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• The fee structure for municipal utilities should produce a net annual surplus of revenues <br /> over expenditures after accounting for all operating costs, depreciation of capital assets and <br /> payment of debt service. <br /> • All municipal utility funds will maintain adequate cash reserves. The reserve needs vary for <br /> each municipal utility. The assessment of cash reserves should take into account future <br /> capital investments, diversity, and stability of revenues and potential for unanticipated <br /> changes in revenues and expenditures. <br /> • All utility rates should be reviewed every year to minimize the impacts of rate changes and to <br /> insure adequate long-term funding. <br /> • Elk River Municipal Utilities will make an annual contribution to the city. The cash <br /> contribution will be based on 3% of gross electric sales within the corporate limits of the <br /> city. The City Council will determine the portion of this contribution to be allocated to the <br /> General fund and the Equipment Replacement fund. <br /> • The City Council will determine the chargeback to the Sewer fund for administration of the <br /> sanitary sewer system. <br /> • Any other transfer of equity from a utility fund to the General fund should only be done on <br /> a one-time exception basis, for example, to fund an unusual,unanticipated expense. In no <br /> event shall such equity transfers be made in consecutive years. Equity transfers must be <br /> approved by the City Council. <br /> Financial Management Policies Page 2 <br />