Utility Financial Management Plan
Presented by:
Compliance with Council Priorities
Ecological Stewardship
Prevention of pollution resulting from sewer overflows Quality Infrastructure
Maintain water distribution and sewer collection systems Insure performance of water production facilities Adequate water resources Good Governance
Stewardship of physical and financial resources Long range planningPublic Utilities is an Enterprise Fund
It must be self supporting through its rates and fees
Operating costs covered by User fees Capital costs fund by Pay as you go Bonds It receives NO subsidy from the General Fund
Driving Issues for Financial Plan
Regional Consent Order
Renewal, Replacement, Reliability
Long Term System Maintenance Purchased Water Cost Increases
Operating Cost Inflation
CAPITAL REPAIRS & UPGRADES
Requires development of a plan to address system defects identified in study phases
99 basins identified
Estimated cost - $300 million
Identify improvements by Nov 2013
Meet identified operation
criteria as outlined in the M&O Plan approved by DEQ –
7/27/12
Annual reports on progress Modify activities to meet
requirements
Staffing Equipment Services
MAINTENANCE AND OPERATION
Regional Consent Order
Renewal, Replacement,
Reliability
Stewardship of the System
In addition to the
improvements under
the Regional Consent
Order, the remainder
of the sewer system as
well as the water
system needs
improvements to
continue to provide
reliable service to our
customers.
Purchased Water Cost Increases
Portsmouth Treated Water Purchases
Minimum purchase quantity changes in 2020 from 4 to 5 MGD Average annual rate increase – 4.00% Norfolk Water Purchases
Treated Water – 3.5% average annual increase Raw Water – 2.75% average annual increaseOperating Cost Inflation
Increases in key items:
Electricity Chemicals Fuel Materials Increases in expenses outside control of utility:
Retirement OPEB Equipment replacement
Operational Efficiencies
Utilized part‐time/Encore employees where feasible
Updated with more efficient equipment
Basis of Financial Management Plan
Review and evaluate recent historical results Customers, demands, operating revenues, expenses Integrate current operating and capital improvement budgets Develop capital cash flow requirements and operating expense forecasts Identify timing and amount of future borrowing requirements Identify key factors or drivers affecting rates (see next slide) Perform various sensitivity and scenario analyses using our interactive model and decision support process Growth, rate stabilization transfers, capital spending, cost escalation, etc. Develop a rate adjustment plan to ensure compliance with bond covenants and to maintain adequate operating reserve Prepare FY 2013 comparative residential rate surveyFinancial Management Plan:
Key Drivers
Plan of Water & Sewer Rate Increases is Needed to:
Address immediate and ongoing impacts of key drivers Satisfy annual debt service requirements, including coverage
Maintain adequate operating reserve (equal to 6 months of O&M expenses)
Description FY 14 FY 15 FY 16 FY 17 FY 18
Water & Sewer Rate Increase 4.9% 4.9% 4.9% 4.9% 4.9% Effective Date 7/1/13 7/1/14 7/1/15 7/1/16 7/1/17 Monthly Water & Sewer Cost* $60.30 $63.25 $66.35 $69.61 $73.02 Change in Monthly Cost $2.83 $2.95 $3.10 $3.26 $3.41
*Based upon 5,000 gallons and excludes HRSD fees. Utility billing is bi-monthly for most customers
Financial Management Plan:
Rate Increase Requirements
Financial Management Plan:
Rate Increase Distribution
US Consumer Price Index:
Overall Index
US CPI – Overall: 5 year average annual increase = 2.2% 10 year average annual increase = 2.4% 20 year average annual increase = 2.5% 30 year average annual increase = 3.1% 40% Increase Since 2000 90% Increase Since 2000 US CPI – Water & Sewerage Maintenance 5 year average annual increase = 6.3% 10 year average annual increase = 5.6% 20 year average annual increase = 4.7% 30 year average annual increase = 5.4%Monthly Residential Bill Comparison
Water & Sewer Service for 5,000 Gallons
$4.84 Suffolk $99.58 Isle of Wight County $92.75 Gloucester County $85.49 Poquoson $80.52 Richmond $77.55 Norfolk $73.40 Virginia Beach $73.32 Portsmouth $72.61 Smithfield $70.97 Chesapeake $69.62 Newport News $69.57 York County $67.97 Hampton $65.02 Franklin $63.33 Alexandria $61.72 Prince William County $61.25 Chesterfield County $59.79 FY 2014 Bill = $72.45
Conclusions & Recommendations
Revenue Produced by Current Rates is Not Sufficient to Address
Annual Operating, Capital, Debt, and Reserve Requirements
5-Year Plan of Annual Rate Adjustments is Recommended
4.9% per year for FY 2014 – FY 2018
Comparable to national and local trends
Should result in comparable cost for typical user to neighboring communities
Annual Financial Management Updates As Part of 5-Year Rate Plan
Update analysis based upon changes and report results to Council
Costs, demands, growth, consent order requirements, etc.
Modify the rate adjustment plan as needed (up or down) to meet financial
