AgdaPkt 2016-06-13 Interview and Joint SA PFA

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7.A. - Page 54 • Revenues from facilities fees, connection charges, and capacity charges, are projected at $2 million in 2015/16 based on actual revenues received to date. Future revenues are conservatively projected at $500,000 in 2016/17 and $250,000 per year thereafter, in line with the City's historical planning estimates. • Other/Miscellaneous revenues are projected to remain flat at $150,000 per year. EXPENSE ASSUMPTIONS • SFWD Wholesale Water Purchases are estimated based on the projected volume of potable water sales plus 5%, multiplied by projected wholesale water rates. The 5% represents system loss, the difference between the amount of potable water purchased and the amount sold. • BAWSCA Bond Surcharges are based on recent BAWSCA calculations for fiscal year 2016/17 and include a true-up for the prior fiscal year. Future BAWSCA surcharges may vary with a relatively small range depending on the City's share of total water use from all BAWSCA agencies. • Operating and maintenance expenses (other than wholesale water costs) are based on the City's 2015/16 Budget. • Future operating cost inflation is projected at 4% per year. • The projections assume completion of the City's meter replacement program through 2018/19. • Debt service projections are based on outstanding debt schedules. The City does not anticipate any additional debt in future years. The projections do not account for a potential future refunding of the City's outstanding 2007 Water Revenue Bonds that may result in relatively reduction in total debt service. • Capital improvement funding is gradually phased in from $3 million in 2016/17 to $6 million in 2022/23, in line with City projections of future annual funding needs. • For financial planning purposes, the projections include a minimum fund reserve target equal to 25% of annual operating and maintenance expenses plus an additional $2 million for emergency capital needs. Maintaining a prudent minimal level of fund reserves provides a financial cushion for dealing with unanticipated expenses, revenue shortfalls, and non-catastrophic emergency capital repairs. Water utility cash flow projections are shown on Table W4 . The rate projections shown on the table are designed to fund the City's cost of providing service each year, maintain roughly balanced budgets, and meet long-term fund reserve targets. The overall rate adjustment percentages shown at the top of the table reflect the overall level of revenue increases from proposed water rate adjustments accounting for different levels of increases to fixed and variable charges. Due to proposed modifications to the City's water rate structure, the impacts of projected rate increases will vary based on customer class and water use. B Water Utility Finances& Rates 27 �'\ Water&Sewer Financial Plans&Rate Studies