Minutes 06/06/1975 - Laserfiche WebLink

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.. ~ FRIDAY JUNE 6, 1975 It is possible that the projected profit of the Electric Department is correct, and actual profits may be close to $636,000.00. It is also possible that the projected profit is wrong, as it has been for the last four years. On June 30, 1971 the Electric Department had a surplus of $610,766.00, to be used for capital expansion/replacement/reserve for contingencies of the system. The estimated surplus of the Electric Department on June 30, 1975 is only $86,770.00. The main reason the surplus has dropped to such a low level is because each year, for the last four years, the net profits of the Electric Department which were budgeted for transfer to the General Fund were over-estimated. Because of this, Council was forced to use $427,915.00 of Electric Department surplus in order to balance the budget. The yearly transfers from Electric Department surplus due to over-estimating the net profits were as follows: 1971-72 1972-73 1973-74 1974-75 $ 6,677 63,18l 214,627 143,430 (estimated) $427,915 Four-year total I think it is imperative that Council plan a transfer of money next year from the Electric Department to the General Fund that will come from next year's profit - not from surplus. If next year's actual profit falls short of the transfer of money to the General Fund, the result could easily reduce the already low surplus to a deficit. It is true that if the City receives refunds from APCO as a result of the fuel-adjustment clause and rate cases, the refunds will be added to surplus; however, in view of the dangerously low level of the surplus at this time, I do not think that Council should ignore the low surplus when deciding how much money to transfer to the General Fund from the Electric Department, because Council does not know for sure when the refunds will come, or how much they will be. In addition, the possibility of using APCO refunds as additions to surplus does not safeguard the City against again over-estimating the profit of the Electric Department. The whole concept of a balanced budget is that we fund operating expenses as we go. If we don't do this, we live above our heads - we get accustomed to a standard of living which is not realistic, and this is what I am trying to avoid. Let us hypothesize for a moment - what happens if next year's actual Electric Department profits fall short of the projected transfer to the General Fund, and if APCO refunds don't come? The result could be a deficit in the Electric Department surplus account. And then what will Council do? Where will the money come from? Council has just begun a new precedent of dipping into the Water and Sewer Funds.