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HomeMy WebLinkAboutItem 3 1 2 Springsted Incorporated 380Jackson Street, Suite 300 Saint Paul, MN 55101-2887 Tel: 651-223-3000 Fax: 651-223-3002 www.springsted.com MEMORANDUM TO:Dennis Feller, City of Lakeville FROM:Nick Dragisich, Springsted DATE:November 25, 2013 SUBJECT:Revised Water and Sewer Fund Analysis Earlier this year, the City of Lakeville engaged Springsted to conduct an analysis and review of the financial performance of the City’s Water and Sewer Funds, and to recommend rateadjustments necessary for each Fund to maintain revenues sufficient to meet operating costs, capital outlays and maintenance, debt service coverage, and cash reserves. We presented our findings and recommendations in a memorandum dated November 8, 2013 and discussed these at a City Council workshop on November 19, 2013. The City subsequently requested we evaluate some additional scenarios for the Sewer Fund. These additional scenarios include Scenario Three, Scenario Four, ScenarioFive, and Scenario Six. This memorandum presents ourinitial findings and recommendationsalong with the additional scenarios we evaluated. Recent Performance Our analysis began with a look at each Fund’s recent financial performance, paying particular attention to income levels and cash reserves. In the water fund income and net income have been consistently negative since 2009. Cash accumulated to a level of approximately $5.9 million in 2009 as a result of high consumption due to prevailing weather conditions. Balances have decreased in the ensuing years to approximately $3.2 million at the end of 2013 as result ofinvestment in water main replacements and major maintenance projects. In the Sewer Fund, operating and net income have also been consistently negative, though cash levels have been more stable, varying in the range of $2.7 million to $2.8 million between2009 and 2012. Cash levels are projected to decline slightly to $2.6 million at the end of 2013. Assumptions Inour projections of future performance, we used a number of assumption based on discussions with the City, coupled with our professional experience. For the Water Fund, these assumptions included: New residential accounts and Tier 1 consumption would grow at 2% annually. Tier 2 and 3 consumption would grow 1% annually. City of Lakeville, MN Water and Sewer Fund Analysis Page 2 Commercial accounts and consumption would grow at 1% annually. Miscellaneous revenues would increase by 0.25% each year. Personnel costs would increase 2.3% per year. Commodities costs would rise by 3% annually. Contractual services costs would rise by 2% per year. Cash balances in the Fund would earn 0.73% each year. For our Sewer Fund projections, our assumptions were as follows: Accounts and usage would grow as per Water. Personnel and contractual service costs would increase consistent with Water. Commodities costs for Sewer would grow at 5% annually. Charges from MCES would increase 6.8% per year. Interest earnings of 0.73% on fund balances. For each Fund, we assumed that capital expenditures would be made consistent with the City’s capital improvement plan.Capital spending from each Fund fluctuates from year to year, as can be seen in the chartbelow. In general terms, over the course of the planning period, the Water Fund averages $2.1 million in annual capital outlays, and the Sewer Fund averages $578,000 per year.A detailed list of capital projects and costs for bothFunds is attached as part of this memorandum. Annual Capital Spending $4,000 $3,000 $2,000 $1,000 $0 20132014201520162017201820192020202120222023 SewerWater Baseline Projection Using recent performance and current budgets as a baseline, we projected the financial performance of each Fund assuming that rates remained unchanged.Without rate adjustments, both Funds would run out of cash resources between 2017 and 2021. For this reason,rateincreases in future years willbe required.The extent of these rate increases is based on the amount of revenue needed by each Fund to coverits operating and maintenance costs, City of Lakeville, MN Water and Sewer Fund Analysis Page 3 capital improvementand replacement costs, and debt service costs for any debt issued to finance capital improvements, while maintainingan adequate level of cash reserves. With the understanding that rate increases would be necessary, we looked at the magnitude and timing of rate increases that would be required for each of the Funds. Initially, we modeledthe financial performance of the Funds if each paid for its capital improvements out of cash reserves. This would require 42.6% increase in water ratesin 2014 and 2015. These increases, which would be necessary to keep the Water Fund solvent in those years,would also resulted in large cash surpluses in future years. In the Sewer Fund this would require 10.5% rate increasesin 2014 through 2016. In order to smooth out the cash flows in the Water Fund, some capital expenditure will need to be financed by long-term borrowing. We looked at two basic scenarios for the Funds: one with minimal debt financing, and one with more significant borrowing. Scenario One In our first scenario, we triedto keep debt financing of capital projects to a bare minimum in each Fund. For the Water Fund, we required borrowing in four years, for a total of $6.2million in debt financing. For the Sewer Fund, we projected no borrowing at all. The timing and amount of debt is as follows: YearWaterSewer 2014$ 1,700,000$ - 2015$ 2,261,794$ - 2016$ -$ - 2017$ 1,240,547$ - 2018$ 1,000,000$ - Total$ 6,202,341$ - In order to cover operating and capital expenses, while maintaining sufficient cash reserves, we project the following rate increaseswould be required for each Fund: YearWaterSewer 20147.50%10.50% 20157.50%10.50% 20167.50%10.50% 20177.25%0.00% 20187.25%0.00% 20197.25%0.00% 20207.25%0.00% For the Water Fund, annual rate increases of 7.5% through 2016, and 7.25%from 2017 through 2020, will allow the Fund to maintain its minimum recommended cash reserves throughoutthe course of the planning period. Additionally, these increases will return the Fund to positive net income by 2020.Projected cash balances in the Water Fund are shown in the chart below. City of Lakeville, MN Water and Sewer Fund Analysis Page 4 Projected Cash Balance -Water $4,000 $3,000 $2,000 $1,000 $0 2014201520162017201820192020202120222023 Cash BalanceMinimum Reserve For the Sewer Fund, the rate increases are steeper, but fewer in number. Increases of 10.5% in 2014, 2015, and 2016 are required to keep the Sewer Fund from falling below the minimum recommended cash reserve. These rate increases are driven in large part by the anticipated 6.8% annual increases in the Metropolitan Council Environmental Services (M.C.E.S.)Charges. The combination of these rate increases is sufficient to bring the Fund into positive net income in 2016, but it falls back into negative net income immediately thereafter, as flat rates after 2017 are not enough to keep up with expected increase in M.C.E.S charges in addition toinflation in other operating costs. Cash reserves are maintained in the medium term due to the fact that depreciation is accounted for as an operating expense, but this expense is not reflected in cash balances.The projected cash balances in the Sewer Fund are shown in the chart below. Projected Cash Balance -Sewer $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2014201520162017201820192020202120222023 Cash BalanceMinimum Reserve Interms of quarterly bills, the effect of the increases on water and sewer rates would cause the utility bill for an average residential customer to rise from its current level of $82.36 per quarter to a level of $108.55per quarter in City of Lakeville, MN Water and Sewer Fund Analysis Page 5 2016. From there, theaverage billwould continue to rise until it reached $116.13in 2020, at which point it would level off.Quarterly bills for other customerswould rise similarly. Sample bills for a variety of users are attached as part of this memo. Residential -18,000 gallons $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $- 2013201420152016201720182019202020212022 Water - BaseWater - VolumeWater - Testing FeeSewer - BaseSewer - Volume A comparison of Lakeville’s water rates to those of neighboring communities shows that Lakeville’s rates are significantly lower than its peers at present; projected rate increases would close the gap to some extent, though projections anticipate Lakeville’s rates would still be the lowest of the comparison group.Our projections assume that other communities will raise water rates by 3% annually.These are shown in the chart below. Quarterly Bills -Residential Water $70.00 $60.00 $50.00 Apple Valley Bloomington $40.00 Burnsville Eagan Farmington $30.00 Inver Grove Heights Lakeville Rosemount $20.00 $10.00 $- City of Lakeville, MN Water and Sewer Fund Analysis Page 6 Sewer rates for Lakeville are