CITY OF REDLANDS WATER AND WASTEWATER RATE STUDY. Prepared by:

Transcription

1 CITY OF REDLANDS WATER AND WASTEWATER RATE STUDY Prepared by: August 30, 2010

2 201 S. Lake Blvd, Suite 301 Pasadena CA Phone Fax August 30, 2010 Mr. Chris Diggs Assistant Utilities Director City of Redlands 35 Cajon St., Ste 15 A Redlands, CA DRAFT Subject: Water and Wastewater Rate Study Report Dear Mr. Diggs: Raftelis Financial Consultants, Inc. (RFC) is pleased to present this report on the water and wastewater rate study (Study) to the City of Redlands (City). We are confident that the results based on a cost of service analysis and Utility Advisory Committee (UAC) input, when implemented, will result in fair and equitable water and wastewater rates to the City s customers. The Study involved a comprehensive review of the City s financial plan, user classifications and rate structures. An important feature of this Study was the participation of the UAC representing various business and residential interests. The resulting rate adjustments in this Study reflect the UAC s input. The assumptions and the resulting recommended rates are presented in Section 1 of the report. The various tables describing the calculation of the rates are presented in Sections 2 4. It was a pleasure working with you and we wish to express our thanks to Ms. Patty Baker, Ms. Cindy Tryon, Ms. Rosemary Hoerning, and other staff members of the City for the support and cooperation extended throughout the Study. We would also like to acknowledge the participation of and input provided by the City s UAC. If you have any questions, please call me at (626) Sincerely, Sudhir Pardiwala Project Manager Hannah Phan Senior Consultant

3 TABLE OF CONTENTS SECTION SUMMARY AND OVERVIEW... 2 PROCESS... 2 RESULTS... 2 Water... 3 Water Rate Structure... 7 Wastewater... 9 Wastewater Rate Structure SECTION WATER RATE STUDY SECTION WASTEWATER RATE STUDY SECTION OUTSIDE-CITY SURCHARGE

4 SECTION 1 SUMMARY AND OVERVIEW This Summary presents the water and wastewater rate analyses for the City of Redlands (City). The City s last rate study was conducted in 2008 by Raftelis Financial Consultants, Inc. (RFC) and the recommended rates for 2009 and 2010 have been implemented. In accordance with the Redlands Municipal Code, the City is committed to reviewing its rates and rate structure every two years to ensure fairness and equity to its customers and the financial stability of the water and wastewater enterprises. This Summary contains a description of the process, methodology, findings and recommendations for the City s water and wastewater rates (including outside-city rates). Process The rate setting process involved active participation from the Utilities Advisory Committee (UAC) appointed by the City Council to provide input and guidance on various water and wastewater rate issues. The UAC met with staff and the consultants in a series of public meetings, noticed according to the Brown Act requirements, to understand utility issues and to provide input and guidance in order to finalize the rate recommendations. RFC made presentations showing the assumptions, financial data, usage characteristics of City customers, and the concepts of rate making; and designed rate models used to analyze various scenarios and resulting rate and customer impacts, to promote discussion and build consensus among UAC committee members, City staff and RFC. The revenue adjustments and rates presented in this report are a result of this process. In previous rate studies, the City s goal has been to establish fair and equitable rates that accomplished the following goals: Ability to meet the fiscal needs of the City s water and wastewater utilities in the context of the City s overall policy objectives, and Easy of customer understanding and ease of implementation and update in future years by City staff. The City has conserved water over the last couple of years with the inclining tiered rate structure. Recognizing the importance of conservation, the UAC has retained the current water rate structure. The current wastewater rate structure complies with the State Water Resources Board revenue guidelines and has been retained as well to account for wastewater flow and strength. Results During the committee meetings, RFC presented the UAC members with the assumptions and methodologies used to determine rates. Consensus was obtained regarding the assumptions and methodologies to be used and the resulting rates were determined. Final Report August 30, 2010 Page 2

5 The following summarizes the basis on which the City s water and wastewater rates, including inside and outside-city rates, were established. Water A cost of service approach was used to determine water rates. This approach determines rate revenue requirements based on operating costs and a capital improvement program. The following factors contributed to a necessary enhancement to the City s water rates: Inflationary Cost Pressures for Labor and Materials. The following escalation factors were used in the model: General 3 percent per year Personnel 0 percent until fiscal year (FY) 2013, then 3 percent starting in FY 2014 Fringe Benefits 5 percent per year Capital 0 percent until FY 2012, then 3 percent starting FY 2013 Regulatory Impacts. Capital projects are necessary to allow the City to comply with US Environmental Protection Agency and Department of Public Health regulations. System Improvements. Deferred costs for replacement and system improvement projects are required to provide reliable service. Funding of Reserves. Reserves required to meet minimum recommended levels for fiscal stability are planned to be funded on a phased-stepped basis over a period of five years. It is good practice to establish reserves so that the water utility can provide funding for emergencies and unexpected expenditures. Funding of the reserves will be accomplished over the planning period. Reduced Sales. The number of active accounts and water sales have decreased due to conservation and economic conditions. As a result, the fixed costs have to be spread over a smaller base. A breakdown of the revenue requirements by year is shown in the Figures 1-1 and 1-2. A significant capital project, the Hinckley Regulatory Upgrade, will be mostly funded by a State Revolving Fund (SRF) loan, a low-interest loan program offered by the state, as shown in Figure 1-2. Other capital improvement projects will be funded through the water rates. A detailed capital improvement plan is provided in Section 2, Table 2-6. Final Report August 30, 2010 Page 3

6 Figure 1 1 Projected Operations and Maintenance Expense Millions $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $ O&M Expenses Projections FY 2011 FY 2013 FY 2015 FY 2017 FY 2019 Salaries and Benefits Services Supplies Fixed Assets Figure 1 2 Projected Capital Improvement Expense Millions $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 Water Capital Financing Plan DIF Funded Rate Funded Debt Funded $ FY 2011 FY 2013 FY 2015 FY 2017 FY 2019 DIF Development Impact Fees Figure 1-3 shows the recommended revenue increases needed for the next ten years. Increases for the first four years are 6.5 percent per year and the fifth year increase is 5 percent. There are no subsequent increases projected at this time. However, as the CIP is updated the future projections may change. All increases are projected to become effective for all bills on January 1 st of each year. With the recommended revenue enhancements, the water utility will meet both operating and capital needs, along with existing debt service coverage requirements on previously issued debt. Final Report August 30, 2010 Page 4

7 Figure 1 3 Water Revenue Adjustments and Debt Coverage Revenue Adjustments 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Water Revenue Adjustments and Debt Coverage 500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% FY 2011 FY 2013 FY 2015 FY 2017 FY 2019 Revenue Adjustments Debt Coverage Req'd Debt Coverage 125% Debt Coverage Figure 1-4 shows how the revenue under existing and proposed rates meets revenue requirements over the planning period. Revenue requirements including operational and capital expenses, debt service and transfers to and from unrestricted cash balances and reserves are depicted by the bars. The flat red horizontal line depicts revenue under existing rates. As shown, revenues under existing rates are inadequate to meet the revenue requirements over the planning period. Revenues from the proposed rates are depicted by the green line. Revenues from the proposed rates are adequate to meet the revenue requirements during most of the forecast period. However, reserves will be used in fiscal years 2011 to 2013 to fund the shortfall in revenues. Over the subsequent years, the proposed rates meet the revenue requirements, including restoring reserves and unrestricted cash up to the recommended levels as shown in Figure 1-5. Final Report August 30, 2010 Page 5

