HomeMy WebLinkAboutNB 3 WTR SALES RATE 05-18-81DATE:
TO:
FROH:
SUBJECT:
May 13, 1981
NEW BUSINESS
Inter-Corn
Honorable Mayor and City Co~cil Members
Ron Nault, Finance Directo~.~
Water Sales Rate
BACKGROUND
The accounting procedures for the water fund depart slightly from the governmental
type funds in that they are accounted for in an Enterprise Fund, which more
closely resembles commercial accounting. As there are limited sources for
revenue other than those generated by the service provided by this fund, an annual
evaluation must be made as to the ability for the fund to generate sufficient
revenue to pay for the operating and capital improvement expenses of the fund.
The Operating and Capital Improvement Budgets have been prepared for fiscal year
1981-82 and the current water rates have been found to be inadequate to meet the
required appropriation level.
DISCUSSION
Major increases in the operation budget are a 40% increase in purchased water
costs; a 27% increase in purchased power; and a 10% increase in our pump tax.
We have taken advantage of available options to minimize the impact of these in-
creases, but the budgeted amounts should be considered non-discretionary for
management purposes.
Other major increases to this years' water budget includes $415,000 for debt
service to the previous owners and $289,800 of capital improvements. (For
more detail of capital improvements please see the 1981-82 Preliminary Budget).
We are also budgeting for the annual.reduction to the main line extension agree-
ments, $120,000. With the exception of the proposed capital improvements,
the operating increases and the debt service represents $925,438 of additional
burden to the water fund.
The attached Exhibit compares a 1981-82 budget request with estimated revenues
at the current water rates and a budget request with'estimated revenues increased
by 12%. Budget "A" reflects a 10% increase in water sales only. Neither budget
has an allowance for any negotiated salary increase.
As can be seen from the Exhibit, without a rate increase the water fund will be
facing a $286,000 shortfall. A 12% rate increase will generate $326,417 of
additional revenue to bring the water fund back into the black. It is antici-
pated that 12% will be relatively close to the CPI for the coming fiscal year.
While under the PUC, the last major general increase in water rates was granted
August of 1979 for 20%. In January of 1980 an additional 2.4% was granted as a
general increase; in April of 1980 a 4.5% increase was granted for increased
Honorable Mayor and City Council
Water Sales Rate
April 13, 1951
page 2.
water and power costs; and again in July of 19~0 an additional 5.5% increase was
granted for increased power and water costs.
There have been no increases since July of 1980.
In summary, a 12% rate is required to cover increased operation costs, the
necessary debt service, and a modest capital improvement program. This in-
crease will allow the Water Fund to remain solvent and avoid any support from
the General Fund during its first full year of operation under the guidance of
the City Council.
RECOMMENDATION
Consider a water rate increase for all water sales of 12%, effective July 1,
1981 and order the City Clerk to prepare proper notice for public hearings
at the June 1 and June 15 Council meetings.
attachment
EXHIBIT
WATER FUND
BUDGET/REVENUE COMPARISONS
Current rates:
Funding 6-30-81 $100,000
Revenues
Water sales $2,720,139'
Equity assess-
ment Credit 50,000
TOTAL AVAIL-
ABLE RE-
SOURCES
$2,870,139
Expenses
Purchased
Water $1,128,250
Purchased
Power 276,000
Ops. and
Maint. 926,255**
Pump Tax 120,000
TOTAL OP-
ERATING
EXPENSES
$2,450,505
NET REVENUE $ 419,634
Less:
Capital Im-
provements
$ 289,800
Debt Ser-
vice 415,950
Fund Equity
6-30-81
$ (286,116)
12% in~rease:
Fund Equity 6-30-81
$100,000
$3,046,556
50,000
$3,196,556
$1,128,250
276,000
926,255
120,000
$2,450,505
$ 746,051
$ 289,800
415,950
$ 40,301
* Anticipates 10% increase in water sales only.
** Does not include 'to be' negotiated salary increases