HomeMy WebLinkAboutRes2010-124 Sponsored by: Oates
CITY OF SEWARD, ALASKA
RESOLUTION 2010 -124
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, AMENDING THE 2010/2011 BIENNIAL BUDGET TO REFLECT
MID -CYCLE BUDGET CHANGES TO THE ELECTRIC ENTERPRISE
FUND ONLY, AND APPROPRIATING FUNDS
WHEREAS, the 2010/2011 Biennial Budget was passed on November 23, 2009, reflecting
the City's first biennial budget, and covering the period from January 1, 2010 through December 31,
2011; and
WHEREAS, the City intends to do a mid -cycle budget adjustment at the end of each even -
numbered year, to adjust the "off budget year" to reflect changes to the budget based on updated
revenue information, economic conditions, and other timely and relevant information impacting the
upcoming budget year; and
WHEREAS, the City's Electric Enterprise Fund rates are insufficient to cover current
operating costs and reserves are inadequate to cover capital - related costs, resulting in the rapid
depletion of Electric Enterprise Fund reserves, and requiring significant cost - cutting measures which
are primarily related to postponing right -of- way - clearing and deferring generator project costs and
generator relocation costs; and
WHEREAS, the budget as proposed results in a decrease in budgeted cash in 2011 of
$48,587, and an estimated ending cash balance at December 31, 2011 of $623,263, and without
further rate increases as recommended by the administration, or expense reductions, the Electric
Enterprise Fund cash balance is expected to be fully depleted by the end of 2012; and
WHEREAS, this resolution adopts specific changes to the Electric Enterprise Fund, with
each specific line item change being reflected on the spreadsheet attached hereto.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF SEWARD, ALASKA, that:
Section 1. The Electric Enterprise Fund 2011 Budget is hereby amended and funds are
hereby appropriated, according to the specific modifications included on the attached spreadsheet, as
follows: 1) Operating revenues are decreased by $1,883,299 primarily due to reduced fuel costs
passed through to customers; 2) Operating expenses are decreased by $1,505,632 due primarily to
lower than projected fuel costs, as well as the postponement in right -of -way clearing costs; and 3)
Transfers -in are increased by $110,784 to reflect a loan payment from the General Fund, for a total
decrease in the Electric Enterprise Fund budgeted net assets of $266,883.
CITY OF SEWARD, ALASKA
RESOLUTION 2010 -124
Section 2. This resolution shall take effect immediately upon its adoption.
PASSED AND APPROVED by the City Council of the city of Seward, Alaska, this 13th
day of December, 2010.
THE CITY OF SEWARD ALASKA
= � A L
illard E. Dunham, Mayor
AYES: Valdatta, Bardarson, Keil, Shafer, Dunham
NOES: None
ABSENT: Smith, Casagranda
ABSTAIN: None
ATTEST:
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COUNCIL AGENDA STATEMENT
Meeting Date: December 13, 2010 4 o self,
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Through: Phillip Oates, City Manager u �-
From: Kristin Erchinger, Finance Director tAS� P
RE: Mid -Cycle Budget Modifications for Electric Enterprise Fund 2011 Budget
BACKGROUND & JUSTIFICATION:
The City of Seward passed its first biennial budget on November 23, 2009 covering the period January 1,
2010 through December 31, 2011. The City intends to do a mid -cycle budget adjustment at least one
time during the off -year of each biennial budget cycle (this will occur at the end of each even - numbered
year, in preparation for the second year of the approved biennial budget). The purpose of the adjustment
is to update information relative to current economic conditions, changes to major revenue categories,
newly- acquired or more timely information regarding changes in costs which tend to swing broadly (i.e.
heating fuel, health insurance), and any additional relevant financial information that is expected to
impact the upcoming budget cycle.
The Seward City Council met with staff in a work session on Monday, November 22, 2010, to review the
proposed budget adjustments for the Electric Enterprise Fund. Staff again alerted the Council to the fact
that the current electric tariff rates are insufficient to cover the operating costs of the utility, not to
mention to address some significant capital needs including major repairs and maintenance. It is
estimated that by the end of 2012, the Electric Enterprise Fund could exhaust its cash and fall into a
deficit position if needed structural changes are not addressed.
In order to address the budget deficiency in the short-run, staff postponed planned right -of -way clearing
costs in 2010 of approximately $400,000, deferred planned spending on the generator project in 2010
totaling $230,000, and postponed work planned in 2011 to relocate generators into the new generator
facility, estimated to cost $505,000. The budget adjustment also includes a new transfer to the Electric
Fund from the General Fund to restore contributions made by the Electric Fund in past years to cover
deficits in the SMIC enterprise Fund. In 2010 this transfer -in totaled $226,846, and in 2011 the budget
amendment includes a transfer -in of $110,784.In addition, revenues and expenses have been modified to
reflect a more accurate breakdown of energy costs into the costs of energy, fuel, and customer charges.
