Water Fund Overview
DESCRIPTION
The following section identifies and explains the overall revenue and expenditures planned for the Water Fund in 2024. It also identifies and explains revisions to the initial 2024 budget proposed last year and shows a 4 year table of changes in net position with estimated cash flows for the period from 2020 through 2024.
Water Revenue Sources
Water Fund revenues are estimated based on data provided by the rate consultant as part of a rate study as well as historic revenue trend analysis performed by the City's Finance and Utilities departments. The factor that most influences rate revenue at this time is consumption. Although water consumption can vary significantly from year to year depending on weather conditions, over the past 7 years water consumption has increased at an average rate of approximately 8/10% per year. However, YTD through august 2023,consumption is 12% below2022.This is primarily attributable to a wet and cool spring and first 1/2 of the summer. The last water rate adjustment occurred at the beginning of 2020 and there are no approved or planned rate adjustments for 2024. Estimated total revenue from all sources in the Water Fund are projected to be approximately $12.2 million for 2024. The table below illustrates the sources of revenue.
Water Revenue - Major Source Descriptions
Water Sales
The City s developing a master plan for the water fund to identify long term needs for continuing to provide reliable water service to current rate-payers and for system expansions to serve new rate-payers. It is anticipated that the City will collect approximately $10.6 million in 2024 in metered sales.
Water Connection Fee
The City water connection fee is charged based on water tap size at the time of building permit issuance. The connection fee consists of two components: water acquisition fee and the infrastructure fee. The connection fee is intended to cover the cost of acquiring water rights; conveying, storing and treating raw water; and conveying treated water to the tap. The adequacy of the water connection fee amount will be evaluated upon completion of the Water Master Plan.
Other Financing Sources
It is appropriate to finance through the issuance of debt, capital improvements that are needed to sustain existing service and needed to serve growth. Financed improvements are paid for by existing and future customers that benefit from those improvements. The water utility did borrow money for improvements in 2019 through a joint utility bond with the electric utility. At this time, no issuance of debt is planned for the water utility.
The suggested Revenue revisions to the 2024 initial proposed budget for the Water Fund are as follows:
Expense Overview
The table below indicates the expenditures by expense category for the years 2022 through 2024 including the 2022 actual results, the 2023 amended budget, year to date results through June, the initial 2024 proposed budget, suggested revisions to that budget and the 2024 proposed revised budget. Although capital expenditures are not treated as an actual expense for financial statement purposes, they are budgeted. This is typical of an enterprise fund. The Water Fund's capital expenditures for 2024 approximated $1.4 million.
The suggested Expense revisions to the 2024 initial proposed budget for the Water Fund are as follows:
The suggested Expense revisions to the 2024 initial proposed budget for the Water Fund are as follows (continued):
Water Fund expenses by Department are indicated in the table below for the years 2022 through 2024:
Water Fund Changes in Net Position
Budgets are completed on a cash basis, similar to a check book, which we call the budgetary basis. All government fund budgets are prepared in this manner. Funds reporting governmental activities are then reported for financial statement purposes on a modified cash basis, in accordance with Generally Accepted Accounting Principles (GAAP). Current assets less current liabilities are reported as fund balance, which approximates cash available for appropriation.
Utilities, however, are reported as proprietary funds on a full accrual basis, as if they were an independent business. The utilities report all of their assets and liabilities and the net is called net position. Net position reflects the investments in capital infrastructure less depreciation and long-term debt payments.
In the table below, actual and forecasted revenue and actual and budgeted expenditures for the 5 year period are shown on a budgetary basis and then adjusted for net position on a GAAP basis. The table indicates that continued capital infrastructure investments in this utility fund are not sustainable given the forecasted revenue and inflationary impacted future costs. As indicated, with the exception of 2021, when a large pre-payment of tap fees was received, cash position continues to decrease over the 5 years even though net position stays fairly stable.