currently close to the average of its peer cities; rate increases would put Lakeville higher than these other communities, though they would catch up in later years, when Lakeville’s rates are projected to remain flat. For purposes of our projections, we assume that sewer rates in neighboring communities will rise by 5%; this is higher than our projected water rate increases, due to anticipated annual increases in M.C.E.S.charges all communities will incur. These are shown in the chart below. Quarterly Bills -Residential Sewer $100.00 $90.00 $80.00 Apple Valley Bloomington Burnsville $70.00 Eagan Farmington Inver Grove Heights Lakeville $60.00 Rosemount $50.00 $40.00 Scenario Two In our second scenario, we projectedadditional debt financing of capital projects in order to minimize rate increases while maintainingsufficient cash levels in each Fund. This enablesthe Funds to remainon schedule with their capital improvement programs. Under this scenario, we projectedfour series of debt financing, with the first in 2014 and the last in 2022. The debt issued would total $15.8million for the Water Fundand $2.2 million for the Sewer Fund. The specific years and amounts areshown in the following table: YearWaterSewer 2014$ 4,210,981$ 675,000 2016$ 4,122,039$ 1,052,000 2019$ 4,500,000$ - 2022$ 3,000,000$ 500,000 Total$ 15,833,020$ 2,227,000 City of Lakeville, MN Water and Sewer Fund Analysis Page 7 In order to cover operating and capital expenses, while maintaining sufficient cash reserves, we project the following rate increases would be required for each Fund: YearWaterSewer 20144.25%6.35% 20154.25%6.35% 20164.25%6.35% 20174.25%6.00% 20184.25%2.90% 20194.25%2.90% 20204.25%2.90% 20214.25%2.90% 20224.25%2.50% 20234.25%2.50% The Water Fund recommended annual rate increases of 4.25%arerequired to maintain minimum recommended levels ofcash reserves.These increases are projected to reduce the deficit in the Fund’s net income from approximately ($1.2million)in 2014to approximately ($34,284) in 2023.Projected cash reserves for the Water Fund are shown in the chart below. Cash Balance -Water $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2014201520162017201820192020202120222023 Cash BalanceMinimum Reserve We have recommended sanitary sewer rate increases of 6.35%required in 2014, 2015, and 2016, followed by a 6.0% increase in 2017.For the years 2018-2021, our projected rate increases are 2.9%, falling to 2.5% thereafter. These recommended rate increases, likethose recommended for the Water Fund, are required to maintain minimum recommended levels of cash reserves. Projected cash reserves for the Sewer Fund are shown in the chart below. City of Lakeville, MN Water and Sewer Fund Analysis Page 8 Cash Balance -Sewer $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2014201520162017201820192020202120222023 Cash BalanceMinimum Reserve Under this scenario, the average quarterly water and sewer bill for a residential customerwould rise steadily from its current level of $82.36 per quarter to a level of $119.73per quarter in 2022as shown in the chart below. Residential -18,000 gallons $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $- 2013201420152016201720182019202020212022 Water - BaseWater - VolumeWater - Testing FeeSewer - BaseSewer - Volume The average quarterlywater and sewerbill in 2016 underthis scenario would be $97.42, as compared to $108.55in the earlier scenario. City of Lakeville, MN Water and Sewer Fund Analysis Page 9 Comparing Lakeville’s rates to those of surrounding communities under this scenario, we see that water rates remain well below those of the other cities. Sewer rates are projected to rise to a level approximately equal to those of Inver Grove Heights, which is currently the highest of the group.These are shown in the charts below.As before, we assume for the purposes of our projections that other cities will raise water rates at 3% annually, and sewer rates at 5%. Quarterly Bill -Residential Water $70.00 $60.00 $50.00 Apple Valley Bloomington $40.00 Burnsville Eagan Farmington $30.00 Inver Grove Heights Lakeville Rosemount $20.00 $10.00 $- 2013201420152016201720182019202020212022 Quarterly Bill -Residential Sewer $120.00 $110.00 $100.00 Apple Valley $90.00 Bloomington Burnsville Eagan $80.00 Farmington Inver Grove Heights $70.00 Lakeville Rosemount $60.00 $50.00 $40.00 2013201420152016201720182019202020212022 City of Lakeville, MN Water and Sewer Fund Analysis Page 10 Scenario Three In our third scenario, we projected increases in the Sewer Fund at 2.90% each year. This scenario assumes the same capital improvements and debt financing as in Scenario Two. Cash balances in the SewerFund are projected to fall below the minimum recommended amounts beginning in 2015 and throughout the remaining years of the planning period. The Fund is projected to run out of cash in 2020 due to the insufficient rate increases as shown in the chart below.In addition, the debt service coverage ratio is projected to drop below 1.0 in 2017 and to go negative in 2020. Cash Balance -Sewer $5,000 $4,000 $3,000 $2,000 $1,000 $0 2014201520162017201820192020202120222023 -$1,000 -$2,000 -$3,000 Cash BalanceMinimum Reserve Under this scenario, the average quarterly water and sewer bill for a residential customer would rise from its current level of $82.36 per quarter to a level of $109.10per quarter in 2022 as shown in the chart below. This is $10.63 less than the Scenario Two projected quarterly bill of $119.73. However, Scenario Two meets the minimum reserve requirements in each year. City of Lakeville, MN Water and Sewer Fund Analysis Page 11 Residential -18,000 gallons $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $- 2013201420152016201720182019202020212022 Water - BaseWater - VolumeWater - Testing FeeSewer - BaseSewer - Volume Comparing Lakeville’s sewer rates to those of surrounding communities under this scenario, shows that while sewer rates are projected to rise, they will rise more slowly than those of the surrounding communities. They are projected to be the lowest of the group in 2022. These are shown in the chart below. As in Scenario Two, we assume for the purposes of our projections that other cities will raise their sewer rates at 5% annually. Quarterly Bill -Residential Sewer $120.00 $110.00 $100.00 Apple Valley $90.00 Bloomington Burnsville Eagan $80.00 Farmington Inver Grove Heights $70.00 Lakeville Rosemount $60.00 $50.00 $40.00 2013201420152016201720182019202020212022 City of Lakeville, MN Water and Sewer Fund Analysis Page 12 Scenario Four In our fourthscenario, we projected increases in the Sewer Fund at 2.90% each yearthe same as in Scenario Three. This scenario also assumes the same capital improvements in Scenario Twoand Scenario Three; however, it increases the amount and number of bonds issued to finance capital improvements in an effort to improve the cash reserves. Under this scenario, we projected four series of debt financingfor the Sewer Fund, with the first in 2014 and the last in 2022. The debt issued would total $2.88million as compared to $2.23 million in Scenario Two.A comparison of the debt under each scenario is shown in the tablebelow: SewerSewer Year Scenario TwoScenario Four 2014$ 675,000$ 675,000 2015$ -$ 422,000 2016$ 1,052,000$ 1,287,000 2019$ -$ - 2022$ 500,000$ 500,000 Total$2,227,000$ 2,884,000 Cash balances in the SewerFund are projected to fall below the minimum recommended amounts beginning in 2016 and throughout the remaining years of the planningperiod.The Fund is projected to run out of cash in 2020 due to the insufficient rate increases as shown in the chart below.In addition, the debt service coverage ratio is projected to drop below 1.0 in 2017 and to go negative in 2020. Cash Balance -Sewer $4,000 $3,000 $2,000 $1,000 $0 2014201520162017201820192020202120222023 -$1,000 -$2,000 -$3,000 Cash BalanceMinimum Reserve City of Lakeville, MN Water and Sewer Fund Analysis Page 13 The average quarterlywater and sewer bill for a residential customer would rise from its current level of $82.36 per quarter to a level of $109.10 per quarter in 2022 as in Scenario Three since the projected rate increases are the same. As in Scenario Three, this is $10.63 less than the Scenario Two projected quarterly bill of $119.73. However, Scenario Two meets the minimum reserve requirements in each year. Lakeville’s sewer rates under this scenario compared to surrounding communities are also the same as in Scenario Three.They will rise more slowly than those of the surrounding communitiesand are projected to be the lowest of the group in 2022. As in Scenario Two, we assume for the purposes of our projections that other cities will raise their sewer rates at 5% annually. Scenario Five Scenario Five projects increases in the Sewer Fund each year at a rate the enables the Fund to meet the recommended minimum reserve requirements. This results in projected rate increases that vary erratically from 