6.4. SR 11-24-1997Item # 6.4.
iver
TO:
MEMORANDUM
Mayor and City Council
FROM: Pat Klaers, City Ad~m~i~'strator
DATE: November 24, 199~t~
SUBJECT: Budgets for the City Enterprise
Funds
The City Council has three enterprise funds under its management. These
enterprise funds are for the Liquor Store, Waste Water Treatment System
(WWTS), and the Garbage Collection Program. Attached for your review are
the details of these three enterprise budgets as projected for 1998 activities.
The City Council should review, discuss and (as appropriate) make changes
to these budgets and then consider a motion to approve these budgets for
1998.
The Garbage Collection Program began in 1990. In 1993 the billing
responsibilities for this program shifted to the Elk River Municipal Utilities.
Historically almost all of this budget (between 96 and 97 percent) is for the
fees that are paid to the three garbage collection firms that provide services
to the city and for the disposal of waste at the Refuse Derived Fuel (RDF)
plant, which is the designated destination by ordinance for the garbage. The
city offers three different garbage collection options to the residents and also
offers recycling to the residents on a bi-weekly basis.
In October, 1996, the city and the garbage haulers renegotiated a three year
contract. In this contract the change was made whereby the city only pays
the hauler for their collection services and the city directly pays for disposal
fees to the RDF plant. This change in city payments (we used to pay the
hauler for total services and the hauler in turn paid for disposal charges at
the RDF plant) was done in part due to the County implementing a county-
wide fee on households of $20 per year for waste management services. This
new fee by the County, along with the new renegotiated contract, allowed the
city to reduce its garbage rates in 1997 so that the Elk River households saw
no net change in their waste management expenses. However, it should be
noted that now Elk River households pay their waste management fee mostly
to the city with its monthly utility bill and partly to the County ($20 with the
tax bill).
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425
In 1998, the County is planning some additional changes in its management
of waste disposal. The County may eliminate the $20 expense on the tax bill,
but also may raise the tipping fee paid for waste disposal. This would make
the city increase its rates in order to cover its total expenditures. However,
nothing is final at this time and changes are only in the discussion stages.
Accordingly, the 1998 Garbage Collection budget is somewhat uncertain.
Staff has included a slight increase in solid waste charges, but has included
no rate increase to the customers. Therefore, staff is proposing the use of
reserves that have been built up over the past few years due to penalties to
balance the budget and will recommend adjustments in customer charges as
more information from the County becomes available.
1998 marks a new beginning for the Municipal Liquor Store operation. In
late 1997, the new and larger Northbound store began operation at the
northeast corner of Highway 169 and 193rd Avenue. All of the expenditures
for this construction project were outside of the annual liquor store budget, so
this project will not skew the comparisons between the 1998 and 1997 liquor
store budgets. However, there are a number of significant changes in the
budgets between 1997 and 1998. One of these major changes in the budgets
is in the capital outlay category. In 1997, this category included $375,000 for
the purchase of land for a future Westbound Liquor store. This expenditure
took place and no similar expenditure of funds for land is projected for 1998.
One expenditure in the 1998 budget that was not in the 1997 budget is the
$173,000 for debt service for the new liquor store. This new debt service
expenditure slightly offsets the capital outlay expenditure for land that was
in the 1997 budget. Due to the larger store being in operation in 1998, there
are additional personal services needed in comparison with 1997 to operate
the store. Additionally, the depreciation line item has significantly increased
from $23,000 in 1997 to $52,000 in 1998.
Included in the expenses for the liquor store is the continuation of the liquor
store transfer to the general fund in order to help keep taxes low. Over
$95,000 in transfers is dedicated to this purpose while the balance of the
transfers go toward retiring the debt for City Hall. This amount dedicated
toward City Hall debt has decreased in 1998 due to the refinancing of the
City Hall bonds.
