03-01-2021 Council Work Session Packet

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Water Utility 22 City of Lino Lakes, Minnesota – Water and Sewer Rate Study Update Financial Projections The financial projections assumed the City would maintain a minimum cash balance in the Water Fund equal to three months of anticipated operating expenses and one-year’s debt service within the planning period. In addition, the City would fully fund depreciation and maintain positive operating income. These assumptions were made to ensure that the Water Fund would have sufficient cash to fund operations going forward as well as meet debt service requirements. To determine the appropriate user rates needed for the repayment of debt service and operation of the Water Fund, we have projected future revenue and expenditures and have incorporated the anticipated future capital outlay needs for the time period covered by this study. The financial projections began with the Water Fund expenditures; subsequently, revenues were adjusted to provide the recommended income, cash flow, and level of ending cash balances. Our expenditure projections are generally based on an analysis of past trends, anticipated changes in operations, and our significant experience in preparing Water rate studies. Scenario 1 – Keep Current Block Rate Structure Our projections show that the existing block rate structure combined with projected growth in the customer-base, will provide sufficient revenues for the operation of the Water Utility through 2014. In order to obtain the goals stated above, we determined that a 2.0% increase in user rates in each of the five blocks is needed annually 2013-2017. The projected rate increases are primarily needed to fund depreciation while maintaining recommended reserve levels. The financial projections are shown on the following page.