Page 18 - Hurst Budget FY21

Enterprise Fund

The Enterprise Fund is operated as a stand-alone utility business providing water and sewer
services to Hurst residents and commercial customers. This fund’s approved operating budget has
a -1.12% decrease for 2020-2021. The city of Hurst does not own or operate its own water or
wastewater plant. As such, the city contracts with Fort Worth and the Trinity River Authority (TRA)
for wholesale water and wastewater services. Unfortunately, the City of Hurst has limited ability to
control wholesale costs, which have increased by 11% over the past seven years. However, for
fiscal year 2020-2021, overall wholesale costs are projected to decrease. The city is participating
in a TRA project to replace the Walker Branch Sanitary Sewer Trunk line which will cost $7.9 million
over the next twenty-five years. This and other project costs are factored into rates and included in
the fund’s long-term financial plans. The city’s Public Works Department monitors water usage
and system capacity on a 24/7 basis. The city uses well water and other means to lower maximum
hour and daily demands of water, which helps control wholesale costs as much as possible.
Wholesale costs represent approximately 34% of the operating budget. With such a significant
portion of the fund’s budget being passed back to Ft. Worth and TRA, we actively work with our
wholesale providers but have limited ability to impact wholesale rate decisions.

Under the city’s rate smoothing policy the Council considers small incremental rates increases each
year rather than more significant and infrequent rate increases. Each year the city conducts a
review of our operation and maintenance costs, debt service, and capital needs and compares the
required resources to our projected revenues. Utility revenue is heavily affected by weather
patterns and can cause large budget surpluses or deficits year over year. The rate smoothing
policy is intended to help mitigate similar changes in rate over time. Over the last 20 years the
average rate increase has been less than 4%. However, due to COVID-19 pandemic and the
impact to the community, Council approved no rate increase for FY 2020-2021. This was
recommended to Council based upon the solid financial position of the Enterprise Fund.

Personnel costs represent approximately 19% of Enterprise Fund expenditures. The vast majority
of costs are related to wholesale operations and system depreciation and maintenance. Other
expenditures in the Enterprise Fund include meter replacements and capital purchases for
replacement vehicles and other equipment that have reached the end of their useful lives.

Budgetary Objectives to Maintain City Services

Fiscal year 2020-2021 marked the first year of a state legislative mandate of a 3.5% property tax
revenue cap on properties taxed in both the current and upcoming years. This cap be exceeded only
if approved by voters. Additionally, the city can realize an increase in revenue beyond the 3.5% cap
under the addition of new property not taxed in the prior year and the result of changes in value on
properties not certified by the Tarrant Appraisal District when the prior year’s rate was calculated. In
order to comply with the new mandate, and prepare for future budgetary challenges, the city placed a
strong emphasis on evaluation and analysis of programs and services. Additionally, the entire 2020-
2021 budget process was completed under the economic and programming uncertainty related to the
pandemic. The following short-term organizational objectives were achieved during the budget process
to mitigate the impacts of COVID-19 and contribute to the city's financial sustainability.

 Maintain public safety and infrastructure services at the current level where appropriate and
make programmatic changes to accomplish budgetary savings where needed. Funding is
provided for city services such as public safety, streets/drainage, community services,
neighborhood services and water/wastewater systems. City services expanded over the last two
decades largely due to two separate half-cent sales tax revenue sources approved by voters and
dedicated to Community Services projects and Police expenditures. Another significant special
revenue source, the storm water management fee, provides approximately $1 million per year. For
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