REGIONAL WATER STUDY TO DETERMINE LEVEL OF SERVICE, COST OF SERVICE AND FINANCIAL FEASIBILITY STUDY FOR TOLEDO AND CONTRACT COMMUNITIES FINAL REPORT

Transcription

1 REGIONAL WATER STUDY TO DETERMINE LEVEL OF SERVICE, COST OF SERVICE AND FINANCIAL FEASIBILITY STUDY FOR TOLEDO AND CONTRACT COMMUNITIES FINAL REPORT ΤΟ TOLEDO METROPOLITAN AREA COUNCIL OF GOVERNMENTS (TMACOG) June 7, 2016 Prepared by Environmental Rate Consultants, Inc., Poggemeyer Design Group, and T. Parker & Company

2 REGIONAL WATER STUDY TO DETERMINE LEVEL OF SERVICE, COST OF SERVICE AND FINANCIAL FEASIBILITY STUDY FOR TOLEDO AND CONTRACT COMMUNITIES June 7, 2016 Regional Water Rate Study Final Report Table of Contents TC. Table of Contents Page 2 Section I. Introduction Page 3 Section II. Key Tables Summarizing Study Results Page 6 Section III. Scenario 1 City of Toledo Only Page 7 Section IV. Scenario 2 Outside Communities Build New Plant Page 10 Section V. Scenario 3 Equal Partnership Page 19 Section VI. Projected 2024 Octopus Diagram Page 21 Section VII. Appendix 1 Page 23 City of Toledo - Joe Franckhauser financial forecasts Section VIII. Appendix 2 Page 49 A. City of Toledo Projected Operating Results B. City of Toledo Projected Debt Service C. City of Toledo Debt Service D. Projected Rates 3 Rate Scenarios E. Projected Debt Service and Operating Costs Scenario 2 F. Projected Costs 3 Scenarios Including Local Costs (Octopus) G. Usage / Consumption Used in the Analysis Section IX. Appendix 3 Page 90 Modified Scenario 3 Regional Water Rate Study Final Report (June 7, 2016) Page 2

3 I. Introduction The Toledo Metropolitan Area Council of Governments (TMACOG) hired the consultant team comprised of Environmental Rate Consultants, Inc. (ERC), Poggemeyer Design Group, Inc. and T. Parker & Co. (the ERC/PDG/TPC Team) to successfully prepare, perform and furnish a Financial Feasibility Study evaluating the public water supply level of service, cost of service, and financial feasibility for the Toledo Metropolitan Area Council of Governments. This overall financial analysis is based on the City of Toledo water historical data and rate schedules currently in place and approved by Toledo City Council for years 2016 through The regional water rate study will project and forecast monthly water rates for years 2019 through 2060, with emphasis on years 2019 through 2028 and specifically year 2024 for scenarios 2 and 3. The regional water rate study is segregated into the following three separate water supply levels of service cost of service rate study scenarios that require separate and distinct rate study analyses as outlined in the original request for proposal. Scenario 1. A public water supply serving the City of Toledo alone (water rates for Toledo water supply without others) Scenario 1 - The City of Toledo (rate payers) only Scenario 2. A public water supply (one or more) serving the current contract communities of the greater Toledo metropolitan area, excluding the City of Toledo itself (water rates for others - outside communities only - with a new water supply) Scenario 2 outside contract communities (rate payers) only Scenario 3. A regional water supply and treatment system to serve all contract communities and the City of Toledo together in a manner where water is provided to all users at a level cost. Each entity would own and operate their own distribution system. (Defining a mechanism to manage Scenario 3 is beyond the scope of the study) Scenario 3 Regional Water Equal Partnership with all water rate payers treated equally The purpose of performing the Scenario 1 level of service analysis and rate study above is to project, forecast and compare current (city council approved) and potential future monthly water rates for inside the City of Toledo water rate customers with a key assumption that 100% of the contract communities will leave the City of Toledo water service area. The analysis reviews the impact on overall rate revenues and overall expenses with additional calculations to determine if the 1.10 revenue bond requirements coverage test is met as part of the analysis. The purpose of Scenario 2 is to develop cost comparisons for probable future monthly rates for financing construction and operation of a new regional water plant operating under a non-profit district that would supply bulk water at equal rates to each community/entity. Each community/entity would then be responsible for their own distribution expenses within the legal boundaries of their respective service territories. These monthly rates will then be compared to Scenario 1 and 3 monthly rates for service provided by the City of Toledo. This Scenario then defines the remaining costs for the City of Toledo to develop a stand-alone rate for its customers. The purpose of performing the Scenario 3 level of service analysis and rate study is to project, forecast and compare current City of Toledo council approved monthly rates with potential future monthly Regional Water Rate Study Final Report (June 7, 2016) Page 3

4 water rates for inside the City of Toledo water rate customers and also for all of the contract community water rate customers with a key assumption that all communities are of equal value and all communities would have equal input into the organizational and financial aspects of managing the regional water system. The analysis reviews the impact on overall rate revenues and overall expenses with additional calculations to determine if the 1.10 revenue bond requirements coverage test is met as part of the analysis. The ERC/PDG/TPC Team began reviewing and analyzing the data necessary to perform the regional water rate study once all of the data was requested and collected from the City of Toledo. The project purpose and the results of the process of analyzing the 3 level of service scenarios led to the ERC/PDG/TPC Team developing over twenty additional levels of service alternatives to be considered as part of the analysis. The ERC/PDG/TPC Team then reduced these approximately 20 levels of service alternative scenarios into eight alternatives that were presented and discussed with the regional water study steering committee on Monday April 11, Further refining of the monthly water rate alternatives have resulted in one monthly rate per scenario as included in this final report. All of the additional levels of service scenarios were performed within the corresponding project budget with the goal of anticipating questions, comments and concerns from the elected officials and contract community staff regarding the results of this regional water study and to consider as many additional approaches as possible within the predetermined project budget. The Regional Water Study Steering Committee has now had the opportunity to review and provide comment and input to the analysis. The next step will be to present the results to the Elected Officials and public roll out of the information. The ERC/PDG/TPC Team assumes one additional steering committee meeting may be required to review the one page handout that summarizes the results of the study. The following report incorporates the comments and input from the Regional Water Study Steering Committee members from the inception of the study. The regional water rate study for all 3 scenarios listed above includes the following key study assumptions: The ERC/PDG/TPC Team was hired to develop 3 scenarios and has developed over twenty different scenarios for internal discussion and consideration for the regional water study that is outside the scope of work. The City of Toledo water supply rate schedule approved by City Council for years 2016 through 2018 and all of the corresponding support data is the basis for the study and the basis for all 3 scenarios. 3 year analysis (2016 through 2018) City of Toledo council approved rate schedule. This existing rate schedule provides the foundation for the ERC/PDG/TPC Team analysis. 5 year analysis 2019 through 2023, represent the first 5 year analysis that is critical to all 3 scenarios the ERC/PDG/TPC Team has developed and based on all of the City of Toledo water rate information. Regional Water Rate Study Final Report (June 7, 2016) Page 4