8 Figure 1 4 Water Operating Financial Plan $30 Water Operating Financial Plan $25 $20 Millions $15 $10 $5 $ $(5) $(10) FY 2011 FY 2013 FY 2015 FY 2017 FY 2019 Capital Projects Reserves Transfers Out Transfers In Debt Service O&M Revenue Current Revenue Proposed Figure 1 5 Water Reserve Balance Millions $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $ Water Reserves Water Reserves Reserve for DIF Funded Debt Target 37% of O&M FY 2011 FY 2013 FY 2015 FY 2017 FY 2019 The water reserves are used for working capital requirements, unanticipated or larger than anticipated operating and/or capital expense, and as a rate stabilization reserve for anticipated expenses in excess of revenues during the year. The recommended balance in this fund is to maintain 37 percent of the City s annual water operating and maintenance (O&M) expenses. The orange bars represent a reserve for the development impact fees funded portion of the current debt service, in case the City does not collect sufficient revenue to pay for that portion of the debt. Figure 1-5 shows that the reserve will meet the target in all forecast years. Final Report August 30, 2010 Page 6

9 Water Rate Structure During the 2008 study, the UAC recommended the addition of the third tier for building usage rate and a second tier for the non-building usage rate in order to promote conservation. For this planning period, the UAC did not recommend changing the water rate structure since the tiers were expanded during a previous study, and since the rate structure is effective in promoting conservation. The current water rate structure consists of a bi-monthly service charge varying with meter size and a three-tier water usage rate for all building usage and a two-tier rate for all non-building or irrigation usage, as shown in Table 1-1. In order to meet the revenue requirements of the water utility, both volumetric and bimonthly service fees are increased. The volume rate adjustment is approximately six percent for FY 2011 but varies slightly based on tiers. However, the water bi-monthly service charges increase approximately four percent, depending on the meter size. Table 1-1 summarizes the existing and proposed rates. Private fire protection rates are shown in Table 1-2. Table 1 1 Existing and Proposed Bimonthly Water Rate Schedule Bi Monthly Service Charge Meter Size Current Rates Proposed January 2011 Proposed January 2012 Inside City Outside City Inside City Outside City Inside City Outside City 5/8" $ $ $ $ $ $ /4" $ $ $ $ $ $ " $ $ $ $ $ $ /2" $ $ $ $ $ $ " $ $ $ $ $ $ " $ $ $ $ $ $ " $ $ $ $ $ $ " $ $ $ $ $ $ " $ $ 1, $ $ 1, $ 1, $ 1, Building Usage Rate (in 100 cu ft, ccf) Inside City Outside City Inside City Outside City Inside City Outside City Tier 1 1 to 10 $ 0.74 $ 0.75 $ 0.77 $ 0.78 $ 0.83 $ 0.84 Tier 2 11 to 60 $ 1.24 $ 1.27 $ 1.33 $ 1.36 $ 1.42 $ 1.45 Tier 3 61 & up $ 1.31 $ 1.34 $ 1.47 $ 1.50 $ 1.57 $ 1.60 Non Building Usage Rate (in 100 cu ft, ccf) Inside City Outside City Inside City Outside City Inside City Outside City Tier 1 1 to 60 $ 1.24 $ 1.27 $ 1.33 $ 1.36 $ 1.42 $ 1.45 Tier 2 60 & up $ 1.31 $ 1.34 $ 1.47 $ 1.50 $ 1.57 $ 1.60 Final Report August 30, 2010 Page 7

10 Table 1 2 Existing and Proposed Private Fire Protection Rate Schedule Bi Monthly Service Charge Current Proposed Proposed Meter Size Rates January 2011 January " $ $ $ " $ $ $ " $ $ $ " $ $ $ " $ $ $ " $ $ $ " $ $ $ Fire Usage Rate (in 100 cu ft, ccf) All $ 1.31 $ 1.47 $ 1.57 Figure 1-6 compares how the proposed rate structure will impact customers with a 3/4-inch meter, the common size for single-family residence. As shown in Figure 1-6, as more water is consumed, the increase in the bi-monthly bill becomes larger. The average singlefamily residence uses 24 hcf of per month. The impact to the average single-family residence using a 3/4-in meter is an increase of $5.09 in the bi-monthly bill or $2.55 monthly. The impact for a single-family residence using 15 hcf per month will be an increase of $3.47 in the bi-monthly bill or $1.74 monthly. The bi-monthly increase for a single-family residence using 10 hcf per month is $2.57 or $1.29 monthly. These charges are based on a 3/4-in meter. Figure 1 6 Comparison of Existing and Proposed Bi monthly Water Bills $175 $150 $125 $100 $75 $50 Usage Charge Service Charge Current Bill % change Monthly Bill for Different Usage 12% 10% 8% 6% 4% $25 2% $ 0% Montly Usage (HCF) Final Report August 30, 2010 Page 8

11 Wastewater A cost of service approach was used to update the wastewater service rate. The primary revenue requirements include capital projects, increased costs of operation due to inflationary effects and increased electricity costs, and debt service payments. The following elements have impacted the City s wastewater rates: Power Costs. The cogeneration facilities at the wastewater treatment plant no longer meet regulatory guidelines. The City s cost to purchase power has doubled. Inflationary Cost Pressures for Labor and Materials. The following escalation factors were used in the model: General 3 percent per year Personnel 0 percent until fiscal year (FY) 2013, then 3 percent starting in FY 2014 Fringe Benefits 5 percent per year Capital 0 percent until FY 2012, then 3 percent starting FY 2013 System Improvements. Deferred costs for replacement and system improvement projects are required for reliable service. The recommended revenue enhancements for the wastewater utility are 5 percent per year in 2011 and The revenue adjustments are required to meet all financial obligations of the wastewater utility. Because of the replacement and refurbishment nature of the capital improvements, the UAC opted to fund capital improvements on a pay-as-you-go basis from rates instead of debt funding. Figures 1-7 and 1-8 show the projected O&M and capital expenses in the City during the forecast period. Figure 1 7 Projected Operations and Maintenance Expense Millions $9 $8 $7 $6 $5 $4 $3 $2 $1 $ O&M Expenses Projections FY 2011 FY 2013 FY 2015 FY 2017 FY 2019 Salaries and Benefits Services Supplies Fixed Assets Figure 1 8 Projected Capital Improvement Expense Final Report August 30, 2010 Page 9

