AGENDA MEMORANDUM

 

 

Meeting Date:           July 23, 2007

 

From:                          Bill Pfeilsticker, Finance Director

 

Subject:                      Ordinance amending Sections 2-233, 2-234 and 2-235 Code of Ordinances substantially changing the Utility Fund Transfer Policy

 

 

Staff Recommendation:

Interim City Manager, Finance staff, the Financial Advisor, and all Utility Department Directors recommend adoption of the proposed Ordinance changing the Utility Fund Transfer Policy.

 

Analysis:

The Utility Fund Transfer Policy describes transfers of funds from all six Utility Funds: Electric, Natural Gas, Sanitation, Communications, Water and Wastewater.  The ambiguity of the current policy allows transfers much larger than fiscally prudent. For the fiscal health of the City, it is extremely important to correct the ambiguity of the policy by stating precisely how to calculate the allowable transfers.

 

In any fiscal year, the amount transferred from any of the various enterprise funds to the general       fund as an operating transfer shall not exceed 10% of the estimated operating revenues included        in the adopted budget for that fund.

 

The proposed Ordinance states the exact operating revenues that are allowed to be used for calculating the operating transfers:

 

Estimated Operating Revenues

       Less:

       Franchise fees imposed by the City against itself

       Franchise fees paid to other jurisdictions

       Gross Receipts Taxes paid to the State of Florida

            Surcharge revenues on Electric, Gas and Water

 

This draft policy was reviewed by Moody’s, Fitch Ratings, and Standard and Poor’s, prior to their release of ratings.  Each rating agency cited this revised fund balance policy as a significant reason for their improved outlook on Leesburg’s finances.

 

 

 

Options:

1.  Adopt the Ordinance as proposed; or,

2.  Such alternative action as the Commission may deem appropriate

 

 

Fiscal Impact:

There will be no expenses incurred as a result of adoption of this policy.   

 

Approval of this policy will assist the City by providing assurance that liquidity levels will be maintained by establishing minimum cash reserves within the required funds.  It will also assist in providing a favorable outlook by the rating agency's responsible for oversight of the City's bond issues.  Accurate definitions and specifically described exemptions from cash reserve prohibit manipulation in the calculation of maximum transfer amount.  The policy requires continued analysis of cash reserves in all funds and oversight when considering transfers.

 

Submission Date and Time:    8/8/2007 4:38 PM7/19/2007 10:48 AM____

 

Department: ______________________

Prepared by:  ______________________                     

Attachments:         Yes____   No ______

Advertised:   ____Not Required ______                     

Dates:   __________________________                     

Attorney Review :       Yes___  No ____

                                                

_________________________________           

Revised 6/10/04

 

Reviewed by: Dept. Head ________

 

Finance  Dept. __________________                                     

                              

Deputy C.M. ___________________                                                                         

Submitted by:

City Manager ___________________

 

Account No. _________________

 

Project No. ___________________

 

WF No. ______________________

 

Budget  ______________________

 

Available _____________________

 

ORDINANCE NUMBER____   

                                                                                              

 

AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA; AMENDING SECTIONS 2-233, 2-234, AND 2-235 OF THE CODE OF ORDINANCES OF THE CITY OF LEESBURG, FLORIDA, ENTITLED UTILITY FUND TRANSFER POLICY; ESTABLISHING A UTILITY FUND TRANSFER POLICY FOR EACH OF ITS ENTERPRISE FUNDS; REPEALING CONFLICTING ORDINANCES; PROVIDING A SAVINGS CLAUSE; AND PROVIDING AN EFFECTIVE DATE

 

                 WHEREAS, the City Commission, in and for the City of Leesburg, Florida, hereinafter referred to as Commission, endorses sound financial policies and practices; and

 

                 WHEREAS, the Commission has created a total of six enterprise funds to account for the following utility services:  electric, natural gas, sanitation services, communication services, water and wastewater treatment; and,

           