5 Year 2024 represents the first year the contract (outside city) communities may be on their own with a new water source and plant. 5 year analysis 2024 through 2028 represent the second 5 year analysis that is critical to all 3 scenarios the ERC/PDG/TPC Team has developed and based on all of the City of Toledo water rate information. Year 2024 is the assumed year a new water plant will have been built and up and running for the contract communities for scenario 2 (construction would begin in 2021). Year 2024 is the assumed year 1 of a new organization that will be created and all communities will be of equal status. Years 2029 and beyond are extrapolated accordingly. The ERC/PDG/TPC Team revenue analysis is based on the first water volume charge of First 300 ccf only. A complete and thorough water rate structure analysis is outside the scope of work outlined by the initial TMACOG request for proposal. Therefore, the consumption figures used in these analyses utilize an average aggregate approach to account for the City of Toledo 4 tier water rate block rate structure. The 4 tier rate structure is already in place for some communities. Section II - Key Tables Summarizing Study Results - includes four tables that summarize the study and results: Table 1 - Existing City of Toledo City Council Approved Water Rates & Increases Table City of Toledo Cost Escalated Projected Rates Table Consultant Team Calculated Monthly Water Rates for the 3 Rate Scenarios Table 4 Consultant Team Future Projected an Calculated Monthly Water Rates for the 3 Rate Scenarios Regional Water Rate Study Final Report (June 7, 2016) Page 5

6 II. Key Tables Summarizing Study Results Table 1 Existing City of Toledo City Council Approved Water Rates & Increases Note: Existing Monthly Rates Table City of Toledo Cost Escalated Projected Rates Note: Projected Monthly Rate Table Consultant Team Calculated Monthly Water Rates for the 3 Rate Scenarios Note: Projected Monthly Rates Table 4 Consultant Team Future Projected and Calculated Monthly Water Rates for the 3 Rate Scenarios Note: Projected Future Monthly Rates Regional Water Rate Study Final Report (June 7, 2016) Page 6

7 III. Scenario 1 City of Toledo Stand Alone Only Scenario 1 City of Toledo Stand Alone Only The ERC/PDG/TPC Team initially developed 6 separate alternatives for Scenario 1 that have been reduced to 1 scenario included in this section. The following are the assumptions that have been used by ERC/PDG/TPC Team to analyze the City of Toledo only regional water approach Scenario 1: All of the above assumptions included in the introduction section of this report have been used by the ERC/PDG/TPC Team to analyze Scenario 1. The City of Toledo water supply rate schedule approved by City Council for years 2016 through 2018 and all of the corresponding support data is the basis for the study and is the basis used to develop Scenario 1 rate projections. Table 1 above includes the 3 year (2016 through 2018) City of Toledo council approved rate schedule. This existing rate schedule provides the foundation for the ERC/PDG/TPC Team s analysis. The City of Toledo provided their projections of revenue, operating expenses, debt service and replacement improvements for the period 2016 through 2060 for Scenarios 1 and 3. These projections were used to calculate projected rates for the same time period (See first six pages of Appendix 1). The $70 Million capital improvement bond that will also fund design of HAB related ozone facilities is included and funded in Table 1 of the current City of Toledo rates. The first 5 year analysis (2019 through 2023) is critical to the Scenario 1 rate projections developed by ERC/PDG/TPC Team and are based on all of the City of Toledo water rate information. A new $100 Million Capital Improvement Bond with payments beginning in 2020 is included in the analysis for years 2020 and beyond (30 years). A new $85 Million Capital Improvement Bond with payments beginning in 2022 is included in the analysis for years 2022 and beyond (30 years). An annual replacement and improvement budget was provided by the City of Toledo through the year 2060 (See appendix). The Scenario 1 rates include a 1.10 bond coverage test to meet all of the Bond and Debt assumptions. Year 2024 represents the first year the contract communities will be on their own with a new water source and plant specific to Scenario 2 below. The analysis uses Actual 2014 consumption figures instead of using the average of 2013 and 2014 suggested by City staff. The reason is that 2014 appears to provide more realistic consumption figures than the two year average, which is lower than 2014 and would result in a higher rate and revenue projection needed to meet expenses. The consumption information used in this analysis Regional Water Rate Study Final Report (June 7, 2016) Page 7

8 was provided by the City of Toledo and is included in the Appendix 2 of this document. The ERC/PDG/TPC Team used an average aggregate consumption approach to account for the 4 tier rate block rate structure used by the City of Toledo. The calculation used for determining rates is total operating expense plus debt service payment / annual projected City of Toledo usage in thousands of cubic feet, and meeting the 1.10 debt service coverage test. A one-time reduction of $530,000 was taken in year 2024 to reflect the reduced cost of operating without outside communities. The ERC/PDG/TPC Team revenue analysis is based on the first water volume charge of First 300 ccf only. A complete and thorough water rate structure analysis is outside the scope of work outlined by the initial TMACOG request for proposal. Therefore, the consumption figures used in these analyses utilize an average aggregate approach to account for the 4 tier block rate structure. Operating revenue was only used in the calculation of debt service coverage. City of Toledo usage was maintained at the 2014 level (flat with no increase or decrease). Total costs include operating expenses, debt service and replacement improvements. The Scenario 1 assumptions and future projections are presented and summarized in the following Table 5, Table 6 and Table 7: Regional Water Rate Study Final Report (June 7, 2016) Page 8

9 Scenario 1 Summary Results included in Table 5, Table 6 and Table 7 Table 5 Table 6 Table 7 Regional Water Rate Study Final Report (June 7, 2016) Page 9

