Enterprise funds need to keep pace with costs
By A TIMES EDITORIAL
Published October 18, 2007
There is a basic principle behind what governments call "enterprise funds." That principle is that the users of an "enterprise" service are supposed to pay fully the government's cost of delivering that service.
Enterprise funds are fairly common. Government water utilities are often set up to operate that way, so water rates fluctuate as the utility's cost of providing water to your home or business changes. Ditto for wastewater treatment, landfills and some other services. The practice preserves tax dollars for other good purposes.
Problems arise, however, when the government does not force the fees for enterprise services to keep pace with the cost of delivering the service. It is usually for political reasons that elected officials refuse to raise rates, but then the issue comes back to bite them later when they must raise rates by an even greater amount to catch up, create a capital account, or avoid violating the covenants of bond documents. Dunedin recently faced that problem in its water enterprise fund.
Clearwater's Municipal Marina on Clearwater Beach was set up to operate as an enterprise fund. However, the city has not raised rental fees for boat owners and businesses enough to keep up with the cost of operating the marina. Now the marina fund is running a deficit that is expected to be $300,000 next year, and city staffers also point out that someday, the marina will have to be rebuilt. The fund needs to be building reserves for that.
Yet at a recent work session, City Council members seemed uncertain whether and how much to raise the rates, especially on commercial boat operators at the marina. Council member George Cretekos, for one, argued that "it's not fair" to significantly increase those rates when businesses on Clearwater Beach already are struggling to survive the Beach Walk construction and a loss of hotel rooms.
One reason for the marina fund deficit is that the city requires every enterprise fund to pay a portion of its gross revenues back to the city general fund. This is basically a reimbursement for general fund services the city government provides to the enterprise services, such as marketing or budgeting assistance, for example.
That's a cost of doing business, so it ought to be borne by the users of the marina. City Council members were scheduled to further discuss the rate issue at a meeting Wednesday night.
Tax dollars already provide only a portion of the money needed by governments to provide services to residents. With state tax reform cutting into that portion, enterprise funds may become even more common in the future. Elected officials don't have to apologize for making sure that fee structures are sufficient to support the principle behind enterprise funds.