Water & Sewer Rate Study

Capital Funding - As a result of increased levels of historical and projected growth/development, this city utility needed to increase its wastewater treatment capacity. As such, our FAMS-XL© model was used to quantify and evaluate the financial and customer impacts of alternative facility expansion scenarios and ultimately determine the most financially feasible facility expansion that the utility should pursue.

Impact Fees - Part of the feasibility analysis for each scenario also included the development of updated impact fees or capital charges applicable to new customers so that growth could “pay for itself” to the maximum extent possible and minimize the burden on existing customers for the cost of expanding the wastewater treatment plant.

Rate Design - The final aspect of the study included a diagnostic rate structure evaluation whereby the utility’s existing rate structure was reviewed for conformance with several criteria or objectives, such as fairness/equity, legal precedent, resource conservation, industry practice, etc. This review determined that modifications should be made to the utility’s existing rate structure, primarily to encourage greater water conservation. As such a revised rate structure was developed to meet the appropriate rate structure criteria while also providing adequate revenues to satisfy the cost requirements of the system, including those associated with the treatment plant expansion.

Fire Services Non-Ad Valorem/Fee Study

Non-Ad Valorem Assessments/Fees - This study developed a new fire services fee structure to recover the costs of this city's fire protection services as opposed to continuing to fund these costs via ad valorem tax revenues. The fire services fees were developed so that they could be applied monthly as part of the utility bill or annually as a non-ad valorem assessment and were designed to recover fire protection costs from properties in proportion to the benefit received by the availability of and provision of fire protection service to those properties.

Revenue Requirements - The annual revenue requirements for the fee were determined via our FAMS-XL© model and embodied the current operating cost requirements, the funding of capital improvement projects, and the maintenance of appropriate reserves.

Cost Apportionment - The annual revenue requirements were allocated to different customer classes (i.e. Residential, Commercial, Institutional, Government, etc.) in proportion to the amount of developed space on all properties assigned to each customer class. Residential fees were then developed to be applied to each residential dwelling unit, while all other fees were calculated as a rate per square foot of developed space.

Solid Waste Rate Study

Waste Diversion & Revenue Sufficiency Analysis - This county utility was in a situation where there was a strong possibility that a significant portion of the waste delivered to its landfill could be diverted. To fully understand the impacts of waste diversion, a detailed cost allocation analysis was performed to identify what portion of the utility’s disposal operating costs were variable as opposed to fixed. This allowed us to then utilize our FAMS-XL© Model to evaluate the impacts of potential waste diversion scenarios, based upon the resulting changes to operating costs, deferral of capital improvement project timing, and revenue loss. These evaluations showed the range of borrowing, cash flow, reserves, and tipping fee increases that the disposal enterprise fund would experience in different waste diversion scenarios.

Non-Ad Valorem Collection Assessments - The study also included a comprehensive review of the sufficiency of revenue provided by the utility’s residential collection assessment and determined a multi-year financial management plan, and corresponding plan of annual rate adjustments, for the collection enterprise fund that would satisfy current projections of future cost requirements.

Water & Sewer Bond Feasibility Analysis

Capital Funding Feasibility Analysis - In order to upgrade existing facilities, serve an increasing service area, and enhance operational performance, this county utility planned to construct a new wastewater treatment plant. Accordingly, we performed a financial feasibility analysis to determine if the revenues provided by the utility’s existing rates and approved annual rate adjustments would be adequate to fund a new wastewater treatment plant while continuing to meet all other cost requirements of its existing system.

Revenue Limited Analysis - Our FAMS-XL© model was used to not only determine if the $60 million plant could be funded, but to identify the maximum annual debt payments that could be sustained by the utility over a ten-year projection period without additional rate adjustments. The results of this analysis were then used by the utility’s financial advisor in structuring a borrowing with annual principal and interest payments at or below the maximum amounts that could be sustained by the utility per our analysis. Finally, the output of our FAMS-XL© was used to directly populate the pro forma financial statements required to certify the ability of the utility to satisfy the annual debt obligations associated with the revenue bond.

Stormwater Revenue Sufficiency Analysis

Revenue Sufficiency Analysis - On an annual basis, this city utility performs an evaluation of the financial performance of its stormwater enterprise fund. Burton & Associates assists in this process using our FAMS-XL© model to produce a multi-year projection of the sufficiency of stormwater revenues to meet all of the system’s current and projected financial requirements and determine the level of rate revenue increases necessary in each year to provide sufficient revenues to fund all of its requirements.

Alternative Financial Management Program Scenario Analysis - In this instance, alternative financial management programs were developed based upon a specified level of rate increase. The financial management programs were the result of the FAMS-XL© model being utilized in a revenue limited capacity, where specified annual rate adjustments were input in order to determine the amount of revenue projected per year available to the system. Then the amount of total capital expenditures per year was adjusted to levels that could be adequately funded while allowing the utility to meet its annual debt service payment and coverage requirements within the confines of the revenue produced by the specified annual rate adjustments that were input into FAMS-XL© model.

Determination of Borrowing Requirements - Moreover, to the extent that current revenues and unrestricted reserves are not adequate to fund all capital projects, the FAMS-XL© model identifies a borrowing requirement to fund those projects, or portions thereof that are determined to be eligible for borrowing. The utility chooses to bundle its borrowing requirements and issue bonds typically every two years. In years of bond issuances, our final report from this analysis is provided as evidence to certify the utility’s financial ability to repay such debt.

Reclaimed Water Financial Feasibility Study

Innovative Reuse Application - Given the plans for continued growth and the finite nature of existing potable water resources, a large university requested a financial feasibility analysis of using reclaimed water in certain cooling towers at various locations throughout campus. The technical requirements of the reclaimed water system, capital and operations and maintenance cost projections, as well as demand projections by facility were integrated into our financial models to determine the effective cost of reclaimed water for specific scenarios and compare it to the projected cost of potable water over a ten-year period in order to determine the financial feasibility of developing a reclaimed water system with its service provider.

Impact of Potable Water Offset and Deferral of Capacity Expenditures - This analysis also included the evaluation of the financial impacts to the university’s water and sewer provider associated with the implementation of a reclaimed water system, such as changes in operating costs, the deferral of substantial water supply and treatment capital projects that would otherwise be necessary to satisfy increasing potable water requirements as well as the net revenue impacts associated with substituting lower reclaimed water revenues for larger potable water revenues. The final conclusions were that a cost savings would result to the university for converting certain facilities to reclaimed water and that its water and sewer provider would in fact have lower water and sewer rates in the future by implementing a reclaimed water system than would otherwise occur.

Impact Fee/Capital Charge Study

Ensure That Growth Pays Its Way - As a result of increased levels of recent and projected growth/development, this City was experiencing tremendous increases in its capital requirements in many different service areas. As such, the City requested a comprehensive impact fee study that would maximize the recovery of these capital costs associated with new development from that development and thereby minimize the cost burden of these facilities to existing citizens.

Comprehensive Impact Fee Evaluation - Therefore this study first encompassed an update to the level of the City’s existing impact fees for water and sewer service. Upon completion of the update to the existing impact fees, proposed impact fees were then developed to recover the capital costs of park and recreation, law enforcement, general government, and road equipment and facilities within the City associated with new development.