oak harbor rate study
TRANSCRIPT
Sept. 30, 2015
Sewer Rate Study Update
Presented by:Shawn KoornAssociate Vice PresidentHDR Engineering, Inc.
City of Oak Harbor
2
Overview of the Presentation
• Review of the previous sewer rate analyses
• Summary of the updated analysis
• Overview of the rate scenarios
• Questions and answers
3
Prior Sewer Rate Analyses
3
• Established initial projections during the 2009 rate study– Used conservative borrowing assumptions and
estimated capital costs• Updated the analysis for financing scenarios in
2012 for the feasibility study– Updated O&M and other capital assumptions– Updated revenue projections– Various funding sources (loans/bonds/grants)– Based on project cost estimates at that time
• Updated the analyses for planned long-term debt issuance
4
Overview of the Updated Sewer Analysis
4
• Analysis reviews the 2016 – 2021 time period• Updated revenue projections based on current
customer information and adopted rates– Rates were adopted through 2016 (last adjustment in
December 2015)• Updated O&M expenses
– Based on current budgeted O&M– Estimated O&M for the new WWTF– Annual inflation assumed at 3.5%
• Updated the capital improvement plan– Items other than the WWTF
• Updated fund balances (reserves)
5
WWTF Capital Cost Scenarios
5
• Based on the current financing scenarios– 2015 and 2016 SRF loans– 2015/16 revenue bond and close-out bond– Grants– Use of reserves (capital and SDCs)
• Developed three rate scenarios– Low project cost ($90 million)– Mid project cost ($98 million)– High project cost ($110 million)
• Each scenario results in different long-term debt amounts and annual debt service payments
• Developed rate adjustments to meet DSC ratios and minimum target reserve funds
6
Capital Plan Summary
• Project costs are based on preliminary estimates– May not reflect actual year of total costs
• 2018 through 2021 reflects typical annual capital– Approximately $500,000 per year on average
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
2015 2016 2017 2018 2019 2020 2021
Low Mid High
7
• Key difference is the annual debt service payments– Ability to maintain required DSC ratios
• All three options maintain target minimum reserve levels
• Rate adjustments would be implemented the December prior to the year effective
• Reserves are utilized in several years (2018 & 2019) to fund annual deficiencies (both O&M and capital needs)
Summary of the Proposed Sewer Rate Transition Plans
7
2017 2018 2019 2020 2021
Low Estimate 15.0% 12.0% 10.0% 10.0% 8.0%
Mid Estimate 15.0% 15.0% 15.0% 10.0% 9.5%
High Estimate 20.0% 15.0% 15.0% 15.0% 15.0%
8
Residential Customer Bill Impacts
• Developed approximate monthly residential customer bill impacts based the scenarios
• 2015 is the current residential customer rate• 2016 is the adopted residential customer rate
– 12.5% adjustment effective Jan 1, 2016
8
2015 2016 2017 2018 2019 2020 2021
Low Estimate $57.50 $64.75 $74.46 $83.40 $91.74 $100.91 $108.98
Mid Estimate $57.50 $64.75 $74.46 $85.63 $98.48 $108.32 $118.62
High Estimate $57.50 $64.75 $77.70 $89.36 $102.76 $118.17 $135.90
9
Residential Customer Bill Impacts(cont’d)
9
$40.00$50.00$60.00$70.00$80.00$90.00
$100.00$110.00$120.00$130.00$140.00
2015 2016 2017 2018 2019 2020 2021
Low Mid High
10
Preliminary Debt Service Coverage Ratios
• Combined utility (water and sewer) calculation– Actual calculation will exclude utility taxes
• Minimum of 1.0• Target of 1.25 and above
0
0.5
1
1.5
2
2.5
3
3.5
2016 2017 2018 2019 2020 2021
Low Mid High
11
Summary of the Reserve Funds• Target minimums vary based on total revenue
– Operating fund is 25% of total revenues, including additional revenues from rate adjustments
– Target is approximately $2.2 million in 2015 increasing to $3.6 million in 2021
• Reserve funds exclude the SDC fund
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
2015 2016 2017 2018 2019 2020 2021
Low Mid High Target
12
Summary of the Updated Analysis
• Annual rate adjustments vary depending on final project cost and total borrowing
• Rates provide required DSC ratios and meet minimum target reserve funds
• Additional low cost borrowing (low interest loans) and grants will reduce overall rate impacts
• Through 2018 rate impacts are similar to what was provided during the feasibility study– Final three years (2019 – 2021) were not included in
the prior analyses
13