0% in some years to 12.553% in one year as shown in the table below. This scenario assumes the same capital improvements and debt financing as in Scenario Two. SewerSewer Scenario Two Scenario Five Year Projected Rate Projected Rate IncreasesIncreases 20146.35%0.00% 20156.35%9.706% 20166.35%12.553% 20176.00%2.716% 20182.90%1.117% 20192.90%2.480% 20202.90%8.951% 20212.90%0.00% 20222.90%0.00% 20232.50%5.034% The chart on the following page shows these projected rate increases each year. Ourexperience is that utility customers do not like erratic utility rate increases as they are difficult to plan for and accommodate particularly for large utility customers. City of Lakeville, MN Water and Sewer Fund Analysis Page 14 Comparison of Projected Rate Increases 14.000% 12.000% 10.000% 8.000% 6.000% 4.000% 2.000% 0.000% 2014201520162017201820192020202120222023 SEWER UTILITY PROJECTIONS - SCENARIO FIVE SEWER UTILITY PROJECTIONS - SCENARIO TWO Cash balances in the SewerFund are projected to be at orabove the minimum recommended amounts over the planning period as shown in the chart below. Debt service coverage ratio is projected to be above 2.0 in each year. Cash Balance -Sewer $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2014201520162017201820192020202120222023 Cash BalanceMinimum Reserve The average quarterly water and sewer bill for a residential customer would rise from its current level of $82.36 per quarter to a level of $117.67 per quarter in 2022. This is $2.06 less than the Scenario Two projected quarterly bill of City of Lakeville, MN Water and Sewer Fund Analysis Page 15 $119.73. Lakeville’s sewer rates under this scenario will rise and fall based on each year’s rate increase compared to those of the surrounding communities and are projected to be the in the middle of the group in 2022. As in Scenario Two, we assume for the purposes of our projections that other cities will raise their sewer rates at 5% annually. Quarterly Bill -Residential Sewer $120.00 $110.00 $100.00 Apple Valley $90.00 Bloomington Burnsville Eagan $80.00 Farmington Inver Grove Heights $70.00 Lakeville Rosemount $60.00 $50.00 $40.00 2013201420152016201720182019202020212022 Scenario Six Scenario Six projects a 3% rate increase in the Sewer Fund for 2014 then projects future rate increases each year at a rate the enables the Fund to meet the recommended minimum reserve requirements. Like Scenario Five, this results in projected rate increases that vary erratically from 0% in some years to 15.683% in one year as shown in the table on the following page. This scenario assumes the same capital improvements and debt financing as in Scenario Two. City of Lakeville, MN Water and Sewer Fund Analysis Page 16 SewerSewer Scenario Two Scenario Six Year Projected Rate Projected Rate IncreasesIncreases 20146.35%3.00% 20156.35%3.630% 20166.35%15.683% 20176.00%2.716% 20182.90%1.117% 20192.90%2.480% 20202.90%8.951% 20212.90%0.00% 20222.90%0.00% 20232.50%5.034% The chart on the following page shows these projected rate increases each year. Again, our experience is that utility customers do not like erratic utility rate increases as they are difficult to plan for and accommodate particularly for large utility customers. Comparison of Rate Increases 18.000% 16.000% 14.000% 12.000% 10.000% 8.000% 6.000% 4.000% 2.000% 0.000% 2014201520162017201820192020202120222023 SEWER UTILITY PROJECTIONS - SCENARIO SIX SEWER UTILITY PROJECTIONS - SCENARIO TWO Cash balances in the SewerFund are projected to be at or above the minimum recommended amounts over the planning period as shown in the chart below. Debt service coverage ratio is projected to be above 2.0 in each year. City of Lakeville, MN Water and Sewer Fund Analysis Page 17 Cash Balance -Sewer $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2014201520162017201820192020202120222023 Cash BalanceMinimum Reserve The average quarterly water and sewer bill for a residential customer would rise from its current level of $82.36 per quarter to a level of $117.67 per quarter in 2022as in Scenario Five. This is $2.06 less than the Scenario Two projected quarterly bill of $119.73. Lakeville’s sewer rates under this scenario will rise and fall based on each year’s rate increase compared to those of the surrounding communities and are projected to be the in the middle of the group in 2022. As in Scenario Two, we assume for the purposes of our projections that other cities will raise their sewer rates at 5% annually. Quarterly Bill -Residential Sewer $120.00 $110.00 $100.00 Apple Valley $90.00 Bloomington Burnsville Eagan $80.00 Farmington Inver Grove Heights $70.00 Lakeville Rosemount $60.00 $50.00 $40.00 2013201420152016201720182019202020212022 City of Lakeville, MN Water and Sewer Fund Analysis Page 18 Recommendations Ourprojectedfuture financial performance of the Water and Sewer Funds incorporating anticipating increases in operations and maintenanceexpenses and the City’s capital improvementprogram shows that rate increases are need in each fund. In our memorandum of November 8, 2013 we recommended rate increases in the Water and Sewer Utility based on Scenario Two. These were recommended because theywill provide sufficient revenues to adequately fund water and sewer operations and capital costs and provide an adequate level of cash reserves while minimizing the impact on rates to the greatest extent possible.Scenario Two recommended a balanced approach to financing needed capital assets incorporating both debt and cash to minimize the rate increases needed. The recommended rate increases for the Water Fund were 4.25% each year while those for the Sewer Utility were 6.35% in 2014 through 2016, 6.00% in 2017 then declining to 2.90% in the period 2018 –2021 and further declining to 2.50% in 2022 and 2023 as shown in the table below. YearWaterSewer 20144.25%6.35% 20154.25%6.35% 20164.25%6.35% 20174.25%6.00% 20184.25%2.90% 20194.25%2.90% 20204.25%2.90% 20214.25%2.90% 20224.25%2.50% 20234.25%2.50% The additional Scenarios Three and Four we evaluated for the Sewer Fund showed that limiting rate increases to less than 3% each year would cause the Sewer Fund to not meet recommended cash reserve levels and to actually run out of cash. The additional Scenarios Five and Six we evaluated for the Sewer Fund would meet recommended cash reserve levels each year, but result in very erratic rate increases that are, in our experience, problematic for utility customers. Of the scenarios evaluated, it is our opinion that Scenario Two provides the best alternative for the City and its utility customers over the long-term. These recommendations are based on information provided to us by the City of Lakeville. The City will need to monitor the performance of the Water and SewerUtilitiesand make any necessary adjustments based upon actual performance and on the actual construction costs of the anticipated capital improvements. We would also point out that we have not included a sensitivity analysis for projected capital improvement costs. A sensitivity analysis would evaluate the utility rate impacts of actual construction improvements costs being more or less than projected costs.However, itis important to recognize that the actual cost of capital improvements may be greater than those projected which would impact projected rate increases. This differencecan arise because the capital improvement plan is generally developed based on preliminary information and current construction costs. Costs can change as the projects get more clearly defined and construction costs at the time of the actual constructionvary from those at the time of planning. City of Lakeville, MN Water and Sewer Fund Analysis Page19 Annual Capital Outlays - Water and Sewer YearProjectDeptCostYearProjectDeptCost 2013Well RehabWater60,0002013#18 Lift Station RehabSewer35,000 2013Water Meter ReplacementWater64,2002013#22 Lift Station RehabSewer15,000 2013WTFWater71,5002013#3 Lift Station RehabSewer48,000 2013EquipmentWater131,1932013I&I RepairsSewer50,000 2013Water Main Replace - Clays AcresWater2,474,0002013Misc EquipmentSewer94,903 2013Sanitary Sewer Rehabilitation Proj 13-02Sewer128,300 2013Total - Water2,800,8932013Total - Sewer371,203 2014Water TowerWater10,0002014#11 Lift Station RehabSewer40,000 2014WTFWater27,0002014#19 Lift Station RehabSewer35,000 2014Well RehabWater60,0002014#5 Lift Station RehabSewer48,000 2014EquipmentWater67,7402014I/I ImprovementsSewer177,000 2014Water Main ReplacementsWater1,949,1872014Misc EquipmentSewer290,609 2014Water Meter ReplacementWater375,9702014Sanitary Sewer Rehabilitation Proj 14-02Sewer175,000 2014Total - Water2,489,8972014Total - Sewer765,609 2015Well RehabWater60,0002015#12 Lift Station RehabSewer35,000 2015EquipmentWater118,5492015#13 Lift Station RehabSewer35,000 2015Water Main ReplacementsWater2,261,7942015#6 Lift Station RehabSewer175,000 2015Water Meter ReplacementWater422,0902015I&I RepairsSewer77,000 2015WTFWater661,0002015I/I