(A) Since it is an accepted accounting principle to recognize depreciation as an operating expense of enterprise facilities in determining gross and net operating incomes or losses, it is to the public interest to recognize annual depreciation on the water treatment plant and the overhead storage facility as a mandatory requirement in maintaining the accounting records of the city.
(B) In addition, it is to the best interests of the public to make orderly provisions for total replacement, certain partial replacements, or improvements to said facilities when needs arise in the future. The continued use of these facilities increases the incidence of contingencies for malfunctions, obsolescence, wear-and-tear, and/or sudden emergencies that threaten the safety and general welfare of the residents of the city if such contingency occurrences cannot be taken care of immediately.
(C) Therefore, it is the objective of this subchapter not only to recognize annual depreciation as an operating cost or expense in the accounting records and supporting financial statements, but also to set aside a cash reserve water sinking fund at the rate of annual depreciation, and to require the accumulate of such sinking fund to aggregate or accumulate, or recover, the prepaid cost of the water treatment plant and the overhead storage reservoir by the time they are individually fully depreciated, and to hold such funds in reserve for contingencies.
(Prior Code, § 5.0401)