Case Studies

Project Background

The City of Lompoc historically provided funding from its water and wastewater enterprises to the general fund based on a 1998 study, which justified a transfer of 5% of operating revenues. After 16 years, the City was looking for a review and update of the City’s historical 5% reimbursement. To do so, HF&H developed a cost allocation framework for determining the cost-based reimbursement to the general fund for costs incurred by the general fund on behalf of the enterprises. The study focused on three cost allocation areas: public safety (police and fire), governmental facilities (City Hall, purchasing storage facility, corporation yard), and right-of-way maintenance (street construction and maintenance). Each of these areas represents a service provided to the enterprises which has been funded exclusively by the general fund.

Project Results

• Our review found that the justifiable transfers could be expanded to include the City’s electric, communications, solid waste, airport, and transit enterprises. The City’s general fund has been providing services to these other enterprises, similar to the water and wastewater enterprises, for which these other enterprises had not provided reimbursement.
• We identified over $5 million in annual reimbursements from the seven enterprises, compared to the approximately $2 million transferred historically. The $5 million in annual reimbursements represents the amount that the enterprises should reimburse the general fund in return for its proportionate share of the cost of services provided by the general fund.