ImprovementsSewer100,000 2015Misc EquipmentSewer118,549 2015Total - Water3,523,4332015Total - Sewer540,549 2016EquipmentWater27,1072016EquipmentSewer26,116 2016Tower and Reservoir PaintingWater45,0002016I/I ImprovementsSewer100,000 2016Well RehabWater60,0002016Lift Station RehabSewer835,000 2016Water Meter ReplacementWater190,9072016Sewer VactorSewer440,000 2016Water Main ReplacementsWater1,186,9342016Total - Sewer1,401,116 2016Total - Water1,509,948 2017EquipmentSewer86,777 2017Tower and Reservoir PaintingWater40,0002017GrindersSewer60,000 2017EquipmentWater86,7772017I/I ImprovementsSewer100,000 2017Well RehabWater120,0002017Lift Station RehabSewer35,000 2017Water Meter ReplacementWater199,330 2017Water Main ReplacementsWater1,440,547 2017Total - Water1,886,6542017Total - Sewer281,777 2018EquipmentWater86,3422018EquipmentSewer86,342 2018WellsWater165,0002018I/I ImprovementsSewer100,000 2018Water Meter ReplacementWater201,2742018Lift Station RehabSewer50,000 2018Water Main ReplacementsWater1,494,558 2018Total - Water1,947,1742018Total - Sewer236,342 2019EquipmentWater61,0692019EquipmentSewer61,069 2019WellsWater120,0002019I/I ImprovementsSewer100,000 2019Water Meter ReplacementsWater208,7112019Lift Station RehabSewer15,000 2019Water Main ReplacementsWater1,500,000 2019Total - Water1,889,7802019Total - Sewer176,069 City of Lakeville, MN Water and Sewer Fund Analysis Page 20 Annual Capital Outlays - Water and Sewer 2020EquipmentWater49,7282020EquipmentSewer317,172 2020WellsWater120,0002020I/I ImprovementsSewer100,000 2020Water Meter ReplacementsWater210,8082020Lift Station RehabSewer200,000 2020Water Main ReplacementsWater1,500,000 2020Total - Water1,880,5362020Total - Sewer617,172 2021EquipmentWater11,2582021EquipmentSewer11,258 2021WellsWater120,0002021I/I ImprovementsSewer100,000 2021Water Meter ReplacementsWater214,809 2021Water Main ReplacementsWater1,500,000 2021Total - Water1,846,0672021Total - Sewer111,258 2022WellsWater60,0002022EquipmentSewer556,003 2022EquipmentWater179,6002022I/I ImprovementsSewer100,000 2022Water Meter ReplacementsWater218,902 2022Water Main ReplacementsWater1,500,000 2022Total - Water1,958,5022022Total - Sewer656,003 2023EquipmentWater10,0002023EquipmentSewer10,000 2023WellsWater120,0002023I/I ImprovementsSewer100,000 2023Water Meter ReplacementsWater219,902 2023Water Main ReplacementsWater1,500,000 2023Total - Water1,849,9022023Total - Sewer110,000 Annual Capital Spending $4,000 $3,000 $2,000 $1,000 $0 20132014201520162017201820192020202120222023 SewerWater City of Lakeville, MN Water and Sewer Fund Analysis Page21 Sample Utility Bills –Scenario One City of Lakeville, MN Water and Sewer Fund Analysis Page 22 Sample Utility Bills –Scenario One(Continued) City of Lakeville, MN Water and Sewer Fund Analysis Page 23 Sample Utility Bills –Scenario Two City of Lakeville, MN Water and Sewer Fund Analysis Page 24 Sample Utility Bills –Scenario Two (Continued) City of Lakeville, MN Water and Sewer Fund Analysis Page 25 Sample Utility Bills –ScenariosThreeand Four City of Lakeville, MN Water and Sewer Fund Analysis Page 26 Sample Utility Bills –Scenario Three and Four (Continued) City of Lakeville, MN Water and Sewer Fund Analysis Page 27 Sample Utility Bills –Scenario Five City of Lakeville, MN Water and Sewer Fund Analysis Page 28 Sample Utility Bills –Scenario Five (Continued) City of Lakeville, MN Water and Sewer Fund Analysis Page 29 Sample Utility Bills –Scenario Six City of Lakeville, MN Water and Sewer Fund Analysis Page 30 Sample Utility Bills –Scenario Six (Continued) City of Lakeville, MN Water and Sewer Fund Analysis Page 31 Water Utility Projections –Scenario One Average Projected Projected Water Rate Adjustment7.50%7.50%7.50%7.25%7.25%7.25%7.25%0.00%0.00%0.00% Calculate ChangeChange 2009-20132014-202320132014201520162017201820192020202120222023 Operating Revenues -2.84% Charges for services3,058,0003,315,2663,608,0223,927,2824,265,8054,634,1615,035,0015,471,2105,552,8925,635,9305,720,348 -2.93%0.25% Penalties and interest177,822178,267178,712179,159179,607180,056180,506180,957181,410181,863182,318 0.00%0.00% Connection fees----------- N/A0.25% Miscellaneous2,5002,5062,5132,5192,5252,5312,5382,5442,5502,5572,563 Total Operating Revenue3,238,3223,496,0393,789,2474,108,9604,447,9374,816,7485,218,0445,654,7115,736,8525,820,3505,905,229 Operating Expenses 2.94%2.30% Personnel904,130948,019969,823992,1291,014,9481,038,2921,062,1731,086,6031,111,5951,137,1611,163,316 3.02%3.00% Commodities343,482349,067373,815385,029396,580408,478420,732433,354446,355459,745473,538 -2.77%2.00% Contractual services1,122,6351,147,2501,151,6881,174,7221,198,2161,222,1811,246,6241,271,5571,296,9881,322,9271,349,386 0.00%0.00% Major maintenance----------- Existing Depreciation2,091,2512,086,4452,044,7162,003,8221,963,7451,924,4701,885,9811,848,2611,811,2961,775,0701,739,569 New Depreciation-74,513135,630273,563314,631432,406507,559537,559537,559537,559537,559 Total Operating Expenses4,461,4984,605,2944,675,6734,829,2654,888,1215,025,8275,123,0695,177,3335,203,7925,232,4635,263,367 Operating Income (Loss)(1,223,176)(1,109,255)(886,426)(720,306)(440,184)(209,078)94,976477,378533,060587,887641,862 Non Operating Revenues (Expenses) 0.73% Investment Earnings16,16222,29623,51021,43917,49321,84325,19223,28024,12225,32025,804 Existing Special Assessments- New Special Assessments---------- Intergovernmental revenue1,6321,6321,6321,6321,6321,6321,6321,6321,6321,6321,632 Other revenue- Bond Interest - Existing----------- Bond Interest - New-(51,000)(114,405)(103,904)(130,304)(145,917)(128,481)(110,523)(92,025)(72,973) Gain/(Loss) on disposal4,5004,5004,5004,5004,5004,5004,5004,5004,5004,5004,500 Total Non Operating Revenues (Expenses)22,29428,428(21,358)(86,835)(80,279)(102,329)(114,593)(99,069)(80,269)(60,573)(41,037) Net Income (Loss) Before Transfers(1,200,882)(1,080,827)(907,784)(807,140)(520,463)(311,407)(19,618)378,308452,791527,313600,825 Operating Transfers Transfers In- Transfers (Out) to General Fund(136,521)(143,107)(146,412)(150,804)(155,328)(159,988)(164,788)(169,732)(174,824)(180,068)(185,470) Transfers (Out) to Water Fund- Transfers (Out) - other- Total Operating Transfers(136,521)(143,107)(146,412)(150,804)(155,328)(159,988)(164,788)(169,732)(174,824)(180,068)(185,470) Net Income (Loss)(1,337,403)(1,223,934)(1,054,196)(957,944)(675,792)(471,396)(184,406)208,577277,967347,245415,354 City of Lakeville, MN Water and Sewer Fund Analysis Page 32 Water Utility Projections –Scenario One(Continued) Average Projected Projected Water Rate AdjustmentCalculate7.50%7.50%7.50%7.25%7.25%7.25%7.25%0.00%0.00%0.00% ChangeChange 2009-20132014-202320132014201520162017201820192020202120222023 Beginning Cash & Investments5,120,4833,073,4383,220,5652,936,7852,396,2392,992,1773,450,9143,189,0823,304,3203,468,4953,534,788 Net Income(1,337,403)(1,223,934)(1,054,196)(957,944)(675,792)(471,396)(184,406)208,577277,967347,245415,354 Depreciation2,091,2512,160,9582,180,3472,277,3852,278,3762,356,8762,393,5402,385,8202,348,8552,312,6292,277,127 Acquisition and Construction of Assets(2,800,893)(2,489,897)(3,523,433)(1,509,948)(1,886,654)(1,947,174)(1,889,780)(1,880,536)(1,846,067)(1,958,502)(1,849,902) Proceeds from New Long-Term Debt-1,700,0002,261,794-1,240,5471,000,000----- Payments on New Long-Term Debt-(148,292)(350,038)(360,539)(479,569)(581,186)(598,622)(616,581)(635,078)(654,131) Payments on Existing Long-Term Debt----------- Ending Cash Balance3,073,4383,220,5652,936,7852,396,2392,992,1773,450,9143,189,0823,304,3203,468,4953,534,7883,723,238 Minimum Cash Balance For ongoing operations25.00%809,581874,010947,3121,027,2401,111,9841,204,1871,304,5111,413,6781,434,2131,455,0871,476,307 For debt service100.00%-199,292464,443464,443609,873727,104727,104727,104727,104727,104727,104 For Revenue Deviations20.00%611,600663,053721,604785,456853,161926,8321,007,0001,094,2421,110,5781,127,1861,144,070 1,736,3552,133,3592,277,1392,575,0182,858,1233,038,6153,235,0233,271,8953,309,3773,347,480 Minimum Cash Balance Required1,421,181 Amount Over (Under) Minimum1,652,2581,484,210803,425119,100417,159592,792150,46769,297196,600225,411375,757 Debt Service Coverage Operating Revenues3,238,3223,496,0393,789,2474,108,9604,447,9374,816,7485,218,0445,654,7115,736,8525,820,3505,905,229 Less (Operating Expenditures)(4,461,498)(4,605,294)(4,675,673)(4,829,265)(4,888,121)(5,025,827)(5,123,069)(5,177,333)(5,203,792)(5,232,463)(5,263,367) Add in Depreciation2,091,2512,160,9582,180,3472,277,3852,278,3762,356,8762,393,5402,385,8202,348,8552,312,6292,277,127 Plus Non-Operating Investment Earnings16,16222,29623,51021,43917,49321,84325,19223,28024,12225,32025,804 Net Revenues884,2371,073,9991,317,4311,578,5181,855,6852,169,6412,513,7072,886,4782,906,0362,925,8362,944,793 Debt Service--199,292464,443464,443609,873727,104727,104727,104727,104727,104 Debt Service Coverage--6.613.404.003.563.463.974.004.024.05 City of Lakeville, MN Water and Sewer Fund Analysis Page 33 Sewer