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5.6. SR 11-20-1995ry o ikkl River ITEM 5.6. 10 10 WIM11i1M TO: Mayor & City Council FROM: Pat Klaers, City Admin ator DATE: November 20, 1995 P SUBJECT: Enterprise Funds Budget The City Council has three enterprise funds under its control. These enterprise funds are for the liquor store, wastewater treatment system (WWTS), and the garbage collection program. Attached for your review are the details of these three enterprise budgets as projected for 1996 activities. The City Council should review, discuss, and, as appropriate, change these budgets and then consider a motion to approve the budgets for 1996. The garbage collection program began in 1990. In 1993 the billing . responsibility for this program shifted to the Elk River Municipal Utilities department. Almost all of this budget (97 %) is for the fees that are paid to the three garbage collection firms that are contracted to provide services in the city. The city offers recycling to the residents on a bi- weekly basis and offers three different options for garbage collection services. The liquor store budget has generated a significant surplus of revenues over expenditures for the last ten years. A large part of this surplus is transferred into the general fund to help finance the Fire Hall expansion project, the City Hall facility, and the general operation of the city. In the past few years, in addition to the annual $58,000 for public buildings, anywhere from $85,000 to $125,000, has been transferred to the general fund to finance government activities in order to help keep the city tax levy and tax rate down. After the transfers into the general fund, the balance of excess revenues over expenditures is retained in the liquor store reserve. These funds are necessary for inventory purposes and in order to make improvements in the liquor store facility along with planning for the future. This future may include an additional facility as the community grows, and a new upgraded facility at a different Highway 169 location. A tentative new Northbound Liquor store site was purchased in 1995. • The WWTS budget receives operating revenues that are sufficient to meet its operating expenditures. Excess operating revenues are combined with sewer 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441 -7420 • Fax: (612) 441 -7425 connection charges to help finance the plant expansion and to provide for depreciation funding. A $1 million phase one of the treatment plant expansion was undertaken in 1994, and the principal payment for this project is due in 1996. The balance of the treatment plant expansion project, estimated at $4.8 million, is proposed to be undertaken in 1996 with the first bond payment due in 1997. Funding for this plant expansion project still needs to be approved by the City Council. I] GARBAGE COLLECTION PROGRAM - -- Provides for the coordination with the Elk River Municipal Utilities • for the billing of the garbage collection program. The garbage collection program includes expenditures for the total administration and service contracts for the operation of the City garbage and recycling collection program. 1996 BUDGET COMPARED WITH 1995 BUDGET The 1996 Garbage Collection Program budget is proposed in the amount of $697,750. This is $19,100 less than the adopted 1995 budget. The reason for this budget decrease is a more accurate estimate for the haulers contract. The garbage haulers contract is the single largest item in the Garbage Collection budget and this fee was estimated high in the 1995 budget. The contract amount is approximately 97 percent of the total budget. The other expenses in the Garbage Collection Program includes expenses for the Zoning Assistant to help in the administration of the program; the fee charged by the Municipal Utilities to bill out and collect the garbage charges; for miscellaneous legal expenses related to the ordinance and contract; and for the audit. • In the early years of the program, the charges for services to the residents did not cover all of the operating expenses and the garbage fund showed an operating loss. This operating loss was due to the city subsidizing the 32 gallon bi- weekly pick up service, and due to the city subsidizing the plastics component of the recycling program. This subsidy was funded from the Landfill surcharge that is designated for waste abatement purposes. In 1994, the garbage charges to the residents were decreased and restructured due to a reduction in the tipping fee paid by the garbage haulers at the Refuse Derived Fuel plant. Through the restructuring of the fees to the residents, it is estimated that the garbage collection budget will be self sufficient in 1995 and beyond. Fees that are not paid by the residents are assessed to their property taxes as allowed by state law. The Elk River Municipal Utilities department collects garbage fees and remits the money to the city on a monthly basis. The city then makes monthly payments to the three garbage collection firms which are under contract with the city. Currently this program bills for the collection of approximately 2,500 ninety gallon containers, 560 thirty -two gallon containers, both of which are picked up weekly, and 250 thirty -two gallon containers which are picked up bi- weekly. • Projected 1996 revenues for customer charges, late penalties, and interest income are anticipated to be approximately $700,000. • r� LJ GARBAGE COLLECT /ON 1993 1994 1995 1996 ACTUAL ACTUAL ADOPTED PROPOSED PERSONAL SERVICES $15,499 $1,911 $2,150 $2,350 OTHER SERVICES AND CHARGES. 