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<br />
<br />Water Rate Cost-of-Service Study
<br />Section 3. Revenue Requirements
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<br />HF&H Consultants, LLC | July 8, 2025 | Page 20 of 53
<br />costs. As shown in Figure 3-6, available reserves have been used to minimize the annual
<br />revenue increases from ratepayers.
<br />Figure 3-6. Rate Increase Calculations
<br /> Note: Non-operating revenue includes backflow administrative and testing fees, and transfers from the
<br />Sewer Fund and General Fund.
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<br />Rate increases account for rate revenue and future revenue requirements. The revenue
<br />requirement (shown in greater detail in Figure 3-5) increases due to increasing water supply
<br />costs and capital expenditures. Figure 3-7 summarizes the resulting annual increases in rates
<br />and revenues from the proposed service and water use charges. The fiscal year increase in
<br />revenue and rate adjustment columns typically do not match, as the City implements rate
<br />increases mid-fiscal year. Thus, any changes to the rates apply to six months instead of the
<br />whole fiscal year period. In effect, the rates of one calendar year are made up of rates set in
<br />adjoining fiscal years.
<br />Figure 3-7. Projected Revenue Increases
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<br />The rates are derived in Section 5. With these rate increases, the Water Enterprise is able to
<br />pay for its annual O&M and capital expenses, maintain adequate debt service coverage, and
<br />maintain adequate reserves, as further discussed below.
<br />DEBT COVERAGE
<br />Figure 3-8 shows the debt service coverage provided by the revenue increases in Figure 3-
<br />7. The City is required to maintain a minimum coverage ratio of 1.20. A higher ratio provides
<br />a greater margin of safety to bondholders and enhances the credit rating on bonds. Moreover,
<br />a higher credit rating benefits rate payers by reducing the cost of borrowing. While the
<br />resulting debt coverage ratio is greater than the 1.20 minimum, and lower increases would
<br />Projected
<br />FY 2025-26 FY 2026-27 FY 2027-28
<br />Revenue from Current Rates $49,463,496 $49,463,496 $49,463,496
<br />Revenue Requirement ($60,862,207) ($61,477,061) ($62,447,811)
<br />Non-Operating Revenue $1,648,725 $1,699,695 $1,752,254
<br />Use of Reserves $6,263,116 $0 $0
<br />Net Revenue Requirement ($52,950,366) ($59,777,367) ($60,695,557)
<br />Revenue Surplus/(Shortfall)($3,486,871) ($10,313,871) ($11,232,062)
<br />Proposed Rate Increase 7%6%5%
<br />Revenue at Proposed Rates $51,236,452 $54,538,877 $57,530,573
<br />Revenue Surplus/(Shortfall)($1,713,914) ($5,238,489) ($3,164,985)
<br />Rate Date of Revenue After Fiscal Year
<br />Fiscal Year Adjustments
<br />Rate Adjustments Rate Adjustments Inc. in Revenue
<br />Revenue at Current Rates $48,968,971
<br />FY 2025-26 7.0% 1/1/2026 $50,682,884 3.5%
<br />FY 2026-27 6.0% 1/1/2027 $53,968,702 6.5%
<br />FY 2027-28 5.0% 1/1/2028 $56,929,122 5.5%
<br />ATTY/RESO.0109/CC RESO WATER RATES - EXHIBIT A
<br />REV: 11-05-25 MI
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