HomeMy WebLinkAboutFS 2013-02-05 Item 2C - Review - Sewer Fund Financial StatusTO:
City of Tukwila
Jim Haggerton, Mayor
INFORMATIONAL MEMORANDUM
Mayor Haggerton
Finance & Safety Committee
FROM: Peggy McCarthy, Finance Director
DATE: January 30, 2013
SUBJECT: Sewer Fund Analysis
ISSUE
Review the financial status of the Sewer Fund to determine adequacy for financing capital
projects and meeting the Reserve Policy requirements over the 2013-2018 six year financial
planning period. Consider options for enhancing the fund, including reducing or eliminating the
interfund utility tax, should the financial position appear insufficient to meet these plans and
requirements.
BACKGROUND
At the budget workshop on October 11, 2012 discussion was held regarding the Sewer Fund
and the risk that the targeted reserve balance was not being met as presented in Attachment E
of the draft 2013-2018 Capital Improvement Program (CIP). Additional discussion was held at
the Council meeting on November 13, 2012 and it was determined that a review of the Sewer
Fund would be done early in the first quarter of 2013.
DISCUSSION
Financial Sustainability. Based on preliminary 2012 financial data and as demonstrated in the
revised and updated Attachment E schedules attached to this memorandum, the Sewer Fund
appears able to finance planned capital projects and meet reserve requirements under the
existing financial structure over the 6-year CIP planning period.
Using working capital (a) (current assets less current liabilities) as an indicator of liquidity, the
Attachment E presented in Schedule 1 was revised to show a beginning working capital balance
of $1.5 million (line 18), an amount equal to the preliminary ending working capital balance for
2012. By making this change and leaving the remainder of Attachment E as it was presented in
the CIP, a positive working capital balance results (line 19) for each of the years in the planning
period indicating that, based on the structure and assumptions incorporated into the Attachment
E financial model, the fund will be able to afford the planned capital projects and meet its
operating liquidity needs.
The Reserve Policy requires attainment of a 20% minimum unrestricted fund balance by 2014.
For the Sewer fund, the difference between the working capital balance and the unrestricted
fund balance is attributable mostly to the sewer payment plan receivable, a noncurrent asset.
Attachment E was revised in Schedule 2 to reflect an updated beginning 2013 fund balance of
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INFORMATIONAL MEMO
Page 2
$1.9 million (line 18), an amount equal to the preliminary 2012 year end fund balance. By
making this change and leaving the remainder of Attachment E as it was presented in the CIP,
the fund balance reserve requirements (lines 21 and 22) are shown to be met over the period.
For reference, the Attachment E that was presented in the CIP is included as Schedule 3.
Interfund Utility Tax. Additionally, at the meetings referenced above, there was discussion
regarding the interfund utility tax and whether it should be reduced or eliminated. Current
legislation calls for the tax to sunset in 2015; however, the current Attachment E includes the tax
through 2018. It is suggested that a review of the interfund utility tax policy coincide with the
biennial budget amendment process that will take place in the 3rd quarter of 2013.
RECOMMENDATION
Information only. The Sewer Fund financial status and the interfund utility tax policy will be
reviewed in conjunction with the biennial budget amendment process in the 3rd quarter of 2013.
ATTACHMENTS
Schedule 1 - Attachment E as revised for updated Working Capital beginning 2013 balance
Schedule 2 - Attachment E as revised for updated Fund beginning 2013 balance
Schedule 3 - Attachment E as published in the 2013-2018 Capital Improvement Program
(a) Working Capital means "Net liquid assets computed by deducting current liabilities from current
assets. The amount of working capital is a measure of a business's ability to meet its short-term
obligations; or stated in a different way, the cash available for day-to-day operations of an organization".
Source -- Business Dictionary. corn.
WAFIN Projects\Council Agenda Items12013kInfo Memo - Sewer Fund Analysis 1-30-13.docx
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ATTACHMENT E
City of Tukwila
SEWER ENTERPRISE FUND
2013 - 2018 Analysis in 000's
REVENUES
2013 2014 2015 2016 2017 2018
Totals
Monthly Sewer Charges
King County Metro Sewer (1)
Regular City Sewer (2)
Subtotal Sewer Revenue
Other Misc. Revenue
Grant /Bonds /PWTF
Sewer Connection Fees (3)
Total Revenues
EXPENDITURES
Sewer Operations & Maintenance
King County Metro Sewer (4)
Regular City Sewer (5)
Debt Service (6)
Interfund Utility Tax (7) 10%
Engineering Labor (9)
Subtotal
Sewer Capital - CIP Program
Total Expenditures
+20% +20% +10% +15% +10% +15
3,749 3,749 4,161 4,161 4,577 4,577 24,974
1,886 2,169 2,342 2,647 2,859 3,230 15,133
5,635 5,918 6,503 6,808 7,436 7,807 40,107
150 150 160 180 200 210 1,050
750 458 1,756 1,757 - 750 5,471
120 120 125 125 100 100 690
6,655 6,646 8,544 8,870 7,736 8,867 47,318
3,749 3,749 4,161 4,161 4,577 4,577 24,974
987 1,012 1,036 1,067 1,099 1,132 6,333
355 354 392 391 709 710 2,911
579 609 666 699 764 802 4,118
74 77 78 80 83 85 477
5,744 5,801 6,333 6,398 7,232 7,306 38,813
1,420 883 1,831 1,832 500 1,075 7,541
7,164 6,684 8,164 8,230 7,732 8,381 46,354
ING CAP
TAL
tal
Change in Working Capi
Beginning Working Capital
Ending Working Capital
509 (38) 380 640 4
992 953 1,33
992
487
,974 1,978
974 1,978 2,464
9
,500
2,464
(a) Working Capital means "Net liquid assets computed by deducting current liabilities from current assets. The amount of
working capital is a measure of a business's ability to meet its short -term obligations; or stated in a different way, the cash
available for day -to -day operations of an organization ". Source -- Business Dictionary. corn.
