Water and Sewer Fund. Maintenance ""'\. 61.2% \ Professional Services. I l 1 1.9% Fund Balance

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Water and Sewer Fund The Water and Sewer Fund, an enterprise fund and the City's second largest operating fund, provides for the administration, operation and maintenance of the City's water and

1 Water and Sewer Fund The Water and Sewer Fund, an enterprise fund and the City's second largest operating fund, provides for the administration, operation and maintenance of the City's water and wastewater system, as well as the City's billing and collection activities. Sources The services provided by the Water and Sewer Fund are financed through user fees charged to residential and commercial customers. Water and Sewer rates are periodically reviewed and adjusted to assure that revenues collected are sufficient to fund the expenditures related to providing water and wastewater services.,...-.! -, FY Water and Sewer Fund Revenues $59,874,411 Sewer Sales & Rate Stabilization l Uses The expenditures of the Water and Sewer Fund are related to the purchase of water and sewer services from service providers, as well as water and sewer daily operations and infrastructure maintenance and renewal. The purchase of water from the North Texas Municipal Water District (NTMWD) and sewer services from the NTMWD, the City of Dallas and the City of Garland account for 58.5% of the fund's total expenditures. r , ,.,~- -! FY Water and Sewer Fund Expenditures- $59,161,541 Maintenance ""'\. 61.2% \ Contracts 1.2% Supplies 1.9% -----, j j ; l Service Fees - Others 62.1% Miscellaneous 0.1% j Water Sales & Charges L_ o.7% J Professional Services 1.9% Services 10.5% 12.4% 9.1% l 1 Fund Balance The Fund Balance target for the Water and Sewer Fund is 90 days of expenditures. Water and Sewer Debt Service Fund The Water and Sewer Debt Service Fund hosts the revenue and expenditures required to meet the City's utility debt service obligations. The primary source of revenue for the fund is a transfer of revenues from the Water and Sewer Fund generated through the sale of water and sewer services to residential and commercial customers. The expenditures include the annual debt service payments for water and sewer infrastructure renewal projects funded through the issuance of utility certificated of obligation.

2 WATER AND SEWER FUND Year End Estimates Revenues Revenue in the water and sewer fund is a function of the rate structure and expected sales of service. Sales are affected by several factors including weather, consumption patterns, and vacancy rates in commercial and residential properties. Clearly, consumption constrained by water conservation stage restrictions impact sales as well. n light of continued increasing costs for water and sewer wholesale services, as well as fluctuating demand, Council passed a 10.9% increase in response to the continued rate pressures in this fund. The following year-end projections are based on assumptions including the new customer rate and a full year of Stage 3 water restrictions. Revenue projections call for a decrease of ($2.8 million) or -4.9% at year-end from the original budget of $56.8 million. Through the end of June this year, the City received 20.2" of rainfall compared to the YTD for FY of22.4" and the five-year average rainfall of27.5" too., ~ ] Oct ~ov Dec Jan Feb Mar Apr May Jw1.FYB ~ FY~ -syr avgj The following graphics compare current year consumption with last year. Through the end of June, commercial consumption is down -23.1% from last year while residential is down %. 300, ~000 Comtnercial Water Sales ~ ~ "- -" ~ i ~ " --! 100,000 Oct. Nov Dec Jan Feb Mar Apr ~lay Jtm FY FY Water and Sewer Fund -1

$Residentia Water Sales 300,000 100,000 Oct. Nov Dec Jan Feb :\lar Apr 1\.-ay Jtm DFY 2013-.!014 FY.:!012-.. :?013 This graph measures revenue gain/ (loss) from the expected budget targets for each month this year.$

