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Home My WebLink AboutHandouts_Workshop_Tab 01_11/30/2015 (2) ,w�.�ar�.r.� Presentation to VILLAGE OF TEQUESTA (ci(;� r � : ,(=_ 1 / , , � ,� � ` � �`''.� c�. r ��.�\� r N � � `�'`d } �; i �� ;`�,' ;� �� + r �,� ` f �� ' �C� .� �''�. �/ (• °s� 0 � / 'l Yi ;I � WATER SYSTEM R�VENUE SUFFICIENCY STUDY November 30, 2015 Public Resources Management Group, Inc. Utility, Rate, Financial and Management C�;��u;�t� �' �� • �� _�� , �, : \ �� F, ,� I � � � A enda g � � C.� Background and Purpose � Financial Forecast a Customer Statistics / Revenue Projections � � Revenue Requirements • Capital Improvement Funding (�ther Financial Considerations Adequacy of System Rates C.� Conclusions and Recommendations 2 R, . \S` . _ .... _. . . � � �� F , �� Back round and Pur ose � g p ,., ,. .. . � ,.....�,.,r,. _ . ,.;.....�_� �__.. �: -��.,..�,�.�� CI Last Formal Rate Analysis Completed in 2008 ■ Encompassed Financial Forecast Through Fiscal Year 2012 � Prepared Updated Financial Forecast Through Fiscal � Year 2020 to Reflect Current Economic Conditions � Need to Ensure Recovery of Total System Costs and � � Funding Requirements � � � r , 3 � w�� ;� - , �� ,. r F� . '�.. <<.�,,.:,,� , Where Are We Now ��..� �� .�. L.�: System is in Good Current Financial Condition �� Strong Existing Cash Balances — Approximately $4.0 million �` �=� Available to Fund Immediate Capital Improvements and Phase-In Future Rate Adjustments � Low Debt To Net Plant Ratio (Approximately 25°Io) �` Allows for Future Flexibility in Funding Capital Projects � System Financial Outlook Less Stable � Reducing Operating Margins (Net Revenue Available for System Needs) �, � No Significant Rate Adjustments Except Annual Indexing Since 2012 Minimal Customer Growth — Reduced System Contributions { Results in Limited Net Revenues Available for Capital Reinvestment � � Results in Limited Net Revenues Available for Capital Reinvestment 4 � �� _. � ,.,_ �� ' . Where Are We Now cont' d. �� ( ) t Net Revenue Margin Trend 45.0% 40.0°Io � -- ---- --- - -_ _ ---------------- ; __ ' 35.0°Io ' i ! ' 30.0�/0 - ---- — � � — 25.0% ; �* � -- - - ----- _ __ _ - --- _ : 1 � ; ; 20.0% ! - ' � , , ' 15.0 _ . _ i . � I I --- i ., d__ ___ � '� � 10.0°Io ; j . . . � ' —. ; �� I j ; � � ' � � i 5.0% � a _� ; _ I �.:��i„�*i= I i ' 0.0% i � � I ' I �, 2011 2012 2013 2014 2015 2016 ', ---..-! Net Revenue Margin Target 5 �:, ...- ,�.,.,�-.: r-.,� , - ._ :-. � ��§ , ��. .,� .., _,... _ �. , .� .. _ ,. . � . ��. _ - ��, " �� , � Where Are We Now cont' d. � �,,��.�, � ) _ . . . �.�ar � _ . �-� Significant Capital Im rovement Pro ram Needs p g Identified � All Renewals and Replacements / No New Capacity y� Consulting Engineers in 2011 Facility Assessment Report �J Results in Average Annual Expenditures of $1.35M � � � .- - �� . �. . � . - ' Filter Plant $ 1,530,000 $ 755,000 $ 490,000 $ - ; ' Reverse Osmosis Plant 530,000 245,000 2,040,000 3,545,000 � Storage 115,000 - - 1,450,000 ��k Surficial Wells - 735,pnn 3ZS,Qnn _ ; , Floridan Wells - - 115,000 2,090,000 � Distribution System Improvements: AC Pipe Replacement 3,850,000 3,850,000 3,850,000 3,850,000 '; , Other Pipe and Facilities Improvements 650,000 650,000 650,000 27,900,000 � Total Distribution System Improvements 4,500,000 4,500,000 4,500,000 31,750,000 � ,,. Total Costs $ 6,675,000 $ 6,235,000 $ 7,460,000 $ 38,835,000 �' Annual Amount � �1 Planning Period (Years) 5 5 5 15 Amortization Amount $ 1 335 000 $ 1 247 000 ' � � s , , , , $ 1,492,000 $ 2,589,000 ,, � ,��:�a..��,w.a._.. . � �,,s��- :� i � , Where Are We Now cont' d. . � � ) . ._� ..._ �.:.._�.., IeA�lel: y _ , . _ Cr.