1. One Step Ahead: Using a Finance Plan for Regional Water System Operations Deena Hood Central Wyoming Regional Water System Carol Malesky Integrated Utilities Group, Inc. September 18, 2002 RMSAWWA/RMWEA Joint Annual Conference

2. Central Wyoming Regional Water System (CWRWS) Located in Casper, Wyoming Serves eight wholesale customers Governed by Joint Powers Board (JPB) Annual rate setting is crucial Computerized finance plan is a critical tool

3. Challenges Faced by the Regional Water System Issuing revenue bonds Using a Capital Construction Reserve Fund Change from contract to in-house operations Establishing a Rate Stabilization Fund Responding to drought conditions

4. Issuing Revenue Bonds Issue: Refinanced $23 million loan Saved ratepayers $12 million over 30 year period Finance Plan: Savings estimated Coverage calculated New rate determined

5. Using a Capital Construction Reserve Fund Issue: Reserve needed for major construction project Finance Plan: Raised sufficient revenues to set aside necessary funds over 2 years

6. Changing from Contract to In-House Operations Issue: A number of options for operations exist for Regional Water Finance Plan: Compared rate impact of city operations vs. regional operations Impact did not differ significantly

7. Establishing a Rate Stabilization Fund Issue: Revenue bonds provided for the establishment of this fund Rate changes needed to be levelized Finance Plan: Established the fund Provided mechanism for tracking transfers

8. Responding to Drought Conditions Issue: Call placed on North Platte River Water purchases necessary Finance Plan: Projected for future water purchases and zero growth in usage Alternate scenarios answered “what if” questions Projected rate increases under scenarios

9. Finance Plan Schematic

10. Finance Plan Model Requires data input Forecasts revenue requirements Estimates debt service payments Determines water rates Allows CWRWS to evaluate alternative financing scenarios

11. Tool for Planning Budgeting process – One year of history, current budget year, 10 years of forecasting – Used every year to prepare and justify budget and rate Shows expected changes – Capital improvements – Water sales – Rates

12. Model Inputs Project expenditures to date Budgeted and actual O&M expenditures Bond issue sizing Beginning fund balances Water rate revenues Non-rate revenue Water usage billed Interest rates on fund balances Transfers to other funds

13. Assumptions Used in the Model Expected water sales – Growth factor – Actual sales Coverage ratio – Net annual revenues over annual debt service – Minimum of 1.10 Maintain 25% of annual revenue requirement in operating fund.

14. Establishing a Rate Based on revenue requirements and water sales Same rate for each customer No rate decreases Current rate= $1.09

15. Conclusion Finance plan is part of long-term financial management strategy Allows JPB to control rates Shows how different financial planning scenarios impact rates and fund balances Flexible model matures with the regional water system

16. Conclusion (continued) Model is accurate Managers and policy makers can make informed decisions and be proactive Provides credibility