Utility Projections –Scenario One Average Projected Calculate Projected Sewer Rate Adjustment10.500%10.500%10.500%0.000%0.000%0.000%0.000%0.000%0.000%0.000% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Revenues 3.54% Service charges4,359,1664,899,0965,511,9996,201,7426,315,2946,431,0366,549,0116,669,2626,791,8356,916,7757,044,128 0.00% Connection rees----------- 0.00% Penalties and interest----------- 0.00% Miscellaneous----------- Total Revenue4,359,1664,899,0965,511,9996,201,7426,315,2946,431,0366,549,0116,669,2626,791,8356,916,7757,044,128 Operating Expenses 2.79%2.30% Personnel641,895677,457693,039708,978725,285741,966759,032776,489794,349812,619831,309 0.00%5.00% Benefits----------- 6.54%5.00% Commodities87,21684,48182,64286,77491,11395,668100,452105,474110,748116,286122,100 -12.53%2.00% Contractual services258,918276,999270,516275,926281,445287,074292,815298,672304,645310,738316,953 0.00%5.00% Major maintenance----------- 6.80%6.80% MCES charges3,092,1953,297,9823,522,2453,761,7574,017,5574,290,7514,582,5224,894,1335,226,9345,582,3665,961,967 0.00%0.00% Other charges----------- Existing Depreciation1,224,7151,218,9011,133,6111,110,9391,088,7201,066,9461,045,6071,024,6951,004,201984,117964,434 New Depreciation29,12680,987122,322256,464283,217298,851308,458362,175365,301422,902 Total Operating Expenses5,304,9395,584,9465,783,0396,066,6976,460,5846,765,6227,079,2797,407,9227,803,0528,171,4268,619,664 Operating Income (Loss)(945,773)(685,850)(271,040)135,045(145,290)(334,586)(530,268)(738,659)(1,011,217)(1,254,651)(1,575,536) Non Operating Revenues (Expenses) 0.73% Investment Earnings19,08719,04516,68618,91417,94723,88428,81932,72831,80832,79427,873 Existing Special Assessments----------- New Special Assessments---------- Intergovernmental revenue1,6321,6321,6321,6321,6321,6321,6321,6321,6321,6321,632 Other revenue- Bond Interest - Existing----------- Bond Interest - New/Projected---------- Gain/(Loss) on disposal4,5004,5004,5004,5004,5004,5004,5004,5004,5004,5004,500 Total Non Operating Revenues (Expenses)25,21925,17722,81825,04624,07930,01634,95138,86037,94038,92634,005 Net Income (Loss) Before Transfers(920,554)(660,673)(248,222)160,090(121,211)(304,570)(495,317)(699,799)(973,277)(1,215,726)(1,541,531) Operating Transfers Transfers In19,02519,04518,85718,85718,85718,85718,85718,85718,85718,85718,857 Transfers (Out) to General Fund(138,143)(146,428)(135,165)(139,220)(143,397)(147,698)(152,129)(156,693)(161,394)(166,236)(171,223) Transfers (Out) - other-(115)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340) Total Operating Transfers(119,118)(127,498)(120,648)(124,703)(128,880)(133,181)(137,612)(142,176)(146,877)(151,719)(156,706) Net Income (Loss)(1,039,672)(788,171)(368,870)35,387(250,091)(437,752)(632,929)(841,975)(1,120,154)(1,367,444)(1,698,237) City of Lakeville, MN Water and Sewer Fund Analysis Page 34 Sewer Utility Projections –Scenario One(Continued) Average Projected Calculate Projected Sewer Rate Adjustment10.500%10.500%10.500%0.000%0.000%0.000%0.000%0.000%0.000%0.000% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Beginning Cash & Investments 2,777,6482,591,4882,285,7352,590,9142,458,4463,271,7623,947,8314,483,2914,357,2974,492,2613,818,231 Net Income(1,039,672)(788,171)(368,870)35,387(250,091)(437,752)(632,929)(841,975)(1,120,154)(1,367,444)(1,698,237) Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Acquisition and Construction of Assets(371,203)(765,609)(540,549)(1,401,116)(281,777)(236,342)(176,069)(617,172)(111,258)(656,003)(110,000) Proceeds from New Long-Term Debt----------- Payments on New Long-Term Debt---------- Payments on Existing Long-Term Debt----------- Ending Cash Balance2,591,4882,285,7352,590,9142,458,4463,271,7623,947,8314,483,2914,357,2974,492,2613,818,2313,397,330 Minimum Cash Balance 40.00% For ongoing operations2,121,9762,233,9792,313,2162,426,6792,584,2342,706,2492,831,7112,963,1693,121,2213,268,5703,447,866 100.00% For debt service----------- Minimum Cash Balance Required 2,121,9762,233,9792,313,2162,426,6792,584,2342,706,2492,831,7112,963,1693,121,2213,268,5703,447,866 469,51251,756277,69831,767687,5291,241,5821,651,5801,394,1281,371,040549,661(50,535) Amount Over (Under) Minimum Debt Service Coverage Operating Revenues4,359,1664,899,0965,511,9996,201,7426,315,2946,431,0366,549,0116,669,2626,791,8356,916,7757,044,128 Less (Operating Expenditures)(5,304,939)(5,584,946)(5,783,039)(6,066,697)(6,460,584)(6,765,622)(7,079,279)(7,407,922)(7,803,052)(8,171,426)(8,619,664) Add in Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Plus Non-Operating Investment Earnings19,08719,04516,68618,91417,94723,88428,81932,72831,80832,79427,873 Net Revenues298,029581,222960,2441,387,2191,217,8411,039,460843,009627,222386,967127,560(160,327) Debt Service----------- Debt Service Coverage ----------- City of Lakeville, MN Water and Sewer Fund Analysis Page 35 Water Utility Projections –Scenario Two Average Projected Projected Water Rate AdjustmentCalculate4.250%4.250%4.250%4.250%4.250%4.250%4.250%4.250%4.250%4.250% ChangeChange 2009-20132014-202320132014201520162017201820192020202120222023 Operating Revenues -2.84% Charges for services3,058,0003,218,5063,400,1293,592,2463,795,4704,010,4544,237,8864,478,4964,733,0655,002,4045,287,382 -2.93%0.25% Penalties and interest177,822178,267178,712179,159179,607180,056180,506180,957181,410181,863182,318 0.00%0.00% Connection fees----------- N/A0.25% Miscellaneous2,5002,5062,5132,5192,5252,5312,5382,5442,5502,5572,563 Total Operating Revenue3,238,3223,399,2793,581,3543,773,9233,977,6024,193,0414,420,9294,661,9984,917,0255,186,8245,472,263 Operating Expenses 2.94%2.30% Personnel904,130948,019969,823992,1291,014,9481,038,2921,062,1731,086,6031,111,5951,137,1611,163,316 3.02%3.00% Commodities343,482349,067373,815385,029396,580408,478420,732433,354446,355459,745473,538 -2.77%2.00% Contractual services1,122,6351,147,2501,151,6881,174,7221,198,2161,222,1811,246,6241,271,5571,296,9881,322,9271,349,386 0.00%0.00% Major maintenance----------- Existing Depreciation2,091,2512,086,4452,044,7162,003,8221,963,7451,924,4701,885,9811,848,2611,811,2961,775,0701,739,569 New Depreciation-74,513135,630273,563314,631432,406507,559537,559537,559537,559537,559 Total Operating Expenses4,461,4984,605,2944,675,6734,829,2654,888,1215,025,8275,123,0695,177,3335,203,7925,232,4635,263,367 Operating Income (Loss)(1,223,176)(1,206,015)(1,094,319)(1,055,342)(910,519)(832,786)(702,139)(515,336)(286,767)(45,639)208,896 Non Operating Revenues (Expenses) 0.73% Investment Earnings16,16222,29641,13419,94844,57434,04224,09848,53737,79228,58241,841 Existing Special Assessments- New Special Assessments--29,58029,58029,58029,58029,58029,58029,58029,580 Intergovernmental revenue1,6321,6321,6321,6321,6321,6321,6321,6321,6321,6321,632 Other revenue- Bond Interest - Existing----------- Bond Interest - New-(147,384)(139,746)(255,502)(236,533)(216,953)(331,744)(299,109)(265,449)(320,733) Gain/(Loss) on disposal4,5004,5004,5004,5004,5004,5004,5004,5004,5004,5004,500 Total Non Operating Revenues (Expenses)22,29428,428(100,118)(84,086)(175,216)(166,778)(157,143)(247,495)(225,605)(201,155)(243,180) Net Income (Loss) Before Transfers(1,200,882)(1,177,587)(1,194,438)(1,139,428)(1,085,734)(999,564)(859,282)(762,831)(512,372)(246,794)(34,284) Operating Transfers Transfers In- Transfers (Out) to General Fund(136,521)(143,107)(146,412)(150,804)(155,328)(159,988)(164,788)(169,732)(174,824)(180,068)(185,470) Transfers (Out) to Water Fund- Transfers (Out) - other- Total Operating Transfers(136,521)(143,107)(146,412)(150,804)(155,328)(159,988)(164,788)(169,732)(174,824)(180,068)(185,470) Net Income (Loss)(1,337,403)(1,320,694)(1,340,850)(1,290,232)(1,241,063)(1,159,552)(1,024,070)(932,562)(687,195)(426,863)(219,754) City of Lakeville, MN Water and Sewer Fund Analysis Page 36 Water Utility Projections –Scenario Two (Continued) Average Projected Projected Water Rate Adjustment4.250%4.250%4.250%4.250%4.250%4.250%4.250%4.250%4.250%4.250% Calculate ChangeChange 2009-20132014-202320132014201520162017201820192020202120222023 Beginning Cash & Investments 5,120,4833,073,4385,634,7872,732,6166,105,9874,663,3003,301,1366,648,9315,177,0123,915,3295,731,658 Net Income(1,337,403)(1,320,694)(1,340,850)(1,290,232)(1,241,063)(1,159,552)(1,024,070)(932,562)(687,195)(426,863)(219,754) Depreciation2,091,2512,160,9582,180,3472,277,3852,278,3762,356,8762,393,5402,385,8202,348,8552,312,6292,277,127 Acquisition and Construction of Assets(2,800,893)(2,489,897)(3,523,433)(1,509,948)(1,886,654)(1,947,174)(1,889,780)(1,880,536)(1,846,067)(1,958,502)(1,849,902) Proceeds from New Long-Term Debt-4,210,981-4,122,039--4,500,000--3,000,000- Payments on New Long-Term Debt-(218,234)(225,873)(593,346)(612,315)(631,894)(1,044,640)(1,077,276)(1,110,935)(1,407,343) Payments on Existing Long-Term Debt----------- Ending Cash Balance3,073,4385,634,7872,732,6166,105,9874,663,3003,301,1366,648,9315,177,0123,915,3295,731,6584,531,786 Minimum Cash