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STAFF REPORT <br /> PAGE TWO <br /> AUGUST 2 , 1993 <br /> Future Maintenance is a device to spread the costs of large cost <br /> maintenance projects over several budget periods. Cash should be <br /> kept on hand for these reserves. The Water Fund has sufficient <br /> cash on hand for these reserves. The Water Fund uses interest <br /> earnings to offset the costs of operations. Those interest <br /> earnings have the effect of lowering Water Utility rates. A <br /> permanent reduction of the Water Fund's cash, as a result of a <br /> transfer of funds, will lower interest earnings and could effect <br /> utility rates. In the case of a permanent of funds for the City <br /> Hall Expansion/Remodeling Project the effect on interest earnings <br /> would be minimal. Using the assumption that each fund would <br /> contribute half the amount needed($62,500) and an interest rate <br /> of 4% the loss of interest would be approximately $2,500. The <br /> Water Fund could transfer that amount to the City Hall <br /> Expansion/Remodeling Project with a minimal impact upon the funds <br /> operations or rates. A interest bearing loan of $250,000 to the <br /> golf course fund from the Water Utility would have no impact upon <br /> interest earnings of the fund because any loss of interest <br /> earnings from investments would be offset from the interest paid <br /> on the loan. The loan could be considered a long term investment <br /> of the Water Utility Fund. The fund has sufficient cash balances <br /> to make this loan. <br /> The Sewer Fund is not as financially strong as the Water Fund. <br /> The Sewer Fund has a cash flow requirement of approximately <br /> $80, 000. There is sufficient cash on hand to meet this <br /> requirement. Two reserves have been established in the Sewer <br /> Fund: Reserve for Sewer Main Breaks($118, 184) and Reserve for <br /> Future Maintenance($332,462) . The Reserve for Sewer Main Breaks <br /> is a reserve for emergencies and a small increase for this <br /> reserve is budgeted for each year. The Reserve for Future <br /> Maintenance is a device to spread the costs of large cost <br /> maintenance projects over several budget periods. Cash should be <br /> kept on hand for these reserves. The Sewer Fund has sufficient <br /> cash on hand for these reserves. The Sewer Fund has sufficient <br /> cash on hand for only the cash flow requirements and the reserves <br /> mentioned above. The Sewer Fund does not have sufficient cash to <br /> allow a permanent transfer of funds. The Sewer Fund also uses <br /> interest earnings to offset the costs of operations. Those <br /> interest earnings have the effect of lowering Water Utility <br /> rates. A permanent reduction of the Water Fund's cash, as a <br /> result of a transfer of funds, will lower interest earnings and <br /> could effect utility rates. <br /> The Special Projects Fund was established to provide a <br /> permanent and ongoing non property tax source of financing for <br /> purchases of equipment. The Fund uses interest earnings only for <br /> capital items. By doing so the City has established a permanent <br />