#02 - Utility Financial Management Plan Updates

Home Browse Search

maintenance expenses of the planned treatment plants. The operations of these facilities are expected to almost double the operations expenses of the water fund within three years. There is the possibility that those expenses will be covered by the MPCA via the 3M Settlement Funds or the 3M Consent Decree for a number of years, but that information will not be available for some time. For now, the utility model reflects a lack of that funding, as it is difficult even to determine the likelihood that it will occur. As we looked at these models, we contemplated what our goals were for the utility funds. Revenue sufficiency overall is the main goal of any long-term study, and we look at cash balances, debt load, and operating expense recovery to determine whether the rates we are looking at are sufficient for long-term sustainability of the funds. • Revenue Sufficiency – making sure we have revenue sufficient to fund operations, debt, and long-term capital needs. • Cash Balances – ensuring we have cash on hand for current operations and debt, as well as future capital needs. • Debt Load – minimize new debt and decrease debt load over time. • Expense Recovery – ensure all expenses, including depreciation, are covered by revenues. Rate Comparisons / Overall Cash Impact Below are some comparison charts showing what happens to cash and revenues/expenses with some example rate increases. While it is easiest to discuss these increases in terms of percentages across-the- board, staff encourages Council to also keep in mind the dollar value of these increases. 3% on a low- volume residential bill is about $3.50 per quarter. 20% on the same bill is $18 per quarter or $6 per month. 3% for 10 years It is apparent with the addition of the water treatment plants that an inflationary 3% increase is not an option due to the increase in operations expenses alone. Cash decreases drastically over the next 10 years.