12 Millions $5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $ WW Capital Financing Plan DIF Funded Rate Funded Debt Funded FY 2011 FY 2013 FY 2015 FY 2017 FY 2019 Figure 1-9 shows the revenue adjustments needed to meet all the City s financial obligations for the next ten years, as well as the calculated debt service coverage. Figure 1 9 Wastewater Revenue Adjustments and Debt Coverage 10% ts 9% n e 8% s tm 7% ju d 6% A e 5% u n 4% v e e R 3% 2% 1% 0% WW Rate Adjustments and Debt Coverage 500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% FY 2011 FY 2013 FY 2015 FY 2017 FY 2019 Revenue Adjustments Debt Coverage Req'd Debt Cvg 125% g e ra v e o t C b e D Figure 1-10 shows how the wastewater revenues under the current and proposed rates meet revenue requirements over the planning period. The flat red horizontal line depicts revenue under existing rates. As shown, revenues under existing rates are inadequate to meet the revenue requirements over the planning period. Revenues from proposed rates are depicted by the green line. Revenues from proposed rates are adequate to meet revenue requirements during most of the forecast period. However, reserves will be used in fiscal years 2012 to 2018 to fund the shortfall in revenues. Over the subsequent years, the proposed rates meet revenue requirements, including restoring reserves to the recommended levels as shown in Figure Final Report August 30, 2010 Page 10

13 Figure 1 10 Wastewater Operating Financial Plan Millions $14 $12 $10 $8 $6 $4 $2 $ $(2) $(4) WW Operating Financial Plan FY 2011 FY 2013 FY 2015 FY 2017 FY 2019 Capital Projects Reserves Transfers Out Transfers In Debt Service O&M Revenue Current Revenue Proposed Figure 1 11 Wastewater Reserve Balance Millions $5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $ Wastewater Reserves Reserve for DIF funded Debt Wastewater Reserves Target 37% of O&M FY 2011 FY 2013 FY 2015 FY 2017 FY 2019 The wastewater reserves are used for working capital requirements, unanticipated or larger than anticipated operating and/or capital expense, and as a rate stabilization reserve for anticipated expenses in excess of revenues during the year. The recommended balance in this fund is to maintain 37 percent of the City s annual wastewater operating and maintenance (O&M) expenses. The orange bars represent a reserve for the development impact fees funded portion of the current debt service, in case the City does not collect sufficient DIF revenue to pay for that portion of the debt. Figure 1-11 shows that the reserve will meet the target in all forecast years. Final Report August 30, 2010 Page 11

14 Wastewater Rate Structure The current wastewater rate structure consists of a flat bi-monthly charge for residential customers and a rate based on water usage for non-residential customers, varying depending on the wastewater strength. During the 2004 rate study, RFC recommended changes to the City s wastewater rate structure based on input from the UAC. The changes included expanding the classification of non-residential customers from three categories to eight. This new classification included three classifications of low strength users, three classifications of medium strength users, and two classifications of high strength users, as shown in Table 1-3 below. For this planning period, the UAC retained the existing wastewater rate structure. Table 1 3 Wastewater Strengths for Non Residential Customers Category BOD + SS (mg/l) Low Strength Medium Strength ,000 1,001-1,200 High Strength 1,201-1,400 >1,400 Table 1-4 summarizes the proposed rates under the wastewater rate structure. Final Report August 30, 2010 Page 12

15 Table 1 4 Proposed Wastewater Rate Schedule Current Proposed Proposed Bi Monthly Charges Rates January 2011 January 2012 SFR (per unit) $ $ $ MFR (per unit) $ $ $ Non residential Customers (per hcf of water) Minimum Charge $ $ $ Low Strength I $ 1.61 $ 1.70 $ 1.79 Low Strength II $ 1.71 $ 1.80 $ 1.89 Low Strength III $ 2.09 $ 2.20 $ 2.31 Medium Strength I $ 2.50 $ 2.63 $ 2.77 Medium Strength II $ 2.87 $ 3.02 $ 3.18 Medium Strength III $ 3.25 $ 3.42 $ 3.60 High Strength I $ 3.63 $ 3.82 $ 4.02 High Strength II $ 3.96 $ 4.16 $ 4.37 Large Volume User* $ 2.18 $ 2.29 $ 2.41 School (per 100 ADA) Elementary $ $ $ Secondary & High $ $ $ Septage Customers (per gallon) $ 0.07 $ 0.08 $ 0.09 Minimum Charge $ $ $ * Large Volume Users are user with greater than 25,000 gallons per day discharge. Table 1-4 shows that single-family customers will experience an increase of $1.99 bimonthly or about $1.00 per month. Multi-family users will experience an increase of $1.50 bi-monthly or $0.75 on a monthly basis. Non-residential customers rates will increase by six percent; however, their actual bill will vary depend on their water usage. Figure 1-12 shows how the City s current and proposed water and wastewater bills for a single family residential customer with a 3/4-in meter using 24 hcf of water per month compare with those of nearby agencies. Redlands is at the low end even with the proposed rate adjustments. Final Report August 30, 2010 Page 13

16 Figure 1 12 Comparison of Monthly Water and Wastewater Bills $90 $80 Monthly Water and Wastewater Rate Survey Water Wastewater $70 $60 $50 $40 $30 $63 $65 $67 $70 $71 $82 $83 $50 $43 $46 $46 $45 $43 $44 $20 $10 $ Redlands C $20 $19 $21 $24 $28 $38 $33 San Bernardino Redlands P Loma Linda EVWD Yucaipa Colton Final Report August 30, 2010 Page 14

17 SECTION 2 WATER RATE STUDY The detailed output of the water rate study is contained in this section of the report. Table 2-1 shows the existing water rate schedule. Table 2 1 Existing Water Rate Schedule Service Charge Bi Monthly Effective 1/1/2010 Meter Size Inside City Outside City Fire Non Potable 5/8" $ $ /4" $ $ $ " $ $ $ /2" $ $ $ " $ $ $ $ " $ $ $ $ " $ $ $ $ " $ $ $ $ " $ $ 1, $ $ " $ " $ Fire Hydrant Construction $ $ Water Usage Rate Bi Monthly ($/hcf) Building Usage Inside City Outside City Tier $ 0.74 $ 0.75 Tier $ 1.24 $ 1.27 Tier 3 over 60 $ 1.31 $ 1.34 Non Building Usage Tier $ 1.24 $ 1.27 Tier 2 over 60 $ 1.31 $ 1.34 Fire Hydrant Construction $ 1.31 $ 1.31 Non Potable Water $ 0.99 $ 0.99 Final Report August 30, 2010 Page 15

