Agenda Packets - 1996/12/02 - Laserfiche WebLink

Home Browse Search

City of Mounds View Utility Rate Study Page 9 • Reserves and Capital Replacement Policies (continued) b) Contributed assets: The City has three options with regard to replacing contribution systems as follows: 1) Pay for all such replacements from net utility revenues and/or tax levies. 2) Pay for all such replacements through the special assessment process. 3) Pay for such improvements through a combination of the above two methods. Payment for replacing contributed systems entirely through utility revenues may be financially burdensome for the water and sewer funds and the users of such systems. Conversely, full assessment of replacement systems may not be practical and may have statutory challenges(i.e., increase in value of property may not correlate to the assessment amount). An alternative method of financing the replacement of contributed systems is to assess a portion to the benefited property owners based on an established standard life for the system. A system of assessing replacement systems at a proportionate rate compared to useful life may be the most practical method. If a system has an established useful life of 50 years and requires replacement after 30 years, the property owners would be assessed 60%of the cost of the replacement system. Any such policy must be scrutinized by legal counsel to improve the change of prevailing in a contested assessment. The level of reserve balance to fund asset replacement is dependent upon the City's policy of funding the replacement of the various types of assets of the City. Asset replacements will not be entirely financed from reserve balances of the fund. Adequate reserves, however, allow the City options in dealing with annual outlays related to such asset replacements. 3. Emergency and/or unanticipated expenses. The nature of a City's utility system is such that emergency expenditures are incurred frequently(�.e., major unanticipated repairs). Additionally, major expense categories can fluctuate significantly from year to year(i.e., MCWS, insurance, etc.). An adequate reserve structure allows the City to react to these fluctuations without severely disrupting the financial position of the funds. • •