STAFF REPORT - CITY COUNCIL/SUCCESSOR AGENCY/PUBLIC FINANCE AUTHORITY

City Council is recommended to approve Resolution No. 4305, amending the Gas Purchase Policy to become the Natural Gas Enterprise Policy, thereby establishing sub-funds for Capital Improvement and Rate Stabilization, and making changes to the terms of the existing gas purchase policy.

At the request of the city council, the attached resolution provides further structure and fiscal discipline for the management of the city’s natural gas enterprise.  It is an expansion of the existing gas purchase policy to establish Rate Stabilization and Capital improvement sub-funds.

Establishment of Capital Improvement and Rate Stabilization Sub-Funds

The intent of these cash sub-funds within the Gas Enterprise is to set aside, under defined accounting codes, cash that is reserved for capital improvement projects and for rate stabilization.  Transfer to and from these sub-funds will be by the authority of the city council.  The result will be increased transparency in the use and management of available cash in the gas enterprise and will also serve to avoid rate swings.

Though the approved resolution establishes the two sub-funds, it does not provide available cash to be assigned to them.  However, it does suggest the objective amount for Rate Stabilization to be $500,000 total, and the annual amount for Capital Improvement to be $250,000 per year.

Proposed Resolution No. 4305 provides more detail on the two established funds.

Changes to Gas Purchase Policy

The following changes have been made to the gas purchase policy to streamline its use and adjust to current gas market conditions.

• The three-year purchase schedule has been removed to allow more discretion to staff (and allow fewer exceptions to the policy) regarding advance purchases.
• The Gas Purchase Policy is amended to be incorporated with the Rate Stabilization and Capital Improvement Funds.

Do not implement sub-funds for rate stabilization and capital improvement.