18 Table 2-2 presents the projected number of water accounts. Table 2 2 Summary of Water Accounts Line Budgeted Projected Projected Projected Projected Projected No. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Accounts Summary 1 5/8" /4" 8,006 8,006 8,006 8,006 8,006 8, " 10,634 10,634 10,634 10,634 10,634 10, /2" " " " " " " " 12 Total Accounts Summary 20,737 20,737 20,737 20,737 20,737 20,737 Table 2-3 shows the breakdown of projected volume of water used while Table 2-4 shows the revenues under existing rates. Table 2 3 Summary of Water Accounts Line Budgeted Projected Projected Projected Projected Projected No. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Inside City Customers 1 SFR 6,045,147 6,045,147 6,045,147 6,045,147 6,045,147 6,045,147 2 MFR 1,150,362 1,150,362 1,150,362 1,150,362 1,150,362 1,150,362 3 Non Residential 882, , , , , ,550 4 School 219, , , , , ,352 5 Municipal 46,221 46,221 46,221 46,221 46,221 46,221 6 Non Building 1,215,090 1,215,090 1,215,090 1,215,090 1,215,090 1,215,090 7 Fire Service 33,534 33,534 33,534 33,534 33,534 33,534 8 Subtotal 9,592,256 9,592,256 9,592,256 9,592,256 9,592,256 9,592,256 Outside City Customers 9 SFR 672, , , , , , MFR 126, , , , , , Non Residential 84,643 84,643 84,643 84,643 84,643 84, School 128, , , , , , Non Building 101, , , , , , Fire Service 3,625 3,625 3,625 3,625 3,625 3, Subtotal 1,117,341 1,117,341 1,117,341 1,117,341 1,117,341 1,117, TOTAL USAGE (HCF) 10,709,597 10,709,597 10,709,597 10,709,597 10,709,597 10,709,597 Final Report August 30, 2010 Page 16

19 Table 2 4 Revenues under Existing Rates Line Estimated Budgeted Projected Projected Projected Projected No. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Account Description 80% 4.00% Operating Revenue Water Usage $ 15,387,952 $ 16,003,470 $ 16,003,470 $ 16,003,470 $ 16,003,470 $ 16,003, Irrigation Water Usage $ 1,467,080 $ 1,525,763 $ 1,525,763 $ 1,525,763 $ 1,525,763 $ 1,525, Fire Hydrant Water Usage $ 38,279 $ 39,810 $ 39,810 $ 39,810 $ 39,810 $ 39, "B" Contract Water Usage $ 136,056 $ 136,056 $ 136,056 $ 136,056 $ 136,056 $ 136, Fire Protection Water Usage $ 250,616 $ 260,641 $ 260,641 $ 260,641 $ 260,641 $ 260,641 6 Subtotal Operating Revenue $ 17,279,984 $ 17,965,741 $ 17,965,741 $ 17,965,741 $ 17,965,741 $ 17,965,741 Other Operating Revenue Cost Recover/Reimb Exp. $ 16,511 $ $ $ $ $ Water Meter Install $ 12,327 $ 9,000 $ 9,000 $ 9,000 $ 9,000 $ 9, Frontage Charge $ 1,253 $ $ $ $ $ Rental Income $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85, Miscellaneous Receipts $ 160,000 $ 160,000 $ 160,000 $ 160,000 $ 160,000 $ 160, Bad Debt Recovery $ $ $ $ $ $ 13 Subtotal Other Operating Revenue $ 275,091 $ 254,000 $ 254,000 $ 254,000 $ 254,000 $ 254,000 Non Operating Revenue Investment Income $ 92,419 $ 89,490 $ 70,216 $ 91,724 $ 117,593 $ 161, Sale of Surplus Property $ 35,870 $ $ $ $ $ Misc Taxable Sales $ 3,245 $ $ $ $ $ 17 Subtotal Non Operating Revenue $ 131,534 $ 89,490 $ 70,216 $ 91,724 $ 117,593 $ 161, TOTAL WATER REVENUE $ 17,686,609 $ 18,309,231 $ 18,289,957 $ 18,311,465 $ 18,337,333 $ 18,380,889 Table 2-5 summarizes the projected O&M costs by program. O&M costs have been inflated at 3.0 percent for most of the costs. Table 2 5 Operations and Maintenance Expense Projections Line Estimated Budgeted Projected Projected Projected Projected No. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 WATER 1 Salaries and Benefits $ 4,288,643 $ 4,357,307 $ 4,440,619 $ 4,647,675 $ 4,823,989 $ 5,007,436 2 Services $ 6,286,184 $ 6,757,074 $ 6,959,786 $ 7,168,580 $ 7,383,637 $ 7,605,146 3 Supplies $ 1,569,800 $ 2,290,601 $ 2,359,319 $ 2,430,099 $ 2,503,002 $ 2,578,092 4 Fixed Assets $ 858,983 $ $ $ $ $ 5 TOTAL WATER O&M EXPENSES $ 13,003,610 $ 13,404,982 $ 13,759,725 $ 14,246,353 $ 14,710,628 $ 15,190,674 Final Report August 30, 2010 Page 17

20 Table 2-6 shows the capital improvement projects in detail. Costs are shown by project and by year in inflated dollars. Capital improvement projects are categorized as replacement and/or expansion-related projects. Table 2 6 Capital Improvement Projects Line Projected Projected Projected Projected Projected No. FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Replacement Projects 1 Hinckley regulatory upgrades $ 12,000,000 $ $ $ $ 2 New well/treatment $ $ $ 1,030,000 $ $ 3 Dearborn , (add'l booster) $ $ 250,000 $ $ $ 4 Texas Street Rehab existing boosters $ $ $ 257,500 $ $ 5 Smiley (add'l booster) $ $ $ $ 79,568 $ 6 Agate (add'l booster) $ $ $ $ $ 218,545 7 Country Club Reservoir Replacement $ 500,000 $ $ $ $ 8 SCADA system $ 950,000 $ $ $ $ 9 Water Production Annual Replacement $ 433,000 $ 433,000 $ 445,990 $ 459,370 $ 473, Water System Improvements $ 333,000 $ 300,000 $ 309,000 $ 318,270 $ 327, Highline Replacement $ 280,000 $ 1,200,000 $ 1,236,000 $ $ 12 Master Planned Water Mains $ $ 200,000 $ 206,000 $ 212,180 $ 218, Local Water Mains $ 1,400,000 $ 2,000,000 $ 2,060,000 $ 2,121,800 $ 3,278, Utilities Building Improvements $ 111,000 $ 111,000 $ 114,330 $ 117,760 $ 121, Reservoir Recoat/Rehab $ $ 350,000 $ 489,250 $ 530,450 $ 573, Dearborne Roof Replacement (reservoir) $ 2,500,000 $ $ $ $ 17 Water Studies and Projects $ 180,000 $ 180,000 $ 185,400 $ 190,962 $ 196, Subtotal Replacement Projects $ 18,687,000 $ 5,024,000 $ 6,333,470 $ 4,030,359 $ 5,407,906 Expansion Projects (DIF Funded) 19 SCADA system $ 50,000 $ $ $ $ 20 Highline Replacement $ 70,000 $ 300,000 $ 309,000 $ $ 21 Master Planned Water Mains $ $ 200,000 $ 206,000 $ 212,180 $ 218, Water Studies and Projects $ 20,000 $ 20,000 $ 20,600 $ 21,218 $ 21, Subtotal Expansion Projects (DIF Funded) $ 140,000 $ 520,000 $ 535,600 $ 233,398 $ 240, TOTAL CIP PROJECTS $ 18,827,000 $ 5,544,000 $ 6,869,070 $ 4,263,757 $ 5,648,306 Final Report August 30, 2010 Page 18