3 Residentia Water Sales 300, ,000 Oct. Nov Dec Jan Feb :\lar Apr 1\.-ay Jtm DFY !014 FY.:! :?013 This graph measures revenue gain/ (loss) from the expected budget targets for each month this year. When all the variances are added together, water sales are ($1.2 million) below budget targets. $ \Vater Revenue Gain (Loss) Frotn Target Expectations so The following chart illustrates the changes to our tier structure that have resulted from the NTMWD increases to the wholesale rate since Fiscal Year NTMWD/1,000 gal. $ 0.92 $ 0.97 $ 0.97 $ 1.02 $ 1.08 $ 1.18 $ 1.25 $ 1.37 $ 1.49 $ 1.70 $ 1.87 %ncrease 5.85% 5.400fc, 0.00% 5.20% 5.90% 9.25% 5.90% 9.60% 8.80% 14.09% 10.00% Mid-Yr City Rates Adj. Minimum $ 6.00 $ 6.00 $ 6.00 $ 6.00 $ 7.00 $ 7.00 $ 7.00 $ 7.00 $ 8.00 $ 8.00 $ ,000 gallons $ 2.23 $ 2.23 $ 2.55 $ 2.55 $ 2.95 $ 2.95 $ 2.95 $ 2.95 $ 3.22 $ 3.63 $ ,001-20,000 $ 2.41 $ 2.41 $ 2.76 $ 2.76 $ 3.19 $ 3.19 $ 3.19 $ 3.19 $ 3.48 $ 3.93 $ ,001-40,000 $ 2.52 $ 2.52 $ 2.88 $ 2.88 $ 3.33 $ 3.33 $ 3.33 $ 3.33 $ 3.63 $ 4.10 $ ,001-60,000 $ 2.92 $ 2.92 $ 3.35 $ 3.35 $ 3.87 $ 3.87 $ 3.87 $ 3.87 $ 4.22 $ 4.77 $ 5.29 Over 60,000 $ 3.07 $ 3.07 $ 3.51 $ 3.51 $ 4.05 $ 4.05 $ 4.05 $ 4.05 $ 4.41 $ 4.99 $ 5.53 %ncrease 16.50% 0.00% 14.50% 0.00% 15.50% 0.00% 0.00% 0.00% 9.00% 13.00% 10.90% Year end revenue projections for Water Sales of $32.5 million decrease ($2.9 million) or - 8.2% from original budget. Water and Sewer Fund- 2

4 Sewer Sales are projected to end the year up $192,000 or 0.9% from the original budget of $20.4 million. Late Charges, nterest Earnings, Service Fees, nstallation Fees and Miscellaneous revenue combine for a decrease ($46,000) from original budgets totaling $969,000. Expenditures Overall, expenditures and transfers are projected to end the year down ($287,000) or -0.5% from the original budget of $56.3 million. Personal Services will realize ($272,000) due to standard vacancies throughout the year Professional Services increase $9,000 from original budget. The Maintenance category is expected to finish the year $52,000 above the original budget of $34.3 million. With a combined budget of $2.6 million, the remaining categories of Contracts, Supplies and Capital show a combined increase of $61,000. Fund Balance Even with continued water restrictions in place, the fund is expected to finish the year with a higher level of fund balance than was originally budgeted. At the time of budget adoption last year, the beginning fund balance was expected to be $10.1 million. With better than expected performance during FY 12-13, the actual beginning fund balance for the current fiscal year was $14.3 million, an increase of $4.2 million. Fund Balance is projected to be 80.2 days at year-end or 9.8 days below the Council approved Financial Policy for the Water and Sewer Fund of "90 Days in Fund Balance". Conclusion The fund will finish this year below its established fund balance level though every effort is being made to improve that position. ncreasing retail water rates is always a last resort and unpleasant for all involved, but one we face more and more as rates continue to rise. n the near term, we face continued increases in our wholesale water and sewer treatment costs, while at the same time, dealing with restricted consumption based on weather and available supply. WATER AND SEWER FUND Water and Sewer Fund- 3

2014-2015 Proposed Revenues Projected revenues for FY 2014-2015 are based on the assumption of continued Stage 3 restrictions through the second quarter with a slow relaxation of restrictions by the