Typically the WWTS budget receives sufficient operating revenues to meet its
operating expenses. Based on budget estimates, this may not be the case in
1998 and reserves will be required in order to meet the total obligations of
the WWTS. Operating revenues from the rate payers combined with sewer
connection charges and use of reserves in 1998 will finance the plant
operation, the debt on the 1994 and 1996 plant expansion projects, and
provide for depreciation funding. Expansion projects in excess of $5,000,000
were undertaken in 1994 and in 1996.
In anticipation of the plant expansions, and the need for additional revenues
to meet expenses, the City Council adopted a resolution in 1994 which called
for an increase in sewer user fees for 1994, 1995, and 1996. At this time, due
to uncertainty as to how the revenues and expenditures will balance out
because of the expanded plant, staff is recommending only an inflationary
increase of 2% per year for 1998 and 1999 in the sewer user fees. By mid to
late 1999, staff should have a better understanding as to the true
expenditures and revenues in the WWTS so then a more accurate
recommendation can be made on any necessary rate adjustments. At this
time, we are only looking for an inflationary increase to keep pace with the
cost of living expenses.
Recommendation
It is recommended that the City Council adopt a motion approving the three
attached enterprise fund budgets.
It is recommended that the City Council adopt Resolution- , a
resolution for the City of Elk River setting the sanitary sewer user fees for
1998 and 1999.
The agenda for the 11/24/97 City Council meeting is very modest and
Assistant City Administrator, Lori Johnson, and I will be in attendance at
this meeting. Therefore, if the City Council wants to discuss any budget
issues before the December 1, 1997, public hearing, we may have a good
opportunity for an open discussion at the end of this meeting. If no
discussion is desired by the City Council at the end of this meeting, then the
Council should know the plan for the December 1, 1997, public hearing. This
presentation plan is to review the September 8, 1997, maximum tax levy and
budget; do a presentation of some of the budget details; and review the
potential changes in the tax levy and budget as discussed by the City Council
on 10/27/97 and 11/3/97. Finally, a summary or an overview of some budget
changes as required by the Truth in Taxation Law will be presented.
Depending on the amount of budget detail information that is provided, the
presentation on 12/1/97 could be in the I hour range, which is similar to past
budget public hearing presentations.
GARBAGE COLLECTION PROGRAM
Provides for the coordination, with the Elk River Municipal Utilities for the
billing, of the garbage collection program. This budget includes expenditures
for service contracts for the collection of the city garbage and recycling
material, payments for disposal of waste at the Refuse Derived Fuel (RDF)
plant, and for the overall administration of the program.
1998 BUDGET COMPARED WITH 1997 BUDGET
The 1998 Garbage Collection Program budget is proposed in the amount of
$710,750. This is an approximately 7% or $46,000 increase over the adopted 1997
budget. The major expenses in the Garbage Collection Program are for the hauler
contracts and for waste disposal at the RDF plant. These two expenditures in 1998
equal approximately 96 percent of the total budget. A new three year contract,
which began in 1997, calls for the city to pay the haulers only for collection of
garbage and for the city to directly pay the RDF plant the waste disposal fee. In
this manner, the city hopes to be able to respond more immediately to changes in
the solid waste fee which would affect customer charges. In 1998, the County is
considering an increase in tipping fees. In anticipation of this increase, the 1998
budget includes an additional $35,000 in solid waste expenses. To offset this
additional expense, the city plans to use $29,750 worth of reserves. Once action by
the County on the tipping fee is finalized, the city will adjust its customer charges
accordingly. The increase in the Garbage Collection budget is due to this
anticipated change in the tipping fee by the County and to a growth in the number
of households that are covered by the program. The city Garbage Collection
Program only deals with residential properties of 4 units or less.
The revenues for the Garbage Collection Program are shown on the adjacent page.
All of the revenues come from customer charges. This includes the penalty fees and
the special assessment method for collection of non-paid bills. The projected
garbage collection revenues, including the use of reserves, match the projected
garbage collection expenditures.
