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Office of: <br />JOEL R. HANSON, Administrator <br />515 Little Canada Road <br />Little Canada, MN 55117 <br />612-484-2177 <br />FAX: 612-484-4538 <br />CITY OF LITTLE CANADA <br />RAMSEY COUNTY, MINNESOTA <br />MEMORANDUM <br />TO: Mayor Hanson and Members of the City Council <br />FROM: Joel Hanson, City Administrator <br />DATE: January 4, 1991 <br />RE: Designation of Depreciation as Capital Replacement <br />Monies for Water and Sewer Funds <br />On the income statement prepared as part of our 1989 audit <br />process by Voto, Tautges & Redpath, we show amounts for <br />depreciation in both the water and sewer funds. While we <br />have shown depreciation amounts for both funds as they <br />effect net income from operations, we have never designated <br />the use of these funds for any specific purpose. <br />Therefore, they have remained in the cash investment <br />balances for each respective fund. <br />As our system ages, it will become increasingly important <br />to have money available for capital replacement. Also, we <br />are sure to face situations whereby we cannot recover 100% <br />of an improvement cost by special assessments due to lot <br />size considerations or the fact that a main has only single <br />frontage along a roadway. To address these types of <br />issues, I am proposing that we designate depreciation as <br />capital replacement monies. This would entail specifically <br />setting money aside into a water and sewer capital <br />replacement fund which would be used for any capital <br />upgrades of equipment, facilities, or other issues <br />involving expansion of the system. It should be noted that <br />I am not proposing that we utilize these funds to subsidize <br />any improvements to our residents in the form of lower <br />special assessments. <br />A system must plan for replacement of its components and at <br />this point in time, we are not doing that. We have been <br />relying on operating funds to finance needed improvements <br />to the systems such as repainting of the City's water <br />tower. To the extent that operating revenues are not fully <br />funding depreciation, we are in fact holding our rate <br />1 'ge 26 <br />MAYOR <br />Michael Fahey <br />COUNCIL <br />Beverly Scalze <br />Bill Blesenor <br />Rick ColIova <br />Jim LaValle <br />