HomeMy WebLinkAbout09.09.13 Work Session Minutes Joint Council/Water Board Workshop Minutes
September 9,2013
Mayor Larson called the workshop to order at 6:30 p.m.
Council Present: Larson, Bartholomay, Bonar, Donnelly
Council Absent: Fogarty
Water Board Present: Jensen, Snobeck, Weierke
Also Present: David McKnight, City Administrator;Robin Hanson, Finance Director;
Kevin Schorzman, City Engineer;Cynthia Muller, Executive Assistant
MOTION by Bartholomay, second by Donnelly to approve the agenda. APIF,MOTION
CARRIED.
Cash Flow Challenges—General Fund and Debt Service Funds
The general fund and debt service funds do not have sufficient funds at various times of the year
to pay the bills. The City relies on other funds(water, sewer, storm water trunk funds)to cover
the deficit. The year starts on a positive note,there is a drop February 1,when principal and
interest payments are made on the bonds,there is a further decline with day-to-day operations, in
mid-June we receive a partial tax payment, and the remainder of the first half tax payment is
received July 1. There is a decline again with day-to-day operations, August 1,there are bond
interest payments,there is a slight increase with annual transfers, and at the end of December,
the second half tax payment is received. So looking at year-end financials, all looks well, but
this is the cycle during the year.
We save money in the general fund and debt service funds because we are not borrowing outside
money, and rely on positive cash in the other funds. The water, sewer, storm water trunk funds
are shorted because of borrowing and we cannot invest as much as we could. We need to take
steps to address this situation over the next five to six years. Staff would like to adopt a formal
policy where each fund has a goal to stand on its own. The majority of funds are in a position to
do this. There are 40 individual funds. Some examples of how this can be achieved are:
1. Specific funds set aside in future budgets to address this issue($80,000 is being included
in the 2014 budget to begin to address deficiencies in the debt service funds).
2. If actual revenues are higher than anticipated and/or actual expenditures are less than
budgeted,the general fund fund balance will increase(this occurred in 2012).
3. As refunding opportunities arise they need to be structured to restore the timing in the
cash flows to have the funds be collected prior to debt service being paid(this occurred
with the 2013A refunding bond issue), and
4. All new borrowings (bond or otherwise)need to be structured so that the source of
repayment is collected prior to the related debt service being paid(2013B bond issue is
structured this way).
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September 9,2013
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The maximum cumulative deficit in the general fund, debt service and ice arena funds was$3.8
million in June 2012. Of this, $1.3 million is the general fund. Council agreed staff should
prepare a financial policy to address this. Staff will bring this back to Council in October or
November.
Water CIP
As of December 2012 there is a cash balance in the water fund of$5.2 million. This includes
$2.2 million in fees collected from developers for construction of a water treatment plant,there
are water main trunk charges of$302,000 where sometimes developers pay into this and
sometimes we pay developers for the difference in upsizing pipes, water benefit charges amount
to $37,000 which are obtained from someone hooking up to the system for the first time,water
availability charges amount to $483,000 and are charges collected on building permits and
designated to be used for new wells and towers. The net operating cash is$2.3 million for
operating the utility.
City Engineer Schorzman developed a water CIP for 2014-2061 showing revenues and expenses,
an ending operating balance before depreciation and accumulating depreciation. If we don't
cover accumulating depreciation, we will not have enough money to take care of the system as it
is replaced over time. This will put us in a sustainable mode. The operating revenues do include
future rate increases. Right now this includes a$.15 increase every three years. We have
enough money to cover depreciation and operations with$500,000 left over. However,between
now and 2061 there will be expenses to replace those items that have depreciated. The CIP
shows we will have collected enough money to pay for it at today's value. There is a list of
assets in the general ledger along with accumulated depreciation. All depreciated assets can be
tied to tangibles that have a defined life cycle and have dates established for repair.
The CIP shows in 2019, $3.25 million will be used for a new water tower. In 2020, $1.9 million
will be used to replace well number one and for painting the existing water tower.
Water Rates
City Engineer Schorzman presented four options for water rate increases. There are three tiers
for water rates;the more you use,the more you pay with tier one being the lowest usage.
Option 1 Option 2 Option 3 Option 4
Tier 1 .05 .15 .10 0
Tier 2 .10 .15 .10 0
Tier 3 .25 .15 .20 .40
Large users drive the size and cost of the water system. The difference between tier one and
three, also serves a conservation purpose. Councilmembers favored option 1. Our current water
rate structure is:
Base Fee $12.00
0-20 $1.10
20-40 $1.30
Over 40 $1.50
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Staff proposed increasing the rates by the amounts in option one every three years. Water rates
and tiers have not changed since 2008.
MOTION by Bartholomay, second by Bonar to adjourn at 7:45 p.m. APIF,MOTION
CARRIED.
Respectfully submitted,
Cynthia Muller
Executive Assistant
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