HomeMy WebLinkAbout3.A.2. Internal Service Fund Overview 14
2013 Equipment Internal Service Fund Overview
ACTION SOUGHT
Provide an overview of the Internal Service Fund for Council to discuss during the budget process.
INTRODUCTION
The Equipment Internal Service fund has been established for the City of Shakopee to prevent large
variances in annual funding requests and provide budget planning consistency. During the 2012 budget
process, staff met to discuss and review the funding formulas, and determine if these were still useful
for planning purposes.
In reviewing the IS Fund for 2013, one major change to note is that the costs to each department are
more aligned to the actual usage and the replacement formula has been adjusted to keep the fund in a
solid cash position.
In review of the fund and preparing the 2013 budget, the following items were updated:
• Life of each asset was reviewed and revised if necessary
• Salvage values were reviewed, an in many cases eliminated, as these have not historically been
significant
• Replacement values were revised, based on recent purchase data or confirmation of current and
future pricing from state bid vendors
• All items in the equipment list were verified and tied to both the Fleet listing maintained by
Public Works staff, as well as the insurance listing supplied to League of MN Cities Insurance
Trust. This confirmed that all equipment items were in fact brought into the replacement
schedule.
For the 2013 departmental charges the rates were re- calculated based on the above information and
adjusted if needed. Police and Public Works will have incremental increases as needed to cover the full
amount of annual charges in comparison to their historical reduced charges. The inverse occurred in
Fire, in which the annual charges have been lowered to reflect actual replacement costs.
In review of the replacement costs of Public Works equipment, the new emissions standards have
created an increased replacement value for the Dump Trucks, which have resulted in the higher annual
charges. In Police, the historical rates have reflected the use of forfeited vehicles, but this estimate has
not resulted in reduced purchases of Police vehicles. The current replacement charges need to cover
future purchase costs.
Fire department equipment replacement costs have resulted in lower anticipated future costs for the
larger equipment pieces, based on current data from equipment vendors. This has been factored into
the calculations, resulting in lower annual charges for this department.
H: \BUDGET\Budgetl3 \Council Worksession 8 -13 -12 \Equipment IS fund memo 8- 13.docx
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The 2013 annual departmental charges also include initial funding for the maintenance and upkeep of
the Car Wash, Truck Wash and Fueling stations. These service sites at the Public Works facility have
been in place for several years, and to date, have not received annual funding for upkeep and future
replacement. These facilities have recently required much needed repair and maintenance. The
departmental charges now reflect the estimated future costs spread over a 5 year period. Staff is also
working on developing an agreement with SPUC, Scott County, School District, and other users to ensure
that all parties that are utilizing the benefits of these services and are paying for commodity costs as
well as repairs and maintenance. As these agreements are developed, and ready to route to outside
parties, Council will be asked for input and suggestions. These agreements will also provide for timely
review and "opt out" clauses, which will be addressed during each budget review cycle.
As staff continues to review and refine the Internal Service funds the goal is to maintain a consistent
funding source to purchase and maintain equipment as needed for the operations of efficient City
services.
As with other City operations, often the annual requirements of equipment purchases do not allow for a
consistent annual expense or outlay. The years in which major equipment is needed or replaced will
result in higher cash outlays than years of lesser needs. As staff continues to review these operations,
the focus will be to maintain the financial health of this fund, allowing for the unknowns that may occur,
without impacting future tax levies with unanticipated costs.
H: \BUDGET\Budgetl3 \Council Worksession 8 -13 -12 \Equipment IS fund memo 8- 13.docx