Question

Why does a governmental entity need an enterprise fund? Find an example of this type of fund for your city and share the details of that fund.?

Answer 1

An enterprise fund is a self-supporting government fund that sells goods and services to the public for a fee. For example, a government-owned power generating facility provides electricity to local homeowners in exchange for a fee

An enterprise fund is a specific type of “state-owned business” authorized by the Colorado Constitution under the Taxpayer’s Bill of Rights (TABOR). There are a number of important aspects that characterize a legal enterprise fund in Colorado:

It’s a government-owned business, housed in an existing state agency and run by a state employee

It can only receive up to 10 percent of its annual revenue from state and local governments grants combined

The bulk of the revenue for enterprises comes primarily from user fees

Enterprises have bonding authority, meaning they can take out debt based upon the projected revenue from their user fees

Enterprises cannot levy taxes and must provide goods or services in exchange for fees

Wisconsin's Liquor Fund is an example of an enterprise fund. It administers state liquor stores and warehouses, and finances its operations through money from alcohol sales. The state's Worker's Compensation coverage is an enterprise fund paid for by employers' workers comp insurance payments. Governments don't have to rely on fees to cover all the fund's spending. If necessary, a government can pay for some of the services with tax dollars. Most of the financing, however, is based on the fees or bonds backed by future fee payments.