07-13-2020 Council Packet - Laserfiche WebLink

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City of Sample, Minnesota Water Rate Study Date I. Introduction The City of Sample, Minnesota (the City) owns and operates the Water utilities and is responsible for maintaining the infrastructure to serve the residents. The City has five customer classes, Residential, Commercial, Development, Government and Tax Exempt. Water service is billed based on consumption. Billing is done on a quarterly basis. This rate study analyzes the cash flows of the Water utilities of the City. Sources and uses of cash are projected for the years ending December 31, 2018 to December 31, 2028. The study uses the current number and type of accounts to project future revenue at a suggested rate, each year. Annual capital costs are projected separately for each of the funds for the projection period. The City has a Capital Improvement Plan (CIP) that goes from 2018 to 2028. The financial projection is based on billings using three different scenarios: • Scenario 1 is based on billings at the current rate with an inflationary increase. • Scenario 2 is based on billings increased variedly over a number of periods, adding a meter fee starting at $2.50 in 2019 for all meters with an annual inflationary increase of 3% and increasing the WAC fee to reach the target cash balance. In this Scenario, the WAC fee is increased to $4,500 as requested by the City and is based on a market analysis conducted by the City. • Scenario 3 is based on billings increased variedly over a number of periods, adding varying meter fees and increasing the WAC fee to reach the target cash balance. In this Scenario, the WAC fee is increased to $3,600 as requested by the City and is based on a market analysis conducted by the City. Expense assumptions are outlined in the assumptions section on the following page and present, to the best of management’s knowledge and belief, the City’s expected results of cash flows for the projection period if such uses of cash occur. Accordingly, the projection reflects management’s judgment, as of the date of this projection, of the expected conditions and the City’s expected course of action if such usage and expense totals were attained. The presentation is designed to provide information to the City Council concerning recovery of expenses that might be achieved if rates were adjusted and should not be considered to be a presentation of expected future results. Accordingly, this projection may not be useful for other purposes. The assumptions disclosed herein are those that management believes are significant to the projection. Furthermore, there will usually be differences between projected and actual results, because events and circumstances frequently do not occur as expected and those differences may be material. Sample 7