HomeMy WebLinkAbout1A NSI Presentation Prior Lake Utlity Study PPTRC 18-
UTILITY STUDY
Financial Management Plan for Water and Sanitary Sewer
Council Workshop
Monday, November 4, 2019
Tammy Omdal, Northland Public Finance
RC 18-
Introduction of the Plan
To serve as a guide for the financial
management of the water and
sanitary sewer systems
2
RC 18-
Study Objectives
Revenue Sufficiency
Rate Calculation
3
RC 18-
Study Objectives
Revenue Sufficiency
Develop and populate a forecasting model that will
determine the level of annual revenue needed to
satisfy each system’s projected annual operating,
capital costs, and debt service while maintaining
adequate reserves for future capital needs of the City
Avoid future issuance of debt for capital
improvements
4
RC 18-
Study Objectives
Rate Calculation
Review existing rate structures for the utilities and
develop modifications, as appropriate, to ensure that
rates reflect accepted practices, fair and equitable
distribution of costs, and competitiveness with other
communities
5
RC 18-
Study Approach
City provided:
Data on customer bills for 2017 and 2018,
with adjustments for certain customers due
to meter readings and other adjustments
Historical financial data, along with current
year estimates, and preliminary 2020 budget
Input and feedback on assumptions and
different scenarios for the Plan
6
RC 18-
Revenue Sufficiency
Revenue to meet current and future obligations
Avoid future debt issuance consistent with City
objectives
Cash on-hand to provide:
Three-months of operating expense
Following-year debt service payments
Following year capital acquisition (planned to be paid
from cash)
Reserves for replacement of infrastructure located
under private streets
Reserves for future capital improvements
7
RC 18-
Rate Calculation
Current Rate Structure
Base rate
Capital facility charge
Two tiers / block rates for water
One tier /block rate for sanitary sewer
Proposed Rate Structure
Base rate
Four tiers / block rates for water
Four tiers /block rates for sanitary sewer
Base rate for customers located on private streets for
infrastructure replacement
8
RC 18-
Rate Calculation
9
Figure 2.Figure 3.
WATER SERVICES WATER SERVICES
PRELIMINARY 2020 BUDGET PROPOSED FOR YEAR 2021
VOLUME BASED RATES VOLUME BASED RATES
Tier 1 25,000 $5.05 73.4%Tier 1 10,000 $3.40 55.6%
Tier 2 $6.96 38%26.6%Tier 2 20,000 $4.08 20%15.2%
Tier 3 Tier 3 30,000 $5.30 30%6.4%
Tier 4 Tier 4 > 30,000 $7.96 50%22.7%
FIXED RATES FIXED RATES
Base Charge $2.50 Base Charge $20.00
$5.00 $20.00
% of
Water
Sold by
Tier
Type of Charge
Per Billing
Period Per
Customer
Capital Facilities
Charge
Tiers
Units in
Tier Per
Period
Unit Rate
$/Unit
%
Increase
in Tier
Rate, Per
Tier
Private Street
Replacement Charge
% of
Water
Sold by
Tier
Units in Tier
Per PeriodTiers Unit Rate
$/Unit
% Increase
in Tier Rate,
Per Tier
Per Billing
Period Per
Customer
Type of Charge
RC 18-
Rate Calculation
10
Figure 4.Figure 5.
