8.1. SR 11-13-2001TO:
FROM:
DATE:
MEMORANDUM
Mayor and Council //~ ~
Pat Klaers, City Admij~~f~.-~
November 13, 2001
SUBJECT: Enterprise Fund Budgets
Item~ 8.1.
The city has three enterprise funds under its management. These funds are thc garbage
collection/recycling program, the municipal liquor store, and the wastewater treatment
system (WWTS). Attached for your review and consideration are the details for these three
budgets.
Garbage Collecdon/Rec~vclt'~g Program... This program began in November 1990. In
1993, the billing and collection responsibilities for this program shifted from the city to Elk
River Municipal Utilities.
In 1999, the City Council approved another rate reduction for our residential customers.
This rate reduction was based on thc renegotiated contract with thc garbage haulers. This
new contract is for five years and it expires in October 2004. The renegotiated contract with
the haulers also provided for a new (and popular) 60-gallon container option and for weekly
recycling pick-ups. This 60-gallon container is one of four main garbage collection container
and service options offered to the residents.
In late 2000, the city entered into a long-term contract with the county for disposal of
garbage to the Refuse-Derived Fuel Plant (RI)F). This contract established disposal fees at
$45 per ton through 2008.
Over the past 10 years the city has accumulated a larger than needed fund balance in the
garbage enterprise fund and it is appropriate to decrease this reserve. For the past two years
funds have been taken out of this reserve to balance the operating budget. In 2002 it is
projected that the city will use $76,250 out of this reserve. This will bring the fund balance
down to approximately $100,000, which is sufficient to cover our cash flow needs.
There is no change being proposed in the 2002 garbage collection rates. The rates
established by the City Council in 1999 for year 2000 are the same rates that are proposed
for 2002. It is expected that rates will increase in 2003 and this increase may be in the 10
percent range. It should be noted that in the mid 1990's, garbage rates were between 19 and
25 percent higher than they are today. In December 1996 rates went down about 10 percent
and then in January 2000 rates went down about another 10 percent. Our current rates are
the lowest in the surrounding area.
The 2002 expenditures for the garbage collection/recycling program are projected at
$820,750. This is a $9,400 or 1.2 percent increase over the adopted 2001 budget.
Approximately 96 percent of the expenditures go to the garbage haulers and to thc RDF
plant for disposal.
Municipal Liquor Store... The municipal liquor store is located at the northeast corner of
the Highway 169 and 19Yd Avenue intersection. This store opened in October 1997. The
third full year of operation was 2000 and these year end figures show profits and operating
income at our highest level ever. The attached 2002 budget is based on the 2000 actual
figures plus a slight increase in sales and a modest increase in operating expenses.
The operating budget for 2002 is proposed in the amount of $892,150. This is a $101,250 or
12.8 percent increase over the adopted 2001 budget. However, it should be noted that debt
service increased by $53,050. Without this significant increase in debt service, then the
budget would have increased 6.1 percent or $48,200.
One expenditure to note is a marketing study for $10,000 in the other professional services
line item. For a number of years, staff has been responding to inquiries about when a
Westbound liquor store would be built. The standard answer has been that funds are not
available and that the market is not yet favorable for a second store. Based on the successful
year we are experiencing in 2001 and based on projections for another successful year in
2002, it is estimated that funds will be available for a second store in the near future. The
biggest question remaining regarding a second store is the market, and to help us answer this
question we are providing funds in the 2002 budget for a professional market study to advise
the city if the timing is right for a second municipal liquor store. The market study would
have to take into consideration not only city (and area wide) growth and Highway 10 traffic
volumes but also potential legislative action that could impact the municipal liquor industry.