The Elk River Municipal Utilities department collects the 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 and to
the RDF plant for waste disposal charges. Currently this city program bills
approximately 4,000 customers for service and this number is expected to increase
to approximately 4,150 by the end of 1998. The breakdown of the program shows
the collection of approximately 3,000 ninety gallon containers, 750 thirty-two gallon
containers, both of which are picked up weekly, and 250 thirty-two gallon
containers which are picked up bi-weekly. Recycling material is collected bi-weekly
and is available for all 3,900 customers.
GARBAGE COLLECTION
REVENUE ANALYSIS
1995 1996 1997 1998
ACTUAL ACTUAL ADOPTED PROPOSED
INTERGOVERNMENTAL
CHARGES FOR SERVICES
OTHER REVENUE
TOTAL REVENUES
USE OF RESERVES
TOTAL SOURCES OF FUNDS
$16,817 $13,729 $10,000 $10,000
678,046 720,674 646,000 660,000
13,645 14,757 8,000 11,OOO
$708,508 $749,160 $664,000 $681,000
0 0 0 29,750
$708,508 $749,160 $664,000 $710,750
INTERGOVERNMENTAL
Special Assessments
$10,000 $10,000
CHARGES FOR SERVICES
Garbage Customer Charges
OTHER REVENUE
Customer Penalties
TOTAL REVENUES
Use of Reserves
TOTAL SOURCE OF FUNDS
660,000 660,000
11,000 11,000
$681,000
$29,750
$710,750
EXPENDITURE ANALYSIS
1995 1996 1997 1998
ACTUAL ACTUAL ADOPTED PROPOSED
PERSONAL SERVICES
OTHER SERVICES AND CHARGES
TOTAL
$1,934 $1,552 $1,600 $1,750
689,958 732,003 663,000 709,000
$691,892 $733,555 $664,600 $710,750
PERSONAL SERVICES
Regular Salaries
Employee Pensions
Employee Insurance
...................................... $1,450
...................................... 160
...................................... 140
$1,750
OTHER SERVICES & CHARGES
Billing Services
Legal Services
Other Professional Services
Hauler Contracts
Solid Waste
21,500
1,500
1,000
445,000
240,000 709,000
9710,750
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.
1998 BUDGET COMPARED WITH 1997 BUDGET
The 1998 municipal liquor store budget is planned in the amount of
$701,250. This is a $174,950 decrease from the adopted 1997 budget. The
decrease in this budget is mainly due to the 1997 land purchase for $375,000
for the future Westbound Liquor store. This decrease is somewhat offset by
the new 1998 expenditure of $173,000 for debt service on the new
Northbound Liquor store, which was constructed and opened in 1997. The
difference between these two major budget changes is $202,000, which is
approximately $27,000 more than the total difference between the 1997 and
the 1998 budgets. The new larger store is the major reason why there is an
increase in personal services for 1998. Personal services are projected to
increase $36,500, which is a 16% increase over the adopted 1997 amount.
Other major changes in the liquor store budget include an increase in the
depreciation expense of $29,000 (to a total of $52,000) based on the new store
and a $27,000 decrease in transfers due to the refinancing of the City Hall
bond. These two major budget changes somewhat offset each other.
The revenue projections and an estimated income statement are listed below.
Gross profits are up significantly due mainly to low estimates in previous
budgets. The more accurate 1998 estimates are generally based on 1996
actual figures.
