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Council approves 2014 wastewater budget; finance director says $6 million is comfortable reserve
Summary
The council approved the 2014 wastewater budget after discussion about projected cash-on-hand through 2020; Finance Director Vito said a $6 million reserve is comfortable and projections that reach $12 million would warrant holding rates steady rather than further accumulation.
The Superior City Council approved the 2014 wastewater budget after a councilor asked about the utility’s cash-reserve projections through 2020.
Councilor Sweeney asked how much cash on hand would be “enough” versus “too much” given projections that showed cash rising to about $12 million by 2020. Finance Director Vito said the city currently holds about $6 million in the wastewater fund and that figure would allow capital projects in 2014 to be completed without issuing debt. Vito said he would be uncomfortable if cash fell to about $3 million or less because major emergency repairs can cost millions of dollars.
Nut graf: Councilors were concerned both about underfunding the utility in the event of emergencies and about accumulating excessive cash balances; the finance director said holding rates steady for several years could prevent the fund from growing to the high projections if projections hold.
Key details from the discussion
Vito noted the short-term capital spending plan in the packet only runs through 2017 and that the three-year projection used $700,000 in annual capital spending for the later years, which could make the long-range projection look inflated if larger projects are not shown. He said that if the projections truly materialize the council could be comfortable holding rates steady to avoid building a $12 million cash cushion.
Formal action
A motion to approve the 2014 wastewater budget carried on a voice vote.
Ending: Councilors approved the budget and directed staff to monitor capital plans and projections; the finance director said he would report back if conditions change or if large capital needs require adjusting rates or issuing debt.
