Large User True up Process ALTERNATIVE METHODOLOGY DISCUSSION JANUARY 12, 2017

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1 City of Hollywood Large User True up Process ALTERNATIVE METHODOLOGY DISCUSSION JANUARY 12, 2017 DATE

2 Why an Alternative Methodology? For many years we have discussed the desire to modify the Large User Agreement to simplify and update it. is very complicated and creates a cumbersome True up report that is difficult to create and follow. We now have many years of True up reports upon which to test the impact of an alternative, streamlined methodology. In order to address some specific areas of concern to the Large Users.

3 Focus Areas Debt Service Coverage PILOT charges Depreciation

4 Complexity of Annual Large User True up Report

5 Current Methodology Alternative Methodology Exhibit Exhibit New D D Method Exhibit Exhibit D D Exhibit Exhibit D D Exhibit Exhibit D D Exhibit Exhibit D D Exhibit Exhibit D D Streamlined Methodology Incorporate the best parts of the existing agreement Easier for Large Users to review Just as transparent as the existing method with much fewer steps Results similar to existing LUA with fewer steps and more concise report

6 Debt Service Coverage and the Large User Agreement

7 Debt Service Coverage and the LUA Existing LUA and Bond Ordinance requires the collection of debt service coverage from the Large Users in each year Alternative methodology assumes collection of debt service coverage when required to meet bond covenants

8 Payment in Lieu of Taxes (PILOT) and the Large User Agreement

9 Payment in lieu of Taxes (PILOT) and the LUA Existing LUA sets forth numerous, specific steps to distribute PILOT costs to the Large Users A more simplified alternative to this complex process is to: Allocate the Water/Sewer PILOT costs as follows: Allocation of PILOT between Water and Sewer based on the average distribution of Directly Allocable Water O&M Costs versus Directly Allocable Sewer O&M Costs Directly Allocable O&M Costs: Water treatment, transmission, distribution O&M Sewer collection, lift station, treatment O&M Allocation of Sewer PILOT to the Large Users based on distribution of Flow

10 Payment in lieu of Taxes (PILOT) and the LUA $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $ PILOT Charges Current vs New Methodology FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Current Methodology $1,212,218 $1,078,537 $1,384,347 $1,329,555 $1,297,758 New Methodology $1,220,683 $1,158,233 $1,157,265 $1,255,196 $1,336,866

11 Depreciation and the Large User Agreement

12 Depreciation In FY 2015 $18,310 of Depreciation was allocated to the Large Users We will eliminate this charge to the Large Users

13 What a Simplified, Alternative Methodology Might Look Like

14 Simplified, Alternative Methodology Allocated Sewer Costs Total Water/Sewer Fund Costs Allocated Water Costs Allocated Sewer Costs Hollywood Large Users Direct Water O&M 100 % Water Direct Sewer O&M 100 % Sewer Flow Distribution Hollywood Flow Distribution Large Users Indirect Water & Sewer O&M General & Admin PILOT Engineering Utility Admin. Direct Water O&M divided by Total Direct Water & Sewer O&M Direct Sewer O&M divided by Total Direct Water & Sewer O&M Flow Distribution Hollywood Flow Distribution Large Users Debt Service Debt funded Water Projects divided by Total Projects Funded with Debt Proceeds Debt funded Sewer Projects divided by Total Projects Funded with Debt Proceeds Allocated By Project Type Treatment = Rsvd. Capacity Collection = 81.5% Improv.& Upgrading = Flows Allocated By Project Type Treatment = Rsvd. Capacity Collection = 18.5% Improv.& Upgrading = Flows Cash funded Sewer R,R&I Capital Costs 100 % Sewer Allocated By Project Type Treatment = Rsvd. Capacity Collection = 81.5% Improv.& Upgrade = Flows Allocated By Project Type Treatment = Rsvd. Capacity Collection = 18.5% Improv.& Upgrade = Flows

15 Possible Financial Impact of Alternative Methodology Annual Change in Cost Share Large User Group $400,000 $300,000 $200,000 $100,000 $ $(100,000) Cumulative Reduction of ~$650,000 over last 5 years $(200,000) $(300,000) $(400,000) $(500,000) $(600,000) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Annual Change in Cost Share Large User Group $161,849 $348,113 $(543,890) $(546,722) $(77,079)

16 Possible Financial Impact of Alternative Methodology Annual Change in Cost Share Large User Group $800,000 $600,000 $400,000 $200,000 $ Cumulative Reduction of ~$650,000 over last 5 years $(200,000) $(400,000) $(600,000) $(800,000) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Annual Change in Cost Share Hollywood $(161,849) $(348,113) $543,890 $546,722 $77,079 Annual Change in Cost Share Large User Group $161,849 $348,113 $(543,890) $(546,722) $(77,079)

17 Possible Financial Impact of Alternative Methodology Broward County Annual Change in Cost Share Broward County $40,000 $20,000 $ $(20,000) $(40,000) $(60,000) $(80,000) $(100,000) Cumulative Reduction of ~$270,000 over last 5 years $(120,000) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Annual Change in Cost Share Broward County $(74,342) $28,506 $(97,124) $(94,815) $(34,744)

18 Possible Financial Impact of Alternative Methodology Dania Beach Annual Change in Cost Share Dania Beach $80,000 $60,000 $40,000 $20,000 $ $(20,000) $(40,000) $(60,000) $(80,000) Cumulative Reduction of ~$93,000 over last 5 years $(100,000) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Annual Change in Cost Share Dania Beach $27,252 $55,441 $(81,432) $(82,289) $(12,157)

