Budget Message / Highlights - Metropolitan Water Reclamation ...

METROPOLITAN WATER RECLAMATION DISTRICT OF GREATER CHICAGO
Financial Policies, Objectives, and Accomplishments
2009 BUDGET
Financial Policies,
Objectives
and
Accomplishments
In order to meet its Federal, State, and local responsibilities, while ensuring cost-effective operations, the Metropolitan Water
Reclamation District of Greater Chicago adheres to a number of financial policies. These policies are part of a dynamic process
whereby the best use is made of available District resources. The following provides an overview of these policies, their
objectives, and measurable accomplishments resulting from their use.
Budgetary Policies
In order to protect the strong financial position of the District, ensure uninterrupted services, and stabilize annual tax levies, the
Board adopted the following policies on December 21, 2006 to enhance and maintain budgetary fund balances. The General
Corporate Fund and Capital Improvements Bonds Fund investment policies were amended on December 14, 2007.
General Corporate Fund
• Corporate Fund undesignated fund balance as of January 1 of each budget year between 12 percent and 15 percent of
appropriations, approximately $45 to $55 million. The fund balance may be maintained by not fully appropriating prior
year fund balances. This level of fund balance will ensure the District’s ability to maintain all operations even in the event
of unanticipated revenue shortfalls, and provide time to adjust budget and operations;
• Corporate Working Cash Fund sufficient to finance 95 percent of the full annual expenditure of the Corporate Fund. This
will be financed through transfers of surpluses from the Construction Working Cash Fund, direct tax levies, tax levy
financed debt (Working Cash Bonds), and transfers of accumulated interest from other funds. This level of fund balance
will continue financing of the Corporate Fund in the event of the typical and extraordinary delays in second installment
real estate tax collections; and
• Reserve Claim Fund at the maximum level permitted by statute or 0.05 percent of the Equalized Assessed Valuation. This
will be financed through tax levies. This level of funding will protect the District in the event of catastrophic failure of
District operational infrastructure or other claims. As the District is primarily self-insured, adequate reserves are critical.
The District will appropriate funds from the unreserved/undesignated fund balance for emergencies and other requirements that
the District believes to be in its best interest. In the event that any of these specific component objectives cannot be met, the
Executive Director will report this fact and the underlying causes to the Board with a plan to bring the fund balances back into
compliance with policy within a two-year period. In order to maintain relevance, this policy will be reviewed every three years
following adoption or sooner at the discretion of the Executive Director.
Capital Improvements Bond Fund investment income
Investment earnings from the Capital Improvements Bond Fund resulting from all future bond issues will fund an equity
transfer to the Bond & Interest Funds and be used to abate property tax levies or for other corporate needs. This practice will
also limit the payment of arbitrage rebates.
Bond & Interest Funds investment income
Fund balances in the Bond & Interest Funds that might accumulate due to investment income will be identified and used to
abate Bond & Interest property tax levies. This is being done to appropriately reduce property tax levies by the amount earned
on invested balances above what is necessary for paying principal and interest due over the following 12 months, while still
maintaining appropriate fund balances. This policy and the subsequent tax abatements will assist in compliance with the
Board’s overall tax levy policy (not to exceed a 5 percent increase over prior year not including the Stormwater Management
Fund tax levy).
Capital Improvements Bond Fund accumulated income
Revenues that have accumulated in the Capital Improvements Bond Fund (CIBF) from investment income, grants, or State
Revolving Fund revenues will primarily be used for capital projects. Capital projects are generally in the CIBF; however,
capital projects in the Construction or Corporate Funds of critical importance may be financed by transfers from this revenue
source. These funds may be transferred to the Bond & Interest Funds to be used to abate property taxes, or may be used for
other corporate needs as necessary. The Budget for the District shall present a complete financial plan for the Budget Year.
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