21 Table 2-7 shows the operating cash flow for the Water Service Fund (501) and includes projected costs and revenues. Revenue under existing rates is generated by meter service fees and water sales for the fiscal year. In addition, miscellaneous revenues, bond proceeds, and transfers are used to offset O&M costs, purchased water costs, debt service payments, transfers to funds and reserves, and routine capital outlays. The overall revenue increases are shown by year and the month effective during the fiscal year is shown alongside. The net working capital cash balance is shown on line 28 of Table 2-7. Line 29 shows the calculated debt service coverage. The debt service coverage requirement of 125 percent is met throughout the planning period. Table 2 7 Water Operating Cash Flow Line Projected Projected Projected Projected Projected No. FY 2011 FY 2012 FY 2013 FY 2014 FY Revenues under Existing Rates $ 17,665,289 $ 17,665,289 $ 17,665,289 $ 17,665,289 $ 17,665,289 2 Fire Service Charges $ 300,451 $ 300,451 $ 300,451 $ 300,451 $ 300,451 Additional Revenue Needed: Year % Adj. Effective 3 FY % January 6 $ 583,887 $ 1,167,773 $ 1,167,773 $ 1,167,773 $ 1,167,773 4 FY % January 6 $ 621,839 $ 1,243,678 $ 1,243,678 $ 1,243,678 5 FY % January 6 $ 662,259 $ 1,324,518 $ 1,324,518 6 FY % January 6 $ 705,306 $ 1,410,611 7 FY % January 6 $ 577,808 8 Total Additional Revenues $ 583,887 $ 1,789,612 $ 3,073,710 $ 4,441,275 $ 5,724,388 9 Total Revenue from Rates $ 18,549,627 $ 19,755,353 $ 21,039,451 $ 22,407,015 $ 23,690, Other Operating Revenue $ 254,000 $ 254,000 $ 254,000 $ 254,000 $ 254, Non Operating Revenue $ $ $ $ $ 12 Loan Payment from Cemetery Fund $ 61,000 $ 61,000 $ 61,000 $ 61,000 $ 61, Investment/Interest Income $ 89,490 $ 70,216 $ 91,724 $ 117,593 $ 161, Transfer from Source Acquisition Fund (508) $ $ $ $ $ 15 Transfer from Water Capital Improv Fund (509) $ 1,427,670 $ $ $ $ 16 Transfer from Water Reserves $ 600,000 $ $ $ $ 17 TOTAL REVENUE $ 20,981,788 $ 20,140,569 $ 21,446,175 $ 22,839,608 $ 24,166, Water O&M Expenses $ 13,404,982 $ 13,759,725 $ 14,246,353 $ 14,710,628 $ 15,190, Transfer to Water Projects (503) $ 8,210,900 $ 5,024,000 $ 6,333,470 $ 4,030,359 $ 5,407, Transfer to Water Debt Service (506) $ 1,621,808 $ 1,621,271 $ 2,359,164 $ 2,354,338 $ 2,355, Transfer to Source Acquisition Fund (508) $ 1,400,000 $ $ $ $ 22 Loan to Water Capital Improv Fund (509) $ $ 1,506,986 $ 1,521,870 $ 1,166,581 $ 1,174, Transfer to Non Potable Water Fund (541) 24 Transfer to Reserves $ $ 1,150,000 $ 150,000 $ 200,000 $ 200, Transfer to General Fund $ 122,844 $ 122,844 $ 122,844 $ 122,844 $ 122, Loan to General Fund $ 150,000 $ (50,750) $ (51,000) 27 TOTAL REVENUE REQUIREMENTS $ 24,910,534 $ 23,184,826 $ 24,733,701 $ 22,534,000 $ 24,399, Annual Cash Balance $ (3,928,746) $ (3,044,257) $ (3,287,526) $ 305,608 $ (233,693) 29 Debt Coverage 268% 308% 348% 394% 435% 30 Req'd Debt Coverage 125% 125% 125% 125% 125% 125% Final Report August 30, 2010 Page 19

22 Table 2-9 shows the flow of funds for all the different funds within the water enterprise. A brief description of each of the listed fund follows. The Water Service Fund (501) shows the unrestricted cash balance available for water related expenses. The Water Project Fund (503) is used to fund capital projects and ongoing projects and improvements including utilities building improvements, water facilities master plans, water resources management plans, water facilities database maintenance, and water resources and information systems maintenance. Transfers from the Water Service Fund (501) and the Water Capital Improvement Fund (509) are used to offset expenditures. The Water Bond Fund (505) shows the receipt of the $10.5 million SRF loan for the Hinckley Regulatory Upgrade. The money is transferred into the Water Project Fund (503) to pay for the project costs. The Water Debt Service Fund (506) is used to pay existing debt service payments. The existing debt service payment for the 1999A Water Revenue Bonds has been allocated 45 percent to new users; the Agricultural Drainage Loan Program (ADLP) and the SRF loan are allocated 50 percent and 10 percent to new users, respectively. These debt service payments are recovered by transfers from the Water Capital Improvement Fund (509) and the Water Service Fund (501). Other revenues are derived from interest earned on the Debt Service Reserve Fund. The Water Source Acquisition Fund (508) is used to purchase water stock and obtain water rights to serve development. Revenue for this fund is derived from Water Source Acquisition Fees. The Water Capital Improvement Fund (509) is a special revenue fund used for capital projects that are related to expansion of the City s water system to serve new users, and that portion of the debt service payments related to new growth. Water Capital Improvement fees (development impact fees) are the main revenue source for this fund. Since there is minimal growth in the system at the current time, the fund borrows cash from the Water Service Fund (501) to make up the shortfall. Final Report August 30, 2010 Page 20

