1. MOUNTAIN REGIONAL WATER
2017 Tentative Budget Recommendations
and
2016 Budget Amendments
to the
Summit County Council
November 2, 2016

2. Statutory Budget Process
Pursuant to Section 17B-1-6
Adopt Tentative 2017 and 2016 Amended Operating, Capital, and Debt Service budgets at 1st Council meeting in November
Set time and place for budget public hearing at least 30 days from today
Order public notice of hearing be published at least 7 days prior to the hearing in the Park Record and Utah Public Notice Website
Direct Mountain Regional to make changes to Tentative budgets prior to public hearing, if so desired

3. 2017 Budget Process Revenue projections biggest variable
Bonds require 1.25 times cash debt coverage
Drives rates and fees
Debt service changes typically have the greatest impact on budget
Cash reserves critical
Cyclical nature of building economy
Weather patterns
Operating expenses easier to forecast
See Page 10 Below

4. 2017 Budget Overview
1.03 Retail Water Consumption Rebounds 1.04 Development Related Collections Remain Strong 1.05 Major Wholesale Water Contracts 1.06 District Water Production 1.08 Allocation of Cash Payments 1.10 Increasing Debt Payments Lead to 2019 Rate & Fee Increases 1.12 Debt Coverage Ratio 1.13 Cash 1.14 Personnel & Compensation Operating Budget Debt Service Budget 4.0 Capital Budget Budget Amendments

5. 1.03 Retail Water Consumption Rebounds
Average Annual Gals Since Conservation Rates Adopted Thru Sep ,269
Thru Sep ,058
Assumed for 2017 Budget 144,000
Past 12 Months (thru Sep) 163,302
Lead to Projected $575,500 Additional Sales in 2016

6. 1.03 Retail Water Budget Variances
Average Annual Variance Since Past Ten Years $82,576 or 1.46% Over Budget
Five Years Over Budget
Five Years Under Budget
2009 $366, Under Budget
$823, Over Budget
, Projected Over Budget

7. 1.04 Development Related Collections Remain Strong
Impact Fee Collections Strongly Correlate with New Water Connections 10 Year Average New Connections 80 Assumed in 2017 Budget Year Average Impact Fee Used in 2017 Budget $7,400 (Average Includes Prepaid Connections)

8. 1.05 Major Wholesale Water Contracts
Park City Wheeling
Has Lost Canyon Rights Up to ,900 Acre Feet
Average Wheeled Since ,525 Acre Feet
Take-or-Pay Contract (Pay for all 2,900 AF) Rate Methodology Outlined in Contract
2017 Projected Revenue $615, Increase from Wheeling Rate Increase
2016 Projected Revenue $575, Production Cost Increase of which Park City Pays 43.9%
Increase Not Due to Increase in Water Taken
Summit Water (thru Weber Basin Regionalization)
Take-or-Pay Contract (Pay for All Contracted Water)
2017 Revenue $889,600 for 800 Acre Feet 2017 Increase from Rate Increase and 100 Additional AF
2016 Revenue $684,600 for 700 Acre Feet

9. 1.06 District Water Production
Wholesale Water Sales Over 50% of Production
Park City Started Taking Water in 2012
Summit Water Started Taking Water in 2015
2016 Projected Production ,806 AF
Higher Than 2017 Due to Hot 2016 Weather
2017 Projected Production ,650 AF
Based Upon Average Consumption

10. 1.08 Allocation of Cash Payments
Efficiency Measures – Power Costs Are Only 10% of 2017 Budget According to State DDW Study, MRW Saving $400,000 Per Year Without Efficiency Measures, Power would be 14%
By 2020,
MRW’s Share of Debt Payments goes to 37% from 22% 2017
Promontory’s Share of Debt Payments drops to 3% from 16% in 2017
This Will Necessitate a 2019 Rate & Fee Increase

11. 1.10 Increasing Debt Payments Lead to 2019 Rate & Fee Increases
Debt Payments Increase $1.03 M between 2016 & 2019
Includes Debt Paid From Water Sales, Impact Fees & Other Minor Revenue
Combined with $250,000 Increase in Weber Basin Regionalization Lease Fees Starting in 2020, Rate & Fee Increase Needed
Estimated Range $15 to $25 Per Month Depending Upon Growth &
Sales to Summit Water
Can Phase in Rate Increase Over 4 Years by Prepaying Debt With Funds Generated From Current Weber Basin Regionalization Water Sales to Summit Water
Current Regionalization Reserves Balance $558,000

12. 1.12 Debt Coverage Ratio
Parity Debt Coverage Must be 1.25 or Higher Pursuant to Bonding Requirements
For 2017, Projected Parity Coverage Ratio is 1.34
The Ratio When All Debt is Included is 1.26
(Non-parity Debt Includes Weber Basin and Zions Property Loan)
It is Projected that $1,018,900 in Additional Cash Will Be Generated in 2017
Capital Facility Reserves $ 306,900
Operating Reserves ,200
Regionalization Reserves ,500
2018 Capital Budget ,300

13. 1.13 Cash (Unrestricted) District’s Current Cash Position Strong
Debt Restructuring in 2012
Strong Building Economy
Rate Increases
Hot Weather in 2016
Unrestricted Cash Fell $591,527 Below Policy Minimum of 120 Days Operating Reserves in 2012.
Unrestricted Cash Can be Used for Any Purpose
Other Cash is Restricted for Specific Purposes
Debt Payments
Customer Deposits
Facility Repairs, Replacement & Construction
Rate Stabilization Funds
Bond Proceeds for Construction
Impact Fee and Assessment Collections

