Theory

Question 1

40A:1-1

Answer 1

“Municipal Public Utility” means any water, sewer, electric power or gas SYSTEM, or any combination thereof, or any public parking system, or any other utility, enterprise or purpose AUTHORIZED to be undertaken by a LOCAL UNIT from which it may RECEIVE FEES, rents or other charges.

Question 2

A utility can be any enterprise operated by a governmental unit in which the revenues are sufficient to meet the requirements of operations and debt service of the enterprise.

Answer 2

True

Question 3

Types of Utilities

Answer 3

Water, Sewer, Water & Sewer, Pool, Electric, Airport, Golf Course, Recreation, Solid Waste, Harbor, Beach, Country Club, Parking

Question 4

A Utility is created by the Adoption of an Ordinance by the Governing Body

Answer 4

True

Question 5

Once a utility is created, a chart of accounts is set up to record the financial activity

Answer 5

True

Question 6

An emergency appropriation may be required if…

Answer 6

commitments are to be made before the Utility Budget can be adopted

Question 7

Utilities are operated under the provisions of

Answer 7

the Local Budget Law and the Local Bond Law

Question 8

A set of separate accounts

Answer 8

are maintained for each fund

Question 9

A Utility will have an Operating Fund but may also have…

Answer 9

a Utility Capital Fund and Utility Assessment Fund

Question 10

Utility Operating Fund

Answer 10

General Revenues, Operating Expenses, CIF, and Debt Service Appropriations

Question 11

Utility Capital Fund

Answer 11

Debt Authorized, Bonds, Notes, Capital Appropriations, Capital Assets

Question 12

Utility Assessment Fund

Answer 12

Assessments Receivable, Assessment Debt

Question 13

A Utility must have an _______ adopted by the Governing Body along with the Municipal Budget

Answer 13

Operating budget

Question 14

Utility Budgets are NOT subject to

Answer 14

the provisions of the budget CAP law

Question 15

Temporary Budget, Transfers, Deferred Charges, Emergency Appropriations

Answer 15

All apply to Utilities

Question 16

40A:4-33

Answer 16

Utility Budget - Separate budget section

Question 17

Revenues not to exceed Appropriation

Answer 17

Balanced Budget

Question 18

Revenues not to exceed Prior Year’s

Answer 18

Cash Collections

Question 19

Exception to revenues not exceeding PY cash collections

Answer 19

Governing Body Application, Certification by the Division

Question 20

40A:4-34

Answer 20

Appropriations in form prescribed by DLGS

Question 21

Appropriations in form prescribed by DLGS

Answer 21

Operations, Interest & Debt Retirement, Deferred charges & statutory expenditures

Question 22

40A:4-35

Answer 22

Utility Operations; Surplus; Deficit (self liquidating)

Question 23

Utility Operations; Surplus; Deficit (self liquidating)

Answer 23

Surplus may be included in (Current) Budget
Deficit shall be included in (Current) Budget
Utility with BPU oversight - 5% surplus limit
40A:4-35

Question 24

40A:2-45 Deemed to be self-liquidating if

Answer 24

cash receipts from fees, rents and other charges are sufficient to meet operating and maintenance expenses and interest and debt redemption charges. Amended law allows interest and appropriated surplus to be counted towards revenue.

Question 25

Utility Debt

Answer 25

is a Deduction from Net Debt

Question 26

Down Payment

Answer 26

is not required for debt authorizations if Utility will remain self liquidating with new debt

Question 27

Self Liquidating

Answer 27

during construction with approval of Local Finance Board

Question 28

Self Liquidating Calculation

Answer 28

done annually on Annual Debt Statement

Question 29

Self Liquidating Calculation

Answer 29

Review before end of the year * impact on net debt * cancellation of appropriation * anticipate change in rate or fees

Question 30

Self Liquidating

Answer 30

Calculation for New Debt on Supplemental Debt Statement

Question 31

Utility Debt

Answer 31

Debt Authorized and Issued in the name of the Utility | Two levels of repayment security

Question 32

Unlike Current Fund

Answer 32

Utilities accrue interest

Question 33

Accrued interest accrual as of

Answer 33

12/31 is shown on Utility Operating Balance Sheet

Question 34

Accrued interest shortfall

Answer 34

must be appropriated in operating budget

Question 35

Information needed to calculate the interest accrual

Answer 35

is found in the Capital Fund

Question 36

Utility Surplus

Answer 36

Fund Balance

Question 37

Surplus may be included

Answer 37

in Current budget

Question 38

Deficit shall be included

Answer 38

in Current budget

Question 39

Utility with BPU oversight

Answer 39

5% Surplus limit

Question 40

Utility Operating, Utility Capital and Utility Assessment Fund Balances

Answer 40

may be anticipated

Question 41

Why a Utility

Answer 41

``` Match Program costs to users User base is limited User base includes Exempt properties No down payment on debt Debt not in net debt calculation No appropriation CAP No levy cap ```

Question 42

"Owned" by a local government

Answer 42

Utility

Question 43

oversight by local governing body

Answer 43

Utility

Question 44

Created by ordinance

Answer 44

Utility

Question 45

Funded as part of municipal budget

Answer 45

Utility

Question 46

Autonomous agency

Answer 46

Authority

Question 47

Oversight by appointed Board of Directors

Answer 47

Authority

Question 48

Created by Ordinance w/prior approval of Local Finance Board

Answer 48

Authority

Question 49

Independent Budget

Answer 49

Authority

Question 50

Utility Operating Assets

Answer 50

``` Cash Change Fund Petty Cash Interfund Receivables Consumer A/R Utility Liens Other Receivables Inventory Deferred Charges ```

Question 51

Operating Liabilities

Answer 51

``` Appropriations Appropriation Reserves Reserve for Encumbrances Accounts Payable Interfund Payable Accrued Interest on Bonds & Notes Utility Overpayments Pre-Paid Rents Reserve for Consumer Accounts Receivable Reserve for Liens; Other A/R Fund Balance ```

Question 52

All aspects of Tax Rate Calculation are governed by Statute

Answer 52

True

Question 53

Almost no Statutory regulation of Utility Rate Calculation

Answer 53

True

Question 54

When is it Time for a Rate Study?

Answer 54

When revenue estimates are not met When utility is not self-liquidating When planning a large capital project periodically as part of good planning

Question 55

When calculating a utility rate

Answer 55

* Review actual revenue vs actual expense for 2-3 prior years * Review current year revenue & expenses vs. budget * Project expenses going forward * Determine assumptions for various expenses: s&w, debt service, pension, etc. * Divide the annual projected expenses by the number of units (households, kilowatts for electric) * Project change in units over the study period

Question 56

Utility Rate Structure - Flat Rate

Answer 56

Same rate per household | Easy to calculate, easy to bill, reliable revenue estimates, may not be equitable based on usage

Question 57

Utility Rate Structure - Per Unit

Answer 57

Gallon/kw | Requires reading and calculation, variable revenue based on demand

Question 58

Utility Rate Structure - Mixed Fee

Answer 58

Base Flat Rate + Usage | Increases revenue reliability, balance between fixed and variable expenses

Question 59

Utility Rate Structure - Policy

Answer 59

``` Discount Fees for: Senior Citizens, volunteers Increased Costs - Reduced Demand Conservation Rate/Scaled Rate Water/Sewer/Electric - Counter to typical bulk discount model (Need to conserve vs desire to conserve ```