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ATTACHMENT E
City of Tukwila
SEWER ENTERPRISE FUND
2013 - 2018 Analysis in 000's
REVENUES
2013 2014 2015 2016 2017 2018 Totals
Monthly Sewer Charges
King County Metro Sewer (1)
Regular City Sewer (2)
Subtotal Sewer Revenue
Other Misc. Revenue
Grant /Bonds / PWTF
Sewer Connection Fees (3)
Total Revenues
EXPENDITURES
Sewer Operations & Maintenance
King County Metro Sewer (4)
Regular City Sewer (5)
Debt Service (6)
Interfund Utility Tax (7) 10%
Engineering Labor (9)
Subtotal
Sewer Capital - CIP Program
Total Expenditures
+20% +20% +10% +15% +10% +15%
3,749 3,749 4,161 4,161 4,577 4,577
1,886 2,169 2,342 2,647 2,859 3,230
5,635 5,918 6,503 6,808 7,436 7,807
150 150 160 180 200 210
750 458 1,756 1,757 750
120 120 125 125 100 100
6,655 6,646 8,544 8,870 7,736 8,867
24,974
15,133
40,107
1,050
5,471
690
47,318
3,749 3,749 4,161 4,161 4,577 4,577 24,974
987 1,012 1,036 1,067 1,099 1,132 6,333
355 354 392 391 709 710 2,911
579 609 666 699 764 802 4,118
74 77 78 80 83 85 477
5,744 5,801 6,333 6,398 7,232 7,3061 38,813
1,420 883 1,831 1,832 500 1,075 i 7,541
7,164 6,684 8,164 8,230 7,732 8,381 46,354
Change'
Bez~g Fund Balance
alance
Endii
Fund Bc
Reserves
tinreserve
509 {38) 380 640 4 487
78
X92 1,353 1,733 2,374 2
92
5
733 2,374 2,
7
2;864
fee Component
of revenue
(a) Fund balance equals working capital plus non current portion of the sewer payment plan notes receiveable and
other noncurrent assets.
Annual reserve balance requirement equals 20% of the prior year operating revenues.
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as publish cl in the
2013 - 2#318;0 ip tal
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ATTACHMENT E
City of Tukwila
SEWER ENTERPRISE FUND
2013 - 2018 Analysis in 000's
REVENUES
2013 2014 2015 2016 2017 2018 Totals
Monthly Sewer Charges
King County Metro Sewer (1) 3,749 3,749 4,161 4,161 4,577 4,577 24,974
Regular City Sewer (2) 1,886 2,169 2,342 2,647 2,859 3,230 j 15,133
Subtotal Sewer Revenue 5,635 5,918 6,503 6,808 7,436 7,807 40,107
Other Misc. Revenue 150 150 160 180 200 210 1,050
Grant /Bonds /PWTF 750 458 1,756 1,757 750 5,471
Sewer Connection Fees (3) 120 120 125 125 100 100 690
Total Revenues 6,655 6,646 8,544 8,870 7,736 8,867 47,318
+20, +20% +10% +15% +10% +15%
EXPENDITURES
Sewer Operations & Maintenance
King County Metro Sewer (4)
Regular City Sewer (5)
Debt Service (6)
Interfund Utility Tax (7) 10%
Engineering Labor (9)
Subtotal
Sewer Capital - CIP Program
Total Expenditures
FUND BALANCE
17 Change in Fund Balance (a)
18 Beginning Fund Balance
19 Ending Fund Balance
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3,749 3,749 4,161 4,161 4,577 4,577 24,974
987 1,012 1,036 1,067 1,099 1,132 6,333
355 354 392 391 709 710 2,911
579 609 666 699 764 802 4,118
74 77 78 80 83 85 477
5,744 5,801 6,333 6,398 7,232 7,306 38,813
1,420 883 1,831 1,832 500 1,075 7,541
7,164 6,684 8,164 8,230 7,732 8,381 46,354
(509) (38) 380 640 4 487 964
1,100 592 553 933 1,574 1,578 1,100
592 553 933 1,574 1,578 2,064 2,064
Fund Balance Componen
Reserved (b)20% of revenue
Unrese.
................
ing Bai
Lc+
9,
74 1,578
If the Ending Fund Balance (Accumulated Totals listed above) goes negative, an interfund loan
would be requested and an emergency rate increase may be considered.
(a) Reserve fund balance requirement is based on fund balance and not working capital. Attachment has been
updated to reflect fund balance rather than working capital. Estimated 2013 working capital is estimated to be
approximately $1,800.
(b) Annual reserve balance requirement equals 20% of the prior year operating revenues.
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