02-22-2021 Council Packet - Laserfiche WebLink

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City of Lino Lakes, Minnesota Page | 12 E. Project approach/work plan Project approach  Review any current allocations of capital costs to system development fees, connection fees and other charges  Review current and historical billing data, including water consumption history  Review current funding practices, funding sources and policies related to financing capital improvements  Review and update the existing capital improvement plan identifying the sources of funding for each improvement  Review outstanding debt service related to the water and sewer utilities  Review any existing debt service coverage requirements for both senior and subordinate debt and the impact of adding additional debt to finance new capital improvements. Task 3 – Analyze existing rate structure/conduct rate study – Develop a 10-year financial projection for each utility that integrates all anticipated revenue sources, anticipated operating expenditures including existing and projected new depreciation, anticipated capital expenditures, existing and projected debt service and changes in the customer base over the planning period:  Develop recommendations for the financing of the anticipated capital improvements o Evaluate financing alternatives and structures to minimize rate impacts to the greatest extent possible  Develop recommendations for funding infrastructure replacement/renewal  Develop recommendations for cash reserve balances  Review the 2020 Water Treatment Plant Feasibility Study and explore potential funding scenarios  Identify the overall change in revenue required to provide for adequate funding for major capital improvement programs, to fund infrastructure replacement/renewal, to meet all recurring annual operating and capital expenditures, to cover all debt service requirements, to comply with any existing revenue bond and loan covenants, and to maintain sufficient cash balances and capital reserves. The projections will be made using an income statement approach and will include a yearly cash flow analysis.  Develop a range of alternative rate structures that provide revenue recovery at levels necessary to support each utility’s operation as defined above for a 10-year period. Rates developed will include fixed and variable user fees, system fees, and other fees and charges that provide sources of revenue to each utility. Our recommended fee/rate structure will result in no decrease in the stability of revenue streams for each utility, as compared to the current rate structures. Rate structures will take into consideration the following: o Current and future cost of providing utility services in accordance with established and anticipated standards and regulations o Projected demand o The need to fund both long-term capital improvements and replacements and annual capital reinvestment, including the proposed Water Treatment Plant o Funding requirements for all current and anticipated long-term liabilities and debt obligations (bonds and loans) o Impact of current and future environmental regulations o Maintenance of existing utility assets and infrastructure o Direct identification of revenues appropriate to fund utility operating activities and infrastructure o Base rates to cover fixed costs and consumption rates to cover variable costs o Ability of each alternative water rate structures’ potential to reduce per-capita demand and the impact on overall demand o The City’s Springbrook utility billing system o Weigh the benefits of any proposed charges in rate structures against the financial impacts on ratepayers, including an affordability analysis for residential customers o Perform a sensitivity analysis to illustrate the impacts of adverse assumption changes (e.g. future customer growth, water sales, seasonable aberrations, operating costs, capital costs)