19 Possible Financial Impact of Alternative Methodology Hallandale Beach Annual Change in Cost Share Hallandale Beach $250,000 $200,000 $150,000 $100,000 $50,000 $ $(50,000) $(100,000) $(150,000) Cumulative Increase of ~$70,000 over last 5 years $(200,000) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Annual Change in Cost Share Hallandale Beach $203,848 $166,260 $(158,320) $(156,554) $14,404

20 Possible Financial Impact of Alternative Methodology Miramar $ $(5,000) $(10,000) $(15,000) $(20,000) $(25,000) $(30,000) $(35,000) Annual Change in Cost Share Miramar Cumulative Reduction of ~$95,000 over last 5 years $(40,000) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Annual Change in Cost Share Miramar $(37,978) $(13,844) $(14,290) $(14,289) $(14,249)

21 Possible Financial Impact of Alternative Methodology Pembroke Park Annual Change in Cost Share Pembroke Park $20,000 $15,000 $10,000 $5,000 $ $(5,000) $(10,000) $(15,000) $(20,000) Cumulative Reduction of ~$13,000 over last 5 years $(25,000) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Annual Change in Cost Share Pembroke Park $11,330 $17,065 $(19,860) $(20,275) $(1,196)

22 Possible Financial Impact of Alternative Methodology Annual Change in Cost Share Pembroke Pines $150,000 Pembroke Pines $100,000 $50,000 $ $(50,000) $(100,000) $(150,000) Cumulative Reduction of ~$250,000 over last 5 years $(200,000) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Annual Change in Cost Share Pembroke Pines $31,740 $94,686 $(172,864) $(178,500) $(29,137)

23 Takeaway Thoughts Related to an Alternative Methodology

24 Two Primary Takeaway Thoughts Simplified Methodology is easier for all Large Users to understand, interpret and explain to their stakeholders Simplified Methodology likely to result in not much difference in cost sharing relationship between Large User group / Hollywood In fact, based on recent 5 years of True up Reports, there appears to be a cumulative benefit to the Large User group of ~$650,000 Annual Change in Large User Cost Share $400,000 $300,000 $200,000 $100,000 $ $(100,000) $(200,000) $(300,000) $(400,000) $(500,000) $(600,000) Exhibit Exhibit D D Exhibit Exhibit D D Exhibit Exhibit D D Exhibit Exhibit D D Exhibit Exhibit D D Streamlined Methodology + Annual Change in Amount Due from Large User Group FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 New Method $161,849 $348,113 $(543,890) $(546,722) $(77,079)

25 Next Steps

26 Next Steps Large User Group to determine if Alternative Methodology is to be implemented Requires unanimous approval to: Replace with New Methodology Adjust Large User Agreement, as applicable, based on New Methodology Large User Group determines to retain methodology If unanimous approval of New Methodology not secured

27 Questions

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29 Existing Large User True up Methodology

30 Large User True up Process Expense Category Expenses Water Sewer Operations & Maintenance Treasury Utility Billing & Collections Utility Administration Engineering Support Water Treatment Plant Water Distribution Sewer Treatment Sewer Collection Pmt in Lieu of Taxes Gen. & Admin. Charges Debt Service Debt Service Depreciation Depreciation Total Not allocated to Large Users Utility Administration Staff Time Spent on Water/Sewer Engineering Staff Time Spent on Water/Sewer 100% Water 100% Water 100% Sewer 100% Sewer Per LUA / Ex. D Multi step, including Sewer Coll / Treatment Assets Value Weighted Allocation of Personnel, O&M, Minor Capital Costs per LUA / Ex. D Methodology Each Issue Allocated By Service Type (Water / Sewer) 100% to Sewer (Large Users) Calc developed for LUTU Only

31 Large User True up Process Expense Category Sewer Hollywood Large Users Operations & Maintenance Treasury Utility Billing & Collections Utility Administration Engineering Support Water Treatment Plant Water Distribution Sewer Treatment Sewer Collection Pmt in Lieu of Taxes Gen. & Admin. Charges Debt Service Debt Service Depreciation Depreciation Not allocated to Large Users Utility Administration Staff Time Spent on Water/Sewer Engineering Staff Time Spent on Water/Sewer NA - 100% Water NA - 100% Water Flows 18.5% to Large Users Per Ex. D this is LU Share of Collection Per LUA / Ex. D Multi step, including Sewer Coll / Treatment Assets Value Flows Each Issue Allocated By Project Type Treatment = Reserve Capacity Collection = 18.5% Improv.& Upgrading = Flows Flows Total

32 Large User True up Process Expense Category Operations & Maintenance Large Users Broward Treasury Utility Billing & Collections Utility Administration Engineering Support Water Treatment Plant Water Distribution Sewer Treatment Sewer Collection Pmt in Lieu of Taxes Gen. & Admin. Charges Debt Service Debt Service Depreciation Depreciation Total Not allocated to Large Users LU Flows LU Flows NA - 100% Water NA - 100% Water LU Flows LU Flows LU Flows LU Flows Each Issue Allocated By Project Type Treatment = LU Reserve Capacity Collection = LU Flows Improv.& Upgrade = LU Flows LU Flows Dania Beach Hallandale Beach Miramar Pembroke Park Pembroke Pines