5. 2022 Draft Utility Budget Transmittal Letter
MEMORANDOM
DATE:December 1, 2021
TO:Sewer Committee Members
FROM:Ken Cammilleri, City Administrator
RE:2022 Draft Utility Budget Transmittal Letter
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utility enterprises within a positive financial condition.The following draft document is intended to
both meet state compliance requirements, best accounting practices, and to provide the necessary
to long-term strategic goals.Because this is an annual process, budgets can be influenced by many
factors including changing economic conditions, introduction of regulatory mandates, and
unanticipated failures, that require a budget to consider both current operational needs but also
future ones.This process may even potentially identify the need to set future goals to address
challenges.
combination with a line-item budgeting approach to help set utility rates, outlay capital expenses, and
meet operational demands in a manner that takes into account the financial impacts on its utility
users.
The City is implementing its utilities budget on a modified accrual basis consistent within Generally
Accepted Accounting Principles as set forth by the Government Accounting Standards Board due to
its operation is for profit.The only exception to adhering GAAP applies to the methodology used
for capital assess purchases and depreciation.In which case, the budget accounts for capital
transactions as a budgeted expense rather rather than depreciating individual existing assets
at the time it becomes measurable and available, and expenses arerecognized when they are
measurable, fund liability is incurred, and the liability will be liquidated with resources included in the
budget including principal and interest expenses on long-term debt. Revenues are included in the
budget in the year they are expected to become measurable and available. Expenses are included in
the budget when they are measurable, a fund liability is incurred, and the liability will be liquidated
with resources included in the budget.
Budgetary practices included in the me
targets and improved forecasting of debt service expenses. The cash flow methodology accounts
fordebt service expenses and 50% of operational expenses (less depreciation) for the year following
each budget year.Estimates for debt now attempt to account for balanced or balloon payment
amortization.
The utilities budget is divided into two sections; the Big Marine Sewer Utility and the Uptown Sewer
Utility each section has 4 key documents.Here is an explanation of each document and how it may
be used for budget decision making:
Utility Report Letter -this includes critical background information for decision making
and a brief summary of budgetary highlights and capital expenses anticipated within the
next two years.Most importantly, it includes a utility rate plan summary.
The Cash-Flow Analysis Summary. This document is a statement of previous, budgeted
and predicted activity that can be used to visualize fund performance. The key is to
confirm that revenues not only meet expenditures but also keep pace with the level of
targeted cash balance. The document helps with identifying adjustment needs with
regard to rates, the timing and size of capital expense, and adjustment to individual line-
item capital expenses.
The Fund Capital Improvement Plan This document delays anticipated capital
expenditures and schedules the timing of completion while attempting to account for
cost variables such as inflation. These totals from this document are fed into the cash-
flow analysis.
The Line-Item Budget This document lays out the budget revenue and expense
categories and can include notes that detail transactions that are associated with it. It
can also be used as a tool to evaluate operational budget, in general.
Please let me know if you have any questions.
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City of Scandia
th
14727 209 St. N. PO Box 128, Scandia, Minnesota 55073
Phone (651) 433-2274 | Fax (651) 433-5112 | http://www.cityofscandia.com