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Water and Sewer Fund Capital Analysis <br /> Depreciation is required to fund replacement of worn out equipment and <br /> infrastructure. <br /> Capital Contributions consist of special assessment collections and connection <br /> fees. These fees fund future expansion of the system. <br /> The Water and Sewer Funds have been posting an operating loss for the last <br /> five years. This means that adequate funds are not being reserved, based on <br /> the life cycle of the capital items, for future replacement. <br /> Capital Contributions have been significant enough to mitigate the shortfall in <br /> most years; however,this results in a reduction of funds available for <br /> expansion and inflation of costs. <br /> An analysis of annual requirements, based on the replacement cost of the <br /> capital items, indicates underfunding of capital reserves. <br /> Water and Sewer Funds are well situated for short term needs and liquidity <br /> requirements. <br /> Recommendation: Small increase in both user charges to cover inflation on an <br /> annual basis. <br /> 27 <br />