10 IV. Scenario 2 Contract Communities Build New Water Plant This scenario is an alternative that involves the contract communities that currently purchase water from Toledo, directly or indirectly, constructing their own Regional Water Treatment Facility. These communities include: Fulton County Lucas County Monroe County Maumee Perrysburg Sylvania Waterville Whitehouse Northwest Water & Sewer District (NWWSD) Indirect communities include: Holland Northwood Ottawa Hills Rossford The purpose of Scenario 2 is to develop cost comparisons for probable rates for financing construction and operations of a regional non-profit district to supply bulk water at equal rates to each community/entity. Each community/entity would then be responsible for their own distribution expenses within the legal boundaries of their respective service territories. These rates will then be compared to Scenario 1 and 3 rates for service by the City of Toledo. This Scenario then defines the remaining costs for the City of Toledo to develop a stand-alone rate for its customers. There are numerous variations of concepts and rate impacts that could result from final negotiations for customer service. Evaluation of all the potential concepts and resulting rate impacts is beyond the scope of this study. Some of the current communities are already considering options that are not being addressed in this study. These final modifications to service agreements impact all Scenarios 1, 2 and 3, but may have the greatest impact on Scenarios 1 and 3. This is because Scenarios 1 and 3 are rates that are inclusive of the volume and rates from these communities, and Scenario 2 has various combinations of independent concepts that may run concurrently for lower cost water than one joint regional concept may offer. Regional Water Rate Study Final Report (June 7, 2016) Page 10

11 Some independent or collective alternatives being explored that would impact Scenarios 1, 2 and 3 include: Waterville to Bowling Green Whitehouse to Bowling Green GWTP HCRD Sylvania Regional Northwest Water & Sewer District to Bowling Green Surface WTP Regional with Perrysburg Regional with Sylvania Perrysburg to Bowling Green Surface WTP Regional with NWWSD Regional with Sylvania Fulton County to Own GWTP Regional Fulton Connection Regional with Sylvania Sylvania to Own Surface WTP Regional Surface WTP All other users Some other users This creates an infinite number of alternatives to evaluate; therefore, this effort was narrowed to three primary alternatives for evaluation. 1) Toledo rate impacts without any of this outside usage and revenue. 2) All other Toledo customers constructing water treatment facilities to be operational in 2024, and projected 30-year debt and operational financing period thereafter. 3) Projected rates to all communities on equalized basis with no surcharges, effective in 2018 and projected for 36 years, using Toledo water. Not included in this rate study are a non-profit bulk water cost concept to all users of the Water Treatment Facility with some allowance for transmission and storage. This could also be further refined to address the impact of some form of joint operational control. Regional Water Rate Study Final Report (June 7, 2016) Page 11

12 Without some operational control by a majority of users, such as an intergovernmental agreement or 6119, this may not be a viable consideration. Since this is a rate study evaluation and not a comprehensive regional alternative study, the alternatives developed are based on several previous studies and realistic preliminary assumptions for a regional system development. It is not intended to be an all-encompassing effort relating to all options that may be available, but a realistic conceptual estimate of a regional concept. Basic Concept Design Size Intake / Intake Pipe 60 MGD Water Treatment Plant 60 MGD expandable in 20 MGD increments High-service at 60 MGD, Clearwell 20MG Raw Water Pump Station 60 MGD Raw Water Transmission 60 MGD or two parallel mains On-Line Storage 40 MG Booster Pump Station 3 at 20 MGD and 10 MG storage each Transmission Lines 60 MGD Land Purchase 70 acres 60 MGD (alternative) These design sizes are based on the average demand for all entities being 22.6 to 23.9 MGD for 2016, and 25.1 MGD average demand in 2024 depending on the committed usage. Peak demands in 2025 to 2035 could be 34.3 MGD to 41.6 MGD. Maximum day projected use could be 51.5 to 62.4 MGD. Regional Water Rate Study Final Report (June 7, 2016) Page 12

13 Water Treatment Plant a) Conventional with GAC and Ozone, or b) Membrane with Ozone Concept Usages The following are potential average day and peak day usages that could be utilized for the independent regional partners in an alternative water treatment concept. These vary from several previous studies and estimates. Average (MGD) Average Water Use Projections 2060 (MGD) Max. Water Use Projections 2060 (MGD) Fulton County * Lucas County Maumee Monroe County Sylvania * Perrysburg * NWWSD * With Lucas Co. Whitehouse * Incl. Lucas Co. Waterville * MGD Total (used 35.7 MGD) MGD Toledo MGD * All evaluated other alternatives for water in Regional Water Rate Study Final Report (June 7, 2016) Page 13

14 Probable Costs 2016 Estimate Probable Costs 2016 Estimate 60 MGD Water Treatment Plant without Clearwell and High Service Pump $254,215,000 Land $700,000 Intake Structure / Pipe $35,000,000 Pump Station / Shorewell $25,000,000 Raw Water Transmission - 30 Miles $36,600,000 Easement Allowance $7,500,000 24" Main 12 Miles $15,840,000 48" Main 14.5 Miles $38,280,000 36" Main 5 Miles $9,240,000 24" River Crossing 2 Miles $4,000,000 24" Main 8.5 Miles $11,220,000 High-Service Pumps 60 MG, 20 MG Storage 3 Booster Pump Stations 15 MGD, 10 MG Storage $36,600,000 $38,700,000 6 Pressure Reducer Stations $900,000 Total $513,795,000 Contingency 15% $77,077,000 Sub-Total $590,872,000 A/E Other 15% $88,631,000 TOTAL $679,503,000 Regional Water Rate Study Final Report (June 7, 2016) Page 14

15 Alternate Bayshore Intake Option 60 MGD Treatment Plant Water Treatment Plant $254,215,000 Land 70 Acres 700,000 Pump Station 25,000,000 Raw Water 7.5 Miles 9,900,000 Easement Allowance 5,000,000 24" Main 12 Miles 15,840,000 36" Main 28 Miles 51,740,000 36" River Crossing 2 Miles 5,200, MG High Service Pump with 20 MG Storage 3-15 MG Booster Station with 10 MG Storage 36,600,000 38,700, Pressure Reducer Stations 900,000 Total $443,795,000 Contingency - 15% $66,615,000 Sub-Total $510,410,000 A/E Other 15% $76,560,000 TOTAL $586,970,000 Regional Water Rate Study Final Report (June 7, 2016) Page 15

