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into this with the CSO issue —if you use that asset value and you embark on a huge asset project,
<br />you are at the same time raising your tax.
<br />Mr. Julien responded, You could, yes.
<br />Committeemember Dr. Varner stated, If you don't have any guidelines. One of the things I want
<br />the Council to understand is that this PILOT —yes, it's historical, it's new, there is no ordinance,
<br />it is allowable. I just see that the PILOT transfers are growing, and as the asset value grows, I
<br />expect them to get larger. Is this going to be a $4,000,000 or $5,000,000 project in a few years?
<br />Have you looked at that?
<br />Mr. Julien responded, I haven't projected it out. Your comments lead into the projection portion
<br />of the report, but there are two (2) things that are going to happen to book values. One (1) is, as
<br />you invest in new equipment, there's some in -flow and out -flow in that number. But your
<br />comment is correct, in terms of if the net number grows and the City looks at adjusting that
<br />annually, that payment would increase annually. One thing that I always caution municipalities,
<br />in this area: most utilities don't adjust their rates each year. You don't set your water rates each
<br />year like you set your tax rates each year. If you add more to the payment in lieu of taxes, and
<br />you don't adjust your rates to accommodate that — you're stealing from Peter to pay Paul. All
<br />your questions are on -point regarding payment in lieu of taxes. If you look at what's happened
<br />with the cash position over the last several years, on Slide 3, you'll see that back in 2013 there
<br />was a substantial drop in cash that was reduced to almost break -even in 2014, and it's up in
<br />2015. What's driving that number is your investment in capital. To the extent that you can defer
<br />discretionary investments and replacements of equipment and capital— that's how you're
<br />controlling your cash position.
<br />Committeemember Dr. Varner asked, As you have more assets and you make your depreciation
<br />adjustments, your depreciation annually probably gets larger —and you said that's a non -cash
<br />expense —so what's our annual depreciation number?
<br />Mr. Julien responded, Annual depreciation is somewhere around $1,500,000.
<br />Committeemember Dr. Varner asked, $1,500,000, $2,000,000?
<br />Mr. Julien responded, Yeah. So, if you invest $1,500,000 and depreciate $1,500,000, your net
<br />assets, and consequently your payment in lieu of taxes, would remain the same.
<br />Committeemember Dr. Varner responded, I was following the line of the fact that you can have
<br />more cash because you're expensing something that has no cash expense.
<br />Mr. Julien responded, You have to compare your depreciation expense to your annual capital
<br />pay -as- you -go plan. Mr. Julien moved on, stating that further analysis could be found on Page
<br />10. He stated that the first obligation was to take care of day -to -day operation costs. He stated
<br />that in 2015, day -to -day costs were just under $10,800,000. He explained the organization of
<br />data in the analysis and how the data was intended to help identify what can be reasonably
<br />projected in the next couple of years, regarding how the analyzed numbers will change. He
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