CCP 10-25-2004 - Laserfiche WebLink

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.1. . . CITY OF ARDEN HILLS, MINNESOTA RATE STUDY SEPTEMBER 9, 2004 INrRODUCTION - CONTINUED This rate study analyzes the cash flows of the water, sanitary sewer and snrface water management funds of the City. Sonrces and uses of cash are projected for the years ending December 31,2004 to December 31, 2009. The study uses the current number and type of accounts to project future revenue at different rate scenarios for the each fund. Average annual capital costs are projected at approximately $687,000 for the projection period for all three funds combined. For the years ended December 31, 2000 through 2003, the average annual capital expenditure for all three funds was approximately $450,000. The increase in capital cost along with a decline in operating margins over the last several years will result in the elimination of reserves and working capital in a fairly short time frame even ifrates are raised at a 3 percent inflationary rate over the next seven years. The tmancial projection is based on sales at current usage patterns and expenses projected as discussed in the assumptions below and presents. to the best ofmanagement's knowledge and belief, the City's expected results of cash flows for the projection period if such usage patterns and uses of cash ocenr. Accordingly, the projection reflects its judgment as of September 9,2004, the date of this projection, of the expected conditions and its expected conrse of action if such usage and expense totals were attained. The presentation is designed to provide information to the City Council concerning recovery of expenses that might be achieved if rates were raised and usage totals are realized and should not be considered to be a presentation of expected future results. Accordingly, this projection may not be useful for other purposes. The assumptions disclosed herein are those that management believes are significant to the projection. Furthermore, even if the stated population growth and usage totals were attained, there will usually be differences between projected and acmal resuIts~ because events and circumstances frequently do not occur as expected and those differences may be material. II. ASSUMPTIONS Usage Assumptions The water usage assumptions were based on consumption information from the Banyan Data Systems utility module for the most recent fonr quarters. These quarters included 3'd and 4ili quarter 2003 and J" and 2nd quarter 2004. This consumption information was broken down by number of senior accounts and number of accOlmts over and under the base fee by quarter. This information was used as the basis to project future usage. No change in total gallons billed per household was anticipated. We also used the usage information to calculate a usage based rate for sanitary sewer. TIlls scenario calculated a rate based on 'Winter quarter usage. Expense Assumptions Personal services - The fIrst year of the projection $20,000 was added along with a 3 percent inflationary increase for salaries. The $20,000 was added as a result of the increase in employee insnrance costs. After 2004, a 3 percent inflationary increase was added per year. Supplies and maintenance - 3 percent inflationary increase per year based on fairly consistent expenses each year. Other services and charges - The three years of history were averaged and, for years 2004 and thereafter, a 3 percent inflationary increase per year were added along with a fIxed $75,000 per year for unexpected maintenance of deteriorating infrastructure. The $75,000 is allocated 40 percent to the water fund, 40 percent to the sewer fund and 20 percent to the surface water management fund. Rent. Increased to a total of$56,000 based on county projection for 2005, allocated 50 percent to each of the Water and Sanitary Sewer funds, with a 3 percent increase from that point starting in 2006. -2-