� Significant Capital Improvement Program Needs Identified (cont'd) ; � Facility Assessment Plan Illustrates Need to Annually Fund Capital Expenditures � Current Rates Support Only $240,000 ; � � . . . . . �<<� Facility Assessment Plan identified Approximately $15.5 million in � � Future AC Pipe Replacement Projects x � Rates Currently Not Adequate to Fund Significant AC Pipe Improvements � � � Village Should Consider Phasing-in Rates to Fund AC Pipe Replacement � .� ❑ Oh�erv;�tjpp System Will Require Rate Adjustments Above Price `�� Indexing 7 �' -' 3� - ',,, � F � � - �' , . , � u ,_ _=.._-.m •-�- �. � .,� r - :=��.�:..�+ai::ar: . . _ . . . . .. �� FINANCIAL FORECAST �: � � � �:;. ..�. , � % �� Rate Guidin Princi les R n' ,E�� g p ecog ized . .�.....�: � Revenues Should Be Sufficient to Recover The Full Cost � of Providing Service � µ� !��.� Utility Should Remain Financiall Viable and y � Sustainable � �: �� Adequate Funding for Operating and Maintaining the System Ri Ongoing Capital Re-Investment to Improve, Renew, and � Rehabilitate Facilities � � Maintain Com liance i p W th Any Rate Covenants on Existing � and Anticipated Debt , 150% All-In Debt Service Coverage Target (Minimum) � Ensure Access to Future Credit at Favorable Interest Rates � � 9 � _ _ ��"" _ �-��_.:,.,,�� a3 .r, ..r. % �� Rate Guidin Princi 1 R ' , g p es ecogn�zed (cont.) :,��I:l�� -.- _raR`�-:-. ":i�{s4•_..'. � . � � .. . . . ._ . _ ._. ^' . _ - . :.+ l.�i Utility Should Remain Financially Viable and Sustainable (cont.) :; � Utility Service Area Essentially At Buildout Condition: � Capital Needs Are primarily Renewals and Replacements- � , Related �: � Rates Should Support Pay-As-You-Go Capital Funding � Reduce Future Borrowing Costs � Promotes Rate Sustainability Over Long-Term � Maintain Adequate Cash Reserves — Reduced Financial Risk � � Workin Ca ital Fund Balance — Minimum 120 Da s O Ex � g p Y p Allowance for Unforeseen Operating or Capital Expenditures (e.g., System Failures, Emergency Preparedness) Y � io �„` ° . _ . �.s-�� ,.R ` .� • ' .�, ,.� Revenue Requ�rements � ❑ Revenue Requirements of the System Equals "Expenditures /� Fund Deposits" Financed from Rates p Based on Following Formula: � . + Operating Expenses � � � + Debt Service Payments + Capital Funded from Operations + Deposits to Working Capital / Financial Position and Compliance * � ,� - �the� �pP:-�±i�ag Re�enues and Income - Use of Working Capital (Fund Balance) �; = Net Revenue Requirements Funded From Rates � j� * Includes: �� „ Promoting Financial Best Management Practices (Utility Credit) ' 1 �� Maintain Rate Covenant Compliance � 11 � � �,,.. , r �. ��'� - FY 2016 - 2020 Forecast Assum tions p ,. . ' . ,�a r.._.__«r,vc. _...-_ . .� ❑ Projected Revenues from Rates Based on: � Current Approved Rates and Charges / Assumes Index Application � Driver: Limited Customer Growth (Built-out Service Area - Less than '� � " 0.25 °Io Per Year) � I:.� Projected Operating Expenses Based on: � FY 2016 Budget Adjusted for Updated Conditions f - { Driver: Allowances for Inflation and Other Anticipated Increases (2.4%) '� � M No Additional Employees above FY 2016 Budget Allowances � � � Includes Contingency Allowance of 2.5 °Io Recognized for Unforeseen � Ex enses / Reduced Rev n p e ues �� -� Average Annual Increase in Operating Expenses = 3.1 %; ; � Consistent with Industry Averages / Water and Sewer Maintenance Index 12 �"' i _ - '� i� i �� FY 2016 - 2020 For ' �-, �,� ecast Assumptions ��...rr..,•s�s... t.: .�.�.: „�..: .. �.�:�. �.,. . - . ��. .,,�,... .,.�,. � ■ Driver: Village has Significant Capital Improvement Needs � 2016 — 2020 �� Estimated at Approximately $7.6 Million In Ca ital Ex enditures p p Recognized During Forecast Period � All projects for Renewals and Replacements — Benefits Existing Users ■ No Expansion-related Projects ■ Includes: Jupiter Inlet Colony Pipe Replacement ($1.73M) � Water Well and Treatment Improvements • Ongoing Replacements — Including an Allowance for AC Pipe Replacement 13