Three Year Forecast Revenues and Expenditures Enterprise Fund Water & Sewer

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1 Three Year Forecast Revenues and Expenditures Enterprise Fund Water & Sewer ENTERPRISE FUNDS (Funds 51 and 52) Enterprise Funds account for operations funded and operated in a manner similar to private business enterprises, where the intent of the County is to recover, through user charges, the cost of providing services to users of the service. The Water and Sewer Enterprise Fund (Fund 51) accounts for the provision of water and sewer services to residents of Henrico County, and wholesale service to Hanover and Goochland Counties. The Belmont Park Golf Course Enterprise Fund (Fund 52) accounts for the operations of Belmont Park Golf Course. All activities necessary to provide such services are accounted for in the respective funds, including operations, maintenance, construction, financing, and related debt service. The three-year forecast narrative of revenues and expenditures has been prepared for each of these operations separately, using the same basic framework as the General Fund. Water and Sewer Operations (Fund 5101) Revenues Water and Sewer Enterprise Fund revenues are forecasted with increases in customer growth necessary to keep pace with routine operating costs, expansion and rehabilitation of infrastructure and the debt service payments on outstanding debt. Forecasted revenues also satisfy the requirements of the County s revenue bond covenants for current and future debt issues. Sale of Water for FY is based on a 5.0 percent increase in water rates. Forecasts for FY and FY were prepared using 5.0 percent rate increases in each year. These increases will support inflationary growth in expenditures and planned rehabilitation projects, as well as future new capital infrastructure needs, including the Cobbs Creek Reservoir project scheduled to begin in FY Water Basic Fees are those fees collected for initial connection to the County's water distribution system. This revenue category mirrors economic development activity and all collections are used to fund the cost of expanding

2 the County s water system. Forecasted revenue collections in FY reflect an increase of 5.0 percent in water connection fees. The forecast for Water Basic Fees also reflects 5.0 percent rate increases in each year, with little consideration of the performance of the commercial and residential real estate markets due to the uncertainty in this area. $6 $4 $2 Millions Water Basic Fees Sale of Sewer Services for FY is based on a 5.0 percent increase in sewer rates. Like Sale of Water Service revenues, noted above, forecasts for FY and FY were prepared using 5.0 percent rate increases in each year. The majority of these increases will be used to support growth in expenditures and capital infrastructure projects and rehabilitation. $ $10 $8 $6 $4 $2 $0 Millions Sewer Basic Fees Sewer Basic Fees are those fees collected for initial connection to the County's sewage system. This revenue category mirrors economic development activity and all collections are used to fund the cost of expanding the County s sewer system. Like Water Basic Fees, as noted above, forecasted revenue collections in FY reflect an increase of 5.0 percent in connection fees. This same 5.0 percent increase has been forecasted in FY and FY (To) From General Fund includes the General Fund payment to support debt service on the portion of the $32.0 million subordinate Water and Sewer Revenue bonds sold in FY to fund the infrastructure improvements of the Elko Tract in eastern Henrico County (these bonds were refunded in FY ). In addition to payment of the debt service, the General Fund is also responsible for the annual repayment of the $9.6 million loan made in FY to the Capital Projects Fund for additional infrastructure built at the Elko Tract site. The County s year-end financial statements disclose this loan as an asset in the Water and Sewer Enterprise Fund and a liability in the Capital Projects Fund; however, the General Fund is responsible for repaying the debt. The annual repayment of this loan was included in the General Fund transfer amount in FY However, from FY through FY , this amount was reflected as an expenditure in the General Fund for budget purposes, therefore, was not reflected in the General Fund transfer amount. With the refunding of the $32.0 million subordinate Water and Sewer Revenue bonds in FY , the structure of these payments from the General Fund will again be solely reflected in the General Fund transfer amount. Budget for Capital Use projections represent non-bond resources, available from Water and Sewer Operations to supplement utility infrastructure rehabilitation, expansion and other capital improvement activities. The transfer amounts for the forecast period reflect the planned appropriations for capital improvement projects to be supported by non-bond resources. Expenditures Expenditures developed for the forecast period represent total operating costs for providing water and sewer service to County residents. Operating costs include infrastructure maintenance, operation of the water and sewer systems and debt service on bond issues. Results of Operations (Prior to Capital Expenses) reflect the anticipated variance of revenues less expenditures.

3 Water and Sewer Construction Fund (Fund 5102) Capital Budget Expenditures Approved/Proposed Capital Projects are expected to total $100.8 million in FY , $40.3 million in FY , and $41.5 million in FY These projections represent expenditures for projects planned in future years listed in the Capital Projects Fund section of this budget document. Continuing Capital Projects represent the expenditures in construction appropriations based on projected resources and corresponding expenditures throughout the forecast period. Capital Budget Resources Water and Sewer Revenue projections represent non-bond resources transferred from the Operations subfund to the Construction subfund to support costs related to system rehabilitation, expansion and improvements. This transfer includes the connection fees paid by real-estate developers and new customers for initial connection to the County's water and sewer systems. Revenue Bonds (2006 Series) represents the proceeds from the sale of $80.0 million in revenue bonds issued in 2006 to finance necessary new and rehabilitation capital projects. ARRA Federal Stimulus Funds reflect the utilization of proceeds from the issuance of $9.8 million in Recovery Zone Economic Development Bonds (RZEDBs) in December RZEDBs are taxable bonds that were created by the American Reinvestment and Recovery Act (ARRA) in February 2009 to assist local and state governments in their economic development initiatives in distressed areas. In addition to the RZEDBs, Water and Sewer has also appropriated $300,000 in ARRA funding through the Virginia Department of Environmental Quality for extension of water to homes with petroleum contaminated wells.