SANITARY SEWER SERVICES SANITARY SEWER SERVICES
PRELIMINARY 2020 BUDGET PROPOSED FOR YEAR 2021
VOLUME BASED RATES VOLUME BASED RATES
Tier 1 $3.89 100.0%Tier 1 10,000 $2.50 70.4%
Tier 2 Tier 2 20,000 $3.00 20.0%12.6%
Tier 3 Tier 3 30,000 $3.90 30.0%2.5%
Tier 4 Tier 4 >30,000 $5.85 50.0%14.6%
FIXED RATES FIXED RATES
Base Charge $2.50 Base Charge $17.00
$5.00 $20.00Private Street
Replacement Charge
Capital Facilities
Charge
Tiers
Units in
Tier Per
Period
Unit Rate
$/Unit
%
Increase
in Tier
Rate, Per
Tier
Type of Charge
Per Billing
Period Per
Customer
% of
Volume
Sold by
Tier
Type of Charge
Per Billing
Period Per
Customer
% of
Volume
Sold by
Tier
Tiers Units in Tier
Per Period
Unit Rate
$/Unit
% Increase
in Tier
Rate, Per
Tier
RC 18-Proposed Rate Structure
Water Fund
11
Tiers
Units in
Tier /
Period
Usage in Tier Customer Bills in
Tier
Customer Bills
Per Billing
Period 1, 2
Unit Rate $/unit
Volume Sold at
Tier (in 1,000
Gallons)
Revenue
Tier 1 10,000 55.6%61.7%5,512 $3.40 407,287 $1,384,775
Tier 2 20,000 15.2%31.8%2,844 $4.08 111,530 $455,040
Tier 3 30,000 6.4%4.8%430 $5.30 47,181 $250,059
Tier 4 - 22.7%1.7%154 $7.96 166,322 $1,323,921
Volume Basis Revenue 732,319 $3,413,795
Base Rate Revenue 8,941 $20.00 $1,072,900
Private Street Replacement Revenue 1,570 $20.00 $188,400
Net Rounding Differences $244
Water Fund Total Operating Revenue $4,675,340
Based on Proposed New Rate Structure
Projected Year 2021
Table 3
RC 18-Proposed Rate Structure
Sanitary Sewer
12
Tiers
Units in
Tier /
Period
Usage in Tier Customer Bills in
Tier
Customer Bills
Per Billing
Period 1, 2
Unit Rate $/unit
Volume Sold at
Tier (in 1,000
Gallons)
Revenue
Tier 1 10,000 70.4%67.0%5,955 $2.50 396,961 $992,401
Tier 2 20,000 12.6%26.8%2,383 $3.00 70,791 $212,372
Tier 3 30,000 2.5%4.8%423 $3.90 13,841 $53,981
Tier 4 - 14.6%1.4%129 $5.85 82,239 $481,096
Volume Basis Revenue 563,831 $1,739,850
Disposal (Volume Basis) MCES Charge Revenue $3.19 555,738 $1,773,138
Base Rate Revenue 8,889 $17.00 $906,644
Private Street Replacement Revenue 1,570 $20.00 $188,400
Net Rounding Differences -$318
Sanitary Sewer Total Operating Revenue $4,607,713
Projected Year 2021
Based on Proposed New Rate Structure
Table 4
RC 18-Rate Calculation
Volume by Classification
13
Water Customers
Residential, Single Family
Residential, Multi-Family
Commercial
Sprinklers
All Other
Sanitary Sewer Customers
Residential, Single Family
Residential, Multi-Family
Commercial
All Others
Residential, single family, customers comprise the largest share of customers
RC 18-Rate Calculation
Impact of Proposed Rate Structure
14
52%48%
Water Customers
Winter (Feb) Billing Period
Customer bills with a reduction
Customer bills with an increase
60%
40%
Water Customers
Summer (Aug) Billing Period
Customer bills with a reduction
Customer bills with an increase
RC 18-Rate Calculation
Impact of Proposed Rate Structure
15
60%
40%
Sanitary Sewer Customers
Winter (Feb) Billing Period
Customer bills with a reduction
Customer bills with an increase
53%
47%
Sanitary Sewer Customers
Summer (Aug) Billing Period
Customer bills with a reduction
Customer bills with an increase
RC 18-
16
Rate Calculation
Impact of Proposed Rate Structure
0%10%20%30%40%
($15) to ($10)
($10) to ($5)
($5) to $0
$0 to $5
$5 to $10
$10 to $300
Percent of Total Bills (Customers)
More than half (52%) of customers will see a reduction
in winter Water bill
RC 18-
17
Rate Calculation
Impact of Proposed Rate Structure
0%5%10%15%20%25%
($20) to ($15)
($15) to ($10)
($10) to ($5)
($5) to $0
$0 to $5
$5 to $10
$10 to $40
$40 to $600
Percent of Total Bills (Customers)
More than half (60%) of customers will see a reduction
in summer Water bill
RC 18-
18
Rate Calculation
Impact of Proposed Rate Structure