Balance 25.00% For ongoing operations809,581849,820895,338943,481994,4011,048,2601,105,2321,165,4991,229,2561,296,7061,368,066 100.00% For debt service-365,619365,619848,847848,847848,8471,376,3851,376,3851,376,3851,728,0761,728,076 20.00% For Revenue Deviations611,600643,701680,026718,449759,094802,091847,577895,699946,6131,000,4811,057,476 Minimum Cash Balance Required1,421,1811,859,1401,940,9832,510,7772,602,3422,699,1983,329,1943,437,5833,552,2544,025,2634,153,619 Amount Over (Under) Minimum1,652,2583,775,647791,6333,595,2102,060,958601,9373,319,7371,739,429363,0751,706,395378,168 Debt Service Coverage Operating Revenues3,238,3223,399,2793,581,3543,773,9233,977,6024,193,0414,420,9294,661,9984,917,0255,186,8245,472,263 Less (Operating Expenditures)(4,461,498)(4,605,294)(4,675,673)(4,829,265)(4,888,121)(5,025,827)(5,123,069)(5,177,333)(5,203,792)(5,232,463)(5,263,367) Add in Depreciation2,091,2512,160,9582,180,3472,277,3852,278,3762,356,8762,393,5402,385,8202,348,8552,312,6292,277,127 Plus Non-Operating Investment Earnings16,16222,29641,13419,94844,57434,04224,09848,53737,79228,58241,841 Net Revenues884,237977,2401,127,1611,241,9911,412,4311,558,1331,715,4991,919,0212,099,8802,295,5722,527,865 Debt Service--365,619365,619848,847848,847848,8471,376,3851,376,3851,376,3851,728,076 Debt Service Coverage--3.083.401.661.842.021.391.531.671.46 City of Lakeville, MN Water and Sewer Fund Analysis Page 37 SewerUtility Projections –Scenario Two Average Projected Calculate Projected Sewer Rate Adjustment6.350%6.350%6.350%6.000%2.900%2.900%2.900%2.900%2.500%2.500% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Revenues 3.54% Service charges4,359,1664,715,2525,106,0475,529,3485,968,1746,253,6826,552,9646,866,6917,195,5647,511,0237,840,445 0.00% Connection fees----------- 0.00% Penalties and interest----------- 0.00% Miscellaneous----------- Total Revenue4,359,1664,715,2525,106,0475,529,3485,968,1746,253,6826,552,9646,866,6917,195,5647,511,0237,840,445 Operating Expenses 2.79%2.30% Personnel641,895677,457693,039708,978725,285741,966759,032776,489794,349812,619831,309 6.54%5.00% Commodities87,21684,48182,64286,77491,11395,668100,452105,474110,748116,286122,100 -12.53%2.00% Contractual services258,918276,999270,516275,926281,445287,074292,815298,672304,645310,738316,953 6.80%6.80% MCES charges3,092,1953,297,9823,522,2453,761,7574,017,5574,290,7514,582,5224,894,1335,226,9345,582,3665,961,967 0.00%0.00% Other charges----------- Existing Depreciation1,224,7151,218,9011,133,6111,110,9391,088,7201,066,9461,045,6071,024,6951,004,201984,117964,434 New Depreciation29,12680,987122,322256,464283,217298,851308,458362,175365,301422,902 Total Operating Expenses5,304,9395,584,9465,783,0396,066,6976,460,5846,765,6227,079,2797,407,9227,803,0528,171,4268,619,664 Operating Income (Loss)(945,773)(869,694)(676,993)(537,349)(492,410)(511,941)(526,314)(541,230)(607,488)(660,403)(779,219) Non Operating Revenues (Expenses) 0.73% Investment Earnings19,08719,04520,27118,79819,83821,21822,80224,99423,75726,60428,599 Existing Special Assessments----------- New Special Assessments---------- Intergovernmental revenue1,6321,6321,6321,6321,6321,6321,6321,6321,6321,6321,632 Other revenue- Bond Interest - Existing----------- Bond Interest - New/Projected-(18,500)(16,342)(42,168)(36,357)(30,397)(25,204)(19,873)(16,249)(22,516) Gain/(Loss) on disposal4,5004,5004,5004,5004,5004,5004,5004,5004,5004,5004,500 Total Non Operating Revenues (Expenses)25,21925,1777,9038,588(16,198)(9,007)(1,463)5,92210,01716,48712,216 Net Income (Loss) Before Transfers(920,554)(844,517)(669,089)(528,761)(508,608)(520,947)(527,777)(535,308)(597,472)(643,915)(767,003) Operating Transfers Transfers In19,02519,04518,85718,85718,85718,85718,85718,85718,85718,85718,857 Transfers (Out) to General Fund(138,143)(146,428)(135,165)(139,220)(143,397)(147,698)(152,129)(156,693)(161,394)(166,236)(171,223) Transfers (Out) - other-(115)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340) Total Operating Transfers(119,118)(127,498)(120,648)(124,703)(128,880)(133,181)(137,612)(142,176)(146,877)(151,719)(156,706) Net Income (Loss)(1,039,672)(972,015)(789,737)(653,464)(637,487)(654,129)(665,390)(677,484)(744,349)(795,634)(923,709) City of Lakeville, MN Water and Sewer Fund Analysis Page 38 SewerUtility Projections –Scenario Two (Continued) Average Projected Calculate Projected Sewer Rate Adjustment6.350%6.350%6.350%6.000%2.900%2.900%2.900%2.900%2.500%2.500% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Beginning Cash & Investments 2,777,6482,591,4882,776,8912,575,1282,717,5772,906,5863,123,5563,423,8323,254,4123,644,3773,917,730 Net Income(1,039,672)(972,015)(789,737)(653,464)(637,487)(654,129)(665,390)(677,484)(744,349)(795,634)(923,709) Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Acquisition and Construction of Assets(371,203)(765,609)(540,549)(1,401,116)(281,777)(236,342)(176,069)(617,172)(111,258)(656,003)(110,000) Proceeds from New Long-Term Debt-675,000-1,052,000-----500,000- Payments on New Long-Term Debt-(86,074)(88,232)(236,911)(242,722)(202,723)(207,916)(120,804)(124,428)(249,473) Payments on Existing Long-Term Debt----------- Ending Cash Balance2,591,4882,776,8912,575,1282,717,5772,906,5863,123,5563,423,8323,254,4123,644,3773,917,7304,021,884 Minimum Cash Balance 40.00% For ongoing operations2,121,9762,233,9792,313,2162,426,6792,584,2342,706,2492,831,7112,963,1693,121,2213,268,5703,447,866 100.00% For debt service-104,574104,574279,079279,079233,120233,120140,677140,677271,988271,988 Minimum Cash Balance Required 2,121,9762,338,5532,417,7902,705,7582,863,3132,939,3693,064,8323,103,8453,261,8983,540,5593,719,854 469,512438,338157,33811,81943,274184,187359,000150,567382,480377,171302,029 Amount Over (Under) Minimum Debt Service Coverage Operating Revenues4,359,1664,715,2525,106,0475,529,3485,968,1746,253,6826,552,9646,866,6917,195,5647,511,0237,840,445 Less (Operating Expenditures)(5,304,939)(5,584,946)(5,783,039)(6,066,697)(6,460,584)(6,765,622)(7,079,279)(7,407,922)(7,803,052)(8,171,426)(8,619,664) Add in Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Plus Non-Operating Investment Earnings19,08719,04520,27118,79819,83821,21822,80224,99423,75726,60428,599 Net Revenues298,029397,378557,877714,710872,613859,440840,946816,917782,645715,619636,716 Debt Service--104,574104,574279,079279,079233,120233,120140,677140,677271,988 Debt Service Coverage --5.336.833.133.083.613.505.565.092.34 City of Lakeville, MN Water and Sewer Fund Analysis Page 39 SewerUtility Projections –Scenario Three Average Projected Calculate Projected Sewer Rate Adjustment2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Revenues 3.54% Service charges4,359,1664,562,4184,780,3965,008,8815,248,3845,499,4395,762,6076,038,4766,327,6636,630,8146,948,609 0.00% Connection fees----------- 0.00% Penalties and interest----------- 0.00% Miscellaneous----------- Total Revenue4,359,1664,562,4184,780,3965,008,8815,248,3845,499,4395,762,6076,038,4766,327,6636,630,8146,948,609 Operating Expenses 2.79%2.30% Personnel641,895677,457693,039708,978725,285741,966759,032776,489794,349812,619831,309 0.00%5.00% Benefits----------- 6.54%5.00% Commodities87,21684,48182,64286,77491,11395,668100,452105,474110,748116,286122,100 -12.53%2.00% Contractual services258,918276,999270,516275,926281,445287,074292,815298,672304,645310,738316,953 0.00%5.00% Major maintenance----------- 6.80%6.80% MCES charges3,092,1953,297,9823,522,2453,761,7574,017,5574,290,7514,582,5224,894,1335,226,9345,582,3665,961,967 0.00%0.00% Other charges----------- Existing Depreciation1,224,7151,218,9011,133,6111,110,9391,088,7201,066,9461,045,6071,024,6951,004,201984,117964,434 New Depreciation29,12680,987122,322256,464283,217298,851308,458362,175365,301422,902 Total Operating Expenses5,304,9395,584,9465,783,0396,066,6976,460,5846,765,6227,079,2797,407,9227,803,0528,171,4268,619,664 Operating Income (Loss)(945,773)(1,022,528)(1,002,644)(1,057,816)(1,212,200)(1,266,183)(1,316,672)(1,369,445)(1,475,389)(1,540,612)(1,671,055) Non Operating Revenues (Expenses) 0.73% Investment Earnings19,08718,18721,17917,33614,56610,6526,6532,958--- Existing Special Assessments----------- New Special Assessments---------- Intergovernmental revenue1,6321,6321,6321,6321,6321,6321,6321,6321,6321,6321,632 Other revenue- Bond Interest - Existing----------- Bond Interest - New/Projected-(18,500)(16,342)(42,168)(36,357)(30,397)(25,204)(19,873)(16,249)(22,516) Gain/(Loss) on disposal4,5004,5004,5004,5004,5004,5004,5004,5004,5004,5004,500 Total Non Operating Revenues (Expenses)25,21924,3198,8117,126(21,471)(19,572)(17,612)(16,114)(13,741)(10,117)(16,384) Net Income (Loss) Before Transfers(920,554)(998,209)(993,832)(1,050,691)(1,233,671)(1,285,756)(1,334,283)(1,385,559)(1,489,130)(1,550,728)(1,687,439) Operating Transfers Transfers In19,02519,04518,85718,85718,85718,85718,85718,85718,85718,85718,857 Transfers (Out) to General Fund139,943(146,428)(135,165)(139,220)(143,397)(147,698)(152,129)(156,693)(161,394)(166,236)(171,223) Transfers (Out) - other-(115)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340) Total Operating Transfers158,968(127,498)(120,648)(124,703)(128,880)(133,181)(137,612)(142,176)(146,877)(151,719)(156,706) Net Income (Loss)(761,586)(1,125,707)(1,114,480)(1,175,393)(1,362,550)(1,418,937)(1,471,896)(1,527,736)(1,636,007)(1,702,447)(1,844,145) City of Lakeville, MN Water and Sewer Fund Analysis Page 40 SewerUtility Projections –Scenario Three (Continued) Average Projected Calculate Projected Sewer Rate Adjustment2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Beginning Cash & Investments 2,777,6482,869,5742,901,2852,374,7801,995,2991,459,245911,407405,177(614,495)(1,116,188)(1,749,648) Net Income(761,586)(1,125,707)(1,114,480)(1,175,393)(1,362,550)(1,418,937)(1,471,896)(1,527,736)(1,636,007)(1,702,447)(1,844,145) Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Acquisition and Construction of Assets(371,203)(765,609)(540,549)(1,401,116)(281,777)(236,342)(176,069)(617,172)(111,258)(656,003)(110,000) Proceeds from New Long-Term Debt-675,000-1,052,000-----500,000- Payments on New Long-Term Debt-(86,074)(88,232)(236,911)(242,722)(202,723)(207,916)(120,804)(124,428)(249,473) Payments on Existing Long-Term Debt----------- Ending Cash Balance2,869,5742,901,2852,374,7801,995,2991,459,245911,407405,177(614,495)(1,116,188)(1,749,648)(2,565,930) Minimum Cash Balance 40.00% For ongoing operations2,121,9762,233,9792,313,2162,426,6792,584,2342,706,2492,831,7112,963,1693,121,2213,268,5703,447,866 100.00% For debt service-104,574104,574279,079279,079233,120233,120140,677140,677271,988271,988 Minimum Cash Balance Required 2,121,9762,338,5532,417,7902,705,7582,863,3132,939,3693,064,8323,103,8453,261,8983,540,5593,719,854 747,598562,732(43,011)(710,459)(1,404,068)(2,027,962)(2,659,655)(3,718,340)(4,378,085)(5,290,207)(6,285,784) Amount Over (Under) Minimum Debt Service Coverage Operating Revenues4,359,1664,562,4184,780,3965,008,8815,248,3845,499,4395,762,6076,038,4766,327,6636,630,8146,948,609 Less (Operating Expenditures)(5,304,939)(5,584,946)(5,783,039)(6,066,697)(6,460,584)(6,765,622)(7,079,279)(7,407,922)(7,803,052)(8,171,426)(8,619,664) Add in Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Plus Non-Operating Investment Earnings19,08718,18721,17917,33614,56610,6526,6532,958--- Net Revenues298,029243,686233,134192,781147,55094,63234,440(33,335)(109,013)(191,194)(283,720) Debt Service--104,574104,574279,079279,079233,120233,120140,677140,677271,988 Debt Service Coverage --2.231.840.530.340.15(0.14)(0.77)(1.36)(1.04) City of Lakeville, MN Water and Sewer Fund Analysis Page 41 SewerUtility Projections –Scenario Four Average Projected Calculate Projected Sewer Rate Adjustment2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Revenues 3.54% Service charges4,359,1664,562,4184,780,3965,008,8815,248,3845,499,4395,762,6076,038,4766,327,6636,630,8146,948,609 0.00% Connection fees----------- 0.00% Penalties and interest----------- 0.00% Miscellaneous----------- Total Revenue4,359,1664,562,4184,780,3965,008,8815,248,3845,499,4395,762,6076,038,4766,327,6636,630,8146,948,609 Operating Expenses 2.79%2.30% Personnel641,895677,457693,039708,978725,285741,966759,032776,489794,349812,619831,309 6.54%5.00% Commodities87,21684,48182,64286,77491,11395,668100,452105,474110,748116,286122,100 -12.53%2.00% Contractual services258,918276,999270,516275,926281,445287,074292,815298,672304,645310,738316,953 6.80%6.80% MCES charges3,092,1953,297,9823,522,2453,761,7574,017,5574,290,7514,582,5224,894,1335,226,9345,582,3665,961,967 0.00%0.00% Other charges----------- Existing Depreciation1,224,7151,218,9011,133,6111,110,9391,088,7201,066,9461,045,6071,024,6951,004,201984,117964,434 New Depreciation29,12680,987122,322256,464283,217298,851308,458362,175365,301422,902 Total Operating Expenses5,304,9395,584,9465,783,0396,066,6976,460,5846,765,6227,079,2797,407,9227,803,0528,171,4268,619,664 Operating Income (Loss)(945,773)(1,022,528)(1,002,644)(1,057,816)(1,212,200)(1,266,183)(1,316,672)(1,369,445)(1,475,389)(1,540,612)(1,671,055) Non Operating Revenues (Expenses) 0.73% Investment Earnings19,08718,18721,17920,27818,88914,79110,6077,108--- Existing Special Assessments----------- New Special Assessments---------- Intergovernmental revenue1,6321,6321,6321,6321,6321,6321,6321,6321,6321,6321,632 Other revenue- Bond Interest - Existing----------- Bond Interest - New/Projected-(16,500)(28,966)(61,180)(55,481)(49,644)(45,636)(41,522)(39,149)(46,702) Gain/(Loss) on disposal4,5004,5004,5004,5004,5004,5004,5004,5004,5004,5004,500 Total Non Operating Revenues (Expenses)25,21924,31910,811(2,557)(36,159)(34,557)(32,905)(32,395)(35,390)(33,017)(40,570) Net Income (Loss) Before Transfers(920,554)(998,209)(991,832)(1,060,373)(1,248,359)(1,300,740)(1,349,576)(1,401,841)(1,510,779)(1,573,629)(1,711,625) Operating Transfers Transfers In19,02519,04518,85718,85718,85718,85718,85718,85718,85718,85718,857 Transfers (Out) to General Fund139,943(146,428)(135,165)(139,220)(143,397)(147,698)(152,129)(156,693)(161,394)(166,236)(171,223) Transfers (Out) - other-(115)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340) Total Operating Transfers158,968(127,498)(120,648)(124,703)(128,880)(133,181)(137,612)(142,176)(146,877)(151,719)(156,706) Net Income (Loss)(761,586)(1,125,707)(1,112,480)(1,185,076)(1,377,239)(1,433,922)(1,487,189)(1,544,017)(1,657,656)(1,725,348)(1,868,331) City of Lakeville, MN Water and Sewer Fund Analysis Page 42 SewerUtility Projections –Scenario Four (Continued) Average Projected Calculate Projected Sewer Rate Adjustment2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900%2.900% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Beginning Cash & Investments 2,777,6482,869,5742,901,2852,777,7402,587,4692,026,2211,453,004973,736(18,778)(497,463)(1,107,916) Net Income(761,586)(1,125,707)(1,112,480)(1,185,076)(1,377,239)(1,433,922)(1,487,189)(1,544,017)(1,657,656)(1,725,348)(1,868,331) Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Acquisition and Construction of Assets(371,203)(765,609)(540,549)(1,401,116)(281,777)(236,342)(176,069)(617,172)(111,258)(656,003)(110,000) Proceeds from New Long-Term Debt-675,000422,0001,287,000-----500,000- Payments on New Long-Term Debt-(107,114)(124,340)(247,417)(253,116)(160,469)(164,477)(76,147)(78,520)(202,279) Payments on Existing Long-Term Debt----------- Ending Cash Balance2,869,5742,901,2852,777,7402,587,4692,026,2211,453,004973,736(18,778)(497,463)(1,107,916)(1,901,190) Minimum Cash Balance 40.00% For ongoing operations2,121,9762,233,9792,313,2162,426,6792,584,2342,706,2492,831,7112,963,1693,121,2213,268,5703,447,866 100.00% For debt service-123,614153,306308,597308,597210,113210,113117,669117,669248,981248,981 Minimum Cash Balance Required 2,121,9762,357,5922,466,5222,735,2752,892,8302,916,3613,041,8243,080,8383,238,8903,517,5513,696,847 747,598543,693311,218(147,806)(866,609)(1,463,357)(2,068,088)(3,099,615)(3,736,353)(4,625,467)(5,598,037) Amount Over (Under) Minimum Debt Service Coverage Operating Revenues4,359,1664,562,4184,780,3965,008,8815,248,3845,499,4395,762,6076,038,4766,327,6636,630,8146,948,609 Less (Operating Expenditures)(5,304,939)(5,584,946)(5,783,039)(6,066,697)(6,460,584)(6,765,622)(7,079,279)(7,407,922)(7,803,052)(8,171,426)(8,619,664) Add in Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Plus Non-Operating Investment Earnings19,08718,18721,17920,27818,88914,79110,6077,108--- Net Revenues298,029243,686233,134195,722151,87398,77138,393(29,184)(109,013)(191,194)(283,720) Debt Service--123,614153,306308,597308,597210,113210,113117,669117,669248,981 Debt Service Coverage --1.891.280.490.320.18(0.14)(0.93)(1.62)(1.14) City of Lakeville, MN Water and Sewer Fund Analysis Page 43 SewerUtility Projections –Scenario Five Average Projected Calculate Projected Sewer Rate Adjustment0.000%9.706%12.553%2.716%1.117%2.480%8.951%0.000%0.000%5.034% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Revenues 3.54% Service charges4,359,1664,433,9494,952,8135,676,0165,936,8066,113,0846,379,4957,077,7457,207,8287,340,4227,851,706 0.00% Connection fees----------- 0.00% Penalties and interest----------- 0.00% Miscellaneous----------- Total Revenue4,359,1664,433,9494,952,8135,676,0165,936,8066,113,0846,379,4957,077,7457,207,8287,340,4227,851,706 Operating Expenses 2.79%2.30% Personnel641,895677,457693,039708,978725,285741,966759,032776,489794,349812,619831,309 6.54%5.00% Commodities87,21684,48182,64286,77491,11395,668100,452105,474110,748116,286122,100 -12.53%2.00% Contractual services258,918276,999270,516275,926281,445287,074292,815298,672304,645310,738316,953 6.80%6.80% MCES charges3,092,1953,297,9823,522,2453,761,7574,017,5574,290,7514,582,5224,894,1335,226,9345,582,3665,961,967 Existing Depreciation1,224,7151,218,9011,133,6111,110,9391,088,7201,066,9461,045,6071,024,6951,004,201984,117964,434 365,301422,902 New Depreciation29,12680,987122,322256,464283,217298,851308,458362,175 Total