Nassau-Amelia Utilities FY 2008 Utility Rate Study Presented by: Andrew J. Burnham July 9, 2007 Nassau-Amelia Utilities

Nassau-Amelia UtilitiesNassau-Amelia Utilities

FY 2008 Utility Rate Study

Presented by:Presented by:Andrew J. BurnhamAndrew J. Burnham

July 9, 2007July 9, 2007



FY 2008 Utility Rate StudyFY 2008 Utility Rate Study

• Update to Water & Sewer Revenue Sufficiency Analysis

• Calculate New Impact Fees• Review/Update Miscellaneous Service

Charges


BackgroundBackground

• Revenue Sufficiency Analysis– Update to analysis performed in FY 2006

• 14% rate increase in FY 2006, first since utility acquisition in 2003 • Recommended annual rate indexing at 2.5% per year in FY 2008

• Impact Fees– Two separate components (Plant Capacity & Main Extension)– Current fees have not been updated/reviewed since acquisition

• Miscellaneous Service Charges– Includes meter/service installations, turn-offs, reconnects, etc.– Current charges have not been updated/reviewed since acquisition


Revenue Sufficiency AnalysisRevenue Sufficiency Analysis


FAMS Model

BUSINESSPLAN

$26

$64

$101

$146

$24

$64

$103

$166

$24

$63

$105

$174

FOR EACH YEAR IN THE PLANNING PERIOD,THE FOLLOWING ANALYTICAL PROCESS

IS CARRIED OUT....

Historical financial dataEconomic AssumptionsCapital & Operating PlansPolicy ConsiderationsRegulatory Requirements

Revenue Projections Operating CostsBorrowing RequirementsRate RequirementsCustomer Impact


Financial Summary Financial Summary • Key Issues:

– Minimal working capital– $4.5 million CIP (FY 08 - FY 12)– Annual operating cost increases at about 5% per year– Dependent upon growth related revenues– Use of impact fees for expansion portion of debt service

• Results:– Without annual rate indexing, the System would not meet the net income

coverage requirements of bondholders in future years– The use of impact fees to pay the expansion portion of debt service would

allow rate revenue to be able to pay for non-expansion related CIP costs• Recommendations:

– Increase water and sewer rates annually to provide adequate revenue to:• Maintain net income coverage requirements of outstanding debt• Provide adequate working capital and satisfy annual operating and capital cost

increases– Utilize impact fees to pay the expansion portion of debt service


Rate Adjustment PlanRate Adjustment Plan• Plan:

– Implement annual rate indexing adjustments beginning in FY 08 (10/1/07) of 2.5% per year

• Results:– Allows utility to meet coverage requirements

and “keep up” with annual operating and capital cost increases

– Maintains adequate working capital– Avoids future borrowing


Rate Survey – FY ’07 After 2.5% IncreaseRate Survey – FY ’07 After 2.5% Increase 6,000 Gallons Per Month6,000 Gallons Per Month


Rate Survey – FY ’07 After 2.5% IncreaseRate Survey – FY ’07 After 2.5% Increase 12,000 Gallons Per Month12,000 Gallons Per Month


Rate Survey – FY ’07 After 2.5% IncreaseRate Survey – FY ’07 After 2.5% Increase18,000 Gallons Per Month18,000 Gallons Per Month


Impact Fee Analysis Impact Fee Analysis


Summary of AnalysisSummary of Analysis• Cost Basis:

– RCNLD value of existing System– Cost of CIP (FY 2007 – FY 2012)– Interest costs on assets/CIP funded with debt

• Calculation:– Identify cost basis and capacity for each system– Divide cost basis for each system by capacity in

ERC’s to determine cost per ERC– Deduct credit for debt service paid via user fees

to avoid double recovery of costs


Water Impact FeeWater Impact Fee• Results @ Inclusion of 100% of Eligible Costs:

– Water Impact Fee of $1,602 per ERC• Versus current total fee of $1,402 per ERC

– Increase of $200 or approximately 14%

• Options:– A: Adopt new fee @ inclusion of 100% of eligible costs– B: Adopt new fee @ partial inclusion of eligible costs– C: Maintain current fee

• Recommendations:– Option A

• Ensures growth pays for system expansion project costs to maximum extent possible

• Minimizes financial burden on existing ratepayers– Consolidate current fees (2) into single fee


Sewer Impact FeeSewer Impact Fee• Results @ Inclusion of 100% of Eligible Costs:

– Sewer Impact Fee of $2,531 per ERC• Versus current total fee of $2,237 per ERC

– Increase of $294 or approximately 13%

• Options:– A: Adopt new fee @ inclusion of 100% of eligible costs– B: Adopt new fee @ partial inclusion of eligible costs– C: Maintain current fee

• Recommendations:– Option A

• Ensures growth pays for system expansion project costs to maximum extent possible

• Minimizes financial burden on existing ratepayers– Consolidate current fees (2) into single fee


Impact Fee Survey – FY ‘07Impact Fee Survey – FY ‘07


Miscellaneous Service ChargesMiscellaneous Service Charges


Summary of AnalysisSummary of Analysis• Analysis:

– Recalculate fees based upon cost of providing each service• Salaries, Overhead, Materials/Supplies, Vehicles, Computers, etc.

• Results:– Majority of fees increased:

• Most of Meter/Service Installation Charges• Connection/Reconnection• Premises Visit• Inaccessible Meter Charge• Meter Re-Read• Hydrant Meter Pick-up for Non-Payment

– Certain fees decreased:• Certain of Meter/Service Installation Charges• Fire Connection Tap Fees• Temporary Disconnect Turn-ons/offs• Construction Fee (Temporary Connection)• Meter Removal/Service Tampering


Misc. Charge Summary (1)Misc. Charge Summary (1)


Misc. Charge Summary (2)Misc. Charge Summary (2)


DiscussionDiscussion

Documents

Nassau-Amelia Utilities FY 2008 Utility Rate Study Presented by: Andrew J. Burnham July 9, 2007 Nassau-Amelia Utilities