CC Agenda Packet 05-14-18 Work Session

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Metropolitan Wastewater Management Commission Reserves CAPITAL RESERVES The MWMC Capital Budget includes four reserves: the Equipment Replacement Reserve, SDC Reimbursement Reserves, SDC Improvement Reserves, and the Capital Reserve. These reserves accumulate revenue to help fund capital projects including equipment replacement and major rehabilitation. They are funded by annual contributions from user rates, SDCs, and loans. Each reserve is explained in detail below. EQUIPMENT REPLACEMENT RESERVE The Equipment Replacement Reserve accumulates replacement funding for three types of equipment: 1) major/stationary equipment items costing less than $200,000 with useful lives of 20 years or less; 2) fleet vehicles maintained by the Eugene Wastewater Division; and 3) computer servers that serve the Eugene Wastewater Division. Contributions to the Equipment Replacement Reserve in the FY 18-19 budget total $1,000,000, additional budget details are provided below. The Equipment Replacement Reserve is intended to accumulate funds necessary to provide for the timely replacement or rehabilitation of equipment, and may also be borrowed against to provide short-term financing of capital improvements. An annual analysis is performed on the Equipment Replacement Reserve. The annual contribution is set so that all projected replacements will be funded over a 20-year period and at the end of the 20-year period, the reserve will contain replacement funds for all equipment projected to be in use at that time. Estimates used in the analysis include interest earnings, inflation rates and useful lives for the equipment. PROPOSED ADOPTEDAMENDED BUDGETBUDGETBUDGET EQUIPMENT REPLACEMENT RESERVEFY 17-18FY 17-18FY 18-19 Beginning Balance$11,737,145$11,822,589$12,007,589 Annual Equipment Contribution850,000850,0001,000,000 Interest50,00050,00030,000 Equipment Purchases(715,000)(715,000)(649,000) Equipment Replacement Reserve $11,922,145$12,007,589$12,388,589 SYSTEM DEVELOPMENT CHARGE (SDC) RESERVES SDCs are required as part of the MWMC IGA. They are connection fees charged to new users to recover the costs related to system capacity, and are limited to funding Capital Programs. The purpose of the SDC Reserves is to collect and account for SDC revenues separately from other revenue sources, in accordance with Oregon statutes. The Commission’s SDC structure includes a combination of “Reimbursement” and “Improvement” fee components. Estimated SDC revenues for FY 18-19 are approximately $1,735,000. Budgeted expenditures include $2 millionfrom Improvement Fees to fund portions of the annual debt service payments on the 2016 revenue bonds. The projected beginning SDC Reserve balance on July 1, 2018 is $4,622,481. Page 21FY 18-19 BUDGET AND CIP