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TO: Mayor & Council <br />FROM: Finance Director -Treasurer Brager <br />DATE: March 19, 1983 <br />RE: 1983 WATER & SEWER SYSTEM MAINTENANCE & <br />CAPITAL IMPROVEMENT PROGRAM <br />I. Financial Condition of Enterprise Funds <br />The Water Fund in the last several years has, on a cash basis, <br />generated sufficient revenues from sales to pay for current operat- <br />ing expenses. The Water Fund has also seen an increase in cash and <br />investments. This has largely been due to unusually high interest <br />rates. Unfortunately it appears now that the Fund will no longer be <br />able to benefit as much from investment income. Current interest <br />rates on our investments are now between 7-8o compared to 14-160 <br />during the early summer of 1982. The Fund, however, does have <br />sufficient cash on hand for working capital. <br />The Sewer Fund, on a cash basis, in 1981 did not generate <br />sufficient cash from Sewer Use Fees to pay for current operating <br />expenses. A 1981 transfer of $61,076 to the Fund from Revenue <br />Sharing still did not allow the Fund to break even on a cash basis. <br />1981 Sewer Use Fees $371,655.00 <br />1981 Current Expenses 442,964.00 <br />1981 Loss from Operations ($ 71,309.00) <br />1981 Transfer from Revenue <br />Sharing Fund 61,076.00 <br />1981 Loss ($ 10,233.00) <br />In 1982 Sewer Use Fees did exceed current operating expenses <br />by $5,403 on a cash basis. The Fund does not have sufficient cash <br />on hand for working capital. In June 1982 the Fund had a cash deficit <br />of $33,804. As a result, interest on investments of the Fund have <br />been small in comparison to the Water Fund. <br />I have previously stated that the Water Fund has sufficient <br />cash on hand for working capital and that the Sewer Fund does not. <br />Working capital is only one of several reasons for a Utility Fund <br />to maintain a certain level of cash on hand. I shall comment on these <br />individually and then try to assign some dollar values to them andillustratewhatadesiredlevelofcashonhandforboththeWater <br />Fund and the Sewer Fund may be. One of the main reasons for main- <br />taining cash on hand is to provide cash for operating expenses of <br />the Water Fund and the Sewer Fund (working capital). <br />This is