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9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 Water Fund Capital Cash Reserves 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 ■ 25%Target minimum working capital for operations A 25%Target minimum working capital for capital ■Actual working capital Funding Future Capital Projects The Study reviewed the timing and cost of capital projects over the next ten years. Staff has reviewed timing of capital projects to align them with required repairs/replacement while allowing the funds to build or maintain adequate cash as appropriate. Recommendations: • No external borrowing is anticipated over the next ten years. For 2025, the City will be able to return to allocating $1 million/year for sewer main repairs. Likewise, the City is able to fund the Storm Drainage CIP at the level anticipated in 2022, if it chooses. Annual rate increases are recommended for the Water Fund for the next ten years, while the Sewer and Storm Drainage Funds can maintain their current 2024 rates for several years. We recommend including inflationary increases for the Sewer Fund starting in 2031 and no increases over the next 10 years for the Storm Drainage Fund since the "shot in the arm" rate increase in 2023 has done what was intended. Managing Revenue Volatility The Study reviewed the fixed vs. variable costs for the Water Fund. This was last reviewed in 2020. Fixed costs are defined as those the City will incur regardless of water usage. These fixed costs should be paid for with the Fixed Rate. Current charges cover 100% of fixed costs, plus a portion of capital costs, based on audited 2023 expenditures. Therefore, we do not recommend any structural changes to the existing fixed charges, only minimal increases to continue rebuilding reserves. Review of Water Fund Rates Whenever there are significant changes to water rate structures, a follow-up review is recommended to determine if the rates are generating appropriate revenues, determine if the anticipated capital needs are being met and if reserves are adequate. The new rate structure was adopted effective January 1, 2021. The previous update in 2022 determined a needed correction to the rates, which was completed in early 2023, thus delaying the impacts of the new rate structure until now. A review of 2023 water usage determined the new rates and proposed annual increases will meet the Fund's needs, while building future reserves. Below are some statistics regarding usage for 2023: Residential Customers: Consumption down by nearly 3%. Multi -Family Customers: Consumption increased 14%, due to new construction City of Roseville 2024 Utility Rate Study Update Page 2 October 2024 Page 50 of 78