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views its financial poaition and the rate structure annually. Excess fund balances are used to finance current operations. Rates have increased for all types of users each year since 1984 to cover increased cost from the Metropolitan Waste Control Commission (MWCC). Approximately 77$ of the sewer operating ex- pensea, including depreciation on the distribution system, are for sewage service provided by the MWCC. Consequently, the sewer rates are in a large part determined by the MWCC. Sewer rates are calculated to generate revenues to offset depreciation on the distribution system. The distribution system assets were originally financed by special assessments and future replacement of theae assets is planned to be financed by revenues. It is expected the City will continue to both increase work to reduce costs as much as poasible to move the se tiona to at least a break-even point during the next 2 Below is a summary of the sanitary sewer operations: Operating Revenues User Charges Other Total Operating Operating Expenses Disposal charge - Depreciation Other Revenues 4I� Total Operating Expensea Operating Income (loss) Nonoperating Revenues Transfers out Net Income (loss) 1993 $ 2,504,308 164,331 S 2,668,639 2,164,487 105,359 531,878 $ 2,801,724 $ (133,085) 58,817 (21,500) S (95.768) rates and wer opera- years. 1992 $ 2,286,610 141,437 $ 2,428.047 2,105,927 114,154 520,585 S 2,740,666 $ (312,619) ( 16,234) $ (328,853) The Water Fund accounts for the operation of the water system, with 9,323 customers currently being billed. The City purchases all of the water it uses from the City of St. Paul. The City reviews ite financial position and the rate structure annually. Excess fund balances are used to finance current operationa. It was determined in 1992 that some under registration had taken place in the wholesale metering from the City of St. Paul. That under-registration was negotiated to the amount of $400,000. An agreement was entered to pay that amount with 7� intereat over 4 years. Approximately 77� of the water operating expense, including depreciation of the distribution system, is for water provided by the City of St. Paul. Consequently, the water rates are in a large part determined by the City of St. Paul charges. Water rates are calculated to generate revenuea to offset depreciation on the distribution syetem since these assets were originally £inanced by apecial aseessment, and future replacement of these assets is planned to be financed by syetem users. It is eacpected the City will continue to both increase rates and 12