Wastewater Treatment System (WWTS)... The WWTS budget for 2001 shows revenues
exceeding expenditures. Whenever the actual year end revenues exceed expenditures, the
excess monies are placed into the VCa¢TTS reserves. These reserves are then used to help pay
for the plant expansion debt when SAC fees are not sufficient; are saved for the second
phase of the plant expansion, which will increases capacity from 1.7 to 2.1 mgd; and are used
for any major equipment or building repairs that may unexpectedly be required. Some of
these major expenditures, like the estimated $300,000 for the digester cover, are known to be
needed, but the timing is not known and we will have to be prepared to respond when the
digester cover is no longer fixable. The city does not spend these reserve monies until
necessary, but funds must be available for this type of required expenses.
The VcAX/TS budget is very straightforward and there are no surprises for 2002. Revenues are
projected to increase by 6.9 percent or $84,000 and this is due mainly to an increase in the
number of customers on the sewer system. The expenditures are proposed to increase 5.2
percent or $59,850. Most of this increase is in the capital outlay category. The '9C¢7TS
department includes the chief operator, three full time employees, plus one seasonal
employee during the summer.
In order to keep pace with inflation and cost of living expenses, and to ensure that adequate
funding is available to meet operating expenses and major repair/replacement expenses, the
city has increased sewer rates about 2 percent per year for the past seven years or so. It is
recommended that these inflationary increases in the sewer rates continue. Attached for your
consideration is a resolution, which increases the rates by 2.5 percent for 2002 and for 2003.
Additionally, it should be noted that SAC fees (connection charges) have not increased since
1987 and are still at the $1,300 per unit amount. In the late 80's the city had the highest SAC
rate in the area but at this time we are slightly low when compared to our neighboring
communities. An increase in the SAC rates may be appropriate but our timing is not good. A
new State law was passed that requires the reporting of all municipal building related
revenues and expenditures. The purpose of the report is to see if cities are making a "profit"
off of development and if city fees are making it difficult for the construction of affordable
housing. In this regard, SAC fees will be part of the equation. The SAC fee allows new
homeowners to "buy into" the existing plant and infrastructure that has been constructed
for the sewer system to operate in accordance to MPCA laws. These are one time funds
collected when building permits arc issued and are generally used to pay for debt on the
facility.
Recomrne~datio~
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 01-__ establishing the sanitary
sewer rates for 2002 and 2003.
s:\ finance\budget\entfunds,doc
GARBAGE COLLECTION PROGRAM
This budget includes expenditures for service contracts with haulers 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, including coordination with the Elk River Municipal Utilities for customer
billing.
2002 BUDGET COMPARED WITH 2001 BUDGET
The city began its organized residential garbage collection and recycling program in
November 1990. The garbage collection and recycling program deals only with residential
properties of four units or less. The Elk River Municipal Utilities collects the garbage fees
for the city. The city makes payments to the garbage collection firms for services and to the
RDF plant for disposal.
Currently, the city has approximately 4,800 customers. The breakdown of the major users of
the program shows: 3330 ninety gallon containers, 450 sixty gallon containers, 640 thirty-two
gallon containers, and 230 thirty-two gallon (bi-weekly) containers. Recycling material is
picked up weekly except for the households that have bi-weekly garbage service.
In October 1999, a five-year contract was entered into between the city and the garbage
haulers. This new contract allowed for rates to go down and for a new 60-gallon container
option. The financial impact of this new contract and container option was difficult to
estimate and both the projected 2001 revenues and expenditures are overstated.
The 2002 garbage collection and recycling program budget is proposed in the amount of
$820,750. This is a $9,400 or 1.2 percent increase over the adopted 2001 budget. This
modest increase is due to high estimates being used for the 2001 budget. The only increase
of note in this budget is in the solid waste fees paid to the RDF plant based on the disposal
of a higher volume of garbage. The garbage hauler payment and the waste disposal fee
amounts to 96% of the total budget. This figure is consistent with previous years.