1995 1996 1997 1998
ACTUAL ACTUAL ESTIMATED ESTIMATED
SALES
COST OF SALES
GROSS PROFIT
OPERATING EXPENSES
OPERATING INCOME
OTHER INCOME:
INTEREST INCOME
MISCELLANEOUS
INCOME BEFORE TRANSFERS
TRANSFERS OUT
INCOME AFTER TRANSFERS
CAPITAL OUTLAY
DEBT SERVICE
BALANCE
$2,420,704 $2,703,795 $2,605,000 $2,800,000
1,857,526 2,074,270 2,024,500 2,155,000
563,178 629,525 580,500 645,000
275,855 292,064 322,750 391,950
287,323 337,461 257,750 253,050
36,612 30,344 10,000 12,000
637 475 0 0
324,572 368,280 267,750 265,050
183,450 163,450 153,450 126,300
141,122 204,830 114,300 138,750
403,371 51,066 400,000 10,000
0 0 0 173,000
(262,249) 153,764 (285,700) (44,250)
Liquor
Beer
Wine
Other Taxable Sales
Other Non-taxable Sales
Freight
REVENUE ANALYSIS
Sales Cost of Sales
..................................... $ 810,000 $ 620,000
..................................... 1,525,000 1,175,000
..................................... 315,000 235,000
..................................... 125,000 95,000
..................................... 25,000 18,000
..................................... 12,000
2,800,000 2,155,000
LIQUOR STORE
1995 1996 1997 1998
ACTUAL ACTUAL ADOPTED PROPOSED
PERSONAL SERVICES
SUPPLIES
OTHER SERVICES AND CHARGES
CAPITAL OUTLAY
DEBT SERVICE
TRANSFERS OUT
TOTAL
$195,373 $215,384 $226,000 $262,500
8,482 6,728 8,000 8,500
72,000 69,951 88,750 120,950
430,424 9,047 400,000 10,ooo
0 0 0 173,000
183,450 163,450 153,450 126,300
$889,729 $464,560 $876,200 $701,250
PERSONAL SERVICES
Regular Salaries
Overtime Salaries
Part Time Salaries
Employee Pensions
Employee Insurance
SUPPLIES
Operating Supplies
OTHER SERVICES & CHARGES
Audit
Other Professional Services
Telephone
Postage
Advertising
Repair & Maintenance
Rug & Laundry Services
Utilities
Insurance
Conferences & Schools
Dues & Subscriptions
Depreciation
Licenses & Taxes
Bank Charges
CAPITAL OUTLAY
Landscaping
Furniture & Equipment
DEBT SERVICE
Principal
Interest
TRANSFERS OUT
General Fund
General Fund - City Hall
City Hall Reserve
EXPENDITURE ANALYSIS
$171,150
7,000
38,000
24,600
21,750
8,500
2,500
1,500
3,000
150
9,000
7,000
1,500
20,000
10,500
4,800
900
52,000
600
7,500
5,000
5,000
90,000
83,000
95,050
28,400
2,850
9262,500
8,500
120,950
10,000
173,000
126,300
$701,250
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.
1998 BUDGET COMPARED WITH 1997 BUDGET
The 1998 Waste Water Treatment System (WWTS) budget calls for
expenditures in the amount of $1,099,650. This represents a $24,650 or 2.3%
increase over the adopted 1997 budget.
The modest change in the total increase in the budget does not reflect three
significant changes. The first change is a $132,600 increase in depreciation
expenses due to the new 5 million dollar plant expansion being completed in
1997. The second change is a scheduled decrease in debt service of $77,800
for the expansion project. The last change is a $48,000 decrease in capital
outlay based on the roof replacement and pickup truck being less in 1998
than the sludge hauling truck and trailer was in 1997. The remaining
expenditures in the WWTS are very similar in 1998 as compared to 1997.
There is a decrease in revenues projected for 1998. This is based on the
sewer connection charge for 1998 being $280,000 as compared to the
$425,000 estimate in 1997. The 1997 projection will not be reached. Unless
big volume sewer uses (major offices and industrial) are developed in 1998,
the city will use its reserves to balance the budget and to help pay for the
debt service for the plant expansion.
