5.3. SR 11-23-1998'ity of
River
MEMORANDUM
Item 5.3.
TO:
FROM:
DATE:
SUBJECT:
Mayor & City Council
Pat Klaers, City Admi~h~
November 17, 1998 ~
Enterprise Funds
The City Council has three enterprise funds under its management. These
enterprise funds are the garbage collection program, the municipal liquor
store, and the wastewater treatment system (WWTS). Attached for your
review and consideration are the details for these three budgets.
The Garbage Collection Program began in November 1990. In 1993 the
billing responsibilities for this program shifted to the Elk River Municipal
Utilities. Approximately 96 percent of this budget is for fees that are paid to
the three garbage collection firms that are under contract to provide services
to the city and for the fee associated with the disposal of waste at the Refuse
Derived Fuel (RDF) Plant. Disposal of the waste at the RDF plant is
required in the city contracts. The city offers three different garbage
collection options to the residents and also offers recycling on a bi-weekly
basis.
In October 1996, the city and the garbage haulers renegotiated a three year
contract. This contract expires in October 1999. In this contract a change
was made from past practice whereby the city now pays for the disposal fees
at the RDF plant. (In the past, the hauler paid this fee and the expenses
were negotiated as part of their contracts.) This change was done in part due
to the County implementing a county wide fee on households of $20 per year
for waste management services in 1997. This new fee by the county along
with the renegotiated contract allowed the city to reduce its garbage rates in
1997 so that Elk River households saw no net change in their total waste
management expenses. Elk River households in 1997 and 1998 paid waste
management fees mostly to the city with their monthly utility bill and partly
to the county (i.e. $20 on their tax bill).
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425
In 1999, the county is removing the $20 charge on the tax bill and increasing
the tipping fee at the RDF plant. In this regard, the solid waste charges to
the city will increase in 1999. However, the city does not plan to increase its
charge9 to the customer by $20 per year and instead is planning to use some
of the reserves which has butt up in the garbage collection fund since
November 1990. Once the revenues are reduced and a new contract is
negotiated, rates to the customers for 2000 will be evaluated. One item that
may be negotiated with the haulers, which ultimately could lower rates to the
customers, is to release the haulers from the requirement of waste disposal at
the R/~F plant and let the haulers negotiate the best environmentally safe
contract for disposal. This expense would then be wrapped back into the
overallI contract with the haulers as it was prior to October 1996. With
contradt renegotiations coming up in 1999, there are a number of issues
which need to be evaluated including our commitment to the RDF plant,
getting the lowest possible fees for our customers, and considering an option
to turnl back the billing for services to the garbage haulers rather than
havingi the city continue with this responsibility.
The new Municipal Liquor Store at the corner of Highway 169 and 193rd
Avenue opened in October 1997. Accordingly, .1998 is the first full year of
operation at the larger Northbound store. Until year end totals are available
in early 1999, we will not have an accurate picture of expenditures and
revenues at the new facility. The proposed 1999 budget is based on the nine
month actual figures for 1998.
Overall the customer count at the new liquor store is down about i percent
and thb expenditures for labor are up from what was experienced at the old
facility. Both of these statistics are not a surprise, however, we do expect the
customer count to increase in the future. Initially profit at the liquor store
was ar~ticipated to decrease, but, over time, as labor costs stabilize and total
sales and customer counts increase, the profits are also expected to increase.
Nonetheless, annual total profit will be lower than what we experienced at
the oldi Northbound for a few years because that smaller facility operated
with much less personnel.
Northbound still has over 50 percent of its revenues generated from selling
beer and beer has the lowest profit margin of all the products sold at the
store. V~ine has the highest margin and is becoming a bigger seller at the
new facility. This new market for wine is also expected to help boost profits
in the future.
It should be noted that the transfers to the general fund have increased to
$110,000 for 1999. This transfer is for general city services and excludes the
$31,250 transfer for the city hall debt service.