23 Table 2 8 Water Fund Balances Line Projected Projected Projected Projected Projected No. FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Water Service Fund (501) 1 Beginning Balance $ 11,581,337 $ 7,652,591 $ 4,608,334 $ 1,320,807 $ 1,626,416 2 Annual Cash Balance $ (3,928,746) $ (3,044,257) $ (3,287,526) $ 305,608 $ (233,693) 3 Ending Balance $ 7,652,591 $ 4,608,334 $ 1,320,807 $ 1,626,416 $ 1,392,723 4 Interest $ 57,606 $ 36,682 $ 29,334 $ 21,383 $ 28,869 Water Projects Fund (503) 5 Beginning Balance $ $ $ $ $ 6 Transfer from Water Service Fund (501) $ 8,210,900 $ 5,024,000 $ 6,333,470 $ 4,030,359 $ 5,407,906 7 Transfer from Water Bond Fund (505) $ 10,476,100 $ $ $ $ 8 Transfer from Water Cap Improv Fund (509) $ $ $ $ $ 9 Expenses $ (18,687,000) $ (5,024,000) $ (6,333,470) $ (4,030,359) $ (5,407,906) 10 Ending Balance $ $ $ $ $ 11 Interest $ $ $ $ $ Water Bond Fund (505) 12 Beginning Balance $ $ $ $ $ 13 New Bond Issues $ 10,476,100 $ $ $ $ 14 Transfer to Water Projects Fund (503) $ (10,476,100) $ $ $ $ 15 Ending Balance $ $ $ $ $ 16 Interest $ $ $ $ $ Water Debt Service Fund (506) 17 Beginning Balance $ $ $ $ $ 18 Revenue $ 2,525, Transfer from Water Service Fund (501) $ 1,621,808 $ 1,621,271 $ 2,359,164 $ 2,354,338 $ 2,355, Transfer from/(to) Water Cap Improv Fund (509) $ (1,487,670) $ 1,036,986 $ 1,036,270 $ 1,033,183 $ 1,033, Existing Debt Service $ (2,659,138) $ (2,658,258) $ (3,395,434) $ (3,387,521) $ (3,389,146) 22 Proposed Debt Service $ $ $ $ $ 23 Ending Balance $ $ $ $ $ 24 Interest $ $ $ $ $ Water Source Acquisition Fund (508) 25 Beginning Balance $ 274,716 $ 46,216 $ 57,716 $ 69,216 $ 80, Revenue $ 11,500 $ 11,500 $ 11,500 $ 11,500 $ 11, Transfer from/(to) Water Service Fund (501) $ 1,400,000 $ $ $ $ 28 Expenses $ (1,640,000) $ $ $ $ Ending Balance $ 46,216 $ 57,716 $ 69,216 $ 80,716 $ 92, Interest $ 963 $ 312 $ 635 $ 1,124 $ 1,729 Water Capital Improvement Fund (509) 32 Beginning Balance $ $ $ $ $ 33 Revenue (Development Impact Fee) $ 80,000 $ 50,000 $ 50,000 $ 100,000 $ 100, Loan from Water Service Fund (501) $ (1,427,670) $ 1,506,986 $ 1,521,870 $ 1,166,581 $ 1,174, Expenses (Development Impact Fee CIP) $ (140,000) $ (520,000) $ (535,600) $ (233,398) $ (240,400) 36 Transfer to Water Projects Fund (503) $ $ $ $ $ 37 Transfer from/(to) Water Debt Service Fund (506 $ 1,487,670 $ (1,036,986) $ (1,036,270) $ (1,033,183) $ (1,033,817) 38 Ending Balance $ $ $ $ $ 39 Interest $ $ $ $ $ Final Report August 30, 2010 Page 21

24 Tables 2-9 and 2-10 show the proposed water rate schedule to be implemented on January 1 st, 2011 and 2012, including private fire protection fees and rates. Table 2 9 Proposed Water Rate Schedule Bi Monthly Service Charge Current Proposed Proposed Meter Size Rates January 2011 January 2012 Inside City Outside City Inside City Outside City Inside City Outside City 5/8" $ $ $ $ $ $ /4" $ $ $ $ $ $ " $ $ $ $ $ $ /2" $ $ $ $ $ $ " $ $ $ $ $ $ " $ $ $ $ $ $ " $ $ $ $ $ $ " $ $ $ $ $ $ " $ $ 1, $ $ 1, $ 1, $ 1, Building Usage Rate (in 100 cu ft, ccf) Inside City Outside City Inside City Outside City Inside City Outside City Tier 1 1 to 10 $ 0.74 $ 0.75 $ 0.77 $ 0.78 $ 0.83 $ 0.84 Tier 2 11 to 60 $ 1.24 $ 1.27 $ 1.33 $ 1.36 $ 1.42 $ 1.45 Tier 3 61 & up $ 1.31 $ 1.34 $ 1.47 $ 1.50 $ 1.57 $ 1.60 Non Building Usage Rate (in 100 cu ft, ccf) Inside City Outside City Inside City Outside City Inside City Outside City Tier 1 1 to 60 $ 1.24 $ 1.27 $ 1.33 $ 1.36 $ 1.42 $ 1.45 Tier 2 60 & up $ 1.31 $ 1.34 $ 1.47 $ 1.50 $ 1.57 $ 1.60 Table 2 10 Proposed Private Fire Protection Rate Schedule Bi Monthly Service Charge Current Proposed Proposed Meter Size Rates January 2011 January " $ $ $ " $ $ $ " $ $ $ " $ $ $ " $ $ $ " $ $ $ " $ $ $ Fire Usage Rate (in 100 cu ft, ccf) All $ 1.31 $ 1.47 $ 1.57 Final Report August 30, 2010 Page 22

25 SECTION 3 WASTEWATER RATE STUDY The detailed output of the wastewater rate study is contained in this section of the report. Table 3-1 shows the existing wastewater rate schedule. Table 3 1 Existing Water Rate Schedule Effective 1/1/2010 Bi Monthly Service Charge SFR per unit $ $ MFR per unit $ $ Non residential Customers Minimum Charge $ $ Low Strength I per HCF of water $ 1.61 $ 1.61 Low Strength II per HCF of water $ 1.71 $ 1.71 Low Strength III per HCF of water $ 2.09 $ 2.09 Medium Strength I per HCF of water $ 2.50 $ 2.50 Medium Strength II per HCF of water $ 2.87 $ 2.87 Medium Strength III per HCF of water $ 3.25 $ 3.25 High Strength I per HCF of water $ 3.63 $ 3.63 High Strength II per HCF of water $ 3.96 $ 3.96 Large Volume User* per HCF of water $ 2.18 $ 2.18 School Elementary per 100 ADA $ $ Secondary & High per 100 ADA $ $ Septage Customers per gall(min $10) $ $ * Large Volume Users are user with greater than 25,000 gallons per day discharge. Final Report August 30, 2010 Page 23

26 Table 3-2 contains the projected number of residential wastewater accounts. Table 3 2 Summary of Residential Wastewater Accounts Line Budgeted Projected Projected Projected Projected Projected No. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Inside City Customers 1 SFR 14,748 14,748 14,748 14,748 14,748 14,748 2 MFR Units 8,736 8,736 8,736 8,736 8,736 8,736 3 Subtotal 23,484 23,484 23,484 23,484 23,484 23,484 Outside City Customers 4 SFR MFR Units Subtotal 1,191 1,191 1,191 1,191 1,191 1,191 7 Total Residential Accounts 24,676 24,676 24,676 24,676 24,676 24,676 Final Report August 30, 2010 Page 24