0%10%20%30%40%
($15) to ($10)
($10) to ($5)
($5) to $0
$0 to $5
$5 to $10
$10 to $40
$40 to $700
Percent of Total Bills (Customers)
More than half (60%) of customers will see a reduction
in winter Sanitary Sewer bill
RC 18-
19
Rate Calculation
Impact of Proposed Rate Structure
0%10%20%30%40%50%
($10) to ($5)
($5) to $0
$0 to $5
$5 to $10
$40 to $700
Percent of Bills Total Bills (Customers)
More than half (53%) of customers will see a reduction
in summer Sanitary Sewer bill
RC 18-
Fixed and Variable Expense
20
58%
9%
33%
Water Fund
Fixed Costs
Fixed Costs / Transfers to Other Funds
Variable Costs
Utility funds provide revenue to the General Fund, Equipment
Fund, and Facilities Fund resulting in lower City property tax levy
39%
8%
53%
Sanitary Sewer Fund
Fixed Costs
Fixed Costs / Transfers to Other Funds
Variable Costs
RC 18-Non-Volume Basis and
Volume Basis Revenue
21
9%
91%
Water Fund
Projected 2020
Non-Volume Basis Volume Basis
27%
73%
Water Fund
Projected 2021
Non-Volume Basis Volume Basis
Change in rate structure will result in an increase in non-volume
basis revenue to help offset a greater portion of fixed costs
RC 18-Non-Volume Basis and
Volume Basis Revenue
22
10%
90%
Sanitary Sewer Fund
Projected 2020
Non-Volume Basis Volume Basis
24%
76%
Sanitary Sewer Fund
Projected 2021
Non-Volume Basis Volume Basis
Change in rate structure will result in an increase in non-volume
basis revenue to help offset a greater portion of fixed costs
RC 18-
23
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
2020202120222023202420252026202720282029MillionsChart 1
Water Fund
Projected Ending Cash Position
Projected Cash Position With Projected Future Rate Adjustments
Minimum Cash Position to Meet Minimum Requirements
Difference between Projected Cash Position and Minimum Cash Position represents the net amount of
cash projected to be available as reserves for future capital improvements. The Plan does not anticipate
the issuance of debt to finance capital improvements.
Revenue Sufficiency
Water Fund
RC 18-
24
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
201920202021202220232024MillionsChart 2
Water Fund
Projected Ending Cash by Designation
For future capital
improvements
For following year pay-go
capital
For Private Street
Replacement
For 3-months of
operating cash
For following year debt
service
Revenue Sufficiency
Water Fund
RC 18-
25
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
$0
$1
$2
$3
$4
$5
$6
$7
201920202021202220232024As % of Exepnse (Target is for greater than 50%)MillionsChart 3
Water Fund
Ending Unrestricted Net Position
Ending
unrestricted
net position
Ending
unrestricted
net position as
% of expense
Revenue Sufficiency
Water Fund
RC 18-
26
$0
$1
$2
$3
$4
$5
$6
$7
$8
201920202021202220232024MillionsChart 4
Water Fund
Revenue and Expense
Revenue
Expense
Revenue Sufficiency
Water Fund
RC 18-
27
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
201920202021202220232024Total Customer Units (ERU)Annual Water Volume Billed (1,000 Gal)Chart 5
Water Fund
Customers and Annual Water Volume Billed
Total Water
Volume Billed
(1,000 of
gallons)
Total Average
Number of Bills
Per Year
Revenue Sufficiency
Water Fund
RC 18-
28
$0
$2
$4
$6
$8
$10
$12
2020202120222023202420252026202720282029MillionsChart 6
Sanitary Sewer Fund
Projected Ending Cash Position
Projected Cash Position With Projected Future Rate Adjustments
Minimum Cash Position to Meet Minimum Requirements
Difference between Projected Cash Position and Minimum Cash Position represents the net amount of cash
projected to be available as reserves for future capital improvements. The Plan does not anticipate the issuance of
debt to finance capital improvements, with the exception of projects in year 2021.