5 Proposed Revenues Projected revenues for FY are based on the assumption of continued Stage 3 restrictions through the second quarter with a slow relaxation of restrictions by the summer months. A 9.5% rate increase is requested with this budget. The increase would go into effect with the first billing in November of2014. Fiscal Year NTMWD/1,000 gal. $ 1.08 $ 1.18 $ 1.25 $ 1.37 $ 1.49 $ 1.70 $ 1.87 $ 2.06 %ncrease 5.90% 9.25% 5.90% 9.60% 8.70% 14.80% 10.00% 10.16% Mid-Yer City Rates Adjustment Minimum $ 7.00 $ 7.00 $ 7.00 $ 7.00 $ 8.00 $ 8.00 $ 8.00 $ ,000 gallons $ 2.95 $ 2.95 $ 2.95 $ 2.95 $ 3.22 $ 3.63 $ 4.03 $ ,001-20,000 $ 3.19 $ 3.19 $ 3.19 $ 3.19 $ 3.48 $ 3.93 $ 4.36 $ ,001-40,000 $ 3.33 $ 3.33 $ 3.33 $ 3.33 $ 3.63 $ 4.10 $ 4.55 $ ,001-60,000 $ 3.87 $ 3.87 $ 3.87 $ 3.87 $ 4.22 $ 4.77 $ 5.29 $ 5.79 Over 60,000 $ 4.05 $ 4.05 $ 4.05 $ 4.05 $ 4.41 $ 4.99 $ 5.53 $ 6.06 %ncrease 15.50% 0.00% 0.00% 0.00% 9.00 /o 13.00% 10.90% 9.50% Revenue from Water Sales and Charges is programmed at $3 7.2 million representing a 14.5% increase from year-end and is based on a 9.5% increase across all five tiers as well as continued Stage 3 restrictions through the second quarter of the fiscal year. The City charges a base fee of $8.00/month for both water and sewer service. Regardless of volume consumed, the meters have to be maintained and read once a month. rrigation meters have the same requirements, but have not been charged this base fee. This proposed budget includes instituting the $8.00/month base charge for irrigation meters, resulting in $269,000 in revenue. There are just over 2,800 such rneters currently in the system with 1,670 residential and 1,132 commercial. Sewer Sales are budgeted at $21.4 million or 3.9% above year-end and includes the 9.5% rate increase. Sewer revenue does not exhibit the same consumption based swings as water due in part to winter averaging. Sewer charges do not apply to irrigation. Late Charges are projected to increase $335,000. A survey of area cities indicates our current 5% late fee is one of the lowest in the area. This budget proposes raising the late fee to 10% which is more in-line with area cities. Remaining revenues combined increase $18,000. Expenditures Expenditures and Transfers are proposed at $59.2 million representing an increase of $3.1 million or 5.6% over year-end estimates. The Maintenance category is the largest operational expenditure in this fund and includes the costs of water and sewer services. The City is not expecting to set a new "minimum purchase," however we will be charged an additional $0.19/1,000 gallons in the price of wholesale water from the NTMWD. This represents an increase of$2.1 million over last year. For FY , the total cost of wholesale water increases to $22.7 million. Water and Sewer Fund - 4

6 We continue to believe the water rebate program will continue for the foreseeable future. For this reason, we are budgeting a rebate of$1,000,000 for a total "budgeted" charge for water $21.7 million. Water Purchases Minimum Purchase 11.0 billion 11.0 billion 11.0 billion 11.0 billion Projected Sales 7.4 billion 6.6 billion 6.5 billion 7.1 billion Actual Purchase 8.3 billion 8.4 billion NA N/A Purchase as a % of Contract 75% 76% NA N/A Wholesale Cost $16,418,773 $17,868,807 $19,916,305 $21,699,782 Rebate p_er 1,000 Gals. $0.39 $0.35 NA N/A Total Rebate $917,206 $864,022 N/A N/A Rebate as a% of Total Cost 5.6% 4.8% NA N/A Sewer treatment services are expected to increase $580,000 over the year end estimate. Together, the wholesale cost of water and sewer treatment services account for $34.6 million or 58.5% of the total expenses. Personal Services is proposed at $6.2 million, an increase of 2.0% over year-end estimates and includes the merit pay package previously described. Professional Services increase $476,000 to provide funding for the water line replacement program. This work will be done through a contractor this year and has been moved into Professional Services from the Maintenance Category where it was budgeted last year. Contracts decrease ($68,000) or -8.9% from year end and is made up of small savings across several line items. Supplies of $1.1 million will be flat from year-end estimate and includes $756,000 for electricity as well as $160,000 in postage for mailing water bills. Continuing the "pay-as-you-go" initiative, $1.0 million of capital equipment/programs are proposed in operations, including $355,000 for sewer line and manhole reconstruction. Operating Transfer Out sees an increase of $341,000 based on a $66,000 increase in the G&A and $275,000 in additional Franchise Fee while the BABC Transfer remains unchanged at $467,000. The debt service transfer increases $255,000 to $5.4 million to cover debt obligations for this fund. Fund Balance Fund Balance is budgeted at 80.3 days. With a blended strategy of increased consumption and strategic increases to our rate structure based on increasing wholesale costs, we plan to be back at 90 days by the end of Water and Sewer Fund- 5