27 Table 3-3 shows the volume of water used by non-residential customers as well as the average daily attendance (ADA) for the schools within the City. Table 3 3 Non Residential Water Usage/Units Line Budgeted Projected Projected Projected Projected Projected No. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Inside City Non residential Customers 1 Low Strength I 15,081 15,081 15,081 15,081 15,081 15,081 2 Low Strength II 475, , , , , ,347 3 Low Strength III 95,142 95,142 95,142 95,142 95,142 95,142 4 Medium Strength I 41,016 41,016 41,016 41,016 41,016 41,016 5 Medium Strength II 36,277 36,277 36,277 36,277 36,277 36,277 6 Medium Strength III 21,057 21,057 21,057 21,057 21,057 21,057 7 High Strength I 11,090 11,090 11,090 11,090 11,090 11,090 8 High Strength II 121, , , , , ,769 9 Large Volume User 41,899 41,899 41,899 41,899 41,899 41, School 11 Elementary (ADA) 4,901 4,901 4,901 4,901 4,901 4, Secondary & High (ADA) 6,685 6,685 6,685 6,685 6,685 6, Total Usage Inside City 858, , , , , ,678 Outside City Non residential Customers 14 Low Strength I 15 Low Strength II 12,210 12,210 12,210 12,210 12,210 12, Low Strength III 4,472 4,472 4,472 4,472 4,472 4, Medium Strength I 4,694 4,694 4,694 4,694 4,694 4, Medium Strength II 19 Medium Strength III 20 High Strength I 21 High Strength II 19,201 19,201 19,201 19,201 19,201 19, Large Volume User 23 School 24 Elementary (ADA) Secondary & High (ADA) 8,502 8,502 8,502 8,502 8,502 8, Total Usage Outside City 40,577 40,577 40,577 40,577 40,577 40, TOTAL USAGE 899, , , , , ,255 Final Report August 30, 2010 Page 25

28 Table 3-4 shows wastewater revenue under existing rates. Table 3 4 Summary of Residential Wastewater Accounts Line Estimated Projected Projected Projected Projected Projected No. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY % Operating Revenues 0.6% Sewer Residential ##### $ 5,012,901 $ 5,345,459 $ 5,345,459 $ 5,345,459 $ 5,345,459 $ 5,345, Sewer Non Residential ##### $ 1,853,354 $ 2,072,280 $ 2,072,280 $ 2,072,280 $ 2,072,280 $ 2,072, Septage Charge $ 85,341 $ 90,336 $ 90,336 $ 90,336 $ 90,336 $ 90, Recycled Water Usage $ 219,570 $ 219,570 $ 219,570 $ 219,570 $ 219,570 $ 219,570 5 Total Operating Revenues $ 7,171,166 $ 7,727,646 $ 7,727,646 $ 7,727,646 $ 7,727,646 $ 7,727, % Other Operating Revenues Frontage Charge $ $ $ $ $ $ Joint Lab Water Charges $ 90,000 $ 202,714 $ 206,768 $ 210,904 $ 215,122 $ 219, Joint Lab Solid Wst Charges $ 30,000 $ $ $ $ $ Rental Income $ 10,000 $ $ $ $ $ Miscellaneous Receipts $ 3,891 $ 4,000 $ 4,080 $ 4,162 $ 4,245 $ 4, Bad Debt Recovery $ $ $ $ $ $ Cost Recover/Reimb Expenditure $ $ $ $ $ $ 13 Total Other Operating Revenues $ 133,891 $ 206,714 $ 210,848 $ 215,065 $ 219,367 $ 223,754 Non Operating Revenues Investment Income $ 53,893 $ 57,574 $ 53,134 $ 73,009 $ 87,454 $ 97, Land Sale Proceeds $ $ $ $ $ $ Misc. Taxable Sales $ 1,880 $ $ $ $ $ 17 Total Non Operating Revenues $ 55,773 $ 57,574 $ 53,134 $ 73,009 $ 87,454 $ 97, TOTAL REVENUES $ 7,360,829 $ 7,991,934 $ 7,991,628 $ 8,015,720 $ 8,034,467 $ 8,048,506 Table 3-5 summarizes the projected O&M costs by program. O&M costs have been inflated at 3 percent annually for most of the costs. Table 3 5 Operations and Maintenance Expense Projections Line Estimated Budgeted Projected Projected Projected Projected No. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY Salaries and Benefits $ 2,528,906 $ 2,592,146 $ 2,636,776 $ 2,764,081 $ 2,866,925 $ 2,973,850 2 Services $ 2,418,167 $ 2,759,065 $ 2,741,837 $ 2,824,092 $ 2,908,815 $ 2,996,079 3 Supplies $ 688,454 $ 788,410 $ 812,062 $ 836,424 $ 861,517 $ 887,362 4 Fixed Assets $ 116,000 $ 195,000 $ 200,850 $ 206,876 $ 213,082 $ 219,474 5 TOTAL O&M EXPENSES $ 5,751,527 $ 6,334,621 $ 6,391,525 $ 6,631,473 $ 6,850,339 $ 7,076,766 Final Report August 30, 2010 Page 26

29 Table 3-6 shows the capital improvement projects in detail. Costs are shown by project and by year; capital improvement projects are shown as inflated replacement and/or expansion-related projects. Table 3 6 Capital Improvement Projects Line Projected Projected Projected Projected Projected No. FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Replacement Projects 1 Sludge Removal Imhoff Tanks $ $ $ $ 79,568 $ 2 WWTP Annual Replacement $ 300,000 $ 300,000 $ 309,000 $ 318,270 $ 327,818 3 Master Planned Sewer Mains $ $ 92,400 $ 95,172 $ 98,027 $ 100,968 4 Local Collection Mains $ $ 936,360 $ 964,451 $ 993,384 $ 1,023,186 5 Utilities Building Improvements $ 67,000 $ 67,000 $ 69,010 $ 71,080 $ 73,213 6 Master Planning and Study $ 109,800 $ 109,800 $ 113,094 $ 116,487 $ 119,981 7 Electrical Plant Grounding $ 90,000 $ $ $ $ 8 Zenon Filter replacements $ $ $ 515,000 $ 530,450 $ 546,364 9 SCADA Upgrades $ $ $ 61,800 $ $ 10 Solar Panels $ 678,400 $ $ $ $ 11 Subtotal Replacement Projects $ 1,245,200 $ 1,505,560 $ 2,127,527 $ 2,207,266 $ 2,191,530 Expansion Projects (DIF Funded) 12 Master Planned Sewer Mains $ $ 92,400 $ 95,172 $ 98,027 $ 100, Master Planning and Study $ 12,200 $ 13,200 $ 14,626 $ 16,126 $ 17, Subtotal Expansion Projects (DIF Funded) $ 12,200 $ 105,600 $ 109,798 $ 114,153 $ 118, TOTAL CIP PROJECTS $ 1,257,400 $ 1,611,160 $ 2,237,325 $ 2,321,419 $ 2,310,200 Final Report August 30, 2010 Page 27

