HomeMy WebLinkAboutResolution No. 04-C37RESOLUTION NO.04-_ r37
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA,
CALIFORNIA, ESTABLISHING A POLICY CONCERNING THE OBLIGATIONS
OF THE CITY'S ELECTRIC UTILITY OPERATIONS TO COVER GENERAL
FUND SUPPORT SERVICE COSTS AND OTHERWISE PAY ITS FAIR SHARE
OF CAPITAL IMPROVEMENT COSTS FOR INFRASTRUCTURE IMPACTED BY
UTILITY OPERATIONS
WHEREAS, the City Council of the City of Azusa serving as the City's Utility
Board met on February 23, 2004, to discuss the City's General Fund support
services costs related to the City's various utility operations; and
WHEREAS, the City Council desires that the General Fund fully recover all direct
and indirect support service costs and any and all other "franchise fees" or
allocations authorized by law; and
WHEREAS, the City Council desires that the methodology to allocate support
service costs be consistent with the City's guiding principles that the allocations
be administratively simple, fair, transparent and predictable; and
WHEREAS, the City Council has determined that a combination of statutory
franchise fees, an in -lieu property franchise fee applicable to the electric utility
("Electric Utility"), interest income sharing with the General Fund and direct
support service cost allocation reimbursements are consistent with the City's
guiding principles; and
WHEREAS, in August 2003 the City has entered into Series B and C Installment
Sales Agreements ("Agreements") with the Financing Authority for Resource
Efficiency of California ("FARECal") in connection with the issuances of Series B
and C Certificate of Participation for the Electric Utility; and
WHEREAS, the Agreements established flow of revenue covenants in the use of
Electric Utility's GROSS REVENUES as such term is defined in the Agreements;
and
WHEREAS, the electric fund transfers to the General Fund contemplated herein
further incorporate by reference the principles outlined in the flow of revenue
covenants of the Agreements;
NOW THEREFORE, THE CITY COUNCIL DOES HEREBY RESOLVE AS
FOLLOWS:
SECTION 1. The City Council hereby authorizes the following allocation
transfers from the Electric Utility Fund to the General Fund:
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A. In accordance with the California Public Utilities Code provisions related to
the establishment of franchise fees by general law cities, the Electric Utility
shall pay a franchise fee of two (2) percent on retail electric sales to the
General Fund. Such franchise fees shall be considered as Operation and
Maintenance Expenses as such term is defined in the Agreements.
B. Because the Electric Utility operations do not otherwise incur operating costs
related to the payment of property and other taxes like that of a private utility
operation, the use of property that would otherwise be available to private
users subject to such properly and other taxes is a direct loss of revenue to
the City's General Fund. As Electric Utility rates are exempt from the
provisions of Proposition 218 the City Council finds that it is reasonable and
fair that the Electric Utility pay an in -lieu fee of up to eight (8) percent on retail
electric sales to the General Fund. Such in -lieu fees shall not be considered
as Operation and Maintenance Expenses as such term is defined in the
Agreements.
C. For Fiscal Year 2004-05, the Electric Utility shall contribute interest earned on
those Electric Utility reserve funds on a quarterly basis. As the Electric Utility
operations impacts the City's infrastructure and capital improvements the
Electric Utility shall contribute to a capital improvement fund established by
Ordinance of the City Council. The capital improvement fund shall be used
solely to finance those capital improvement items that are impacted by the
Electric Utility operation. The Electric Utility shall contribute to this fund from
interest earned on those Electric Utility reserve funds that are invested. For
Fiscal Year 2005-06, and each year thereafter, the contribution to the capital
improvement fund shall be made within sixty (60) days of the close of each
Fiscal Year, provided, however, that such contribution shall not exceed the
Electric Utility's net positive income for the Fiscal Year that has closed; if the
Electric Utility does not have a positive net income, then the Electric Utility
shall have no obligation to contribute the interest earnings to the capital
improvement fund. Such interest transfer shall not be considered as
Operation and Maintenance Expenses as such term is defined in the
Agreements.
D. In accordance with common practices related to direct cost recovery and
court decisions, the Electric Utility shall reimburse the General Fund for all
costs for City support services directly provided to the Electric Utility in
accordance with the following two-step process:
i. Step 1: A determination shall be made as to the total amount of all
General Fund costs associated with general City support services that
are provided to all City departments. (General City support services
shall include, but not be limited to, those departments like the City
Administration, City Clerk's Office, Finance Department, Human
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Resources, and Information Technology). The total amount of General
Fund costs associated with these general City support service
departments shall be made during the budget preparation process for
the subsequent Fiscal Year.
Step 2: The percentage share of the Utility Department's full time
equivalent (FTE) employees shall be determined as a percent of the
total FTE employees for all departments of the City of Azusa. The
General Fund support services cost determined in Step 1 shall then be
multiplied by the Utility Department's FTE percentage share to
determine the support services cost allocation to the Utility
Department. The Electric Utility's share of this amount shall be thirty-
five (35) percent of the allocation. Such cost reimbursements to the
General Fund for all direct City support service shall be considered as
Operation and Maintenance Expenses as such term is defined in the
Agreements.
E. Because the Electric Utility may from time to time generate net positive
income above the Electric Utility's needs for financial reserves, capital
improvement programs, market risk management, and the transfers to the
General Fund described above, the City Council finds that additional
contributions from the Electric Utility to the General Fund may be reasonable
and fair. Within sixty (60) days after the audited annual financial statements
for the Electric Utility become available the City Council may adopt, upon a
joint recommendation by the City Manager and the Director of Utilities,
additional transfers from the Electric Utility to the General Fund. Any
additional transfers pursuant to this section shall be contributed to the capital
improvement fund and shall be used solely to finance those capital
improvement items that are impacted by the Electric Utility operation. Such
additional transfer shall not be considered as Operation and Maintenance
Expenses as such term is defined in the Agreements.
SECTION 2. This Resolution shall take effect upon its adoption by the City
Council.
PASSED, APPROVED AND ADOPTED this 2'
mayor
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Mendoza,Vera
APPROVED AS TO FORM:
Best Best & Krieger LLP
City Attorney
I HEREBY CERTIFY that the foregoing Resolution No. 04- C37 was duly
adopted by the City Council of the City of Azusa, at a regular meeting thereof, held
on the 24th day of May, 2004 by the following vote of the Board.
AYES: COUNCILMEMBERS: HARDISON, STANFORD, CHAGNON, ROCHA, MADRID
NOES: COUNCILMEMBERS: NONE
ABSENT: COUNCILMEMBERS: NONE