RES 94042 - Laserfiche WebLink

Scenarios 1 and 5 both project a deficit of $1.5 million. This figure is the number that has been assumed throughout the rest of this staff report. Both scenarios assume vacant positions are fiIled, and revenue increases outpace expenditure increases by 3 %. WATER AND SEWER OPERATING FUNDS Water Maintenance and Operating (M & O) Fund The Water Fund had been incurring deficits for several years, which resulted in its reserve being driven below the 10% level. In April 1991, water rates were increased as part of a two year rate program. This was the first increase in six years, outside of the increase for the Sycamore Reservoir debt service in 1987. The purpose of the two year rate plan was for the Fund to start producing an excess of revenue over expenditures in order to bring reserves to an adequate level (at least 30% for an enterprise in order to meet cash flow requirements and provide a 10% contingency), and to begin funding long-term replacement of the City's water system. The City relaxed its water conservation goal in the summer of 1992, from 25% to 10%. The requested 10% reduction was calculated based on comparable consumption periods in the base year, 1990. As a result of relaxing the water conservation goal, consumption increased, and therefore, revenues increased. However, the City received a 12 % rate increase by Zone 7 (its water wholesaler) in January 1993, followed in January 1994 by a 3% rate increase. Staff and an independent consultant completed a new rate study in December 1993. Although the rate structure was changed as a result of the study, overall revenues were not increased. However, now that staff has the computer data developed for the rate model, a better projection of revenues and water purchased costs can be made. Staff is recommending that the appropriation for purchased water be increased by $800,000, with the water sales projection being increased by $700,000. Salary savings from unffiled positions reflect a $45,000 reduction in costs. Appendix A (page 27) contains a recap of staff recommended budget amendments for the Water M & O Fund operations in 1993-94. Projected June 30, 1994 ending fund balance is $913,000. Optimally, the Fund should maintain a reserve of approximately 30% or $2 million. This reserve is necessary for cash flow, contingency, and to improve bond ratings, which will in turn lower borrowing costs. Sewer Maintenance & Operating (M & O) Fund Appendix A (page 27) contains a recap of staff recommended budget amendments for the Sewer M & O Fund operations in 1993-94. Sewer Fund rate projections have not been amended, but will be reviewed in the third quarter. Interest income projections have been increased by $60,000, from $40,000 to $100,000. Expenditures reflect a net increase of $17,000 due to increased electrical costs ($17,000), and Cross Town Sewer Interceptor litigation costs ($22,000); both of which are offset by a decrease due to the delay of two studies until 1994-95 ($22,000). SR94:100 9