03-19-1983 WS - Laserfiche WebLink

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1 March 19, 1983 C Page 6 maintenance is performed not all of it would be used. The unused portion would be accumulated so that enough cash would be on hand to perform larger maintenance projects without borrowing to finance them. During the period 1983--1985 it is estimated by Public Works Director Johnson that new treatment plant equipment at Treatment Plants 2 & 3 at a cost of $40,000 will be needed, new treatment equipment at Well 3 at a cost of $75,000 will be needed, and Ground Reservoir repairs costing $55,000 will be needed. Staff recommends that these items be financed through an interfund loan from the Special Capital Projects Fund to be repaid at 8% interest per annum for ten years. Interest of 8% is recommended to replace the lost Investment Income of the Capital Projects Fund over the term of the loan. Principal and interest on the loan would be $23,458 per year or $.0623 per 1,000 gallons of water sold. (See exhibit entitled Water Fund - Maintenance and Improvement Needs.) Staff recommends the balance of the maintenance and improvement needs for the period 1983 - 85 be financed from cash on hand in the Water Systems Contributions Fund. The cash balance of the Fund at December 31, 1982 was $84,602. Should the cash from the Water Systems Fund not prove sufficient, staff recommends the balance be funded from the Water Fund's cash on hand. This is recommended in order to preserve the cash on hand in the Water Fund. The exhibit entitled Investment Income - Water Fund shows the effect a reduction of the Water Fund's cash on hand has on Investment Income and what a water rate would have to be to earn an equal amount of cash. At an interest rate of 7% each reduction of the Water Fund's cash by $100,000 would result in a loss of Investment Income of $7,000. An additional rate of $.0160 would be necessary to earn an equivalent amount of cash. Staff recommends the Water Fund cash on hand be maintained to benefit from Investment Income as well as for reasons previously mentioned. To provide an annual maintenance allowance of $42,500 would require a water rate of $0.1130 per 1,000 gallons of water sold. A rate of $0.0623 per 1,000 gallons of water sold would be required to repay the interfund loan recommended. A combined rate of $0.1753 per 1,000 gallons would be required for both these items. Staff recommends that non -sales revenues be used to finance the annual maintenance allowance and repayment of the loan from the Capital Projects Fund. Non -sales revenues are equal to $0.1731. The remainder ($0.0022) would be paid from net income. Staff proposes that 1983 water rates be set at $0.70 per 1,000 gallons and that the 1983 Water Fund Budget be adopted as presented in the exhibit labeled Water Fund - 1983 Proposed Income Statement.