                 WHEREAS, unlike investor owned utilities, the City is not subject to certain taxes and fees imposed by the City, including but not limited to franchise fees and property taxes; and,

 

                 WHEREAS, the City has assumed all financial risks associated with operating each of its utilities, and has done so with a goal of providing superior service at the lowest possible cost to the customer and has been able to accomplish this goal while at the same time providing additional financial support to general government functions; and

 

                 WHEREAS, the Commission desires by the means of this ordinance to amend such policy;

 

                 NOW THEREFORE, BE IT ENACTED BY THE PEOPLE OF THE CITY OF LEESBURG, FLORIDA:

 

 

SECTION I.

 

Sections 2-233, 2-234, and 2-235 of the Code of Ordinances of the City of Leesburg, Florida, are hereby amended to read as set forth below:

 

Section 2-233.  Calculation of Annual Operating Transfer.     There is hereby authorized, from each of the enterprise funds now or hereafter created by the Commission, an operating transfer which shall be calculated and appropriated as a part of the annual budget adoption process, subject to the following limitations:

 

A.                 In any fiscal year, the amount transferred from any of the various enterprise funds to the general fund as an operating transfer shall not exceed 10% of the estimated operating revenues included in the adopted budget for that fund.

 

B.                 In no event may an operating transfer be appropriated from any of the various enterprise funds to the general fund as an operating transfer if such appropriation is projected to result in said fund experiencing a net loss after transfers for that fiscal year.

 

Should the City elect to impose a franchise fee against itself, then the maximum amount to be transferred from any of the various enterprise funds to the general fund as an operating transfer shall be calculated as 10% of the estimated operating revenues included in the adopted budget for that fund less the estimated amount of franchise fees to be paid by that fund to the general fund as included in the adopted budget.

 

C.         The basis for calculating the operating transfers is as follows:  

 

Estimated Operating Revenues

       Less:

       Franchise fees imposed by the City against itself

       Franchise fees paid to other jurisdictions

       Gross Receipts Taxes paid to the State of Florida

            Surcharge revenues on Electric, Gas and Water

 

D.        In addition to the foregoing limitations, the operating transfers appropriated from all of the various enterprise funds to the general fund in a fiscal year shall be limited to the amount necessary to balance the general fund budget, including the replenishment of the minimum balance of cash reserves in the general fund as required elsewhere.

                                   

Section 2-234.  Cost Reimbursements and Surcharge Transfers Exclusion from the Definition of Operating Transfers.  For the purposes of the calculation described above, Surcharge Revenues and costs incurred by the general fund for the provision of services to the enterprise funds will be excluded from the definition of annual operating transfer. 

 

Section 2-235.  Annual Review Compliance with the provisions of this ordinance shall be reviewed as a part of the annual budget adoption process.

 

SECTION II

 

If any portion of this ordinance is declared invalid or unenforceable, then to the extent it is possible to do so without destroying the overall intent and effect of this ordinance, the portion deemed invalid or unenforceable shall be severed herefrom and the remainder of this ordinance shall continue in full force and effect as if it were enacted without including the portion found to be invalid or unenforceable.

 

SECTION III

 

All ordinances or parts of ordinances which are in conflict with this ordinance are hereby repealed, to the extent necessary to alleviate the conflict, but shall continue in effect insofar as they are not in conflict herewith, unless repeal of the conflicting portion destroys the overall intent and effect of any of the conflicting ordinances, in which case those ordinances so affected shall be hereby repealed in their entirety.

 

 

SECTION IV.

 

This ordinance shall take effect October 1, 2007.

 

            PASSED AND ADOPTED at the regular meeting of the Leesburg City Commission as held on the 23th day of July 2007.

 

 

 

THE CITY OF LEESBURG

 

 

 

By:

 

 

 

 

Sanna Henderson

Mayor

 

 

 

Attest:

 

 

 

 

 

Betty M. RichardsonCity Clerk