Typically, the WWTS budget receives sufficient operating revenues to meet
its operating expenses. However, in 1999, use of reserves are being projected
in ordeW to balance the budget based on a low estimate for sewer connection
charges. Hopefully connection charges will be higher than what is estimated
and reserves will not be required. Additionally the Council should note that
depreciation is listed as an expense in the operating budget in the amount of
$313,500. These funds are being put away for emergencies, plant repairs,
and a Possible future plant expansion. When the plant was expanded it was
understood that some of these depreciation funds may be needed to balance
the bu~tgets.
As pre~iously discussed with the City Council, the debt service is a long term
obligation based on the approximately $5 million worth of expenses that were
undertaken in 1994 and in 1996 for the expansion of the treatment plant.
This annual debt payment is scheduled to remain level over the next 19
years. ,
The City Council adopted a resolution in 1997 which called for increases in
sewer User fees for 1998 and 1999. The rate increases approved were at the 2
percent per year level.
Recommendation
It is recommended that the City Council adopt a motion approving the three
attached enterprise fund budgets.
s:finance/budget/entfunds
GARBAGE COLLECTION PROGRAM
This budget includes expenditures for service contracts with haulers
for the collection of the city garbage and recychng material, payments
for disposal of waste at the Refuse Derived Fuel (RDF) plant, and for
the overall administration of the program, including coordination with
the Elk River Municipal Utilities for customer billing.
1999 BUDGET COMPARED WITH 1998 BUDGET
The 1998 garbage collection program budget is proposed in the amount of
$748,750. This is an approximately 5.3 percent or $38,000 increase over the
adopted 1998 budget. Most of this increase is due to more customers
(residents) receiving garbage and recychng services as the city's population
increases. The major expenses in the garbage collection program are for the
hauler payments and for waste disposal fees at the RDF plant. These two
expenditures in 1999 equal approximately 95.5 percent of the total budget.
The garbage hauler payments are anticipated to increase $40,000 or 9.2
percent due to growth in the number of customers in the city and due to a low
estimate in the 1998 budget. On the other hand, the sohd waste charge is
projected to decrease by $10,000 due mainly to a high estimate in 1998. This
decrease in sohd waste charges takes into consideration an increase in the
RDF tipping fees as estabhshed by the county. It should be noted that in
spite of this tipping fee increase by the county, the city is not planning to
increase its fees to the customers, but instead is planning on using reserves
which have been building up since the program began in November 1990.
All revenues for the garbage collection program are shown on the adjacent
page. All revenues, in one way or another, come from customer charges. The
projected garbage collection revenues, including the use of reserves, match
the projected expenditures.
The Elk River Municipal Utilities collects the garbage fees and remits the
money to the city on a monthly basis. The city then makes payments to the
garbage collection firms and the RDF plant. The garbage collection program
only deals with residential properties of four units or less. Currently the city
bills approximately 4,165 customers for service and this is expected to
increase to over 4,300 by the end of 1999. The breakdown of the program
shows the collection of approximately 3,130 ninety gallon containers, 785
thirty-two gallon containers, both of which are picked up weekly, and 250
thirty-two gallon containers which are picked up bi-weekly. Recychng
material is collected bi-weekly and the service is available for all 4,165
customers.