Revenue Sufficiency
Sanitary Sewer Fund
RC 18-
29
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
201920202021202220232024MillionsChart 7
Sanitary Sewer Fund
Projected Ending Cash by Designated Purpose
For future capital
improvements
For following year
pay-go capital
For Private Street
Replacement
For 3-months of
operating cash
For following year
debt service
Revenue Sufficiency
Sanitary Sewer Fund
RC 18-
30
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
201920202021202220232024As % of Exepnse (Target is for Greater than 50%)MillionsChart 8
Sanitary Sewer Fund
Ending Unrestricted Net Position
Ending
unrestricted
net position
Ending
unrestricted
net position as
% of expense
Revenue Sufficiency
Sanitary Sewer Fund
RC 18-
31
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
201920202021202220232024MillionsChart 9
Sanitary Sewer Fund
Revenue and Expense
Revenue
Expense
Revenue Sufficiency
Sanitary Sewer Fund
RC 18-
Volume Billed
32
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2/1/20173/1/20174/1/20175/1/20176/1/20177/1/20178/1/20179/1/201710/1/201711/1/201712/1/20171/1/20182/1/20183/1/20184/1/20185/1/20186/1/20187/1/20188/1/20189/1/201810/1/201811/1/201812/1/20181/1/20192/1/2019ThousandsVolume (Gallons) Billed by Billing Period
Sanitary Sewer Water
RC 18-
Customer Examples
33
Note: Based on 2018 billing data, average annual. Sanitary Sewer average
volumes are lower due to the cap on volume pursuant to ordinance.
Water Customers
Percentile
of All
Customers
Water
Usage
Units
(Gallons)
Per Billing
Period
Low Volume Customer 20%8,000
Medium Volume Customer 50%18,000
High Volume Customer 80%78,000
Sanitary Sewer Customers
Percentile of
All
Customers
Volume
Billed
Units
(Gallons)
Per Billing
Period
Low Volume Customer 20%7,000
Medium Volume Customer 50%12,000
High Volume Customer 80%47,000
RC 18-
Water Customers
34
2017 2018 2019 2020 2021 2022 2023 2024
Low Volume Customer $44 $45 $46 $48 $47 $48 $49 $49
Medium Volume Customer $89 $92 $94 $98 $87 $88 $89 $91
High Volume Customer $452 $466 $479 $503 $530 $538 $546 $554
$0
$100
$200
$300
$400
$500
$600
BiMonthly AmountChart 25
Water Customers
RC 18-
Water Customers
35
2018 2019 2020 2021 2022 2023 2024
Low Volume Customer 2.6%2.5%4.2%-1.5%1.5%1.5%1.5%
Medium Volume Customer 2.8%2.8%4.6%-12.0%1.5%1.5%1.5%
High Volume Customer 3.0%2.9%4.9%5.4%1.5%1.5%1.5%
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%Annual % Change in Average BiMonthly AmountChart 26
Water Customers
RC 18-
Sanitary Sewer Customers
36
2017 2018 2019 2020 2021 2022 2023 2024
Low Volume Customer $26 $28 $31 $35 $35 $35 $36 $37
Medium Volume Customer $40 $43 $48 $54 $48 $49 $50 $51
High Volume Customer $134 $146 $167 $190 $210 $215 $219 $223
$0
$50
$100
$150
$200
$250
BiMonthly AmountChart 27
Sewer Customers
RC 18-
Sanitary Sewer Customers
37
2018 2019 2020 2021 2022 2023 2024
Low Volume Customer 6.6%11.2%11.2%-0.7%2.0%2.0%2.0%
Medium Volume Customer 7.5%12.6%12.5%-11.4%2.0%2.0%2.0%
High Volume Customer 8.8%14.5%14.1%10.6%2.0%2.0%2.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%Annual % Change in Average BiMonthly AmountChart 28
Sewer Customers
RC 18-Comparison of Rates
Water
38
$0
$5
$10
$15
$20
$25
$30
White Bear LakeCottage GroveRosemountChanhassenLino LakesFarmingtonChamplinAndoverChaskaSavagePrior LakeChart 20
Comparison of Municipalities
Water Services
Low Volume (4,000 gallons) Monthly Water Bill
Based on Current Published Rate Schedules
RC 18-Comparison of Rates
Water
39
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
White Bear LakeCottage GroveRosemountFarmingtonChanhassenLino LakesChamplinAndoverChaskaSavagePrior LakeChart 21
Comparison of Municipalities
Water Services
Medium Volume (9,000 gallons) Monthly Water Bill
Based on Current Published Rate Schedules
RC 18-Comparison of Rates
Water
40
$0
$50
$100
$150
$200
$250
RosemountLino LakesFarmingtonWhite Bear LakeAndoverChanhassenChamplinCottage GroveChaskaSavagePrior LakeChart 22
Comparison of Municipalities
Water Services
High Volume (40,000 gallons) Monthly Water Bill
