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Mr. Joseph G. Chlebeck <br />May 21, 1985 <br />Page 2 <br />• We will analyze the operating revenue requirements of the <br />Water and Sewer Utility Fund to assure that all required needs <br />of the City are being met by the rate structure. We will <br />recommend a range of utility rates to be adequate to cover the <br />following five areas: <br />1) Normal operating expenses <br />2) Contingency requirements for unexpected repairs <br />3) Capital replacement requirements <br />4) Debt service requirements <br />5) Available subsidy for other City projects (optional) <br />• With regard to capital replacement requirements of the City we <br />will review various policy decisions which the City should <br />face with regard to the replacement of systems from the <br />perspective of both "purchased" systems (i.e., those systems <br />which had been purchased by utility revenues) and from the <br />perspective of "contributed" systems (i.e., those systems which <br />have been contributed to the Water and Sewer Fund through the <br />special assessment process). The replacement of purchased and <br />contributed systems as well as other equipment replacement <br />needs for the Water and Sewer Utility Fund must be addressed <br />by City policy. There are options available to the City with <br />regard to the method of replacing the fixed assets of the uti- <br />lity fund. <br />• We will analyze the existing method of charging for utility <br />usage by user classification. If appropriate, we will recom- <br />mend alternate rate structures to improve the fair and <br />equitable method of charging for utility system usage. <br />• We will prepare a report to the City Council of the results of <br />our study. This report will include financial schedules (both <br />historical and projected), various charts and graphs, and text <br />summarizing our recommendations and options available to the <br />City Council with regard to Water and Sewer Utility Rates. <br />Another feature of our report will be a method of monitoring <br />actual operating results for future periods compared to pro- <br />jected operating results. This will allow the City to amend <br />their plans and projections based on actual operating results <br />and therefore the report should serve the City's utility rate <br />needs for a three to five year period ( in the absence of <br />substantial changes in operating procedures and /or debt or <br />capital replacement requirements of the City). <br />57 <br />