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Policy F3 The Commission will monitor revenues and expenditures, and maintain a <br />balanced budget through an appropriate combination of cost-saving measures, budget transfers, <br />supplemental budgets and/or user rate adjustments as needed.. <br />Policy F4 The Commission shall maintain a capital planning and fmancing system for use in <br />preparing amulti-year CIP for consideration and adoption by MWMC and ratification by the <br />partner agencies' governing bodies as a part of the Commission's budget process. This system <br />shall include prepazation of a rolling CIP (described in Policy C 1) and a Capital Financing Plan <br />(CFP). <br />Discussion -Each yeaz, staff shall update its CFP based on the multi-year CIP and assumptions <br />and projections related to increased operational requirements, inflation, and other cost factors. <br />The CFP will support staff s analysis and development of revenue requirements, budgeted <br />expenditures, and user charges. The CFP shall contain aten-yeaz projection of revenue <br />requirements from all revenue sources, and resulting user rates needed to fund operating budgets, <br />capital budgets, and debt service. <br />Policy FS The Commission shall establish and maintain prudent minimum cash reserves, <br />including, but not limited to Contingency Reserves and the reserves discussed below, as needed. <br />FSa) The Working Capital Reserve shall be suflicient to fulfill operating and capital <br />cash flow needs. The Working Capital Reserve has been set at $200,000 for the City of <br />Springfield and at $500,000 for the City of Eugene for many years. The reserves are <br />sized to provide the cities with cash to pay expenses until the sewer user fees are <br />received. The size of the reserve is reviewed annually and may be adjusted as needed to <br />ensure that it is sufficient and that neither city experiences negative cash flow. <br />FSb) The Operating Reserve shall be maintained to minimize the impact of <br />unanticipated revenue shortfalls. In the operating budget, the guideline for establishing <br />the Operating Reserve when preparing annual budgets is 8% - 10% of the operating <br />expenditure budget. <br />FSc) The Capital Reserve accumulates revenue to help fund capital projects (including <br />major rehabilitation). The Capital Reserve is funded by annual contributions from user <br />rates and is used to fund capital projects as determined through the annual budget <br />process. In no yeaz shall the Capital Reserve be allowed to fall below $1 million in the <br />adopted budget. <br />FSd) The Equipment Replacement Reserve is intended to accumulate funds necessary <br />to provide for the timely replacement or rehabilitation of equipment, and may also be <br />borrowed against to provide short-term financing of capital improvements. An annual <br />analysis is performed on the Equipment Replacement Reserve. The annual contribution <br />is set so that all projected replacements will be funded over a 20-year period and at the <br />end of the 20 yeaz period, the reserve will contain replacement funds for all equipment <br />projected to be in use at that time. Estimates used in the analysis include interest <br />earnings, inflation rates and useful lives for the equipment. <br />FSe) A Rate Stability Reserve shall be maintained as necessary to protect ratepayers <br />from volatility in user rates and to enhance credit-worthiness. The intent of a Rate <br />f ' Stability Reserve is to set aside funds to provide stable rates over a period of yeazs. <br />1 <br />2005 MWMC Financial Plan Page 12 <br />