In 2002 the city will again use some reserves to balance the budget and to keep rates at the
current level. In 2000 and 2001 the city will have used about $130,000 of its reserves and
plans call for using $76,250 in 2002 to balance the budget. This will leave the garbage fund
balance at approximately $100,000 by the end of 2002, which is sufficient to meet cash flow
needs. Currently, the city household garbage collection and recycling rates are lower than
surrounding neighbors. These rates will be evaluated in later 2002 for a possible adjustment
in 2003.
GARBA GE COLLECTION
REVENUE ANALYSIS
1999 2000 2001 2002
ACTUAL ACTUAL ADOPTED PROPOSED
INTERGOVERNMENTAL
CHARGES FOR SERVICES
OTHER REVENUE
TOTAL REVENUES
USE OF RESERVES
TOTAL SOURCES OF FUNDS
20,945 $ 6,904 $ 6,000 $ 5,000
745,866 679,911 730,850 725,500
104,443 27,343 21,000 14,000
871,254 $ 714,158 $ 757,850 $ 744,500
0 0 53,500 76,250
871,254 $ 714,158 $ 811,350 $ 820,750
INTERGOVERNMENTAL
County Grant
Special Assessments
...................................... 5,000 $ 5,000
CHARGES FOR SERVICES
Garbage Customer Charges
OTHER REVENUE
Interest Income
Customer Penalties
TOTAL REVENUES
Use of Reserves
TOTAL SOURCE OF FUNDS
725,500 725,500
...................................... 4,000
...................................... 10,000 14,000
744,500
76,250
$ 820,750
EXPENDITURE ANALYSIS
1999 2000 2001 2002
ACTUAL ACTUAL ADOPTED PROPOSED
PERSONAL SERVICES
OTHER SERVICES AND CHARGES
TOTAL
4,843 $ $ 4,050 $ 3,650
743,842 777,464 807,300 817,100
$ 748,685 $ 777,464 $ 811,350 $ 820,750
PERSONAL SERVICES
Regular Salaries
Employee Pensions
Employee Insurance
..................................... $ 3,200
...................................... 400
$ 3,650
OTHER SERVICES & CHARGES
Billing Services
Legal Services
Other Professional Services
Postage
Hauler Contracts
Solid Waste
...................................... 25,500
...................................... 1,000
...................................... 100
...................................... 547,000
...................................... 243,000
817,100
820,750
LIQUOR STORE
Provides for the total operation of the Elk River Municipal Liquor store as
authorized by Minnesota State Law and the Elk River City Council.
2002 BUDGET COMPARED WITH 2001 BUDGET
The 2002 municipal liquor store operating budget is proposed in the amount of $892,150.
This is a $101,250 or 12.8 percent increase over the adopted 2001 budget. The largest
increase in this 2002 budget is in the debt service category which increased by $53,050.
When removing this budget category from the analysis, the rest of the 2002 budget increased
6.1 percent or $48,200. Additional expenses in 2002 include: $15,700 increase in personnel
services for normal wage adjustments; $10,000 in other professional services for a second
municipal liquor store market feasibility study; and a $10,000 increase in transfers to the
general fund. In 2002 the capital outlay request is for new registers at the check-out counters
and some computer related equipment.
The 2002 estimated income statement for the liquor store is shown below. The operating
expenses from the adjacent page are shown in a slightly different format in the income
statement. The personnel services, supplies, and other services/charges are grouped as
operating expenses, while the transfers, capital ouday, and debt expenses are listed
separately. The sales revenues projected for 2002 is 5.2 percent more than the actual 2000
figure and 4 percent above the 2001 adopted budget. The year-end balance projection is
almost identical to the 2001 estimate even when considering the larger debt service payment.
The balance is projected in the amount of $147,350 for 2002.
The liquor store operation has a manager plus 4 full time and between 4 and 7 part time
employees.