672,385 680,354 714,700 695,400 TOTAL $687,884 $682,265 $716,850 $697,750 PERSONAL SERVICES Regular Salaries Overtime Salaries Employee Pensions Employee Insurance OTHER SERVICES AND CHARGES Billing Services Legal Services Hauler Contracts Other Professional Services EXPENDITURE ANALYSIS $1,850 100 200 244 $2,350 18,000 1,000 675,000 1,400 695,400 $697,750 LIQUOR STORE FUND . - -- Provides for the total operation of the Elk River Municipal Liquor store as authorized by Minnesota State Law and the Elk River City Council. 1996 BUDGET COMPARED WITH 1995 BUDGET The 1995 and 1996 liquor store year end income projections are shown below. The projections for gross operating profit are based on a percentage and historically have been conservative as the actual cost of sales generally are not as high as projected. The 1996 Municipal Liquor Store budget is planned in the amount of $483,050. This is a $12,300 decrease from the adopted 1995 budget. Almost all of the decrease is located in the transfers out to the general fund. Most of the other liquor store expenditures are stable from year to year, but there are some annual increases in personal services. In 1996, the area of most change in this budget is in the general fund transfers out line item. This expense went up $40,000 in 1995 and has decreased by half of this amount, or $20,000, in 1996. The city has a need to save funds for future . capital outlay items so it is attempting to keep the transfers out near the 1990 -94 level which was $83,450. The capital outlay needs include the long term plan to construct a new Northbound Liquor store and to sell its current facility. Fees for preliminary architectural services for this project are included in this 1996 budget. A short term goal is to obtain land for a Westbound Liquor store which may ultimately be needed to serve the community as the population increases. 1996 Proiected 1995 Adopted Sales $2,350,000 $2,300,000 Cost of Sales 1,815,000 1,778,000 Gross Profit 535,000 522,000 Operating Expenses 318,250 308,900 Operating Income 216,750 213,100 Interest Income 38,000 25,000 Net Income Before Transfers 254,750 238,100 Transfers In (Out) City Hall Reserve Fund (30,000) (30,000) General Fund (105,050) (125,050) General Fund -Fire Lease (28,400) (28,400) Income After Transfers Capital Outlay 91,300 (1,350) 54,650 (3,000) Balance After Capital Outlay $89,950 $51,650 LIQUOR STORE • 1993 ACTUAL 1994 ACTUAL 1995 ADOPTED 1996 PROPOSED PERSONAL SERVICES $184,458 $189,908 $205,300 $220,000 SUPPLIES 6,264 6,353 7,000 6,000 OTHER SERVICES AND CHARGES 63,458 69,943 96,600 92,250 CAPITAL OUTLAY 8,857 8,549 3,000 1,350 TRANSFERS OUT 153,450 173,450 183,450 163,450 TOTAL $416,487 $448,203 $495,350 $483,050 450 EXPENDITURE ANALYSIS .......... ............................... 500 PERSONAL SERVICES Regular Salaries .......... ............................... $128,000 Overtime Salaries .......... ............................... 1,500 Part Time Salaries .......... ............................... 42,000 Employee Pensions .......... ............................... 19,000 Employee Insurance ................ ......................... 29.500 $220,000 SUPPLIES Operating Supplies ............... .......................... 6.000 6,000 OTHER SERVICES AND CHARGES Audit.......... ............................... 6,250 • Other Professional Services Telephone .......... ............................... .......... ............................... 6,500 2,500 Postage.......... ............................... 150 Advertising .......... ............................... 7,500 Repair & Maintenance .......... ............................... 7,000 Rug & Laundry Services .......... ............................... 1,250 Utilities .......... ............................... 15,500 Insurance .......... ............................... 12,000 Conferences & Schools .......... ............................... 4,800 Dues & Subscriptions .......... ............................... 850 Depreciation .......... ............................... 23,000 Licenses & Taxes .......... ............................... 450 CashShort .......... ............................... 500 Bank Charges ............... .......................... 4.000 92,250 CAPITAL OUTLAY Furniture & Equipment ............... .......................... 1.350 1,350 TRANSFERS OUT General Fund .......... ............................... 105,050 General Fund - Fire Station .......... ............................... 28,400 City Hall Reserve ................ ......................... 