GARBA GE COLLECTION
INTERiGOVERNMENTAL
REVENUE ANALYS~S
1996 1997 1998 1999
ACTUAL ACTUAL ADOPTED PROPOSED
CHARiGES FOR SERVICES
OTHER REVENUE
TOTAL REVENUES
USE OF RESERVES
TOTAL SOURCES OF FUNDS
$13,729 $11,262 $10,OO0 $9,000
720,674 672,523 660,000 696,000
14,767 14,484 11,000 11,000
$749,160 $698,269 $681,O00 $716,000
0 0 29,750 32,750
$749,160 $698,269 $710,750 $748,750
INTERGOVERNMENTAL
Special Assessments
$9,000 $9,000
CHARGES FOR SERVICES
Garbage Customer Charges
OTHER REVENUE
Customer Penalties
TOTAL REVENUES
Use of Reserves
TOTAL SOURCE OF FUNDS
696,000 696,000
11,OO0 11,OO0
$716,OOO
$32,750
$748,750
PERSONAL SERVICES
EXPENDITURE ANALYSIS
1996 1997 1998 1999
ACTUAL ACTUAL ADOPTED PROPOSED
$1,552 $1,6OO $1,750 $2,050
OTHER SERVICES AND CHARGES
TOTAL
732,003 677,139 709,000 746,700
$733,555 $678,739 $710,750 $748,750
PERSONAL SERVICES
Regular Salaries
Employee Pensions
Employee Insurance
..................................... $1,500
..................................... 200
$2,050
OTHER SERVICES & CHARGES
Billing Services
Legal Services
Other Professional Services
Postage
Hauler Contracts
Solid Waste
..................................... 24,850
..................................... 6,000
..................................... 100
..................................... 485,000
..................................... 230,000
746,700
$748,750
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.
1999 BUDGET COMPARED WITH 1998 BUDGET
The 1999 municipal liquor store operating budget is planned in the amount
of $719,300. This is a $18,050 or 2.6 percent increase from the adopted 1998
budget. The changes include, in round numbers, the personal services going
up by $22,000; the supplies and other services/charges categories going up by
$12,000; the capital outlay category going down $4,000; the debt service
going down $27,000; and the transfers going up $15,000. Additional personal
services are required due to the new larger store which opened in October
1997 and the 1998 estimate appears to be slightly low. The transfer out
increase is due to an additional $15,000 being used for general city services
and activities. The contribution to the general fund in 1999 is $110,000.
This increase in transfers is more than offset by the debt service reduction.
Future debt payments are scheduled to be similar to the 1999 amount.
The revenue projections and an estimated income statement are listed below.
Gross profits are up due mainly to inflation of prices and also due to a low
estimate in 1998. Based on 1997 actual gross sales, the 1999 estimate may
even be low. A negative balance amount is anticipated at the end of 1999,
but this is slightly offset by the budgeted depreciation expense of $52,000.
1996 1997 1998 1999
ACTUAL ACTUAL ESTIMATED ESTIMATED
SALES $2,703,795 $2,887,798 $2,800,000 $3,000,000
COST OF SALES 2,074,270 2~212,344 2,155,000 2,308,600
GROSS PROFIT 629,525 675,454 645,000 691,400
OPERATING EXPENSES 292 064 352,551 391,950 426 050
OPERATING INCOME 337,461 322,903 253,050 265,350
OTHER INCOME:
INTEREST INCOME 30,344 28,692 12,000 12,000
MISCELLANEOUS 475 38,653 0 0
INCOME BEFORE TRANSFERS 368,280 390,246 265,050 277,350
TRANSFERS OUT 163,450 153,450 126,300 141,250
INCOME AFTER TRANSFERS 204,830 236,798 138,750 136,100
CAPITAL OUTLAY 51,066 10,000 6,000
DEBT SERVICE 0 0 173,000 146,000
BALANCE 153,764 236,798 (44,250) /15,900)
REVENUE ANALYSIS
Sales Cost of Sales
Liquor $ 885,000 $
Beer 1,584,000
Wine 378,000
Other Taxable Sales 128,000
Other Non-taxable Sales 25,000
Freight
720,000
1,215,000
270,000
90,000
13,600
3,000,000 2,308,600
· L/OUOR S TORE
PERSONAL SERVICES
SUPPLIES
OTHER SERVICES AND CHARGES
CAPITAL OUTLAY
DEBT SERVICE
TRANSFERS OUT
TOTAL'
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
Furniture & Equipment
DEBT SERVICE
Principal
Interest
TRANSFERS OUT
General Fund
City Hall Debt Service
1996 1997 1998 1999
ACTUAL ACTUAL ADOPTED PROPOSED
$215,384 $241,102 $262,500 $284,800
6,728 9,312 8,500 11,500
69,951 102,136 120,950 129,750
9,047 10,000 6,000
0 173,000 146,000
163,450 153,450 126,300 141,250
$464,560 $506,000
EXPENDITURE ANALYSIS
$701,250
80,250
7,000
50,000
27,000
20,550
11,500
2,000
2,000
4,000
150
12,000
8,000
2,000
24,000
8,000
4,800
1,1 O0
52,000
700
9,000
6,000
75,000
71,000
110,000
31,250
$719,300
$284,800
11,500
129,750
6,000
146,000
141,250
$719,300
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.
