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