4 Water & Sewer Enterprise Fund Forecast Water & Sewer Operations Subfund FY FY FY FY FY Actual Original Forecast Forecast Forecast Revenues: Sale of Water $ 40,257,116 $ 41,852,811 $ 44,258,630 $ 46,471,562 $ 48,795,140 Water Connection Fees 3,420,228 1,706,880 2,216,550 2,327,378 2,443,746 Sale of Sewer Services 39,414,659 42,453,050 43,579,501 45,758,476 48,046,400 Sewer Connection Fees 2,977,783 3,941,635 4,076,998 4,280,848 4,494,890 Miscellaneous Revenue 7,129,623 4,192,790 3,869,880 4,063,374 4,266,543 Transfer from General Fund 661, , , , ,219 Total Revenue $ 93,860,640 $ 94,919,385 $ 98,758,167 $ 103,673,856 $ 108,818,938 Expenditures: Personnel $ 19,246,442 $ 19,516,872 $ 19,760,885 $ 20,156,103 $ 20,559,225 Operating 34,936,809 36,663,397 37,452,511 38,201,561 38,965,592 Capital Outlay 578, , , , ,262 Sub-Total 54,761,421 56,985,943 57,998,923 59,158,901 60,342,079 Debt Service 15,872,176 14,783,503 20,391,286 16,703,903 16,515,628 Total Expenditures $ 70,633,597 $ 71,769,446 $ 78,390,209 $ 75,862,804 $ 76,857,707 Results of Operations (Prior to Capital Expenses) 23,227,043 23,149,939 20,367,958 27,811,051 31,961,230 Budget For Capital Use (Below) n/a (35,079,129) (100,827,965) (40,254,669) (41,510,791) Capital Budget Expenditures FY FY FY FY FY Actual Forecast Forecast Forecast Forecast Approved/Requested Capital Projects 36,629, ,827,965 40,254,669 41,510,791 Continuing Capital Projects (Previously Approved) (1) 41,921,379 19,148,260 Capital Budget Resources Total Capital 41,921,379 55,778, ,827,965 40,254,669 41,510,791 Water and Sewer Revenues 26,259,220 35,079, ,827,965 40,254,669 41,510,791 Revenue Bonds (2006 Series) 15,631,906 10,629, ARRA - Federal Stimulus Funds 30,253 10,069,747 0 Total Capital Budget Resources 41,921,379 55,778, ,827,965 40,254,669 41,510,791 Notes: (1) This number plus the budget figure reflects Utilities estimate of capital spending from previously Board approved capital projects. FY represents actual spending, as per the 2009 audit.

5 Three Year Forecast Revenues and Expenditures Enterprise Fund Belmont Golf Course $1,600 $1,400 $1,200 $1,000 $800 $600 Thousands Revenues Expenditures Belmont Park Golf Course Operations (Fund 5201) Revenues Golf Course Fees revenue for FY2012 is estimated to decrease from the FY2011 projection to $1,120,136, as there is no increase for greens fees in FY2012. The revenue assumptions in this forecast are based on the current rate structure, which was restructured in FY2009 to help attract golfers during times that are historically not busy. Revenue projections for FY2013 and FY2014 are based upon modest one percent growth. Snack Bar Revenues prior to January 1, 2000 were a percentage of gross receipts from the vendor operating the snack bar. Since January 1, 2000, the County operates the Snack Bar with departmental employees and collects all revenues from snack bar sales. Revenues are projected at $93,316 for FY2012, FY2013, and FY2014. $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.2 $0.0 Millions $0.9 Golf Course Fees $1.0 $1.0 $0.9 $1.1 $1.1 $1.1 $ Thousands $120 $100 $80 $60 $40 $20 $0 $75.5 Snack Bar Revenues $62.3 $62.3 $67.4 $93.3 $93.3 $93.3 $

6 (To) From Golf Course Retained Earnings is Retained Earnings from golf course operations to be used for future golf course operations, maintenance or improvements. During the forecast period there is no scheduled use of Retained Earnings. Expenditures Loan Repayment is the repayment of a loan from the General Fund for physical improvements to Belmont Golf Course. Currently the golf course has an outstanding loan with the General Fund for a total of $135,000 for physical improvements to the golf course. The loan is to be repaid in annual installments of $22,500. Operational Expenses include modest increases for course maintenance and enhancements. The forecast period establishes a balance between golf course recurring revenues and expenses in future years. Belmont Golf Course Enterprise Fund Forecast FY FY Actual Original FY FY FY Forecast Forecast Forecast Belmont Golf Course Operations Revenues: Golf Course Fees* $ 868,004 $ 1,133,269 $ 1,120,136 $ 1,132,046 $ 1,144,074 Snack Bar Revenues 67,368 93,316 93,316 93,316 93,316 Gain/Loss on Sale of Property Recoveries & Rebates Total Revenues $ 935,726 $ 1,226,585 $ 1,213,452 $ 1,225,362 $ 1,237,390 Plus: (To)From Golf Course Retained Earnings 183, Total Resources $ 1,118,881 $ 1,226,585 $ 1,213,452 $ 1,225,362 $ 1,237,390 Expenditures: Loan Repayment* $ 0 $ 22,500 $ 22,500 $ 22,500 $ 22,500 Operational Expenses 1,118,881 1,204,085 1,190,952 1,202,862 1,214,890 Total Expenditures $ 1,118,881 $ 1,226,585 $ 1,213,452 $ 1,225,362 $ 1,237,390 Total Net Assets $ 1,270,051 $ 1,270,051 $ 1,270,051 $ 1,270,051 $ 1,270,051 *Loan repayment is to pay back a loan of $135,000 borrowed from the General Fund for greens restoration in FY