16 Scenario 2 Contract Communities Build New Water Plant The ERC/PDG/TPC Team initially developed 4 separate alternatives for Scenario 2 that has been reduced to the 1 scenario as included in this section that will provide as many approaches to the regional water dilemma facing northwest Ohio. The information contained in this section focuses solely on Scenario 2, water rates for the outside City of Toledo contract communities with monthly water rate projections beginning in The following are the assumptions that have been used by ERC/PDG/TPC Team to analyze the outside community s regional water approach Scenario 2: All Toledo contract communities join together and build a new plant (location to be determined) that will provide water to each community through a new distribution system. Note: Some of the current distribution system may be utilized and will result in a reduction in the overall cost and projected rates. The calculated cost of building a new plant and distribution system is based upon 2016 dollars and then increased by 3% annually to arrive at the 2021 projected cost. The calculated rates are solely based upon debt service payment projections (plant and distribution system) and on plant operating expenses. All local community costs (add-ons to rate) would need to be added by each community. Therefore, the rate projections provided in this section pertain to plant construction, water transmission and plant operating costs only. The construction cost has been increased by 3% per year until the year 2021 when it is anticipated that debt will be secured and construction will begin (completed by end of 2023). This is based on the last 5 year s historical construction cost increase index. The plant operating costs have been increased by 4% per year beginning in 2016 and into the future. It is assumed that all of the contract communities will not renew water purchase contracts with the City of Toledo and will choose to purchase water from the new plant beginning in It is assumed that the usage by all contract communities will continue to grow at a minimum of 1% per year based upon the 2014 actual usage figures provided by the City of Toledo. No management structure has been considered for the contract communities beginning in 2024 as determining a management structure is not part of this rate projection project. The assumption for plant size is 60 MGD. The 60 MGD WTP assumption includes the Intake, Intake Pipe, Low Service PS, Raw Water Main, 4 Booster PS, 8-Storage Tanks plus a Clearwell, and transmission mains to each users current Toledo connection. No allowance was made for using existing system components to potentially reduce Scenario 2 costs. Regional Water Rate Study Final Report (June 7, 2016) Page 16

17 It is assumed and projected that a new plant and distribution system will cost $679.5 M to construct in This figure has been increased $788 M for year is the anticipated year that debt will have been secured and construction will begin. The debt is assumed at an annual interest of 2.50% and on a 30 year term bond with payments beginning in Plant operating costs are projected to be $9.4 M in This figure has been increased to $ M per year in is the anticipated year that the new plant and distribution system will become active. 1% of annual debt service payments is added annually to a repair and replacement fund beginning in The Scenario 2 assumptions and future projections are presented and summarized in the following Table 8, Table 9 and Table 10: Regional Water Rate Study Final Report (June 7, 2016) Page 17

18 Scenario 2 Summary Results included in Table 8, Table 9 and Table 10 Table 8 Table 9 Table 10 Regional Water Rate Study Final Report (June 7, 2016) Page 18

19 V. Scenario 3 Equal Partnership Scenario 3 Equal Partnership The ERC/PDG/TPC Team initially developed Scenario 3 information with the assumption that all contract communities and the City of Toledo join together (management scenario to be determined) in a manner where water is provided to all users at a level cost. The contract communities would still need to add their various costs to the cost of water for each customer. The following are the assumptions that have been used by ERC/PDG/TPC Team to analyze the equal partnership for all communities for a regional water approach Scenario 3: The City of Toledo water supply rate schedule approved by City Council for years 2016 through 2018 and all of the corresponding support data is the basis for the study and the basis for all 3 scenarios. 3 year analysis (2016 through 2018) City of Toledo council approved rate schedule. This existing rate schedule provides the foundation for the ERC/PDG/TPC Team analysis. The City of Toledo provided their projections of revenue, operating expenses, debt service and replacement improvements for the period 2016 through 2060 for Scenarios 1 and 3. These projections were used to calculate projected rates for the same time period (See first six pages of Appendix 1). 5 year analysis 2019 through 2023, represent the first 5 year analysis that is critical to all 3 scenarios the ERC/PDG/TPC Team has developed and based on all of the City of Toledo water rate information. 5 year analysis 2024 through 2028 represent the second 5 year analysis that is critical to all 3 scenarios the ERC/PDG/TPC Team has developed and based on all of the City of Toledo water rate information. The ERC/PDG/TPC Team revenue analysis is based on the first water volume charge of First 300 ccf only. A complete and thorough water rate structure analysis that is outside the scope of work outlined by TMACOG but may be needed to further analyze rates and revenues. The ERC/PDG/TPC Team was not provided consumption by community, by meter size, by rate block in order to allow the Team to accurately estimate revenue. The City of Toledo would renegotiate all outside community water purchase agreements to provide water at the same rate to all communities (water purchase cost only). It is uncertain as to whether contracts may be renegotiated. All community add-on cost per month will be added to the cost of water for each customer. All City of Toledo operating, debt and replacement improvement costs will be included in the cost of water provided to each community. The City of Toledo will still need to generate enough revenue to cover the bond coverage tests on current on projected debt payments. Regional Water Rate Study Final Report (June 7, 2016) Page 19

20 Any agreements for maintenance, distribution, billing, customer service would be dealt with on a community by community basis and not be included in the cost of water for that community. These would be considered add-on costs and these costs would be added to the cost of water by each community before billing their customers. Scenario 3 is exactly the same as Scenario 1 except for that Scenario 1 uses Toledo only usage and Scenario 3 uses both Toledo and the contract community usage for projections. The consumption figures are based on an average aggregate approach to the analysis. Scenario 1 also includes a onetime $530,000 reduction in operating expenses in 2024 which is not included in Scenario 3. The Scenario 3 assumptions and future projections are presented and summarized in the following Table 11, Table 12 and Table 13: Table 11 Table 12 Table 13 Regional Water Rate Study Final Report (June 7, 2016) Page 20

21 VI. Projected 2024 Octopus Diagram Regional Water Rate Study Final Report (June 7, 2016) Page 21

22 Year 2024 Rate Comparison Regional Water Rate Study Final Report (June 7, 2016) Page 22

23 VII. Appendix 1 Appendix 1 of this document includes various documents including handouts from steering committee meetings, follow-up s that document specific policy and procedures and financial information provided by Joe Franckhauser with the City of Toledo used in the analysis. Regional Water Rate Study Final Report (June 7, 2016) Page 23

24 Excel Sheet 1 Scenario 1 - Provided by Joe Franckhauser, MBA via Don Moline with the City of Toledo in an dated May 20, 2016 (Included in 1 of this document and appendix 1) Regional Water Rate Study Final Report (June 7, 2016) Page 24

25 Regional Water Rate Study Final Report (June 7, 2016) Page 25

26 Regional Water Rate Study Final Report (June 7, 2016) Page 26

27 Excel Sheet 2 Scenario 3 - Provided by Joe Franckhauser, MBA via Don Moline with the City of Toledo in an dated May 20, 2016 (Included in 1 of this document and appendix 1) Regional Water Rate Study Final Report (June 7, 2016) Page 27

28 Regional Water Rate Study Final Report (June 7, 2016) Page 28

29 Regional Water Rate Study Final Report (June 7, 2016) Page 29

30 Handout 1 - City of Toledo Financial information provided at the April 27, 2016 steering committee meeting Regional Water Rate Study Final Report (June 7, 2016) Page 30