1999 BUDGET COMPARED WITH 1998 BUDGET
The 1999 waste water treatment system (WWTS) budget calls for
expenditures in the amount of $1,063,900. This represents a $35,750 or 3.3%
decrease from the adopted 1998 budget.
The main reason for the decrease in this budget is a $59,000 reduction in
capital outlay requests. In 1998, the roof was repaired and a truck was
purchased while in 1999 the only capital outlay projected is for some
sidewalk improvements around the plant. The only other change of note in
this budget is a $14,000 addition in supphes for new ultraviolet bulbs. These
bulbs are part of the treatment system at the main plant and have to be
replaced about every 26 months.
The WWTS budget requires the use of reserves in order to balance revenues
to expenditures. However, it should be noted that depreciation is budgeted
as an expense in the amount of $313,500. Additionally the sewer connection
charges are simply an estimate and the actual amount has been higher in
previous years than what is projected for 1999: In spite of using reserves to
balance this budget, this fund is in very good financial condition.
1996 1997 1998 1999
ACTUAL ACTUAL ADOPTED PROPOSED
CHARGES FOR SERVICES
OTHER REVENUE
TOTALREVENUES
USE OF RESERVES
TOTALSOURCE OFFUNDS
$634,536 $600,000 $688,000 $720,000
539,430 475 000 330,000 330,000
$1,173,966 $1,075,000 $1,018,000 $1,050,000
0 0 81,650 13,900
$1,173,966 $1,075,000 $1,099,650 $1,063.,900
CHARGES FOR SERVICES
CustomerCharges
OTHER REVENUE
Sewer Connection Charges
Interest Income
TOTAL REVENUES
Use of Reserves
REVENUE ANALYSIS
$720,000 $720,000
.......................................................... 280,000
................................ , ......................... 50,000
330,000
$1,050,000
$13,900
TOTAL SOURCE OF FUNDS $1,063,900
WASTE WA TER TREATMENT SYSTEM
1996 1997 1998 1999
ACTUAL ACTUAL ADOPTED PROPOSED
PERSONAL SERVICES
SUPPLIES
OTHER SERVICES AND CHARGES
CAPITAL OUTLAY
DEBT SERVICE
TRANSFERS OUT
TOTAL
$183,994 $187,435 $216,850 8229,050
30,514 32,118 38,400 53,300
328,544 353,978 424,200 428,400
15,884 66,000 7,000
134,269 217,318 346,200 338,150
6~000 6~000 8~000 8tO00
$699,205 $796,849 $1,099,650 $1,063,900
PERSONAL SERVICES
Regular Salaries
Overtime Salaries
Part Time Salaries
Employee Pensions
Employee Insurance
SUPPLIES
Office Supplies
Operating Supplies
Motor Fuels & Lubricants
Equipment Parts
Uniform Allowance
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
$164,150
14,000
6,000
20,650
24r250
1,600
33,500
4,000
11,500
2~700
3,000
2,000
2,000
6OO
1,100
lO0
8OO
9,500
23,0OO
3,300
59,000
2,800
313,500
2,500
200
5,000
7,000
160,000
178,150
8~000
$229,050
53,300
428,400
7,000
338,150
8~000
$1,063,900