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Financial Management Policies <br />Purpose <br />The City of Elk River has the fiduciary duty to manage its resources wisely. Adopting financial policies is an <br />important step to ensure that resources are managed responsibly. The policies provide the framework for the <br />overall fiscal management of the city and guide the decision-making process. <br /> <br />Most of the policies represent long-standing principles, traditions and practices which have guided the city and <br />have maintained financial stability. These policies will be reviewed periodically to determine changes as <br />necessary. <br /> <br />Objectives <br />1. Provide sound principles to guide the decisions of the City Council and management. <br />2. To provide both short-term and long-term financial stability to city government by ensuring adequate <br />funding for providing and protecting infrastructure needed by the community today and tomorrow. <br />3. Protect and enhance the city <br />4. -making ability by ensuring that important policy decisions are not <br />constrained by financial problems or emergencies. <br /> <br />Revenue and Expenditure <br />The city will: <br />1. Provide long-term financial stability through sound short- and long-term financial planning. <br />2. Estimate annual revenues and expenditures in a conservative manner so as to reduce exposure to <br />unforeseen circumstances. <br />3. Project revenues and expenditures over five years and will update these projections each budget process. <br />4. Establish user charges and fees at a level related to the cost of the service (operating, direct, indirect, and <br />capital), when user charges and fees are determined to be appropriate and the direct benefits are <br />identifiable. Fees will be reviewed annually. <br />5. To the extent feasible, apply one-time revenues toward one-time expenditures or place them into <br />reserves. One-time revenues will not be used to finance ongoing programs. <br /> <br />Utilities <br />The City Council sets fees and user charges for municipal sanitary sewer utility, stormwater utility, and garbage <br />collection. The Utilities Commission sets fees and charges for the water and electric utilities. The city will <br />encourage the Commission to adopt financial management policies similar to the policies stated in this section. <br />1. The city will strive to set user fees for utilities at a level that creates financially-sustaining enterprises. <br />2. The fee structure for utilities should produce a net annual surplus of revenues over expenditures after <br />accounting for all operating costs, depreciation of capital assets and payment of debt service. <br />3. All municipal utility funds will maintain adequate cash reserves. The reserve needs vary for each <br />municipal utility. The assessment of cash reserves should take into account future capital investments, <br />diversity, and stability of revenues and potential for unanticipated changes in revenues and expenditures. <br />4. All utility rates shall be reviewed annually to minimize the impact of rate changes and to ensure adequate <br />long-term funding. <br />5. Elk River Municipal Utilities (ERMU) will make an annual contribution to the city. The cash <br />contribution will be based on 4% of gross electric sales within the corporate limits of the city. The City <br />Financial Management Policies Page 1 <br />