31 Handout 2 - City of Toledo Financial information provided at the April 27, 2016 steering committee meeting Regional Water Rate Study Final Report (June 7, 2016) Page 31

32 1 used for the regional water study analysis From: Moline, Donald [mailto:donald.moline@toledo.oh.gov] Sent: Friday, May 20, :40 PM To: 'Kurt Erichsen'; 'John F. Damico' Cc: Henry, Warren; Shaw, Jim; Greiner, Jerry; Moore, Ed; Street, Susan; Franckhauser, Joe Subject: FW: Regional Water Study data Kurt..John Attached is our redo on Scenario1 and Scenario 3 along with our assumptions. Again while our belief is they represent our best forecast they do not represent RATE requests. Please include this AND its attachments in your background. Don Donald M. Moline PE Administrator Division of Utilities Administration Department of Public Utilities City of Toledo 420 Madison Ave Office From: Franckhauser, Joe Sent: Friday, May 20, :10 PM To: Moline, Donald Cc: Henry, Warren; Moore, Ed; Street, Susan Subject: Regional Water Study data Don, Please find the 2 scenarios we discussed. All assumptions are recorded on each file below the financial forecast. Thanks, Joe Franckhauser, MBA Toledo Waterways Initiative 600 Jefferson Avenue Toledo, OH (419) telephone (419) fax Regional Water Rate Study Final Report (June 7, 2016) Page 32

33 From: John F. Damico [\] Sent: Wednesday, May 18, :34 PM To: Moline, Donald; Henry, Warren Cc: 'Kurt Erichsen'; Moore, Ed; Street, Susan; Franckhauser, Joe; Al Damico; John F. Damico; Jack A. Jones Subject: RE: May 12 TMACOG Report - More Analysis Don and Warren I left a voice mail with Don Moline and then Al and I talked to Joe Franckhauser and the following is what the 3 of us agreed to: Joe has committed by Friday to provide a spreadsheet with the following information for years 2031 through The revenue projections (including the percent increase each year) 2. The operating expenses projections (including the percent change for each year) and 3. The amount to be used for the Improvements / Replacement fund Once we receive this sheet we can finish the report. As discussed with Joe, Don I am sure you will forward the information as soon as you have time to review and provide input I hope this will then conclude all the changes. Incidentally, we agree that from about year 2040 to 2060 is very difficult to project. In terms of a meeting next week, it will depend how early in the morning Friday we get the data. I suggest we still shoot for the next Tuesday or maybe more realistic Wednesday (May 25) morning meeting. Otherwise I it will have to be after Memorial Day weekend. I cannot meet next Thursday or Friday and I will need to leave Toledo early afternoon Wednesday for an evening commitment on Wednesday May25. So until we get the data, the meeting is somewhat secondary. Thank you John F. Damico President Environmental Rate Consultants, Inc (ERC) 2113 Greenbriar Place Union, Kentucky fax cell jdamico@ercerc.com Regional Water Rate Study Final Report (June 7, 2016) Page 33

34 2 used for the regional water study analysis All We asked for a week to review the draft But with two days: Several comments but the largest issue is that : The Total Debt reported in 2016 of $20, 970 is Bond Debt ($19,330) scheduled to retire in 2038 This would reduce rates per your process. See the rest below. Please review. Don Donald M. Moline PE Administrator Division of Utilities Administration Department of Public Utilities City of Toledo 420 Madison Ave Office From: Franckhauser, Joe Sent: Tuesday, May 17, :16 AM To: Moline, Donald; Street, Susan Subject: RE: TMACOG Regional Water Study Final Report (version 3) Don, My observations on the report dated May 20, The Total Debt reported in 2016 of $20, 970 is Bond Debt ($19,330) scheduled to retire in 2038 and loan debt ($1,640) scheduled to retire in The report retired the loan debt in 2036 by ($1,600). The next significant drop in debt service was reported in 2048 for ($9,000). The bond debt should have been reduced by approximately $19,000 as it relates to the breakdown above. The debt drop in 2048 appears to belong to the $70M bond issue planned in 2016 (for 30 years). However the reduction should be approximately $5,000 not $9,000 and should appear in The $100M bond issue planned for 2020 (for 30 years) should show a reduction of approximately $7,000 in The report shows a reduction of $14,000 in The $85M bond issue planned for 2022 (for 30 years)should show no debt as of The report shows the final debt amount of $12,500 concluding in Scenario 1 described the annual replacement and improvement amount would be increased by 1% starting with year I found this amount remained flat at $20,000. Regional Water Rate Study Final Report (June 7, 2016) Page 34

35 If you have any questions, please let me know. Joe Franckhauser, MBA Toledo Waterways Initiative 600 Jefferson Avenue Toledo, OH (419) telephone (419) fax From: Moline, Donald Sent: Monday, May 16, :04 AM To: Street, Susan; Franckhauser, Joe Subject: FW: TMACOG Regional Water Study Final Report (version 3) Importance: High I would appreciate your review as soon as you are able. I need to see if they took off the debt payments in future years. Any corrections needed? Don Donald M. Moline PE Administrator Division of Utilities Administration Department of Public Utilities City of Toledo 420 Madison Ave Office used for the regional water study analysis John First I need to again repeat we have do not have any background that would let us guess on a 44 year rate need and infrastructure replacement rate. My SEG(Scientific Educated Guess) is that a 1% per year growth in cash infrastructure projects would be reasonable post Larger potential projects related to aboveground storage, large main additions, etc should be done by then. Don Donald M. Moline PE Administrator Division of Utilities Administration Department of Public Utilities City of Toledo 420 Madison Ave Office From: John F. Damico [mailto:jdamico@ercerc.com] Sent: Monday, May 09, :30 PM To: Moline, Donald; Henry, Warren; Street, Susan; Shaw, Jim; Greiner, Jerry; 'Kurt Erichsen' Regional Water Rate Study Final Report (June 7, 2016) Page 35

