ADMINISTRATION - Joe Huss, Finance Director
Title
ADOPT THE 2021 WATER AND SEWER UTILITY ENTERPRISE FUND BUDGETS
Background
Council has reviewed the 2021 proposed budgets for the Water and Sanitary Sewer Funds at a previous Workshop and per the following summaries, has directed staff to bring forth the budgets as presented for formal adoption.
• Water Utility Fund
o Operations - The fund is expected to generate positive net operating income of roughly $750,000 for 2020. With the completion of extensive capital and infrastructure improvements in 2021, including the completion of a water treatment plant, operating expenses are expected to increase significantly. Hence, staff is recommending to continue the implementation of water fee increases that Council first approved in 2018.
§ Revenues
• For 2021, budgeted revenue from water sales is 6% above budgeted 2020 revenue and aligns with what would be expected in a typical year with typical rainfall and water usage.
• Other operating revenues are expected to remain flat over the next five years.
§ Expenditures
• Operating expenditures are projected to increase nearly 10% in 2021 when the new water treatment plant is in full operation. Projections for 2022 through 2025 indicate expected increases settling in the 4% range.
o Capital Activity
§ Major capital activity includes:
• Completion of the construction of a new water treatment plant
• $3.2 million in well houses rehabilitation
• $1.4 million for water tower improvements
§ The Water Access Charge (WAC) will increase from $1,836 to $1,873 for residential property and from $4,637 per acre to $4,730 per acre for commercial property pursuant to the fund’s 20-year capital improvement plan.
o 5-year Outlook - Stable operations, with annual rate increases of 10-20¢ per 1,000 gallons over the next five years.
• Sewer Utility Fund
o Operations - The operation is expected to end 2020 with an operating loss of $285,000. An operating gain of $65,000 is anticipated for 2021 as MCES charges will decrease 7% in 2021. With this reduction, a planned $1.00/month increase will not be implemented for 2021. The current 5-year outlook reduces the planned increase of $3/quarter over the next four years to just $1.50/quarter.
o Capital Activity
§ About $1.7 million is budgeted for 2021, with $1.3 million in lift station upgrades planned and $400,000 set aside for slip lining of sewer pipes.
o 5-year Outlook - With the implementation of the previous years’ fee increases, the sewer utility’s outlook has stabilized and operating losses have been replaced by small gains. For capital improvements, an additional $1.7 million in lift station upgrades is planned over the succeeding four years and continuation of the slip-lining program in those same years totaling $1.6 million is planned.
Recommendation
By motion, adopt the following resolution approving the 2021 Water and Sanitary Sewer Utilities Funds budgets.
Body
WHEREAS, the proposed Utility Enterprise Funds Budgets for the fiscal year commencing January 1, 2021 have been prepared by the City Manager; and
WHEREAS, the City Council has examined, studied, and reviewed said proposed Utility Enterprise Funds Budgets; and
WHEREAS, the City Council has, after due consideration and deliberation, made such amendments and adjustments in the proposed Utility Enterprise Funds Budgets as they consider necessary, desirable, or expedient.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Blaine as follows:
1. That the proposed Budgets for the Water and Sewer Utility Funds attached hereto are approved.
2. That the 2021 appropriations attached hereto are approved.
3. That the 2021 funding sources and fee adjustments identified and attached hereto are approved.
4. That the City Manager is authorized and directed to implement and to administer, within the budgetary funding limits and within adopted City policy and relevant State and City laws and regulations, said approved Utility Enterprise Fund Budgets.
PASSED by the City Council of the City of Blaine this 7th day of December, 2020.