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WEDNESDAY, MARCH 30, 1988
<br />
<br /> ADDENDUM NO 1
<br />(Mr. McClain's Statement)
<br />
<br />With regard to the General Fund, the proposed Budget reflects increases from
<br />1987-1988 budget of $565,344 in Local Revenue and $427,786 in Total Aid from the
<br />Commonwealth but it also reflects a decrease in Transfers from other funds to
<br />the General Fund of $244,430. Thus, before any contribution from Surplus, the
<br />General Fund will have a net increase in revenues of $748,800 or 3.7%.
<br />
<br />General Fund Expenditures, on the other hand, are projected to increase by
<br />$1,743,943 or 8% from the 1987-1988 budget and $1,441,459, or 7%, from the
<br />Actual and Estimated expenditures for 1987-1988. It would, therefore, appear
<br />that the Budget projects a 3% to 4% greater increase in Expenditures than in
<br />Revenues.
<br />
<br />Also, the Budget projects a transfer in the amount of $1,600,000 from the
<br />Electric Fund to the General Fund even though his transfer will cause a
<br />reduction in the Electric Fund accumulated surplus of $432,017. Unless I have
<br />missed something, I did not see anything in the Expenditures from the Electric
<br />Fund which would be the type of one-time, non-recurring, major expenditure which
<br />would, in my opinion, be an appropriate expenditure from the Electric Fund
<br />"Savings Account." Therefore, I believe the transfer from the Electric Fund
<br />exceeds a prudent amount by $400,000 and should be limited to actual anticipated
<br />"profits" of $1,200,000.
<br />
<br />If this change were made, however, the actual budgeted increase in revenues
<br />would be reduced to $348,800.
<br />
<br />It has been our policy to parallel Appalachian Power Company's rates for our
<br />electric service and I believe this is a good policy and one I would not
<br />recommend changing even though we have to restrict our transfer from that Fund
<br />this year and in future years to the $1,000,000 to $1,500,000 figure specified
<br />in Mr. Brown's Budget Message.
<br />
<br />On the other hand, I believe there is little point in having an Enterprise Fund
<br />which does not generate enough profit to make a reasonable contribution to the
<br />General Fund. The Budget, as presented, recommends a significant reduction in
<br />the Surplus of both the Water and Sewer Funds. Under the Water fund, however,
<br />two significant non-recurring expenditures are recommended, the new water tank
<br />and the paving at the reservoir. These are, in my opinion, the type of
<br />expenditures for which employment of surplus is appropriate. However, $123,901
<br />of reduction over and above the expenditures is recommended. A far better
<br />approach, in my opinion, would be to increase the water rates by a sufficient
<br />amount to allow us to make the reasonable transfer of $250,000 from the Water
<br />Fund to the General Fund while maintaining the integrity of the Water Fund
<br />Surplus. From Mr. Brown's figures I calculate that an average increase of 5¢
<br />/1000 gallons for water service would allow us to accomplish these goals.
<br />
<br />Similarly with regard to the Sewer Fund, to maintain the integrity of its
<br />surplus we should either eliminate the transfer to the General Fund entirely or
<br />increase the Sewer rates by 13¢/1000 gallons as suggested by Mr. Brown. In
<br />keeping with my belief that Enterprise Funds should generate sufficient profit
<br />to make a reasonable contribution to Surplus, I would favor the increased sewer
<br />rate approach.
<br />
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