HDR Engineering Inc 3/26/2020 - Laserfiche WebLink

City of Everett 12020 Water,Filtration,Sewer,and Stormwater Rate Study F 1.Project Approach rates to be developed for the four-year time period of 2021 —2024, and the models updated and developed through 2030. The analysis will identify the operating and capital infrastructure needs of each utility and provide a rate adjustment strategy(i.e. rate transition plan)to recover the total financial obligations for each utility. The analysis will be developed using the rate models developed as a part of the last comprehensive rate study for the City. The forecast of operating expenses for each utility will identify and project the annual non- capital costs associated with operation, maintenance, and administration of the water, filtration, sewer, and stormwater systems over the study period. The City's current operating budgets will be relied upon as the baseline. The study will incorporate the City's planning growth forecasts and establish escalation factors for projected cost escalation. The projections of operational expenses will incorporate any changes or additional O&M expenses resulting from known or anticipated changes in operational requirements(i.e., additional personnel, changes in levels of service). The projection of the revenue requirements for each utility will include the development of a funding plan for the identified water, water filtration, sewer, and stormwater capital needs over the projected 10-year period. Working from the capital project lists provided by the City, the capital funding analysis will incorporate annual capital projects and associated costs for the study period. The analysis for each utility will then consider the funding sources from current revenue streams (e.g., rates, connection charges, and capital cash reserves)and potential feasible revenue resources such as system reinvestment funding from rates, grants/contributions, low-interest loans, and/or revenue bonds. As a part of the capital funding plan, alternative capital funding strategies will be evaluated based on varying levels of CIP and/or alternative approaches to funding capital needs. The budget developed to conduct this task assumes and provides for up to two (2)discrete capital funding scenarios for each utility. Given the projection of operating and capital needs, a test of sufficiency will be provided to evaluate the adequacy of current rates and revenues in meeting all financial obligations for each utility, along with the City's financial policies(e.g., minimum reserve levels, debt service coverage, etc.). As a part of the analysis, each utility's forecasted financial requirements will be compared against forecasted revenue under existing rates to determine annual and cumulative revenue adjustments needed for each utility to provide financial sustainability over time. As necessary, a rate transition strategy for each utility will be developed for the 2021 —2025 time period that meets the utility's financial obligations over the planning horizon and, to the extent practical, provides a smooth impact to utility customers. The budget provides for up to two (2) revenue requirement scenarios for each utility. Task 3 Assumptions: • Update and develop the City's rate model for a 10-year period which incorporates the current operating and capital component(plan)for each utility. • Rate transition strategy for 2021 —2025 for each utility. • A review of the City's financial policies as developed in the revenue requirement analysis for each utility. Task 3 Deliverables: Page 3