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===== Financial Management Policy Statement ===== | ===== Financial Management Policy Statement ===== | ||
- | The following policies are intended to give direction to planning decisions and help ensure that the District provides for adequate wastewater and potable water services to all customers | + | The following policies are intended to give direction to planning decisions and help ensure that the District provides for adequate wastewater and potable water services to all customers reliably and in a cost efficient manner |
- | - | ||
- | - General Rate and Financial Management Policies | + | - **General Rate and Financial Management Policies** |
- Rates will be adopted as a part of the District’s annual budget process. Rates will be reviewed annually and adjusted as appropriate. As part of that process, a ten year revenue forecast (Revenue Model) should be used for financial planning purposes. The " | - Rates will be adopted as a part of the District’s annual budget process. Rates will be reviewed annually and adjusted as appropriate. As part of that process, a ten year revenue forecast (Revenue Model) should be used for financial planning purposes. The " | ||
- Rates will be set at levels which will generate revenue sufficient to ensure payment of all operating and maintenance expenses and debt service, to ensure compliance with all applicable covenants to bond holders, and to meet such additional requirements as set forth in these policies. | - Rates will be set at levels which will generate revenue sufficient to ensure payment of all operating and maintenance expenses and debt service, to ensure compliance with all applicable covenants to bond holders, and to meet such additional requirements as set forth in these policies. | ||
- | - In the event of lower than projected revenue, the District has established a Rate Stabilization Fund to allow for the District to meet its policy on debt service coverage. The Rate Stabilization Fund includes a minimum balance equal to at least 50% of the annual | + | - In the event of lower than projected revenue, the District has established a Rate Stabilization Fund to allow for the District |
+ | - The Rate Stabilization Fund is a subordinate fund of the Maintenance Fund. The District may make transfers into the Rate Stabilization Fund from the Maintenance Fund or from the Rate Stabilization Fund to the Maintenance Fund at any time. Transfers to the Rate Stabilization Fund from the Maintenance Fund shall be segregated and excluded from operating revenues of the Maintenance Fund as reported in the District’s | ||
+ | - The Rate Stabilization Reserve requirement will be evaluated each year in conjunction with the annual Budget and CIP adoption. | ||
+ | - | ||
- The operating and maintenance budget will be set at a level sufficient to maintain facilities in good condition, provide sufficient staffing to ensure safe and continuous operation, and carry out the operations and programs necessary to meet all permit requirements. | - The operating and maintenance budget will be set at a level sufficient to maintain facilities in good condition, provide sufficient staffing to ensure safe and continuous operation, and carry out the operations and programs necessary to meet all permit requirements. | ||
- Necessary appropriations for annual debt service requirements will be included in the annual budget. | - Necessary appropriations for annual debt service requirements will be included in the annual budget. | ||
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- Major capital investments and other commitments that would significantly affect costs or rates for Utility services will be evaluated using the Revenue Model. Such evaluations will address both short- and long-term impacts on costs and revenues, and address risks and uncertainties associated with the investments. | - Major capital investments and other commitments that would significantly affect costs or rates for Utility services will be evaluated using the Revenue Model. Such evaluations will address both short- and long-term impacts on costs and revenues, and address risks and uncertainties associated with the investments. | ||
- The District requires development projects to complete the infrastructure improvements necessary for new connections, | - The District requires development projects to complete the infrastructure improvements necessary for new connections, | ||
- | - Under state law, the District is allowed to collect a connection or general facilities charge from new connections. The District' | + | - Under state law, the District is allowed to collect a connection or general facilities charge from new connections. The District' |
- | - The District will not approve any construction contract unless it has sufficient monies in its pay—as—you—go construction fund or bond funded construction fund, which together with approved grants or loans, is sufficient to pay for the amounts expected to become due under the contract. | + | - The District will not approve any construction contract unless it has sufficient monies in its pay-as-you-go construction fund or bond funded construction fund, which together with approved grants or loans, is sufficient to pay for the amounts expected to become due under the contract. |
