75A - PH - WATER AND SEWER RATES

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2019 Water, Recycled Water, and Sewer Rate Study 2. Financial Plan 2022/23, with a couple years of enhanced replacements to address the most critical infrastructure needs in FY 2020/21 and 2021/22. In addition to pipe replacement, the City also has one pump station rebuild scheduled for FY 2019/20. The final CIP totaled approximately $73.6M (in current dollars) over the period of FY 2018/19 through FY 2029/30. In conjunction with this increase in capital spending, the Sewer O&M budget assumes that the Sewer Enterprise will require 3 additional FTEs by FY 2021-22. A detailed list of repair and replacement projects and associated costs for the Sewer Enterprise is provided in Schedule 9 of Appendix B. It should be noted that capital forecasts beyond a 5-year planning horizon have less certainty than near -term planning. As a result, this Study is primarily concerned with the capital spending forecasts within the next five years. Since capital spending estimates are provided in current dollars, the sewer RSA includes an annual cost escalation factor for capital costs (see Section 2.2.6). 2.2.8 Interest Earnings on Invested Funds An interest earning rate of 1.36% and 2.34% for invested funds have been used for the Water and Sewer Enterprises respectively. The percentages are based on prior interest earnings from each Enterprise's actual revenue statements and have been approved by City Staff as representative of what they expect for interest earnings moving forward. The Study assumes that all interest earnings will be retained within their respective funds. 2.2.9 Proposed Debt Strategy Existing Outstanding Debt The Water Enterprise's outstanding debt includes a 2014 Series Revenue Bond that will be fully repaid in FY 2031/32. The corresponding annual debt service for the 2014 Series Revenue Bond is provided in Schedule 5 of Appendix A. The City's Sewer Enterprise does not carry any existing debt. Future Borrowing Assumptions This Report proposes that the enterprises cash finance all of their ongoing capital replacements, with exception of the Water Enterprise's AM project, which has already been approved for debt financing. The assumed financing terms for the AMI project, were as follows: • 30-year term • 2.0 percent cost of issuance • Fixed interest rate of 5.0 percent • A 1-year debt service reserve requirement The existing 2014 Water Revenue Bond has a debt service coverage ratio (DCR) requirement of 1.20. Based on recently published guidance from Fitch Ratings, utility systems with mid -range financial profiles City of Santa Ana Stantec 113