30.000 163,450 $483,050 WASTE WATER TREATMENT SYSTEM - -- Provides for the administration, operation and maintenance of the sanitary sewer system, laboratory and lift stations for the sanitary treatment of household, commercial and industrial waste deposited into the sanitary sewer system. 1996 BUDGET COMPARED WITH 1995 BUDGET The 1996 Waste Water Treatment System (WWTS) budget calls for expenditures in the amount of $799,500. This represents a $93,700 increase from the adopted 1995 budget. Almost all of the budget increase can be located in the depreciation line item, the capital outlay category, and the sewer debt service line item. These categories and line items represent $433,600 in 1996 and represented only $349,000 in 1995. This is an $84,600 difference. The rest of the increase in this budget can be identified in the personal services category. One main reason for this budget increase is that in 1994 a $1 million trickling filter plant expansion took place and the bonds for this project start to be paid in 1996. Also, a major capital outlay is planned in 1996 which was not in the 1995 budget. This capital outlay is for the purchase of additional sludge disposal land. In 1997, another major capital outlay expense is planned for a sludge truck. The depreciation amount is approximately the same as in 1995 but has been separated out and is necessary for emergencies and for plant replacement expenses in the future. The city is scheduled to award bids for the $4.8 million plant expansion in 1996. Bonds for this project will begin to be paid in 1997. Expenditures for various operations of the WWTS are shown below. Customer charges for 1996 are estimated at $525,000. Accordingly, it is anticipated that some of the expenses for the depreciation and debt service line items will be financed through the sewer connection charges which are generated from new hook ups to the sewer system. 1996 Projected 1995 Budget Plant Administration $177,230 $ 50,350 Plant Operations 177,915 181,550 Laboratory 47,065 49,250 Sewer System Collection 26,820 40,800 Lift Stations 71,170 53,850 Reserve/Depreciation & 500,200 299,300 375,800 330,000 Debt Service $799,500 $705,800 WASTE WA TER TREA TMENT SYSTEM PERSONAL SERVICES Regular Salaries ......... ............................... $159,800 Overtime Salaries ......... ............................... 8,800 Part Time Salaries ......... ............................... 3,650 Employee Pensions ......... ............................... 18,000 Employee Insurance .................. --------- ______ 9A. qrn SUPPLIES Office Supplies 1993 1994 1995 1996 12,650 ACTUAL ACTUAL ADOPTED PROPOSED • PERSONAL SERVICES $171,251 $167,830 $203,400 $215,600 SUPPLIES 24,534 22,568 28,400 34,000 OTHER SERVICES AND CHARGES 92,566 116,372 118,700 272,300 CAPITAL OUTLAY 300,000 300,000 349,300 137,300 TRANSFERS OUT 6,000 6,000 6,000 140,300 TOTAL $594,351 $612,770 $705,800 $799,500 ......... ............................... EXPENDITURE ANALYSIS Postage......... ............................... PERSONAL SERVICES Regular Salaries ......... ............................... $159,800 Overtime Salaries ......... ............................... 8,800 Part Time Salaries ......... ............................... 3,650 Employee Pensions ......... ............................... 18,000 Employee Insurance .................. --------- ______ 9A. qrn SUPPLIES Office Supplies ......... ............................... 200 Operating Supplies ......... ............................... 12,650 Motor Fuels & Lubricants ......... ............................... 3,600 Chemicals......... ............................... 3,400 Rug & Laundry ......... ............................... 150 Repair & Maintenance Supplies ......... ............................... 10,000 Uniform Allowance ......... ............................... 2,500 Small Tools • .............. .......................... 1.500 OTHER SERVICES AND CHARGES Engineering Services ......... ............................... 5,000 Legal Services ......... ............................... 2,500 Audit......... ............................... 3,500 Other Professional Services ......... ............................... 1,500 Telephone ......... ............................... 900 Postage......... ............................... 100 Printing & Publishing ......... ............................... 1,200 Other Repair & Maintenance ......... ............................... 9,000 Insurance ......... ............................... 27,900 SolidWaste ......... ............................... 2,000 Utilities ......... ............................... 48,000 Depreciation ......... ............................... 165,000 Conferences & Schools ......... ............................... 2,000 Dues & Subscriptions ......... ............................... 200 Licenses & Taxes ......... ............................... 3.500 CAPITAL OUTLAY Land ......... ............................... 115,000 Equipment............... ......................... 22.300 • TRANSFERS OUT General Fund ......... ............................... 6,000 1994B Sewer Debt Service ................. ....................... 134.300 $215,600 34,000 272,300 137,300 ten 4nn $799,500