36 Cc: 'Al Damico'; 'Jack A. Jones'; John F. Damico; T. PARKER & CO., LLC Subject: Cash funded Capital Projects budget line item from 2031 to 2060 Hey Don We are in need of one last clarification that is significant to the study and relates to your response below regarding the Cash funded Capital Project line item in the forecast performed by Joe (I copied the from below here for your convenience) John, Please see our to you of In our spreadsheet of it was labeled Cash funded Capital Projects. It is our belief that about $10 million in ongoing capital projects both at the plant and in the distribution system will be required to replace and maintain the system thru It was adjusted by 4% per year. It is replacing loans/bonds debt. Based on your response and increasing the Cash funded Capital Project line item by 4% through 2030 (this amount is approximately $19,5 M at 2030) How do you suggest we project out to 2060? 1. Continue increasing by 4% through 2060 (this number is $60M in 2060) 2. Set back to $10M in 2031 and increase by 4% through 2060? 3. Keep flat at the $19.5 M from 2031 through Or please provide instructions for this line item through It has a significant impact on the study results no matter how its addressed This is the last issue we need clarified and then jack can complete his analysis he committed to work on at our last steering committee meeting Your prompt response is very much appreciated Thank you John F. Damico President Environmental Rate Consultants, Inc (ERC) 2113 Greenbriar Place Union, Kentucky fax cell jdamico@ercerc.com Regional Water Rate Study Final Report (June 7, 2016) Page 36

37 4 used for the regional water study analysis John, Please see our to you of In our spreadsheet of it was labeled Cash funded Capital Projects. It is our belief that about $10 million in ongoing capital projects both at the plant and in the distribution system will be required to replace and maintain the system thru It was adjusted by 4% per year. It is replacing loans/bonds debt. Therefore is the 493% increase in R/I projects for the Plant? or the system? and if the system is it the entire system or it seems the approximate $10M could apply to the Toledo rate payers and be part of the Toledo local costs and therefore local Toledo share and then reflected in the Toledo only rate I believe that the cash projects are need to serve customers both inside and outside. Warren might be able to give more detail on the discussions of distribution system improvements being discussed with OEPA. I don t believe you can appropriately call them a local only cost. Don Donald M. Moline PE Administrator Division of Utilities Administration Department of Public Utilities City of Toledo 420 Madison Ave Office From: John F. Damico [mailto:jdamico@ercerc.com] Sent: Monday, May 02, :34 PM To: Moline, Donald; Henry, Warren; Street, Susan; Shaw, Jim; Greiner, Jerry; Kurt Erichsen Cc: Al Damico; Jack A. Jones; John F. Damico Subject: Attachment John F. Damico President Environmental Rate Consultants, Inc (ERC) 2113 Greenbriar Place Union, Kentucky fax cell jdamico@ercerc.com ############################################################## This and any files transmitted with it are confidential and intended solely for the use of the individual or entity to which they are addressed. If you have received this in error please notify the system manager. Regional Water Rate Study Final Report (June 7, 2016) Page 37

38 Please note that any views or opinions presented in this are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this . ############################################################# From: John F. Damico Sent: Monday, May 2, :30 PM To: Don Moline Warren Henry Street, Susan Jim Shaw; Greiner, Jerry Kurt Erichsen Cc: Al Damico Jack A. Jones; John F. Damico Subject: Review of Final Report dated April 27, 2016 and the need for 1 final clarification Don and Warren: As we conclude our regional rate study analysis, and using the attached Joe Franckhauser s review handout, we have 1 final question before we finalize the last version of the report. The yellow highlighted line item f) Replace/Improvement in the attached document regarding the section of Data from the Department of Public Utilities provided April 18, 2016 increases from $2,571M in 2018 by 493% to $12,674M and continues to grow to $15,420M in 2024 Can you please clarify what type of projects this line item relates too? I am specifically asking as it relates to Scenario 3 only. We will use the exact information for Scenario 1 and include the $530,000 reduction in operating expenses that Joe was not privy too when he performed his analysis and we will be match exactly except for the $530,000 reduction. Therefore is the 493% increase in R/I projects for the Plant? or the system? and if the system is it the entire system or it seems the approximate $10M could apply to the Toledo rate payers and be part of the Toledo local costs and therefore local Toledo share and then reflected in the Toledo only rate Please let us know as soon as you can. We are hoping to finish the report by this Thursday May 5, Allowing for 1 week for review as requested, we will want any comments back by Thursday morning, May 12, 2016 heading towards a meeting on Thursday May 19, 2016 or Friday morning May 20, 2016 (or whenever Kurt can coordinate to meet next) Thank you and we are looking forward to this last clarification John F. Damico President Environmental Rate Consultants, Inc (ERC) 2113 Greenbriar Place Union, Kentucky fax cell Regional Water Rate Study Final Report (June 7, 2016) Page 38

39 ############################################################## This and any files transmitted with it are confidential and intended solely for the use of the individual or entity to which they are addressed. If you have received this in error please notify the system manager. Please note that any views or opinions presented in this are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this . ############################################################# 5 used for the regional water study analysis John We are attaching our best spread sheet estimate of the answers to your question. Please note the attached is for discussion purposes and does not constitute a rate request. 1. The City of Toledo will provide the consultant team with the following additional financial information: a projected operating expense budget with the cost escalation factors to be used in the future and/or After a review of the past 9-year and 5-year we see a 3.42% and a 3.7% annual increase in these expenses. We therefore believe the 4% we projected to be appropriate. b. How do we treat the increase of $11M in operating expenses for budget year 2016 for future forecasting purposes? Viewing our unaudited 2015 actual expenses and history we believe that Actual operating expenses for 2016 will be in line with our 4% projection. Budget always exceed actual. Again, see the attached spread sheet. c. Please provide a reasonable and realistic %age to be used for future forecasting for operating expenses. Currently City of Toledo suggests 4% and consultants are using 6.30% (for operating expense forecasting) See a above d. Please advise how the reserve fund will be utilized (if at all) for the $11M in item b above Not needed-- see b above Added Information Regional Water Rate Study Final Report (June 7, 2016) Page 39

40 1. We need to point out that debt falls off as an expense when the bonds/loans are repaid. I have reattached a prior-supplied chart on our pre debt. Remember our $75million bond offering is covered by our existing approved Rates. Don 2. We have, with what we consider to be reasonable estimates, projected that 4% Revenue rate increase in 2019 to 2030 will maintain compliance with our debt policy and Bond covenants. We have not done a 14-year estimate in the past and are reluctant to go further. Our CIP and a shift to cash projects instead of bonds are also included in the spread sheet. Debt in 2018 and 2020 are included. 3. We feel that this 4% rate maybe extended into the future, but remember that as bond/loan expenses fall off in 2038,2047,2049,and 2051 there would be a significant reduction in revenue need. 4. Rate Decreases are a realistic potential in future years. Please let us know if you have any questions. Donald M. Moline PE Administrator Division of Utilities Administration Department of Public Utilities City of Toledo 420 Madison Ave Office From: John F. Damico [mailto:jdamico@ercerc.com] Sent: Tuesday, April 12, :39 PM To: Kurt Erichsen; Shaw, Jim; Greiner, Jerry; Henry, Warren; Moline, Donald; Street, Susan Cc: Al Damico; Jack A. Jones; John F. Damico Subject: follow up letter to yesterday's regional water study steering committee meeting held on Monday April 11 Steering Committee Members: This is the follow up letter to yesterday s regional water study steering committee meeting held on Monday April 11, 2016 from 3:00 to 5:00pm. Item 3 in bold below is the additional data the consultant team needs from the city of Toledo in order to revise the rate model and final report as discussed during the meeting. The Steering Committee has agreed to the following: 2. Reduce the 8 monthly rate alternatives (included in the current document) with the goal of one monthly rate per scenario if possible. 3. Use Scenario 2B (the 60 MGD) scenario and eliminate the 2A 40 MGD scenario. Regional Water Rate Study Final Report (June 7, 2016) Page 40

