statements are not designed for those who are not informed about such matters. CITY OF TUSTIN WATER ENTERPRISE FUND Statements of Cash Receipts, Cash Disbursements and Cash Balances for the Periods November 1, 1980 to June 30, 1981, the Year Ended June 30, 1982, the Year Ended June 30, 1983, and the Period July 1, 1983 to February 29, 1984 Cash Balances at Beginning of Period Cash Receipts: Residential water sales: Water enterprise Debt surcharge Bond proceeds, net of discount Advance from General Fund Other receipts: Water enterprise Debt surcharge Bond funds Total Cash Receipts Cash Disbursements: Administration and service billing Operations, service and maintenance Purchased water Legal and consulting acquisition costs Capital improvements Purchase of vehicles Payment o~ debt and related costs: To former stockholers for one-half the unbilled receivables outstanding at October 31, 1980 Payment of accounts payable outstanding at October 31, 1980 Developer advances Tustin Water Works Bond principal Principal payments due former stockholders on the purchase price: Water enterprise Bond funds Payment of General Fund advance: Water enterprise Debt surcharge Interest: Water enterprise Debt surcharge Debt issuance costs - 11-1-80 Year Year 7-1-83 to Ended Ended to S 7.914 ~_~~) ~__~f~) ~ 1,701,707 2,882,134 34,121 164,517 3,025,400 2,256,578 410,449 568,000 534,263 156,960 8,801 4,410,113 299,650 88,600 174,124 157,846 154,744 587,735 1,036,835 987,487 712,584 493,672 929,198 1,130,443 826,027 13,557 16,669 20,631 185,879 264,553 41,370 14,674 1,587 67,350 86,790 365,819 142,529 111,537 78,733 300,000 147,826 146,790 3,687,340 93,827 206,173 134,770 461,053 386,309 95,750 95,750 bond funds 2~ Total Cash Disbursements _~ 3.077~795 _2~ ~ Cash Balances at End of Period ~_/~) ~) ~ ~ Cash Balances Composed of: Water enterprise Debt surcharge Bond funds $ (531,731) $ (562,875) $ 323,500 $ 701,696 589,577 464.729 Total NOTE: Ail cash disbursements are from water enterprise resources unless otherwise indicated.