30 Table 3-7 shows the flow of funds for the Wastewater Service Fund (521) and shows projected costs and revenues. Revenue under existing rates is generated by wastewater user fees for the fiscal year. In addition, miscellaneous revenues, and transfers are used to offset O&M costs, debt service payments, transfers to funds and reserves, and routine capital expenditures. The overall revenue increases are shown by year and the month effective during the fiscal year is shown alongside. The net working cash balance is shown on line 23 of Table 3-7. Line 24 shows the calculated debt service coverage. The debt service coverage requirement of 125 percent is met throughout the planning period. Table 3 7 Wastewater Operating Cash Flow Line Projected Projected Projected Projected Projected No. FY 2011 FY 2012 FY 2013 FY 2014 FY Revenues under Existing Rates $ 7,508,076 $ 7,508,076 $ 7,508,076 $ 7,508,076 $ 7,508, Additional Revenue Needed: 4 Year % Adj. Effective 5 FY % January 6 $ 187,702 $ 375,404 $ 375,404 $ 375,404 $ 375,404 6 FY % January 6 $ 197,087 $ 394,174 $ 394,174 $ 394,174 7 FY % January 6 $ 248,330 $ 496,659 $ 496,659 8 FY % January 6 $ 263,229 $ 526,459 9 FY % January 6 $ 279, Total Additional Revenues $ 187,702 $ 572,491 $ 1,017,907 $ 1,529,466 $ 2,071, Total Revenue from Rates $ 7,695,778 $ 8,080,567 $ 8,525,983 $ 9,037,542 $ 9,579, Recycled Water Usage $ 219,570 $ 219,570 $ 219,570 $ 219,570 $ 219, Other Operating Revenue $ 206,714 $ 210,848 $ 215,065 $ 219,367 $ 223, Non Operating Revenue $ $ $ $ $ 15 Investment/Interest Income $ 57,461 $ 53,965 $ 77,350 $ 96,266 $ 108, Loan Payment from General Fund $ 11,333 $ 11,333 $ 11,333 $ 11,333 $ 11, Cost to cover lab work done for water $ 202, Transfer from Reserves $ 1,400,000 $ $ $ $ 19 TOTAL REVENUE $ 9,793,570 $ 8,576,282 $ 9,049,301 $ 9,584,078 $ 10,142, O&M Expenses $ 6,334,621 $ 6,391,525 $ 6,631,473 $ 6,850,339 $ 7,076, Transfer to Sewer Projects Fund (523) $ 566,800 $ 1,505,560 $ 2,127,527 $ 2,207,266 $ 2,191, Transfer to Debt Service Fund (526) $ 774,694 $ 774,694 $ 774,694 $ 774,694 $ 774, Loan to Capital Improv Fund (529) $ $ $ 375,502 $ 920,441 $ 924, Transfer to Reserves $ $ 50,000 $ 100,000 $ 100,000 $ 100, TOTAL REVENUE REQUIREMENTS $ 7,676,115 $ 8,721,779 $ 10,009,196 $ 10,852,739 $ 11,067, Annual Cash Balance $ 2,117,455 $ (145,497) $ (959,895) $ (1,268,662) $ (925,274) 27 Debt Coverage 168% 178% 196% 220% 245% 28 Req'd Debt Coverage 125% 125% 125% 125% 125% 125% Final Report August 30, 2010 Page 28

31 Table 3-8 shows the flow of funds for all the different funds within the water enterprise. A brief description of each of the listed fund follows. The Wastewater Bond Project Fund (525) currently has no balance, inflows or outflows. The Wastewater Project Fund (523) is used to finance capital projects. Transfers from the Wastewater Service Fund (521) and the Wastewater Capital Improvement Fund (529) are used to offset expenditures. The Wastewater Debt Service Fund (526) is used to pay debt service payments. The existing debt service payment for the 1999A Wastewater Revenue Bonds has been allocated 55 percent to new users, the SRF debt for recycled water is allocated 50 percent to new users and is recovered by a transfer from the Capital Improvement Fund (529) and the Wastewater Service Fund (521). Other revenues are derived from interest earned on the Debt Service Reserve Fund. The Wastewater Capital Improvement Fund (529) is a special revenue fund used for capital projects that are related to expansion of the City s wastewater system to serve new users, and the portion of the existing debt service payments related to new growth. Wastewater development improvement fees are the revenue sources for this fund. Loans are required from the wastewater service fund when there is not enough cash to cover the expenses. Final Report August 30, 2010 Page 29

32 Table 3 8 Wastewater Fund Balances Line Projected Projected Projected Projected Projected No. FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Wastewater Service Fund (521) 1 Beginning Balance $ 2,604,984 $ 4,722,439 $ 4,576,942 $ 3,617,047 $ 2,348,386 2 Annual Cash Balance $ 2,117,455 $ (145,497) $ (959,895) $ (1,268,662) $ (925,274) 3 Ending Balance $ 4,722,439 $ 4,576,942 $ 3,617,047 $ 2,348,386 $ 1,423,112 4 Interest $ 21,876 $ 27,820 $ 40,787 $ 44,351 $ 37,003 Wastewater Bond Fund (525) 5 Beginning Balance $ $ $ $ $ 6 New Bond Proceeds $ $ $ $ $ 7 Transfer to Wastewater Projects Fund (523) $ $ $ $ $ 8 Transfer from WW Cap Improv Fund (529) 9 Ending Balance $ $ $ $ $ 10 Interest $ $ $ $ $ Wastewater Projects Fund (523) 11 Beginning Balance $ $ $ $ $ 12 Revenue $ 678, Transfer from Wastewater Service Fund (521) $ 566,800 $ 1,505,560 $ 2,127,527 $ 2,207,266 $ 2,191, Transfer from WW Cap Improv Fund (529) $ 12,200 $ 105,600 $ 109,798 $ 114,153 $ 118, Transfer from WW Bond Fund (525) $ $ $ $ $ 16 Capital Projects $ (1,257,400) $ (1,611,160) $ (2,237,325) $ (2,321,419) $ (2,310,200) 17 Ending Balance $ $ $ $ $ 18 Interest $ $ $ $ $ Wastewater Debt Service Fund (526) 19 Beginning Balance $ $ $ $ $ 20 Revenue $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25, Transfer from WW Service Fund (521) $ 774,694 $ 774,694 $ 774,694 $ 774,694 $ 774, Transfer from WW Cap Improv Fund (529) $ 906,288 $ 906,288 $ 906,288 $ 906,288 $ 906, Existing Debt Service $ (1,705,982) $ (1,705,982) $ (1,705,982) $ (1,705,982) $ (1,705,982) 24 Proposed Debt Service $ $ $ $ $ 25 Ending Balance $ $ $ $ $ 26 Interest $ $ $ $ $ Wastewater Capital Improvement Fund (529) 27 Beginning Balance $ 2,387,460 $ 1,552,472 $ 590,584 $ $ 28 Revenue (Development Impact Fee) $ 83,500 $ 50,000 $ 50,000 $ 100,000 $ 100, Loan from Wastewater Service Fund (521) $ $ $ 375,502 $ 920,441 $ 924, Transfer to Wastewater Projects Fund (523) $ (12,200) $ (105,600) $ (109,798) $ (114,153) $ (118,670) 31 Transfer to Wastewater Debt Service (526) $ (906,288) $ (906,288) $ (906,288) $ (906,288) $ (906,288) 32 Ending Balance $ 1,552,472 $ 590,584 $ $ $ 33 Interest $ 11,820 $ 6,429 $ 2,953 $ $ Final Report August 30, 2010 Page 30