- | - When a capital project is funded from both rates and bond proceeds, the District will maintain records to allow a separate accounting of the expenditure of bond proceeds. Bond proceeds will be spent before drawing upon other available cash. The acquisition of grants or loans will not be assumed in the rate planning process. | + | - When a capital project is funded from both rates and bond proceeds, the District will maintain records to allow a separate accounting of the expenditure of bond proceeds. Bond proceeds will be spent before drawing upon other available cash. The acquisition of grants or loans will not be assumed in the rate planning process. |
- | - Debt will not be used to finance operating and maintenance requirements. | + | - While both debt and pay-as-you-go financing may be used to finance utility capital needs, the debt-financing component will be managed to minimize annual volatility in rate requirements. |
- | - Management Policies for Debt Obligations | + | |
- | - Capital projects financed through debt issuance will not be financed for a term longer than the expected useful life of the project assets. | + | |
- | - Capital financings will be designed to minimize the cost of funds, ensure equity over time among ratepayers, and provide for the timely completion of capital facilities. | + | |
- | - While both debt and pay-as-you-go financing may be used to finance utility capital needs, the debt-financing component will be managed to minimize annual volatility in rate requirements. | + | |
- The District has a goal of paying for a minimum of 20 percent of the capital program with cash from rates and charges over the long run. As a rule, the District’s baseline level of capital expense for routine replacements, | - The District has a goal of paying for a minimum of 20 percent of the capital program with cash from rates and charges over the long run. As a rule, the District’s baseline level of capital expense for routine replacements, | ||
- | - With respect to any issuance of debt, alternative issuance timing and amortization structures will be analyzed to ensure the most cost—efficient financing, given prevailing market conditions at the time of sale. | ||
- The District will set rates sufficient to provide debt service coverage in excess of the legal minimums. Rates will be set so that the debt service coverage ratio on the Utilities’ senior lien debt, not including connection charge revenue, shall be at least 1.25. | - The District will set rates sufficient to provide debt service coverage in excess of the legal minimums. Rates will be set so that the debt service coverage ratio on the Utilities’ senior lien debt, not including connection charge revenue, shall be at least 1.25. | ||
- | | + | |
- | - The District | + | - |
- | - Management Policies for District Funds | + | - **Management Policies for District Funds** |
- | - To accommodate periodic unanticipated or unforeseen needs, the District will maintain at all times an Operating Reserve equal to at least 180 days of utility operating costs. | + | - To accommodate periodic unanticipated or unforeseen needs, the District will maintain at all times an Operating Reserve equal to at least 21 days of utility operating costs. |
- The District will set rates as described in 1A above, primarily as a means of managing potential volatility in rates. The ”level rate increase" | - The District will set rates as described in 1A above, primarily as a means of managing potential volatility in rates. The ”level rate increase" | ||
+ | - It is the policy of the District to plan capital needs through a 10-year Capital Improvement Program (CIP) and to plan the revenues to fund those capital needs using a 10-year rate revenue forecasting model comprising all expenses and revenues of the system. To provide financial reserves for unplanned capital outlays, the District shall maintain | ||
- District funds, including all reserve funds established by this policy statement and any bond proceeds, will be invested according to the following. The District will invest its funds in a manner that preserves capital and ensures the protection of investment principal, allows for its liquidity needs, and achieves the highest investment return consistent with the primary objectives of safety and liquidity. | - District funds, including all reserve funds established by this policy statement and any bond proceeds, will be invested according to the following. The District will invest its funds in a manner that preserves capital and ensures the protection of investment principal, allows for its liquidity needs, and achieves the highest investment return consistent with the primary objectives of safety and liquidity. | ||
- | **Approved:** April 7, 2008 | + | Approved: April 7, 2008 |
+ | |||
+ | **Revised: ** October 9, 2014; September 21, 2016 |