14. 1.13 Cash (Debt Reserves Held by District)
Reserves Available to Make Debt Payments if Revenue Fall Short of Budget
$1.0 M Rate Stabilization Fund (Created 2011)
Reduced Reserves Held by Trustee
Other Debt Reserves Held by the District:
Special Assessment Reserves
Impact Fee Reserves
Impact Fee Collections are Cyclical
Collections Over Budget Placed Into Reserve Each Year
When Revenue Falls Below Budget, Money is Taken from Reserves to Make Debt Payments, as Happened During the Great Recession

15. 1.13 Cash (Debt Reserves Held by Bond Trustee)
Debt Reserves Held by Trustee Since 2012
Used Only to Make Scheduled Debt Payments Due Within One Year
12 Equal Monthly Deposits Required
1) Pay Annual Principal
2) Pay Semi-Annual Interest
Reduced Trustee Held Reserves by $3.5 M
No Longer Large Reserves Held to Make Debt Payments in Case District Lacks Funds to Make Debt Payments
New Rate Stabilization Fund ($1.0 M Balance) Fund Provides Security if District Lack Funds from Operations to Make Debt Payments
Use of Rate Stabilization Reserves Less Problematic Than Use of Trustee Held Reserves

16. 1.13 Cash (Capital Facility Reserves)
Goal is to Maintain Balance Between $500,000 and $1.0 M
Generally Used for Emergency Repairs
Use Restricted to:
Acquire Capital Equipment (Typically Use Cash from Prior Years)
Facility Repair & Replacement (Typically Use Bonds)
New Facility Construction (Typically Use Bonds)
Used During Great Recession to Fund Critical Small Capital Projects
Typically Funded with Unrestricted Cash Generated From Prior Years’ Operations
2017 Capital Budget Includes $500,000 of these Reserves for Silver Creek Pump
Projected Year-End 2017 Balance is $700,000

17. 1.14 Personnel & Compensation
2017 Budget Includes average 3.5% Pay Increase Plan to Give Same Pay Increase that Summit County Provides its Employees One Level 5 Distribution Operator Retiring Replace with 2 Level 1 Operators One in Distribution One in Public Services – to read meters and respond to service calls

18. 2.0 2017 Operating Budget Projected 2017 Change in Net Position
$1.71 M
Operating Revenue Increase $507,600 or 6.1%
Operating Expense Increase $439,000 or 6.0%
Non-operating Revenue Decrease $303,000 or 11.5%
Non-operating Expense Decrease $69,800 or 4.2%

19. 2.02 2017 Revenue Total Increase $204,600 (1.9%)
2017 Revenue Projections Based Upon:
Average Culinary Consumption – 144,000 Gals
New Customers Using Water - 125
Average New Water Connections – 80
Summit Water to Take 800 Acre Feet
Park City & Summit Water Pay Higher Rates
To Cover Higher Production and Treatment Costs
Interest Earnings Higher Due to 50 Basis Point Increase
in PTIF Rates
Promontory Contracted Assessments Decline $336,500

20. 2.03 2017 Operating Expenses Total Increase - $439,000 (6.0%)
Reductions in Some Programs and Increases in Other Programs Due to Reassignment of FTEs
Total Increase - $439,000 (6.0%)
Non-cash Depreciation - $40,000
Cash Increase - $399,000
Weber Basin Fees Increase - $131,400
Wholesale Water Costs - $50,000
One Retiring Level 5 Operator Replaced with Two Entry Level 1 Operators (minimal budget impact)

21. 2.03 2017 Non-operating Expenses
Interest Expense Declining $69,800 in 2017 due to 2016 Principal Payments
Although Not Part of This Budget, Total Debt Payments (including 1.25 Coverage) Paid from Waters Sales and Impact Fees are Increasing by $271,500

22. 3.0 Debt Service Budget
Bonding Contracts Require 1.25 Coverage of Debt Payment Once All Operations Expenses Paid
2017 Coverage
All Debt
Parity Debt 1.34
2017 Additional Cash Generated $1.02 M

23. 4.0 Capital Budget $1.43 M Total Increase
$256, Capitalized Personnel Costs
$729, Series 2014 Bond Projects
Expanded Tank Size to 2.0 M Gals
Allows MRW to Increase Regionalizaton Water Sales to Summit Water
Adds $225K Additional Annual Revenue
Silver Creek Tank Requires $1.13 M Pump Station (original site did not)
Funded With
Capital Reserves $ 500,000
2017 Capital Budget Funds ,000
Additional Bond Interest Earnings ,200
$443,100 General System Improvements
New Meter Replacement Program
Replace Older Vehicles
Minor Repairs
4.0 Capital Budget

24. 5.01 2016 Budget – Amended Expenses
Additional IT Costs - $25,000
Move Data to the Cloud
Reduce Future Computer Equipment Purchases
Weber Basin Fees - $135,000
Davis Weber Reservation Fees 2013 to 2016
2017 Budget Includes $45,000 Annual Expense
District, Park City, and Summit Water
Disputing the Charging of these Fees by
Weber Basin Prior to 2020
Expensing Now to Avoid $315,000 Expense
in 2020 if Weber Basin Prevails in Dispute

25. Budget - Revenue
2016 $160,000 Budget Amendment Funded from Additional Water Sales
2016 Revenue Projected to Exceed Budget by $1.06 M
Hot Dry Weather
Strong Building Economy
Higher Interest Earnings Rate & Higher Cash Balances

26. Debt Service Budget
Debt Coverage Projections Higher than Initial Budget due to Higher Revenue Collections for 2016
All Debt
2016 Budget
2016 Current Projection
Parity Debt
2016 Budget
2016 Current Projection