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policy:financial_management_policy_statement [2017/02/01 19:20]
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policy:financial_management_policy_statement [2017/02/01 19:59] (current)
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       - 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 annual income statement. ​  ​Transfers from the Rate Stabilization Fund to the Maintenance Fund shall be added to and included in operating revenues of the Maintenance Fund as reported in the District’s annual income statement. ​       - 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 annual income statement. ​  ​Transfers from the Rate Stabilization Fund to the Maintenance Fund shall be added to and included in operating revenues of the Maintenance Fund as reported in the District’s annual income statement. ​
       - The Rate Stabilization Reserve requirement will be evaluated each year in conjunction with the annual Budget and CIP adoption. ​ Adjustments to address significant deficits or surpluses may take place gradually over several rate periods, consistent with sound principles of financial management while maintaining reasonable rate stability. ​ The Rate Stabilization ​ Reserve is classified as an unrestricted reserve that can be used for any valid District purpose.       - The Rate Stabilization Reserve requirement will be evaluated each year in conjunction with the annual Budget and CIP adoption. ​ Adjustments to address significant deficits or surpluses may take place gradually over several rate periods, consistent with sound principles of financial management while maintaining reasonable rate stability. ​ The Rate Stabilization ​ Reserve is classified as an unrestricted reserve that can be used for any valid District purpose.
-      -  Generally, rates charged for each class of customer will be set to reflect the cost of supplying service to that class. Rates that are out of balance with respect to costs may be adjusted over a multiyear period to avoid disruption to any class of ratepayers.+      -  Generally, rates charged for each class of customer will be set to reflect the cost of supplying service to that class. Rates that are out of balance with respect to costs may be adjusted over a multi-year period to avoid disruption to any class of ratepayers.
       - 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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       - The District requires development projects to complete the infrastructure improvements necessary for new connections,​ both local facilities and general system upgrades, at the developer'​s expense and risk.        - The District requires development projects to complete the infrastructure improvements necessary for new connections,​ both local facilities and general system upgrades, at the developer'​s expense and risk. 
       - Under state law, the District is allowed to collect a connection or general facilities charge from new connections. The District'​s policy is to develop this charge based on the value of the existing system less contributions and grants, including 10 years of interest, plus the estimated cost of capacity-related projects planned within 10 years. In addition, the District periodically updates the charge (annually at least) to reflect recent trends in growth and construction cost and changes to the 10-year capital improvement plan.        - Under state law, the District is allowed to collect a connection or general facilities charge from new connections. The District'​s policy is to develop this charge based on the value of the existing system less contributions and grants, including 10 years of interest, plus the estimated cost of capacity-related projects planned within 10 years. In addition, the District periodically updates the charge (annually at least) to reflect recent trends in growth and construction cost and changes to the 10-year capital improvement plan. 
-      - The District will not approve any construction contract unless it has sufficient monies in its payasyougo 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.
       - 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.       - 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.
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       - 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. 
     - **Management Policies for Debt Obligations** ​     - **Management Policies for Debt Obligations** ​
-      -  Debt will not be used to finance operating and maintenance requirements. (See Debt Policy)+      -  Debt will not be used to finance operating and maintenance requirements. (See {{:​policy:​bbwsd_debt_policy.pdf|Debt Policy}})
     - **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 21 days of utility operating costs. ​ The District’s goal is to increase the Operating Reserve to at least 37 days of utility operating costs. The transition to a higher level of Operating Reserve will take place gradually until the year 2020, consistent with sound principles of financial management while maintaining reasonable rate stability. ​ The Operating Reserve requirement will be evaluated each year in conjunction with the annual Budget and CIP adoption. ​ The Operating Reserve is classified as an unrestricted reserve that can be used for any valid District purpose. ​     - The District will set rates as described in 1A above, primarily as a means of managing potential volatility in rates. The ”level rate increase"​ projected by the "​model” is intended to stabilize rates and mitigate the need for large changes in rates from one budget year to the next. +      - 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’s goal is to increase the Operating Reserve to at least 37 days of utility operating costs. The transition to a higher level of Operating Reserve will take place gradually until the year 2020, consistent with sound principles of financial management while maintaining reasonable rate stability. ​ The Operating Reserve requirement will be evaluated each year in conjunction with the annual Budget and CIP adoption. ​ The Operating Reserve is classified as an unrestricted reserve that can be used for any valid District purpose. ​      
 +      - The District will set rates as described in 1A above, primarily as a means of managing potential volatility in rates. The ”level rate increase"​ projected by the "​model” is intended to stabilize rates and mitigate the need for large changes in rates from one budget year to the next. 
       - 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 ​ a Capital Facilities Operating Reserve equal to one percent of the original cost of District Fixed Assets. ​ The Capital Facilities Contingency Reserve requirement will be evaluated each year in conjunction with the annual Budget and CIP adoption. ​ Adjustments to address significant deficits or surpluses may take place gradually over several rate periods, consistent with sound principles of financial management while maintaining reasonable rate stability. ​ The Capital Facilities Contingency Reserve is classified as an unrestricted reserve that can be used for any valid District purpose.       - 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 ​ a Capital Facilities Operating Reserve equal to one percent of the original cost of District Fixed Assets. ​ The Capital Facilities Contingency Reserve requirement will be evaluated each year in conjunction with the annual Budget and CIP adoption. ​ Adjustments to address significant deficits or surpluses may take place gradually over several rate periods, consistent with sound principles of financial management while maintaining reasonable rate stability. ​ The Capital Facilities Contingency Reserve is classified as an unrestricted reserve that can be used for any valid District purpose.
       - 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.
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