AgdaPkt 2016-06-13 Interview and Joint SA PFA

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7.A. - Page 82 3.7 Sewer Enterprise Financial Projections Bartle Wells Associates developed cash flow projections to evaluate sewer enterprise revenue requirements and rate increases. The projections incorporate the latest information available as well as a number of reasonable and slightly conservative assumptions. Key assumptions include: REVENUE ASSUMPTIONS • Rate adjustments go into effect July 1 at the beginning of each fiscal year. • Sewer service charge revenues are projected based on current year estimates (based on year-to- date data available through the end of February 2016) and increase due to projected rate adjustments and growth. • Growth in single family equivalent connections is projected at 2.0% of the City's customer base in 2016/17 and 0.50% in 2017/18 as the City anticipates the addition of approximately 2,000 multi-family dwelling units plus some significant commercial development over the next 2 years. Subsequently, growth is projected at 50 single family equivalents per year, or about 0.15% of the City's customer base. • Revenues from the City's sewer facilities fees and connection fees are estimated at $750,000 in 2015/16, $300,000 in 2016/17, and $100,000 per year thereafter. The financial projections exclude SVCW connection fees collected by Redwood City on behalf of SVCW. • Interest earnings are projected based on the annual beginning fund balance multiplied by projected interest rates that gradually increase from 0.5%to 2.0% over the next 5 years. • Other Revenues are projected at $75,000 per year based on the 2015/16 Budget. EXPENSE ASSUMPTIONS • Operating & Maintenance Expenses are based on the 2015/16 Budget and escalate at the annual rate of 4%to account for future operating cost inflation. • SVCW operating costs are based on SVCW's recently-updated Long-Term Financial Plan. • The City's share of SVCW capital needs and related debt service are based on recently updated project cost estimates and SVCW financial projections. Debt service for anticipated SRF loans is not due until one year after each project's certified completion date. • The projections include payments to SVCW for the City's share of SRF loan debt service reserve requirements. SRF typically requires agencies to set aside one-year of debt service approximately 90 days prior the project completion date for each SRF loan package. • Capital expenditures for the City's collection system are projected at $6 to $7 million per year and will be funded on a pay-as-you-go basis without the need for debt financing. B Sewer Utility Finances& Rates 55 W Water&Sewer Financial Plans&Rate Studies