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APPROPRIATION COMMITTEE-ATM 2017
<br /> Direct Town Costs. In addition to the MWRA assessments, the expenses of the Water and Wastewater Fund
<br /> budgets include direct costs incurred by the Town,primarily for: (1) the wages and salaries of the employees
<br /> in the DPW's Water and Sewer Divisions, (2)the expenses of the water and sewer maintenance activities and
<br /> equipment, and(3) debt service on prior borrowings for water and sewer capital improvements.
<br /> Indirect Town Costs. The Water and Sewer Enterprise Fund budgets also include indirect costs for services
<br /> provided by other Town departments to support water and sewer operations, such as insurance costs (health
<br /> and liability), retirement funding, engineering costs, and the cost of services provided by the Comptroller, the
<br /> Management Information Systems (MIS) Department, and the Revenue Department. Since 2006, the Town
<br /> has conducted periodic studies of the appropriate level of indirect costs and has adjusted the charges to the
<br /> enterprise funds accordingly.
<br /> Rate-Setting and Reserves
<br /> As discussed in Appendix B, the State statute governing enterprise funds, G.L. c. 44, § 53F1/2, requires that
<br /> accumulated surpluses resulting from the operations of an enterprise fund, referred to as retained earnings,
<br /> remain with the fund as a reserve, and that they be used only for capital expenditures of the enterprise, subject
<br /> to appropriation, or to reduce user charges. Deficits must be funded with existing reserves or, in the absence
<br /> of such reserves,made up in the following year's rates.
<br /> During the early 2000s, difficulties in forecasting usage and other accounting issues resulted in rates being set
<br /> at less than adequate levels in several rate years. This, in turn, reduced the retained earnings in the Water and
<br /> Sewer Enterprise Funds to levels that caused concern. Since 2005,the Town's ability to measure and forecast
<br /> water and sewer usage, and thereby to anticipate revenues and reserve levels, has improved significantly. This
<br /> has enabled the Town to restore and stabilize the water and sewer enterprise fund reserve balances for each of
<br /> the two funds to targeted levels of approximately $1,000,000 for each fund and, more recently to draw some
<br /> of the funds down for capital investment as shown in the table below.
<br /> Retained Earnings:Appropriations and Year-End Balances
<br /> Annual Town Meeting 2012 2013 2014 2015 2016 2017
<br /> Water
<br /> Starting Balance 1 $1,952,253 $2,066,566 $2,234,007 $2,119,458 $1,786,659 $1,800,533
<br /> Approp. for Rate Relief 2 $350,000 $300,000 $250,000 $0 $0 $0
<br /> Use of Bedford Surplus $200,000 $250,000 $275,000 $131,000 $0
<br /> Approp. for Capital 3 $25,000 $750,000 $873,500 $1,015,500 $620,500 $1,075,000
<br /> Projected End Balance 4 $1,577,253 $816,566 $860,507 $903,958 $1,035,159 $725,533
<br /> Wastewater
<br /> Starting Balance 1 $1,168,190 $1,319,000 $1,990,816 $2,027,941 $1,032,942 $2,270,848
<br /> Approp. for Rate Relief 2 $150,000 $100,000 $50,000 $0 $0 $0
<br /> Approp. for Capital 3 $0 $200,000 $940,500 $1,390,500 $177,500 $1,270,000
<br /> Projected End Balance 4 $1,018,190 $1,019,000 $1,000,316 $637,441 $855,422 $1,000,848
<br /> 1 Certified retained earnings as of the end of the prior fiscal year(as of 6/30/2016 for this year's ATM).
<br /> 2 Appropriations from retained earnings to subsidize the next fiscal year's operating budget.
<br /> 3 Proposed appropriations for capital projects for the next fiscal year(FY2018 at this ATM).
<br /> 4 Note that appropriations from retained earnings at the annual town meeting must be deducted as a liability from the projected re-
<br /> tained earnings to be certified as of the end of the current fiscal year, even though the funds will not be applied until the following
<br /> fiscal year. The projection of anticipated retained earnings assumes break-even operational results during the current fiscal year. A
<br /> higher(lower) starting balance available for appropriation the following year indicates that the current year's operating results were
<br /> higher(lower)than were projected at rate-setting,resulting in an operating surplus(deficit).
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