Resolution 2801-05 Superseded
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RESOLUTION NO. 2801-05
A RESOLUTION OF THE BOARD OF DIRECTORS OF
THE SOUTH TAHOE PUBLIC UTILITY DISTRICT
ADOPTING A NEW RESERVE POLICY SUPERSEDING
RESOLUTION NO. 2785-04 IN ITS ENTIRETY
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BE IT RESOLVED, by the Board of Directors of the South Tahoe Public Utility
District, County of EI Dorado, State of California, as follows:
WHEREAS, the District maintains operating, capital, self-insurance, and rate
8 stabilization reserves; and
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9 WHEREAS, establishing and maintaining adequate reserves is important to the
10 fiscal health of the District; and
11 WHEREAS, the Board of Directors formally adopted a reserve policy in 2004;
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WHEREAS, the California State Auditor reported in June 2004 on audits of eight
14 other California Independent Water Districts; and
WHEREAS, the District desires to incorporate suggestions made by the
California State Auditor in its reserve policy.
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NOW, THEREFORE BE IT RESOLVED, by the Board of Directors of the South
Tahoe Public Utility District that: The attached Reserve Policy is hereby adopted and
becomes a part of this Resolution by reference herein. Further, Resolution 2785-04 is
hereby superseded in its entirety.
PASSED AND ADOPTED at a duly held regular meeting of the Board of
Directors of the South Tahoe Public Utility District on the 2nd day of June, 2005, by the
22 following vote:
AYES: Directors Jones, Wallace, Schafer, Comte, Mosbacher
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24 NOES: None
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29 ATTEST:
ABSENT: None
Eric W. Sc afe~, oard President
South Tahoe Public Utility District
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oard
South Tahoe Public Utility District
Reserve Policy
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PURPOSE
South Tahoe Public Utility District (the District) shall maintain reserve funds in the
Sewer and Water Enterprise Funds. This policy establishes the level of reserves
necessary for maintaining the District's credit worthiness and for adequately
providing for:
· Funding infrastructure replacement.
· Economic uncertainties and other financial hardships.
· Loss of significant revenue sources such as property tax receipts or
connection fees.
· Local disasters or catastrophic events.
· Future debt or capital obligations.
· Cash flow requirements.
· Unfunded mandates including costly regulatory requirements.
POLICY
Operatinq Reserves
The minimum amount of operating reserves will equal two months of operating
expenses. The maximum amount of operating reserves will equal three months
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Capital Reserves
Capital reserves will be accumulated to fund infrastructure projects and will be an
integral part of the District's capital plan documented in its Ten-Year Forecast. A
key objective for accumulating capital reserves is to minimize external borrowing
and interest expense. The minimum amount of capital reserves will equal one
year's capital spending. The maximum amount of capital reserves will equal two
times the accumulated depreciation balance.
Self-Insurance Reserves
The minimum self-insurance reserve will equal $300,000. The maximum self-
insurance reserve will equal the current annual health insurance expense budget.
Rate Stabilization Fund
The Sewer Enterprise Fund will maintain a minimum rate stabilization fund equal
to one year's property tax receipts and a maximum rate stabilization fund equal to
one and one-half year's property tax receipts. Both the minimum and maximum
amounts will be net of related County of EI Dorado's administration cost and
shifts to the City of South Lake Tahoe's redevelopment agency.
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The Water Enterprise Fund will not maintain a rate stabilization fund while the
funds restricted from the MTBE settlements and judgments exceed $2 million. At
such time as the MTBE settlement funds fall below $2 million, the District will
establish a rate stabilization fund with a minimum amount equaling one year's
water consumption revenue and a maximum amount equaling one and one-half
year's water consumption revenue.
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PROCEDURE FOR USING RESERVE FUNDS
Operatinq and Self-Insurance Reserves
Operating and self-insurance reserves can be used at any time to meet cash flow
requirements of District operations. Authority to use the funds will be consistent
with the District's Purchasing Policy.
Capital Reserves
The Board of Directors will authorize use of capital reserves during the budget
process. Capital reserves are also available for unplanned (unbudgeted) capital
replacement. Authorization for the use of capital reserves for unplanned capital
replacement will be consistent with the District's Purchasing Policy.
Rate Stabilization Fund
The Chief Financial Officer is authorized to use rate stabilization funds to
supplement operating revenue when:
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· Total revenue in either the Sewer Enterprise Fund or the Water Enterprise
Fund is projected to be five percent or more below the annual budgeted
revenue.
· Developing the budget to limit customer rate increases to no more than
two and one-half times the consumer price index for small west coast
cities.
PROCEDURE FOR MONITORING RESERVE LEVELS
The Chief Financial Officer shall perform a reserve analysis to be submitted to
the Board of Directors upon the occurrence of the following events:
· Board of Directors' deliberation of the annual budget;
· Board of Directors' deliberation of a service charge rate increase;
· Upon renewal of the self-insurance excess insurance coverage; or,
· When a major change in conditions threatens the reserve levels
established within this policy.
If the analysis indicates projected or actual reserve levels falling 10% below or
above the levels outlined in this policy, at least one of the following actions shall
be included with the analysis:
· An explanation of why the reserve levels are not at the targeted level, and/
or
· An identified course of action to bring reserve levels within the minimum
and maximum levels prescribed.
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P:\FINANCE\Policies\Reserve Policy 2005.doc