1. Metropolitan Council Environmental Services SAC Revenue Update December 9, 2008 A Clean Water Agency Jason Willett MCES Finance Director Presented to the Environment Committee

2. SAC Revenue Update 2 Historical SAC Rates Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 SAC RateIncrease% Change $1,050 $1,100 $1,150 $1,200 $1,275 $1,350 $1,450 $1,550 $1,675 $1,825 $2,000 $50 $75 $100 $125 $150 $175 5.0 4.8 4.5 4.3 6.2 5.9 7.4 6.9 8.1 9.0 9.6

3. SAC Revenue Update 3 Service Availability Charge SAC units in 2008 (through Sept.) are at a record low. September year-to-date SAC units:  2008: 7,385  2007:10,522  2006:12,149  2005:13,807  2004:14,999

4. SAC Revenue Update 4 Service Availability Charge Total 2008 SAC units are projected to be 11,500. SAC units:  2008:11,500 (projected)  2007:15,194  2006:17,052  2005:19,334  2004:20,542 2008 will likely be the lowest since program’s inception in 1973. Previous lows:  1982:13,400  1975:13,300

5. SAC Revenue Update 5 Service Availability Charge History of SAC units (11,500 projected for 2008):

6. SAC Revenue Update 6 SAC Units by Category SAC units paid by category (net of credits): Residential* 16,553 15,611 13,856 8,050 5,808 4,550 2003 2004 2005 2006 2007 2008** Commercial 4,061 4,571 4,629 7,659 8,371 6,660 Industry 536 360 849 1,343 1,015 290 TOTAL 21,150 20,542 19,334 17,052 15,194 11,500 *Includes houses, town homes, duplexes, condos and apartments. **Estimated

7. SAC Revenue Update 7 Service Availability Charge The economic decline will likely cause the SAC reserve to drop below the established minimum balance in the next couple of years.  Council Policy 3-2-5: The calculated minimum balance is 20% of the sum of the following five years SAC transfers.

8. SAC Revenue Update 8 Service Availability Charge To keep the SAC fund above the minimum balance, the minimum SAC units needed are*:  *Assuming annual $175 SAC rate increases  *Based on 11,500 SAC units in 2008 – 2009:16,000 – 2010:18,000 – 2011:19,000 – 2012:20,000 (and each following year)

9. SAC Revenue Update 9 Service Availability Charge A more realistic—albeit slightly optimistic—recovery might look like this:  2009:13,000  2010:16,000  2011:18,000  2012:20,000 (and each following year) These numbers of SAC units will cause the reserve to drop below the minimum balance.

10. SAC Revenue Update 10 Use of Reserve Fund Council Policy 3-2-5: Use of the minimum reserve shall be allowed only in an economic downturn or natural disaster and as approved by the Council. Reserve balance on 12/31/07 was $72.2 million Minimum balance on 12/31/07 was $35.2 million Projected balance for 12/31/08 was $62 million; now $54 million

11. SAC Revenue Update 11 Recovery Impact on Fund Reserve balance over or (under) the minimum in $ millions. Both cases are based on $175 annual SAC rate increase. Quick Recovery 11,500$12.0 16,000 $3.6 18,000 $0.7 19,000 $1.0 20,000 $3.1 2008 2009 2010 2011 2012 Realistic Recovery 11,500 13,000 ($1.0) 16,000 ($9.3) 18,000($12.4) 20,000($10.9)

12. SAC Revenue Update 12 Questions, Concerns