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REQUEST FOR FISCAL AFFAIRS AGENDA ITEM <br />Agenda Date Requested: September 24, 2012 <br />Requested By Michael Dolby, CPA Director of Finance <br />Department: FINANCE <br />Report: Resolution: Ordinance: <br />Exhibits: <br />Exhibits: <br />Amount Budgeted <br />Source of Funds: N/A <br />Account Number: <br />Amount Budgeted: <br />Amount Requested: <br />Budgeted Item: YES NO <br />SUMMARY AND RECOMMENDATION <br />During the public hearing for the budget, Council wanted staff to review working capital <br />requirements for the Utility Fund. Currently, the fund's policy is 60-90 days. Staff would like to <br />expand the working capital days to 90-120 days for several reasons. First, the additional working <br />capital requirements will allow the utility fund to build its reserves for future contingencies, <br />capital improvements and increased bond ratings. <br />Second, the Utility Fund relies upon user fees to fund its operations; consequently, increasing <br />reserves will allow the fund to adjust for cash cycles, where higher levels of cash are present <br />during summer months and transfers of cash to the general fund for contributions to overhead <br />and support functions. <br />Furthermore, the utility funds rates have been increased over the last three years and passing <br />along additional rate increases are not favorable. Utility Funds have to consider infrastructure <br />cost and age. The cost to replace older infrastructure, which may have a greater likelihood for <br />repairs, will be higher than normal. Therefore, staff feels that it would be prudent to raise our <br />working capital reserves to insure the utility fund remains self sufficient. <br />Action Required by Fiscal Affairs Committee: <br />Consider approval or other action to increase working capital reserves for the Utility Fund from <br />60-90 days to 90-120 days. <br />Approved for Fiscal Affairs Agenda <br />Corby D. Alexander, City Manager <br />Date <br />