41 4. The City of Toledo will provide the consultant team with the following additional financial information: a projected operating expense budget with the cost escalation factors to be used in the future and/or b. How do we treat the increase of $11M in operating expenses for budget year 2016 for future forecasting purposes? c. Please provide a reasonable and realistic %age to be used for future forecasting for operating expenses. Currently City of Toledo suggests 4% and consultants are using 6.30% (for operating expense forecasting) d. Please advise how the reserve fund will be utilized (if at all) for the $11M in item b above 5. The revenue / consumption calculations will be referred to in the report as average aggregate. 6. The City of Toledo will provide this information by Monday April 18, 2016 to meet the steering committee schedule 7. Next steering committee is scheduled for Wednesday April 27, 2016 from 2:00 to 4:00pm (assuming the consultants receive the data by no later than Tuesday April 19, 2016). Thank you John F. Damico President Environmental Rate Consultants, Inc (ERC) 2113 Greenbriar Place Union, Kentucky fax cell jdamico@ercerc.com ############################################################## This and any files transmitted with it are confidential and intended solely for the use of the individual or entity to which they are addressed. If you have received this in error please notify the system manager. Please note that any views or opinions presented in this are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this . ############################################################# Regional Water Rate Study Final Report (June 7, 2016) Page 41

42 6 used for the regional water study analysis Warren Henry reply to Jack Jones dated Friday February 5, 2016 Jack, The City does not drill down budgeting and expenses to the level you request. However, two of the largest operating expenses of a water utility are labor and power. I have not provided the costs for powdered activated carbon and potassium permanganate as they are independent of the cost of transmission. Related to your request for the cost of delivering water from the intake to the water treatment plant (intake, raw water line, and LS transmission main), the estimated cost of labor and power for 2014 and 2015 are as follows: Labor 3 persons at $80,000 including benefits = $240,000 annually Power 2014 (76.5 MGD avg annual flow, 45 ft TDH) = $338, (72.8 MGD avg annual flow, 42 ft TDH) = $300,600 Transmission Main Expenses from the WTP are not tracked separately nor is the operating cost of the Heatherdown Booster Pumping Station and its underground reservoir. Regards, Warren Warren Henry, P.E. Water Program Manager Department of Public Utilities 420 Madison Avenue Toledo, OH Office: used for the regional water study analysis From: Jack A. Jones [mailto:jonesja@poggemeyer.com] Sent: Thursday, January 28, :56 PM To: Henry, Warren Cc: 'John F. Damico' Subject: More Information Warren, Regional Water Rate Study Final Report (June 7, 2016) Page 42

43 At our after meeting lunch discussion we realized that for us to address some items in scenario 3, we will need to get some information that we currently don t think we have. This would be as follows: 2014 & 2015 WTP and Raw Water Line, Intake and Low Service Transmission O&M expenses up to the WTP. We would also like to get Transmission Main Expenses from the WTP if they are available and tracked separately. These could include Booster PS expenses and Storage expenses related to transmission. These WTP production related expenses then would exclude Admin, Distribution and Transmission/Storage/ Booster PS expenses. I appreciate any assistance you can provide to help get these numbers to us next week with the other information request. Thanks, Jack 8 used for the regional water study analysis The following message was received from Don Moline on February 5, 2016: From: Moline, Donald To: "John F. Damico"; Street, Susan; Henry, Warren; Moore, Ed Cc: Kurt Erichsen; Jack A. Jones; Shaw, Jim; Greiner, Jerry; Al Damico; jj@woodlandsconsulting.com Subject: RE: Regional water rate study data request based on the January steering committee meeting Date: Friday, February 5, :27:59 PM SUBJECT: Regional water rate study data request on January steering committee meeting Our rates and budgets are estimated only through Without having approved rates for 2019 and beyond, we are unable to provide information for this time period. We have already given you the Rate Model through Any numbers in the model beyond 2018 should be looked upon as place holders only. Since the year end process is still ongoing, providing unaudited expenses would be purely speculative at this time CAFR was not issued until 6/30/15. While we have increased our available budget $46 million for 2016 to take into account the maximum for lake conditions, we anticipate the lake condition for organics to return to prior years; therefore our expenses will become more in accordance to prior years expenses. We are in compliance with both our Bond Covenant 1.1 and debt policy Regional Water Rate Study Final Report (June 7, 2016) Page 43

44 We currently maintain an emergency replacement reserve of $10 million. Reserves above that number will be determined by year-end s closing To date, the committee discussions and requests for information (October 5, November 16, December 18, and most recently January 28) have all focused on Scenario 1 A public water supply serving the City of Toledo alone. Absent has been any discussion related to Scenario 2 or 3. We appreciate the efforts of the ERC and PDG to accurately represent financial data of the City of Toledo. We also understand the data from Scenario 1 is essential to perform a proper financial analysis related to Scenarios 2 and 3. At the same time, no financial information has been provided (capital improvements, related debt service, and O,M&R expenses) that establishes the basis for developing rates for Scenario 2. We would expect discussions and work toward development of Scenario 2 to be performed concurrently with development of Scenario 1. As stated in our meeting of January 28, please provide financial information for Scenario 2 that will allow the committee sufficient time to adequately review and perform an analysis similar as has been completed for Scenario 1. Don Donald M. Moline PE Administrator Division of Utilities Administration Department of Public Utilities City of Toledo 420 Madison Ave Office used for the regional water study analysis From: John F. Damico [mailto:jdamico@ercerc.com] Sent: Friday, January 29, :17 PM To: Moline, Donald; Street, Susan; Henry, Warren Cc: Kurt Erichsen; Jack A. Jones; Shaw, Jim; Greiner, Jerry; Al Damico; John F. Damico; jj@woodlandsconsulting.com Subject: Regional water rate study data request based on the January steering committee meeting Don and Susan: This is the follow up from our regional water study steering committee meeting from yesterday regarding the additional data request per our meeting discussion. Please provide by next week the following City of Toledo information: 1. Replacement Improvement annual funding amounts for years 2019 and beyond (2016 through 2018 is accurate per Susan s and incorporated in Regional Water Rate Study Final Report (June 7, 2016) Page 44

