Nassau-Amelia Utilities FY 2008 Utility Rate Study Presented by: Andrew J. Burnham July 9, 2007 Nassau-Amelia Utilities

FY 2008 Utility Rate Study Update to Water & Sewer Revenue Sufficiency Analysis Calculate New Impact Fees Review/Update Miscellaneous Service Charges

Nassau-Amelia Utilities Background Revenue Sufficiency Analysis –Update to analysis performed in FY % rate increase in FY 2006, first since utility acquisition in 2003 Recommended annual rate indexing at 2.5% per year in FY 2008 Impact Fees –Two separate components (Plant Capacity & Main Extension) –Current fees have not been updated/reviewed since acquisition Miscellaneous Service Charges –Includes meter/service installations, turn-offs, reconnects, etc. –Current charges have not been updated/reviewed since acquisition

Nassau-Amelia Utilities Revenue Sufficiency Analysis

Nassau-Amelia Utilities FAMS Model BUSINESS PLAN FOR EACH YEAR IN THE PLANNING PERIOD, THE FOLLOWING ANALYTICAL PROCESS IS CARRIED OUT....  Historical financial data  Economic Assumptions  Capital & Operating Plans  Policy Considerations  Regulatory Requirements  Revenue Projections  Operating Costs  Borrowing Requirements  Rate Requirements  Customer Impact

Nassau-Amelia Utilities Financial Summary Key Issues: –Minimal working capital –$4.5 million CIP (FY 08 - FY 12) –Annual operating cost increases at about 5% per year –Dependent upon growth related revenues –Use of impact fees for expansion portion of debt service Results: –Without annual rate indexing, the System would not meet the net income coverage requirements of bondholders in future years –The use of impact fees to pay the expansion portion of debt service would allow rate revenue to be able to pay for non-expansion related CIP costs Recommendations: –Increase water and sewer rates annually to provide adequate revenue to: Maintain net income coverage requirements of outstanding debt Provide adequate working capital and satisfy annual operating and capital cost increases –Utilize impact fees to pay the expansion portion of debt service

Nassau-Amelia Utilities Rate Adjustment Plan Plan: –Implement annual rate indexing adjustments beginning in FY 08 (10/1/07) of 2.5% per year Results: –Allows utility to meet coverage requirements and “keep up” with annual operating and capital cost increases –Maintains adequate working capital –Avoids future borrowing

Nassau-Amelia Utilities Rate Survey – FY ’07 After 2.5% Increase 6,000 Gallons Per Month

Nassau-Amelia Utilities Rate Survey – FY ’07 After 2.5% Increase 12,000 Gallons Per Month

Nassau-Amelia Utilities Rate Survey – FY ’07 After 2.5% Increase 18,000 Gallons Per Month

Nassau-Amelia Utilities Impact Fee Analysis

Nassau-Amelia Utilities Summary of Analysis Cost Basis: –RCNLD value of existing System –Cost of CIP (FY 2007 – FY 2012) –Interest costs on assets/CIP funded with debt Calculation: –Identify cost basis and capacity for each system –Divide cost basis for each system by capacity in ERC’s to determine cost per ERC –Deduct credit for debt service paid via user fees to avoid double recovery of costs

Nassau-Amelia Utilities Water Impact Fee Inclusion of 100% of Eligible Costs: –Water Impact Fee of $1,602 per ERC Versus current total fee of $1,402 per ERC –Increase of $200 or approximately 14% Options: –A: Adopt new inclusion of 100% of eligible costs –B: Adopt new partial inclusion of eligible costs –C: Maintain current fee Recommendations: –Option A Ensures growth pays for system expansion project costs to maximum extent possible Minimizes financial burden on existing ratepayers –Consolidate current fees (2) into single fee

Nassau-Amelia Utilities Sewer Impact Fee Inclusion of 100% of Eligible Costs: –Sewer Impact Fee of $2,531 per ERC Versus current total fee of $2,237 per ERC –Increase of $294 or approximately 13% Options: –A: Adopt new inclusion of 100% of eligible costs –B: Adopt new partial inclusion of eligible costs –C: Maintain current fee Recommendations: –Option A Ensures growth pays for system expansion project costs to maximum extent possible Minimizes financial burden on existing ratepayers –Consolidate current fees (2) into single fee

Nassau-Amelia Utilities Impact Fee Survey – FY ‘07

Nassau-Amelia Utilities Miscellaneous Service Charges

Nassau-Amelia Utilities Summary of Analysis Analysis: –Recalculate fees based upon cost of providing each service Salaries, Overhead, Materials/Supplies, Vehicles, Computers, etc. Results: –Majority of fees increased: Most of Meter/Service Installation Charges Connection/Reconnection Premises Visit Inaccessible Meter Charge Meter Re-Read Hydrant Meter Pick-up for Non-Payment –Certain fees decreased: Certain of Meter/Service Installation Charges Fire Connection Tap Fees Temporary Disconnect Turn-ons/offs Construction Fee (Temporary Connection) Meter Removal/Service Tampering

Nassau-Amelia Utilities Misc. Charge Summary (1)

Nassau-Amelia Utilities Misc. Charge Summary (2)

Nassau-Amelia Utilities Discussion