1. As part of its year end annual financial evaluation process, the City will consider whether it is appropriate and prudent to transfer a portion of the unused retained earnings of the electric utility to the Community Betterment Special Revenue Fund.

2. This transfer payment can not be considered a normal cost of utility operations recoverable through the electric rate base. Rather, it is to be paid out of the annual net profits of the prior year just as a private investor owned utility would pay their shareholders a dividend from these sources.

3. The following controls will be developed to ensure that the payment of dividends by the Light Fund does not jeopardize the financial health of the utility. Profits form the utility's operation need to help pay for system debt retirement and capital improvements as well as provide a working capital reserve for unexpected items.

• On an annual basis in November or December, after the prior fiscal year end audited financial statements are presented, an updated six year financial projection analysis of the Light Fund will be done. The analysis will include all expected sources and uses of funds for the current year as well as a five year future projection.
  
  
• A minimum working capital reserve level equal to two months of operating costs must be maintained at all times. Operating cost is defined as total operating expenses less depreciation and interest expense.
  
  
• Adequate funds must be provided for debt interest and principal repayments and any debt coverage requirements.
  
  
• Capital expenditures on average during the six year projection period must be at a level at least equal to the average depreciation expense during the projection period. (This control is intended to prevent underfunding replacement capital expenditures to allow for dividend transfers).
  
  
• Payment will be made after reviewing the prior year's audited financial statements, and preparation of an updated financial projection analysis for the Light Fund.
  
  
• Mayor and Council act on staff recommendation and declare dividend if appropriate and in compliance with this policy.

4. These needs must be anticipated and adequately provided for in the Light Fund.