45 the handout version 2 discussed at yesterday s meeting) 2. Provide updated total operating expenses for 2015 and beyond (during the meeting the number of $16 million was mentioned that needs to be added to the approximately $35M for 2016 for example) 3. Provide updated total operating revenue for 2015 and beyond 4. Provide updated total non-operating revenue for 2015 and beyond 5. Provide updated reserve annual amounts for 2015 and beyond 6. (basically items 2 through 6 are restating all of the financial and rate information from the PowerPoint intimation from our handout page 11 (project Debt service coverage information from the bond counsel meeting) 7. The consultants will remove the 2016 $70M from our forecast because these costs are already included in the 2016 through 2018 city of Toledo city council approved rates. 8. The anticipated amount of reserve to be used to offset expenses for each year by year and the specific amount in the future and then the amount of remaining reserve. Otherwise, we will have to interpret any shortfall in our rate model to be accounted for with increased rate increased. 9. Lastly, after having time to consider the significant increase in operating expenses etc. (the decisions from yesterday s meeting) we have concerns regarding the 1.10 debt coverage tests that will be required. We would prefer you provide these tests as well; otherwise the calcinations we have already included in the revised handout will be updated accordingly. Please reply back with any questions for clarification as soon as you can. Otherwise, please provide this information by the end of next week Friday February 5, 2016 in order to allow time for updating the handout prior to the Friday February next scheduled water rate study steering committee meeting Thank you John F. Damico President Environmental Rate Consultants, Inc (ERC) 2113 Greenbriar Place Union, Kentucky fax cell jdamico@ercerc.com ############################################################## This and any files transmitted with it are confidential and intended solely for the use of the individual or entity to which they are addressed. If you have received this in error please notify the system manager. Please note that any views or opinions presented in this are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this . ############################################################# Regional Water Rate Study Final Report (June 7, 2016) Page 45

46 10 used for the regional water study analysis The following message was received from the City of Toledo on January 21, 2016: From: Moline, Donald Sent: Thursday, January 21, :18 PM To: John Damico Cc: Henry, Warren; Shaw, Jim; Greiner, Jerry; Street, Susan; Moore, Ed Subject: FW: Regional Water Rate Study Data Request Follow UP John I think this answers all three of your requests. If you have questions let us know. Don Donald M. Moline PE Administrator Division of Utilities Administration Department of Public Utilities City of Toledo 420 Madison Ave Office used for the regional water study analysis From: Street, Susan Sent: Thursday, January 21, :35 AM To: Moline, Donald Subject: RE: Regional Water Rate Study Data Request Follow UP Don, Per our conversation on 1/20/2016, the following is the information requested by the Regional Water Rate Study in regards to the reduction of revenue and expenses for the outside entities leaving the City of Toledo: Revenue would be reduced approximately 50%: $31,768,000 Consumption would be reduced approximately 42% Expenses: Provided by Christy Soncrant at Water Distribution: (3) Meter Readers $ 167,330 (4) Water Service Technicians $ 290,057 $ 457,387 Provided by Andy McClure at Water Treatment Reduction of Electricity 10% $ 72,333 (Budgeted amount $723,332) No change reported at Utilities Administration or Engineering Services. Regional Water Rate Study Final Report (June 7, 2016) Page 46

47 Total approximate Loss: $31,238, Susan is to provide the annual amount of Replacement Improvements expenses to add to each year. The following is Cash funded projects listed on the current water CIP in respect to the rates currently in place ,336,966 3,519,931 1,713,931 1,713,931 This is addition to the CIP attached. Susan Street, MSA Alternate Administrator City of Toledo Department of Public Utilities used for the regional water study analysis The following message was received from the City of Toledo on January 22, 2016: John, As stated in our meeting in December, debt will be issued in 2016, 2018, and 2020 to fund the program through to completion in The programmed rate increases authorized by Toledo City Council through 2018 will be sufficient to meet debt service requirements for bonds sold in With respect to an update to information provided to you last month, the $100 million of debt to be sold in 2018 remains unchanged and the $80 million sold in 2020 should be increased to $85 million. However, I expect the $85 million to decrease when the results of piping condition assessments performed within the plant become known later this year. Plant work recently performed in the past three months indicates that the scope of pipe replacement will likely not be nearly as great as previously budgeted in the program. Regards, Warren Warren Henry, P.E. Water Program Manager Department of Public Utilities 420 Madison Avenue Toledo, OH Office: Regional Water Rate Study Final Report (June 7, 2016) Page 47

48 13 used for the regional water study analysis Five Year Usage History From 2014 City of Toledo Annual Information Statement Regional Water Rate Study Final Report (June 7, 2016) Page 48

49 VIII. Appendix 2 A. City of Toledo Projected Operating Results B. City of Toledo Projected Debt Service C. City of Toledo Debt Service D. Projected Rates 3 Rate Scenarios E. Projected Debt Service and Operating Costs Scenario 2 F. Projected Costs 3 Scenarios Including Local Costs (Octopus) G. Usage / Consumption Used in the Analysis Regional Water Rate Study Final Report (June 7, 2016) Page 49

50 A. City of Toledo Projected Operating Results Scenario 1 and Scenario 3 Regional Water Rate Study Final Report (June 7, 2016) Page 50

51 Regional Water Rate Study Final Report (June 7, 2016) Page 51

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60 Regional Water Rate Study Final Report (June 7, 2016) Page 60

61 B. City of Toledo Projected Debt Service Regional Water Rate Study Final Report (June 7, 2016) Page 61

62 Regional Water Rate Study Final Report (June 7, 2016) Page 62

63 C. City of Toledo Debt Coverage Calculation Scenario 1 and Scenario 3 Regional Water Rate Study Final Report (June 7, 2016) Page 63

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74 D. Projected Rates 3 Rate Scenarios Regional Water Rate Study Final Report (June 7, 2016) Page 74

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80 E. Projected Debt Service, Repair and Replacement Funding and Operating Costs for Scenario 2 Regional Water Rate Study Final Report (June 7, 2016) Page 80

81 Regional Water Rate Study Final Report (June 7, 2016) Page 81

82 F. Projected Costs 3 Scenarios Including Local Costs (Octopus) Regional Water Rate Study Final Report (June 7, 2016) Page 82

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86 G. Usage / Consumption Used in the Analysis Regional Water Rate Study Final Report (June 7, 2016) Page 86

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