Operating Expenses5,304,9395,584,9465,783,0396,066,6976,460,5846,765,6227,079,2797,407,9227,803,0528,171,4268,619,664 Operating Income (Loss)(945,773)(1,150,997)(830,226)(390,681)(523,778)(652,538)(699,783)(330,176)(595,224)(831,004)(767,958) Non Operating Revenues (Expenses) 0.73% Investment Earnings19,08718,18720,24217,65019,75220,90221,45722,37322,65825,58626,329 Existing Special Assessments----------- New Special Assessments---------- Intergovernmental revenue1,6321,6321,6321,6321,6321,6321,6321,6321,6321,6321,632 Other revenue- Bond Interest - Existing----------- Bond Interest - New/Projected-(18,500)(16,342)(42,168)(36,357)(30,397)(25,204)(19,873)(16,249)(22,516) Gain/(Loss) on disposal4,5004,5004,5004,5004,5004,5004,5004,5004,5004,5004,500 Total Non Operating Revenues (Expenses)25,21924,3197,8747,440(16,284)(9,323)(2,808)3,3018,91715,4709,945 Net Income (Loss) Before Transfers(920,554)(1,126,678)(822,353)(383,242)(540,062)(661,861)(702,591)(326,875)(586,307)(815,534)(758,012) Operating Transfers Transfers In19,02519,04518,85718,85718,85718,85718,85718,85718,85718,85718,857 Transfers (Out) to General Fund139,943(146,428)(135,165)(139,220)(143,397)(147,698)(152,129)(156,693)(161,394)(166,236)(171,223) Transfers (Out) - other-(115)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340) Total Operating Transfers158,968(127,498)(120,648)(124,703)(128,880)(133,181)(137,612)(142,176)(146,877)(151,719)(156,706) Net Income (Loss)(761,586)(1,254,176)(943,001)(507,945)(668,942)(795,042)(840,203)(469,051)(733,184)(967,253)(914,718) City of Lakeville, MN Water and Sewer Fund Analysis Page 44 SewerUtility Projections –Scenario Five(Continued) Average Projected Calculate Projected Sewer Rate Adjustment0.000%9.706%12.553%2.716%1.117%2.480%8.951%0.000%0.000%5.034% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Beginning Cash & Investments 2,777,6482,869,5742,772,8162,417,7902,705,7582,863,3132,939,3693,064,8323,103,8453,504,9753,606,709 Net Income(761,586)(1,254,176)(943,001)(507,945)(668,942)(795,042)(840,203)(469,051)(733,184)(967,253)(914,718) Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Acquisition and Construction of Assets(371,203)(765,609)(540,549)(1,401,116)(281,777)(236,342)(176,069)(617,172)(111,258)(656,003)(110,000) Proceeds from New Long-Term Debt-675,000-1,052,000-----500,000- Payments on New Long-Term Debt-(86,074)(88,232)(236,911)(242,722)(202,723)(207,916)(120,804)(124,428)(249,473) Payments on Existing Long-Term Debt----------- Ending Cash Balance2,869,5742,772,8162,417,7902,705,7582,863,3132,939,3693,064,8323,103,8453,504,9753,606,7093,719,854 Minimum Cash Balance 40.00% For ongoing operations2,121,9762,233,9792,313,2162,426,6792,584,2342,706,2492,831,7112,963,1693,121,2213,268,5703,447,866 100.00% For debt service-104,574104,574279,079279,079233,120233,120140,677140,677271,988271,988 Minimum Cash Balance Required 2,121,9762,338,5532,417,7902,705,7582,863,3132,939,3693,064,8323,103,8453,261,8983,540,5593,719,854 747,598434,2630----0243,07866,150- Amount Over (Under) Minimum Debt Service Coverage Operating Revenues4,359,1664,433,9494,952,8135,676,0165,936,8066,113,0846,379,4957,077,7457,207,8287,340,4227,851,706 Less (Operating Expenditures)(5,304,939)(5,584,946)(5,783,039)(6,066,697)(6,460,584)(6,765,622)(7,079,279)(7,407,922)(7,803,052)(8,171,426)(8,619,664) Add in Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Plus Non-Operating Investment Earnings19,08718,18720,24217,65019,75220,90221,45722,37322,65825,58626,329 Net Revenues298,029115,217404,614860,229841,159718,527666,1321,025,350793,810544,001645,707 Debt Service--104,574104,574279,079279,079233,120233,120140,677140,677271,988 Debt Service Coverage --3.878.233.012.572.864.405.643.872.37 City of Lakeville, MN Water and Sewer Fund Analysis Page 45 SewerUtility Projections –Scenario Six Average Projected Calculate Projected Sewer Rate Adjustment3.000%3.630%15.683%2.716%1.117%2.480%8.951%0.000%0.000%5.034% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Revenues 3.54% Service charges4,359,1664,566,8484,818,9445,676,0165,936,8066,113,0846,379,4957,077,7457,207,8287,340,4227,851,706 0.00% Connection fees----------- 0.00% Penalties and interest----------- 0.00% Miscellaneous----------- Total Revenue4,359,1664,566,8484,818,9445,676,0165,936,8066,113,0846,379,4957,077,7457,207,8287,340,4227,851,706 Operating Expenses 2.79%2.30% Personnel641,895677,457693,039708,978725,285741,966759,032776,489794,349812,619831,309 0.00%5.00% Benefits----------- 6.54%5.00% Commodities87,21684,48182,64286,77491,11395,668100,452105,474110,748116,286122,100 -12.53%2.00% Contractual services258,918276,999270,516275,926281,445287,074292,815298,672304,645310,738316,953 0.00%5.00% Major maintenance----------- 6.80%6.80% MCES charges3,092,1953,297,9823,522,2453,761,7574,017,5574,290,7514,582,5224,894,1335,226,9345,582,3665,961,967 0.00%0.00% Other charges----------- 0.00%5.00% ----------- 0.00%5.00% ----------- Existing Depreciation1,224,7151,218,9011,133,6111,110,9391,088,7201,066,9461,045,6071,024,6951,004,201984,117964,434 New Depreciation29,12680,987122,322256,464283,217298,851308,458362,175365,301422,902 Total Operating Expenses5,304,9395,584,9465,783,0396,066,6976,460,5846,765,6227,079,2797,407,9227,803,0528,171,4268,619,664 Operating Income (Loss)(945,773)(1,018,098)(964,095)(390,681)(523,778)(652,538)(699,783)(330,176)(595,224)(831,004)(767,958) Non Operating Revenues (Expenses) 0.73% Investment Earnings19,08718,18721,21217,65019,75220,90221,45722,37322,65825,58626,329 Existing Special Assessments----------- New Special Assessments---------- Intergovernmental revenue1,6321,6321,6321,6321,6321,6321,6321,6321,6321,6321,632 Other revenue- Bond Interest - Existing----------- Bond Interest - New/Projected-(18,500)(16,342)(42,168)(36,357)(30,397)(25,204)(19,873)(16,249)(22,516) Gain/(Loss) on disposal4,5004,5004,5004,5004,5004,5004,5004,5004,5004,5004,500 Total Non Operating Revenues (Expenses)25,21924,3198,8447,440(16,284)(9,323)(2,808)3,3018,91715,4709,945 Net Income (Loss) Before Transfers(920,554)(993,779)(955,252)(383,242)(540,062)(661,861)(702,591)(326,875)(586,307)(815,534)(758,012) Operating Transfers Transfers In19,02519,04518,85718,85718,85718,85718,85718,85718,85718,85718,857 Transfers (Out) to General Fund139,943(146,428)(135,165)(139,220)(143,397)(147,698)(152,129)(156,693)(161,394)(166,236)(171,223) Transfers (Out) - other-(115)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340)(4,340) Total Operating Transfers158,968(127,498)(120,648)(124,703)(128,880)(133,181)(137,612)(142,176)(146,877)(151,719)(156,706) Net Income (Loss)(761,586)(1,121,277)(1,075,900)(507,945)(668,942)(795,042)(840,203)(469,051)(733,184)(967,253)(914,718) City of Lakeville, MN Water and Sewer Fund Analysis Page 46 SewerUtility Projections –Scenario Six (Continued) Average Projected Calculate Projected Sewer Rate Adjustment3.000%3.630%15.683%2.716%1.117%2.480%8.951%0.000%0.000%5.034% ChangeChange 2010-20132014-202320132014201520162017201820192020202120222023 Beginning Cash & Investments 2,777,6482,869,5742,905,7152,417,7902,705,7582,863,3132,939,3693,064,8323,103,8453,504,9753,606,709 Net Income(761,586)(1,121,277)(1,075,900)(507,945)(668,942)(795,042)(840,203)(469,051)(733,184)(967,253)(914,718) Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Acquisition and Construction of Assets(371,203)(765,609)(540,549)(1,401,116)(281,777)(236,342)(176,069)(617,172)(111,258)(656,003)(110,000) Proceeds from New Long-Term Debt-675,000-1,052,000-----500,000- Payments on New Long-Term Debt-(86,074)(88,232)(236,911)(242,722)(202,723)(207,916)(120,804)(124,428)(249,473) Payments on Existing Long-Term Debt----------- Ending Cash Balance2,869,5742,905,7152,417,7902,705,7582,863,3132,939,3693,064,8323,103,8453,504,9753,606,7093,719,854 Minimum Cash Balance 40.00% For ongoing operations2,121,9762,233,9792,313,2162,426,6792,584,2342,706,2492,831,7112,963,1693,121,2213,268,5703,447,866 100.00% For debt service-104,574104,574279,079279,079233,120233,120140,677140,677271,988271,988 Minimum Cash Balance Required 2,121,9762,338,5532,417,7902,705,7582,863,3132,939,3693,064,8323,103,8453,261,8983,540,5593,719,854 747,598567,162--0---243,07866,1500 Amount Over (Under) Minimum Debt Service Coverage Operating Revenues4,359,1664,566,8484,818,9445,676,0165,936,8066,113,0846,379,4957,077,7457,207,8287,340,4227,851,706 Less (Operating Expenditures)(5,304,939)(5,584,946)(5,783,039)(6,066,697)(6,460,584)(6,765,622)(7,079,279)(7,407,922)(7,803,052)(8,171,426)(8,619,664) Add in Depreciation1,224,7151,248,0271,214,5981,233,2611,345,1841,350,1631,344,4581,333,1531,366,3761,349,4181,387,336 Plus Non-Operating Investment Earnings19,08718,18721,21217,65019,75220,90221,45722,37322,65825,58626,329 Net Revenues298,029248,116271,714860,229841,159718,527666,1321,025,350793,810544,001645,707 Debt Service--104,574104,574279,079279,079233,120233,120140,677140,677271,988 Debt Service Coverage --2.608.233.012.572.864.405.643.872.37