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Nassau-Amelia UtilitiesNassau-Amelia Utilities
FY 2008 Utility Rate Study
Presented by:Presented by:Andrew J. BurnhamAndrew J. Burnham
July 9, 2007July 9, 2007
Nassau-Amelia UtilitiesNassau-Amelia Utilities
Nassau-Amelia UtilitiesNassau-Amelia Utilities
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
Nassau-Amelia UtilitiesNassau-Amelia Utilities
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
Nassau-Amelia UtilitiesNassau-Amelia Utilities
Revenue Sufficiency AnalysisRevenue Sufficiency Analysis
Nassau-Amelia UtilitiesNassau-Amelia Utilities
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
Nassau-Amelia UtilitiesNassau-Amelia Utilities
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
Nassau-Amelia UtilitiesNassau-Amelia Utilities
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
Nassau-Amelia UtilitiesNassau-Amelia Utilities
Rate Survey – FY ’07 After 2.5% IncreaseRate Survey – FY ’07 After 2.5% Increase 6,000 Gallons Per Month6,000 Gallons Per Month
Nassau-Amelia UtilitiesNassau-Amelia Utilities
Rate Survey – FY ’07 After 2.5% IncreaseRate Survey – FY ’07 After 2.5% Increase 12,000 Gallons Per Month12,000 Gallons Per Month
Nassau-Amelia UtilitiesNassau-Amelia Utilities
Rate Survey – FY ’07 After 2.5% IncreaseRate Survey – FY ’07 After 2.5% Increase18,000 Gallons Per Month18,000 Gallons Per Month
Nassau-Amelia UtilitiesNassau-Amelia Utilities
Impact Fee Analysis Impact Fee Analysis
Nassau-Amelia UtilitiesNassau-Amelia Utilities
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
Nassau-Amelia UtilitiesNassau-Amelia Utilities
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
Nassau-Amelia UtilitiesNassau-Amelia Utilities
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
Nassau-Amelia UtilitiesNassau-Amelia Utilities
Impact Fee Survey – FY ‘07Impact Fee Survey – FY ‘07
Nassau-Amelia UtilitiesNassau-Amelia Utilities
Miscellaneous Service ChargesMiscellaneous Service Charges
Nassau-Amelia UtilitiesNassau-Amelia Utilities
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
Nassau-Amelia UtilitiesNassau-Amelia Utilities
Misc. Charge Summary (1)Misc. Charge Summary (1)
Nassau-Amelia UtilitiesNassau-Amelia Utilities
Misc. Charge Summary (2)Misc. Charge Summary (2)
Nassau-Amelia UtilitiesNassau-Amelia Utilities
DiscussionDiscussion