AgdaPkt 2019-06-24 Joint SA PFA - Laserfiche WebLink

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6.U. - Page 27 of 47 1.6.3 Ongoing Operating Cost Inflation In addition to other financial needs, small annual rate adjustments are needed to keep revenues in line with ongoing operating cost inflation, both for City operating expenses as well as SVCW operations. For financial planning purposes, the financial projections developed in this report assume that most City operating costs escalate at an annual rate of 4%. The City's share of future SVCW funding requirements is based on SVCW's updated Long -Term Financial Plan. 1.7 Sewer Enterprise Financial Projections Bartle Wells Associates developed updated 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 & FUND RESERVE ASSUMPTIONS ■ Beginning sewer utility fund reserves as of June 30, 2018 are based on the City's sewer operating fund reserves and exclude carryover capital fund reserves which include funds budgeted and set aside in prior years for capital improvements that have not yet been completed. ■ Sewer service charge revenues are projected based on prior fiscal year results and increase due to projected rate increases and growth under slightly conservative growth projections. Projected rate increases go into effect on July 1 at the beginning of each fiscal year. ■ Revenues from the City's sewer facilities fees and connection fees are estimated at $400,000 per year for 2018/19 and 2019/20 assuming elevated levels of new development for roughly another year, and at $100,000 per year thereafter, in line with the City's longer-term projections. The financial projections exclude revenues from SVCW connection fees that are administratively collected by Redwood City on behalf of SVCW and subsequently passed through to SVCW. ■ Interest earnings are estimated at 2.0% of beginning fund reserves each year. ■ Other/Miscellaneous Revenues are projected based on the 2018/19 Budget and are projected to remain constant at that level in future years. EXPENSE ASSUMPTIONS ■ Operating & Maintenance Expenses are based on the 2018/19 Budget. Most expenses are projected to escalate at annual rate of 4% to account for future operating cost inflation. ■ The City's share of SVCW operating costs and other SVCW funding needs other than debt service are based on SVCW's recently -updated Long -Term Financial Plan. ®BARTLE WELLS ASSOCIATES Sewer Financial Plan & Rate Update 706