1999 2000 2001 2002
ACTUAL ACTUAL ESTIMATED ESTIMATED
SALES $3,478,937 $3,788,048 $3,826,400 $3,985,350
COST OF SALES 2,652,392 2,846,327 2,920,050 2,987,350
GROSS PROFIT 826,545 941,721 906,350 998,000
OPERATING EXPENSES 431,835 451,197 490,150 531,150
OPE1LATING INCOME 394,710 490,524 416,200 466,850
OTHER INCOME:
INTEREST INCOME 22,309 78,782 30,000 40,000
MISCELLANEOUS 1,524 (6,766) 2,000 1,500
INCOME BEFO1LE T1LANSFERS 418,543 562,540 448,200 508,350
TRANSFERS OUT 141,250 146,400 148,300 158,300
INCOME AFTER TRANSFERS 277,293 416,140 299,900 350,050
CAPITAL OUTLAY 5,662 9,985 11,500 8,700
DEBT SERVICE 145,961 146,040 140,950 194,000
BALANCE 125,670 260,115 147,450 147,350
Liquor
Wine
Other Sales
Freight
REVENUE ANALYSIS
Sales
.................................. $1,193,400 $ 895,050
.................................. 1,985,750 1,529,050
.................................. 592,450 408,800
.................................. 213,750 138,950
.................................. 15,500
Cost of Sales
$3_985_350 $2_987_35~0
LIQUOR STORE
1999 2000 2001 2002
ACTUAL ACTUAL ADOPTED PROPOSED
PERSONAL SERVICES
SUPPLIES
OTHER SERVICES AND CHARGES
CAPITAL OUTLAY
DEBT SERVICE
TRANSFERS OUT
TOTAL
270,618 $ 279,743 $ 312,400 $ 328,100
11,075 12,158 12,000 15,000
150,143 159,296 165,750 188,050
5,662 9,985 11,500 8,700
145,961 146,040 140,950 194,000
141,250 146,400 148,300 158,300
724,709 $ 753,622 $ 790,900 ~ 892,150
PERSONAL SERVICES
Regular Salaries
Overtime Salaries
Part Time Salaries
Employee Pensions
Employee Insurance
SUPPLIES
Operating Supplies
Uniforms
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 & Uncollectible Debt
CAPITAL OUTLAY
Furniture & Equipment
DEBT SERVICE
Principal
Interest
TRANSFERS OUT
General Fund
City Hall Debt Service
EXPENDITURE ANALYSIS
........................................ $ 203,800
........................................ 2,000
........................................ 62,000
........................................ 31,400
........................................ 28,900
........................................ 13,000
........................................ 2,000
2,900
10,500
4,400
50
17,000
8,000
4,000
25,000
6,000
2,500
1,200
80,000
1,000
25,500
8,700
140,000
54,000
120,000
38,300
$328,100
15,000
188,050
8,700
194,000
158,300
892,150
WASTE WATER TREATI~IENT SYSTEPI
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.
2002 BUDGET COMPARED WITH 2001 BUDGET
The 2002 wastewater treatment system (WWTS) budget calls for expenditures in the amount
of $1,219,150. This represents a $59,850 or 5.2% increase over the adopted 2001 budget.
Over half of this WWTS budget is for plant depreciation and debt service.
The main reason for this budget increase is the additional capital outlay expenditures. The
2002 capital outlay category calls for $44,000 to be spent retrofitting the Jackson Avenue lift
station. This is the oldest and one of the most heavily used lift station in the city. This lift
station serves thc Elk River industrial park and the secondary schools. This lift station is
showing some "wear and tear" and the city would rather be proactive and not wait until an
emergency situation develops at this lift station. The other major expenditure in this budget
category is for the slip-line projects at 6th and 7th Street off of Irving Avenue, and 8th Street
off of Upland Avenue. The slip-line projects are similar to the one completed in the Holt
Avenue and 8th Street area in 2000, whereby the sewer main in the street is lined in order to
limit penetration by tree roots and backup problems. The other increases in the WWTS
budget are in the personal services category for normal wage adjustments, in the supplies
category for purchase of ultra-violet hght bulbs (required every other year or so), and a
$10,000 increase in the depreciation line item. The WWTS department includes four full-
time employees plus one summer seasonal employee.