7 CTY OF RCHARDSON SUMMARY OF REVENUES AND EXPENDTURES WATER AND SEWER FUND ACTUAL BUDGET ESTMATE BUDGET VARANCE FY FY FY FY BUD to BUD EST to BUD Beginning Designated Fund Balance $ 11,596,572 $ 10,104,352 $ 14,275,437 $ 12,312, o/o -13.8% Reserve for Encumbrances 14,390 49,811 N/A % Adjusted Beginning Fund Balance $ 11,610,962 $ 10,104,352 $ 14,325,248 $ 12,312, % -14.1% Revenues Water Sales & Charges $ 32,832,548 $ 35,414,702 $ 32,498,875 $ 37,208, % 14.5% Sewer Sales & Charges 20,355,689 20,399,236 20,592,161 21,389, % 3.9% Late Charges 441, , , , % 75.2% nterest Earnings 17,163 10,260 13,121 13, % 5.0% Service Fees- Others 44,198 49,792 41,050 42, % 3.0% nstallation Charges 101,588 34,372 45,206 49, % 10.0% Miscellaneous 481, , , , % 3.0% Total Revenues $ 54,274,343 $ 56,783,150 $ 54,014,535 $ 59,874, % 10.8% Total Available Funds $ 65,885,305 $ 66,887,502 $ 68,339,783 $ 72,186, % 5.6% Expenditures Personal Services $ 6,161,990 $ 6,383,767 $ 6,111,880 $ 6,235, % 2.0% Professional Services 708, , ,172 1,151, % 70.3% Maintenance 30,574,540 34,349,647 34,401,643 36,204, % 5.2% Contracts 724, , , , % -8.9% Supplies 1,168,598 1,252,728 1,136,879 1,116, % -1.8% Capital 229, , ,530 1,044, % 32.0% Total Expenditures $ 39,566,850 $ 44,027,293 $ 43,876,770 $ 46,444, % 5.9% Operating Transfers Out General and Administrative Charges $ 3,794,779 $ 3,879,623 $ 3,879,623 $ 3,945, % 1.7% Franchise Fees 2,659,412 2,790,697 2,654,552 2,929, % 10.4% BABC Program 466, , , , % 0.0% Total Operating Transfers Out $ 6,920,857 $ 7,136,986 $ 7,000,841 $ 7,342, % 4.9% N/A fotal Exp. And Oper. Transfers Out $ 46,487,707 $ 51,164,279 $ 50,877,611 $ 53,786,541 Transfers Out Debt Service $ 5,072,350 $ 5,150,000 $ 5,150,000 $ 5,375, % 4.4% Rate Stabilization N/A N/A Total Transfers Out $ 5,072,350 $ 5,150,000 $ 5,150,000 $ 5,375, % 4.4% Total Expenditures and Transfers $ 51,560,057 $ 56,314,279 $ 56,027,611 $ 59,161, % 5.6% Revenue Over/(Under) $ 2,714,286 $. 468,871 $ (2,013,076) $ 712, % % Reserve for Encumbrances $ 49,811 $ $ $ N/A N/A Ending Designated Fund Balance $ 14,275,437 $ 10,573,223 $ 12,312,172 $ 13,025, % 5.8% Days of Fund Balance % 0.2%

8 CTY OF RCHARDSON REVENUE BY DETAL WATER AND SEWER FUND ACTUAL BUDGET ESTMATE BUDGET VARANCE FY FY FY FY BUD to BUD EST to BUD Water and Sewer Revenue Water Sales & Charges $ 32,832,548 $ 35,414,702 $ 32,498,875 $ 37,208,985 $ 1,794,283 $ 4,710,110 Sewer Sales & Charges 20,355,689 20,399,236 20,592,161 21,389, , ,007 Rate Stabilization Late Charges 441, , , , , ,000 nterest Earnings 17,163 10,260 13,121 13,777 3, Service Fees- Others 44,198 49,792 41,050 42,282 (7,511) 1,232 nstallation Charges 101,588 34,372 45,206 49,727 15,355 4,521 Miscellaneous 481, , , ,714 (2,839) 11,351 Total $ 54,274,343 $ 56,783,150 $ 54,014,535 $ 59,874,411 $ 3,091,261 $ 5,859,876 Grand Total Water and Sewer Fund $ 54,274,343 $ 56,783,150 $ 54,014,535 $ 59!874,411 $ 3,091,261 $ 5,859,876

a b c d (c-b) Sept 30, 2015 Cash Balance

a b c d (c-b) Sept 30, 2015 Cash Balance Staff Report To: From: Mayor John Muhlfeld and City Councilors Dana Smith, Finance Director Date: October 29, 2017 Re: 1st Quarter Financial Report for Fiscal Year 2018 This quarterly financial report