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16 | Page <br />Enterprise Funds <br /> <br />Lake Elmo currently has three Enterprise (or Utility) Funds: Water, Sewer and Stormwater. <br />Expenses in these funds can vary significantly from year to year due to the use of full <br />accrual accounting. This method includes depreciation, debt payments, and capital <br />expenses - capital being the primary driver of annual fluctuations. <br />Because the City is not currently charging utility fees at a level sufficient to cover <br />depreciation, the Utility Funds show a net negative. Staff is working to revise the chart of <br />accounts and our internal processes to make it easier to distinguish between operational <br />and capital expenses year over year. Beginning in 2026, the City will implement separate <br />capital funds for each utility: Water Capital (Fund 611), Sewer Capital (Fund 612), and <br />Stormwater Capital (Fund 613). Additionally, a new accounting “department” has been <br />created for the Water Treatment Plant at Well 2 to track related expenses. These costs will <br />largely be reimbursable by an MPCA grant for the durat ion of the grant period. <br />Utility revenue projections are updated during the Utility Financial Plan review, most <br />recently completed in January of 2025. Actual revenues can vary significantly depending <br />on summer precipitation, as rainfall decreases irrigation usage. The budgets below are <br />based on a tentative 10% rate increase, as outlined in the January update to that Financial <br />Plan. Further discussion on utility rates will take place during the next Financial Plan <br />update in early 2026, with final adoption scheduled in time for Quarter 1 billing. <br />Note: Enterprise Funds are not supported by property taxes and do not impact the levy. <br /> <br /> <br />