Based on the 2002 projections, it appears that the WWTS revenues will exceed expenditures.
The biggest uncertainty in projecting revenues relates to SAC charges, which are based on
new buildings being constructed in the urban service district. The $280,000 SAC projection
for 2002 is based on building permits being issued for 215 single-family homes. Any excess
funds in the WWTS budget will be reserved for future major repair/maintenance expenses
or for bond payments when SAC fees are insufficient.
1999 2000 2001 2002
ACTUAL ACTUAL ADOPTED PROPOSED
CIIARGES FOR SERVICES
OTHER ILl;VENUE
TOTAL REVENUES
USE OF RESERVES
TOTAL SOURCE OF FUNDS
$797,101 $877,655 $850,000 $950,000
460,378 821,379 376,000 360,000
$1,257,479 $1,699,034 $1,226,000 $l,310,000
0 0 0 0
$1,257,479 $1,699,034 $1,226,000 $1,310,000
CHARGES FOR SERVICES
Customer Charges
OTHER REVENUE
Sewer Connection Charges
Intcrcst Income
REVENUE ANALYSIS
$950,000 $950,000
280,000
80,000 360,000
TOTAL REVENUES $1,310,000
WASTE WA TER TREATMENT SYSTEM
1999 2000 2001 2002
ACTUAL ACTUAL ADOPTED PROPOSED
PERSONAL SERVICES
SUPPLIES
OTHER SERVICES AND CHARGES
CAPITAL OUTLAY
DEBT SERVICE
TRANSFERS OUT
TOTAL
$207,111 $206,941 $231,250 $241,700
53,524 34,761 39,100 49,900
431,384 515,167 432,350 448,700
129,359 99,143 76,000 112,500
348,914 360,821 370,600 342,100
8,000 10,000 10,000 24,250
$1,178,292 $1,226,833 $1,159,300 $1,219,150
PERSONAL SERVICES
Regular Salaries
Overtime Salaries
Part Time Salaries
Employee Pensions
Employee Insurance
SUPPLIES
Office Supplies
Operating Supplies
Motor Fuels & Lubricants
Equipment Parts
OTHER SERVICES & CHARGES
Engineering Services
Audit
Other Professional Services
Telephone
Postage
Printing & Publishing
Repair & Maintenance
Insurance
Solid Waste
Utilities
Cleaning Services
Contractual Services
Uniform Rental
Depreciation
Conferences & Schools
Dues & Subscriptions
Licenses & Taxes
CAPITAL OUTLAY
Buildings
Improvement Project
Equipment
DEBT SERVICE
Principal
Interest
TRANSFERS OUT
General Fund
Debt Service
EXPENDITURE ANALYSIS
$169,300
17,850
6,000
22,400
26,150
$241,700
8OO
26,100
4,0O0
19,000 49,900
10,000
2,800
4,800
3,100
150
450
15,100
8,000
3,300
64,000
200
4,500
1,900
320,000
3,500
200
6,700
448,700
52,000
60,500 112,500
180,000
162,100 342,100
10,000
14,250 24,250
$1,219,150
RESOLUTION 01 -
A RESOLUTION FOR THE CITY OF ELK RIVER
SETTING THE SANITARY SEWER USER FEES
FOR 2002 AND 2003
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 need to be adjusted to cover increases in operating
expenses due to inflation that is expected in 2002 and 2003.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Elk River that sanitary sewer user fees be set as follows:
4/1/02 4/1/03
Charge per 1,000 gallons
Minimum Charge
Apartment Unit Charge
House Unit Flat Charge
$ 3.10 $ 3.18
7.20 7.38
12.37 12.68
16.25 16.66
Passed and adopted by the City Council of the City of Elk River this __
November, 2001.
day of
ATTEST:
Stephanie Klinzing, Mayor
Sandra A. Peine, City Clerk
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