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2019 Water, Recycled Water, and Sewer Rate Study <br />2. Financial Plan <br />Capital <br />Expenditures <br />3.8% <br />Fixed Ot <br />10.: <br />Minor Capital <br />Outlay <br />3.6% <br />Figure 2-2: FY 2017/18 Sewer Expense Categories <br />2.2.6 Cost Escalation <br />Future operating expenses were in large part projected based upon the actual expenditures from FY <br />2017/18, with a few exceptions for expenses that are new in the FY 2018/19 budget, and any additional <br />staff that has been recommended from the financial planning process to deliver upcoming capital <br />projects. All expenses starting in FY 2019/20 were adjusted for inflation. <br />Annual cost escalation factors for the various types of expenses were developed based upon a review of <br />historical inflation trends, published inflation forecasts, industry experience, and detailed discussions with <br />City staff. Table 2-1 summarizes the cost escalation factors used to project assumed increases across all <br />expense categories for both the Water and Sewer Enterprises. <br />This Study assumes that the City will adopt a dynamic Pass -Through Adjustment Policy, which will <br />annually adjust the Water Usage Charge in accordance with actual changes in water supply costs (see <br />Section 4.6). <br />City of Santa Ana Stantec 110 <br />