75A - PH - WATER AND SEWER RATES

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2019 Water, Recycled Water, and Sewer Rate Study 2. Financial Plan 2. FINANCIAL PLAN 2.1 DESCRIPTION This section presents the financial management plan and corresponding plan of water, recycled water, and sewer rate revenue adjustments developed in the RSA, including a description of the source data, assumptions, and policies reflected in the RSA. Appendix A and B include detailed schedules supporting the Water Enterprise and Sewer Enterprise financial plans, respectively, discussed herein. During the RSA, the Stantec team reviewed alternative multi -year financial management plans through several interactive work sessions with City staff. As a result of this process, the Study has produced proposed financial plans that will allow the Water and Sewer Enterprises to meet their respective revenue requirements and financial performance objectives throughout the projection period while striving to minimize rate increases. 2.2 DATA AND ASSUMPTIONS The City provided historical and budgeted financial information associated with operation of the water, recycled water, and sewer systems, including a multi -year capital improvement plan (CIP), and outstanding debt service obligations and covenants. City staff also assisted in providing other data, assumptions and policies, such as water demands and customer growth, debt service coverage requirements, operating and capital reserve targets, earnings on invested funds, and escalation rates for operating costs (all of which are described in the following subsections). The following sections present the key source data relied upon in conducting the RSA. 2.2.1 Beginning Fund Balances The ending cash balances for FY 2017/18 were used to establish the FY 2018/19 beginning balances, as outlined in Schedule 1 of Appendix A for the Water Enterprise and Schedule 6 of Appendix B for the Sewer Enterprise. 2.2.2 Customer Growth & Volume Forecast Forecasting the future usage of water is a perennial challenge for water utilities. Figure 1 below presents a three-year history of the City's water usage, as tracked from pumping records and water purchases. Water production from the two sources of supply is illustrated by the black (groundwater) and orange (surface water purchased from MWD) shading. This figure shows water usage over the last three years has held fairly constant, with a slight uptick in usage in FY 2017/18. This data is consistent with the general water industry assumption there will be little "rebound" in water usage after the decline in usage during the recent California drought. As such, this Study assumes that the growth in water usage will City of Santa Ana Stantec 17