3385o
RESOLUTION NO.3385
A RESOLUTION AUTHORIZING THE TRANSFER OF FUNDS FROM THE.
WATER/SEWER FUND TO THE GENERAL FUND IN 2013 AND 2014
RECITALS:
1.The Cityof Moses Lake operates an Engineering Divisioninthe Municipal Services Department
which is funded with governmental,general operating revenue.
2. The City for many years charged for the actual labor costs and an overhead rate for
engineering services providedthe Water/Sewer Fund, a non-governmental,business related
proprietaryfund at a rate similarto what a private engineering firm would charge the City for
the same services.
3.The overhead rate included a reimbursement forthe cost of housing the Engineering Division,
furnishings,equipment,supplies,etc.
4.The City intended,planned, and budgeted forthe overhead rate as a partof the cost of doing
business for the Water/Sewer Fund and included such costs in the water/sewer rate structure.
5.The City was advised by theWashington State Auditor's Office in 2012 that the City's overhead
rate needed actual support and that it advised the City should not use the overhead rate as it
had been doing for years.The City quit charging the previously charged overhead rate.
6.RCW 35.23.535,in the City's opinion,applicable in part to the City,due to the City's status as
an optional municipal code city,states:
"Rates shall be fixed by ordinance for supplying water . . .sufficient to pay for all
operating and maintenance charges.Ifthe rates inforce produce a greateramount than
is necessary to meet operating and maintenance charges,the rates may be reduced or
the excess income may be transferred to the City's current expense fund.
The term "maintenance and operating charges,"as used in this section include all
necessary repairs,replacement, interestonanydebts incurred inacquiring,constructing,
repairing,and operating plantsanddepartments and all depreciation charges. Thisterm
shallalso include an annualcharge equalto 4% on the cost of the plant orsystem, as
determined by the State Auditor to be paid intothe current expense fund,except that
where utility bondshave been ormay hereafter be issued andare unpaid no payment
shall be required into the current expense fund until such bondsare paid.
7. The City determined it was more costeffective to utilize the authority in RCW35.23.535 rather
than go through a time consuming exercise and process and establishthe overhead rateas
previously usedbythe City which wasa rate similar to what a private engineering firm would
charge the City for the same services.
8.It should be noted that the Water/Sewer Fund,anon-governmental business related proprietary
fund does not pay to the City's governmental general operating fund any property taxes or
RESOLUTION NO.3385
PAGE 2 September 10,2013
payment in lieu of taxes even though the assets of the Water/Sewer Fund are valued at
approximately $1.8 million.If the Water/Sewer Fund were operated as a privately held /">
business itwould pay approximately $341,223 in property taxes to the City.
RESOLVED:
1.The Cityshalltransfer$500,000 in 2013 and 2014 to the General Fund from the Water/Sewer
Fund under the authorityof RCW 35.23.535 since there is excess income inthe fund due to
the fact that the City is not charging an overhead rate forthe engineering services as it had
done in the past as it has budgeted and planned for in 2013 and 2014 and because the
Water/Sewer Fund pays no propertytax to the Cityor payment inlieuof taxes and because the
Citycan includea charge initswater/sewer rates equal to 4% of the cost of the water system
as a maintenance and operating charge.
Adopted by the City Council on September 10,2013
ATTEST:
^Saier/
W.RoberrTaylor,Fin
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