Based on Current Published Rate Schedules
RC 18-Comparison of Rates
Sanitary Sewer
41
$0
$5
$10
$15
$20
$25
$30
SavageChanhassenWhite Bear LakeFarmingtonRosemountPrior LakeCottage GroveLino LakesChaskaAndoverChamplinChart 20.1
Sanitary Sewer Services
Comparison of Municipalities
Low Volume (3,500 gallons) Monthly Sewer Bill
Based on Current Published Rate Schedules
RC 18-Comparison of Rates
Sanitary Sewer
42
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
White Bear LakeFarmingtonChanhassenSavageLino LakesAndoverRosemountPrior LakeCottage GroveChamplinChaskaChart 21.1
Comparison of Municipalities
Sanitary Sewer Services
Medium Volume (6,500 gallons) Monthly Sewer Bill
Based on Current Published Rate Schedules
RC 18-Comparison of Rates
Sanitary Sewer
43
$0
$50
$100
$150
$200
$250
AndoverLino LakesSavageFarmingtonChamplinRosemountPrior LakeCottage GroveWhite Bear LakeChanhassenChaskaChart 22.1
Comparison of Municipalities
Sanitary Sewer Services
High Volume (24,500 gallons) Monthly Sewer Bill
Based on Current Published Rate Schedules
RC 18-Capital Improvement Plan
Water Fund
44201920202021202220232024202520262027202820292030203120322033203420352036203720382039$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
MillionsChart 29
Capital Improvement Plan
Annual Project Costs
Water Fund
Capital funded
from cash/non-
bond sources
Capital funded
from bond
proceeds
➢Replacement of
aging
infrastructure
and build-out
of the existing
system is
anticipated
➢Plan provides
for pay-go
approach
versus debt
issuance
RC 18-Capital Improvement Plan
Sanitary Sewer Fund
45201920202021202220232024202520262027202820292030203120322033203420352036203720382039$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
MillionsChart 30
Capital Improvement Plan
Annual Project Costs
Sanitary Sewer Fund
Capital funded
from cash/non-
bond sources
Capital funded
from bond
proceeds
➢Replacement of
aging
infrastructure
and build-out
of the existing
system is
anticipated
➢Plan provides
for pay-go
approach
versus debt
issuance
RC 18-
Debt Obligations
4620192020202120222023202420252026202720282029$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
MillionsChart 31
Outstanding Bonds Payable
From Water and Sanitary Sewer Funds
(Includes Transfers to Governmental Funds for Debt Service Payable from Water
Funds)
Sanitary Sewer
Fund
Water Fund
(Transfers for
Debt)
Water Fund
RC 18-
Debt Obligations
4720192020202120222023202420252026202720282029$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
MillionsChart 32
Annual Debt Service
Payable From Water and Sanitary Sewer Funds
(Includes Transfers to Governmental Funds for Debt Service Payable from Water
Funds)
Sanitary Sewer
Fund
Water Fund
RC 18-
Recommendations
Focus on revenue sufficiency to meet
objectives for cash balance
Provide for rate calculation that results in
equitable and competitive fixed versus variable
portion charge to customers and considers
conservation impact of tiers and block rates
48
RC 18-
Next Steps
November 4th Utility Study presented to Council
December 2019, Council approves 2020 rates with
no changes to rate structure (i.e., base rates and
tiers)
January 2020, recommendations from study
reviewed at Council workshop (if needed)
First quarter 2020, City staff to identify
process/plan for communicating proposed new
utility rate structure and impact to
customers/public
49
RC 18-
Next Steps Continued
Third Quarter 2020, implement new billing system
Third Quarter, update utility study as needed
based on feedback from customers/public
December 2020, Council approves 2021 rate
structure and rates
Future date/2021, after new billing system is
functioning and new rate structure is in place,
consider monthly billing cycle
50
RC 18-
Northland Public Finance
The public finance group of
Northland Securities, Inc.
150 South Fifth Street, Suite 3300
Minneapolis, Minnesota 55402
800-851-2920
www.northlandsecurities.com/public_finance
Member of FINRA and SIPC | Registered with SEC and MSRB
Thank You
51
Tammy Omdal
612-851-4964
tomdal@northlandsecurities.com