CONSISTENCY CHECKLIST
Where applicable, this agenda statement is consistent with the Seward City Code, Charter, Comprehensive
Plans, Land Use Plans, Strategic Plan and City Council Rules of Procedures.
Other:
ATTORNEY REVIEW: X Yes No
FISCAL NOTE: J
The net overall impact to net assets in the Electric Enterprise Fund is a reduction of $266,883 in net
assets for 2011, based on the specific budget amendments on the attached resolution. Specifically,
revenues are reduced $1,883,299, expenses are reduced $1,505,632, and transfers -in are increased by
$110,784.
`y 4
RECOMMENDATION: City Council approve Resolution 2010- amending the 2011 Budget, and
appropriating funds.
*11
ELECTRIC ENTERPRISE FUND
Amended Budgeted Statement of Revenues and Expenses
And Change in Net Assets
For Fiscal Year 2011
20I1 2011
Original Amended
Budget Budget Subtotal Variance
Operating revenue:
Sales:
Residential 3,657,690 3,043,217 - 614,473
Residential Energy (KWH) I,558,582
Residential Fuel 1,083,600
Residential Customer Charge 401,034
Small General Service 1,854,857 1,569,443 - 285,414
Small General Energy (KWH) 859,950
Small General Fuel 516,600
Small General Customer Charge 192,893
Large General Service 4,274,847 3,597,317 - 1,037,522
LGS (Railroad) 359,992
Large General Energy (KWH) 1,373,388
Large General Fuel 1,355,700
Large General Customer Charge 36,945
Large General Demand (KW) 831,285
Industrial Sales 1,139,768 950,988 54,110
Special Contract (Railroad) - 242,889
Industrial Energy (KWH) 104,403 0
Industrial Fuel 534,076 0
j Industrial Customer Charge 1,153 0
him Industrial Demand (KW) 31 1,356 0
Harbor Power Sales 263,630 263,630 0
Street & Yard Lights 75,500 75,500 0
Miscellaneous 101,300 101,300 0
Total operating revenue: $I1,484,695 $9,601,396 - $1,883,299
Operating expense:
Before depreciation:
Salaries 955,237 955,237 0
Remove J. Bird salary from electric budget - 31,371 - 31,371
Work order charges (salaries) - 200,000 - 200,000 0
Employee benefits 512,311 512,311 0
Remove J. Bird benefits from elec budget -2,761 -2,761
Purchased services 903,550 903,550 0
Heating fuel for generator building 500 500
Reduce ROW clearing cost - 400,000 - 400,000
Rent reduction due to new lease - 24,000 - 24,000
New heating /utilities for crew conex 10,000. 10,000
New conex for crew dry /break room 40,000 40,000
Power for resale - Energy 5,450,000 1 ,290,000 -4,1 60,000
Power for resale - Fuel Costs 3,010,000 3,010,000
Supplies & maintenance 511,100 511,100 0
Two all terrain vehicles for ROW clearing 40,000 40,000
Two new AutoCad computers 12,000 12,000
Work order charges (supplies) - 200,000 - 200,000 0
General & Administrative 1,151,385 1,151,385 0
i
Total operating expense: $9,083,583 $7,577,95I - $I,505,632
t
ELECTRIC ENTERPRISE FUND
Amended Budgeted Statement of Revenues and Expenses
And Change in Net Assets
umj For Fiscal Year 2011
20I1 2011
Original Amended
Budget Budget Subtotal Variance
Operating income before depreciation 2,401,112 2,023,445
Depreciation 1,635,080 (c; I,635,080 0
Earnings from operations $766,032 $388,365 - 377,667
Non - operating revenue (expense)
Interest income I07,000 107,000
Interest expense - 446,34I - 446,341
Other revenue (expense) 2,650 2,650
Total non - operating revenues (expenses) - $336,691 - $336,691 0
Earnings before contributions and transfers $429,341 $51,674 - 377,667
Capital contributions and special items 0 0 0
Transfer from General Fund for loan repayment 0 I10,784 110,784
Transfers to other funds - 1,261,125 - 1,26I,I25 0
Change in net assets - $83I,784 - $I,098,667 - 266,883
Beginning net assets $2I,229,200 $2I,229,200
Ending net assets $20,397,416 $20,130,533
Beginning Cash at I /I /10 $I,334,884
Estimated cash deficit in 2010 per budget - $596,380
Cost savings not spent on generator project 5230,000
Cost savings - reduced spending on ROW repair 5400,000
Unanticipated T -Line Repairs - $367,500
Unanticipated Lowell Point Road repairs - 5250,000
Fuel cost revenue (shortfall) - $980,000
Fuel costs (expense) savings 5674,000
General Fund transfer -in loan payment 5226,846
Revised cash deficit in 2010 - $663,034
2011 Change in net assets - $1,098,667
Add back depreciation $I,635,080
Other uses of cash:
Debt principal payments - $330,000
Capital outlay - $760,000
Defer generator relocation costs (capital outlay) 5505,000
2011 Budgeted Net increase (decrease) in cash - $48,587
Estimated ending cash balance $623,263