Capital Projects Funds These funds account for financial resources-related capital projects. Capital improvements are major projects requir- ing the expenditure of public funds over and above routine operating expenses. A capital project is defined as new, replacement of, or improvements to infrastructure (e.g., buildings, roads, parks) that has a minimum life expectancy of five years and a minimum cost of $25,000. Real Estate Excise Tax (REET): This tax is levied on all sales of real estate. There are two pieces, REET1 and REET2; both halves (.25% each) can be used only for capital projects as defined in RCW 82.46.010 (REET1) and 82.46.035 (REET2). Use is restricted to the Capital Improvement Plan projects. Capital Improvement Fund: This fund is for capital improvement projects not funded elsewhere in the budget. This is the “savings” account for capital projects as identified in the Capital Improvement Plan. REET funds are moved into this fund. Capital improvement costs may include acquisition, development, engi- neering, architectural or other related costs. Park Improvement Fund: This fund contains monies to be used for the acqui- sition and/or development of parks. The City uses a dedicated revenue stream from developers called park mitigation fees. Park mitigation fees are one-time charges assessed by local governments against a new development project to help pay for new or expanded public facilities that will directly address the increased demand created by that development. Road Improvement Fund: This fund contains monies dedicated for the improvement of roads, bridges and sidewalks. Typical projects include road and intersec- tion improvements; pavement preservation on arterial streets and highways; pedestrian and bicycle access improvements; and bridges. Revenue may come from mitigation fees paid by developers. These fees support the cost of new infrastructure needed to support increased capacity created by the new growth and development. Other projects mentioned above may be supported by REET or the General Fund. Debt Service A debt service fund is used to pay back long-term debt issued in order to finance specific government projects. This includes both the principal and interest amounts paid out. Debt Service Fund: This City fund is used to pay debt service on the City’s voted and non-voted general obligation debt. The fund is required per bond covenants and governmental accounting principles. The City only has debt service on its portion of the Snohomish Emergency Radio System megahertz equipment that was funded 20 years ago, which will be paid off in 2019. Proprietary Funds More than anything, proprietary funds operate like a business. They pertain to providing goods or services to the general public. It covers the services that are important, but not essential, to the way a government runs. Propri- etary funds include: Surface Water Utility: This is an enterprise fund for the operation and capital improvement projects of the surface water utility. It is a self-supporting government fund that provides goods and services to the public for a fee—in this instance, surface water services. Revenue comes from user fees billed to all properties in the City based upon equivalent residential units. Reserves in this fund can only be spent for surface water purposes. Equipment Replacement Fund: This fund accumulates resources for the replacement of City-owned vehicles, equipment and other major assets previously purchased. Individual departments owning and operating vehicles/equipment pay into this fund based upon straight line depreciation over the useful life of the asset. There is no legal requirement to reserve for replacement of these assets, but it makes good business sense to plan for eventual replacement of equipment. Unemployment Compensation/ Self-Insurance Fund: The City does not pay into the state’s unemployment fund due to its historically low employee turn-over rate; funds paid to the state cannot be recovered if not used. Therefore, the City is self-insured and estab- lished a reserve fund to pay the cost of unemployment claims. The fund also covers insurance deductibles for property and auto insurance. So now, when the City releases its quarterly reports with the individual funds listed, it should be easier to understand the purpose of each fund. See quarterly reports online: cityofmillcreek.com/quarterlyreports. Transportation 51.99% City Funds b y T y p e