Water Fund Overview
DESCRIPTION
The following section identifies and explains the overall revenue and expenditures planned for the Water Fund in 2022. It also identifies and explains revisions to the initial 2022 budget proposed last year and shows a 3 year table of changes in net position.
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 3/4% per year. The last water rate adjustment occurred at the beginning of 2020 and there are no approved or planned rate adjustments for either 2021 or 2022. Estimated total revenue from all sources in the Water Fund are projected to be approximately $14.7 million for 2021 and $12.4 million for 2022. 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 $10.8 million and $11 million in 2021 and 2022, respectively, 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 2022 initial proposed budget for the Water Fund are as follows:
Expense Overview
The table below indicates the expenditures by expense category for the years 2020 through 2022 including the 2020 actual results, the 2021 amended budget and year to date results, the intial 2022 proposed budget, suggested revisions to that budget and the 2022 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 2020 approximated $6.4 million. Total expenditures therefore exceeded actual revenues for 2020. However, the 2019 bond proceeds and revenues were used to cover the capital costs.
The suggested Expense revisions to the 2022 initial proposed budget for the Water Fund are as follows:
The suggested Expense revisions to the 2022 initial proposed budget for the Water Fund are as follows (continued):
Water Fund expenses by Department are indicated in the table below:
Water Fund Net Position
The following table shows the changes in the Water Fund net position from 2020 through 2022 using the 2020 actual results, the 2021 amended budget and the 2022 initial and revised proposed budgets. Net position is the residual of all other financial statement elements presented in a statement of financial position of a proprietary fund. As a proprietary fund, the net position does include capital expenditures. However and as indicated above, capital expenditures are not an expense for financial statement purposes but they are budgeted. Since they are included in the budgeted expenditures, which decrease net position, we add them back to net position for this schedule. As indicated below, the net position of the Water Fund is stable and gradually increasing.