CHARGES FOR SERVICES
OTHER REVENUE
TOTAL REVENUES
USE OF RESERVES
TOTAL SOURCE OF FUNDS
1995 1996 1997 1998
ACTUAL ACTUAL ADOPTED PROPOSED
$554,537 $634,536 $600,000 $688,000
631,789 539,430 475,000 330,000
$1,186,326 $1,173,966 $1,O75,O00 $1,018,000
0 0 0 81,650
$1,186,326 $1,173,966 $1,075,000 $1,099,650
CHARGES FOR SERVICES
Customer Charges
OTHER REVENUE
Sewer Connection Charges
Interest Income
TOTAL REVENUES
Use of Reserves
TOTAL SOURCE OF FUNDS
REVENUE ANALYSIS
$688,000 $688,000
280,000
50,000 330,000
$1,018,000
$81,650
$1,099,650
WASTE WA TER TREATMENT SYSTEM
1995 1996 1997 1998
ACTUAL ACTUAL ADOPTED PROPOSED
PERSONAL SERVICES
SUPPLIES
OTHER SERVICES AND CHARGES
CAPITAL OUTLAY
DEBT SERVICE
TRANSFERS OUT
TOTAL
$201,046 $183,994 9208,000 $216,850
30,251 30,514 34,400 38,400
311,058 328,544 288,600 424,200
142,523 15,884 114,000 66,000
82,722 134,269 424,000 346,200
6,000 6,000 6,000 8,000
$773,600 9699,205 $1,075,000 91,099,650
PERSONAL SERVICES
Regular Salaries
Overtime Salaries
Part Time Salaries
Employee Pensions
Employee Insurance
SUPPLIES
Office Supplies
Operating Supplies
Motor Fuels & Lubricants
Rug & Laundry
Repair & Maintenance Supplies
Uniform Allowance
Small Tools
OTHER SERVICES & CHARGES
Engineering Services
Legal Services
Audit
Other Professional Services
Telephone
Postage
Printing & Publishing
Other Repair & Maintenance
Insurance
Solid Waste
Utilities
Cleaning Contract
Depreciation
Conferences & Schools
Dues & Subscriptions
Licenses & Taxes
CAPITAL OUTLAY
Buildings
Equipment
DEBT SERVICE
Principal
Interest
TRANSFERS OUT
General Fund
EXPENDITURE ANALYSIS
........................................ 9154,400
........................................ 14,000
........................................ 6,000
........................................ 19,650
........................................ 22,800
........................................ 1,300
........................................ 18,200
........................................ 4,000
........................................ 200
........................................ 10,500
........................................ 2,700
........................................ 1,500
........................................ 2,000
........................................ 2,000
........................................ 2,000
........................................ 1,100
........................................ 1,200
........................................ 8,500
........................................ 24,000
........................................ 2,200
........................................ 57,000
........................................ 2,600
........................................ 313,500
........................................ 2,200
........................................ 5,000
........................................ 40,000
........................................ 26,000
150,000
196,200
8,000
9216,850
38,40O
424,200
66,000
346,200
8,000
81,099,650
RESOLUTION 97 - 122
A RESOLUTION FOR THE CITY OF ELK RIVER
SETTING THE SANITARY SEWER USER FEES
FOR 1998 AND 1999
WHEREAS, the costs for providing sanitary sewer services are to be funded
through a user charge; and,
WHEREAS, the user charge is to cover ongoing operating expenses and
replacement and expansion expenses; and,
WHEREAS, sewer rates did not increase in 1997 even though operating
expenses increased due to inflation and are expected to
experience similar inflationary increases in 1998 and 1999.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Elk River that sanitary sewer user fees be set as follows:
1/1/98 1/1/99
Charge per 1,000 gallons
Minimum Charge
Apartment Unit Charge
House Unit Flat Charge
$ 2.88 $ 2.94
6.68 6.81
11.48 11.71
15.30 15.61
Passed and adopted by the City Council of the City of Elk River this 24th day
of November, 1997.
ATTEST:
John Dietz, Vice Mayor
Sandra A. Thackeray, City Clerk
kkelkriverXsys\shrdocXdocument\resoluti\sew9899.doc