28PU SI Water and Sewer Rates

8/14/2019 28PU SI Water and Sewer Rates

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From: Crisp, DaleTo:Allen, RussellCc: James, Perry; Jackson, Donna; Massengill, Robert; Waldroup, Kenneth; McCauley, Jeff;Alford, Jennifer; Brown,

Nicole; Lex Warmath; Melissa Levin; Doug Carter; Buchan, Edward; Williams, Cinnamon;Alford, Cathy;Watkins, MarvaSubject: SPECIAL AGENDA ITEM: Water and Sewer Rate Increase for Remainder of FY 09 and FY 10 - AdditionalInformationDate: Thursday, April 16, 2009 12:40:20 PMAttachments: Public Utilities CIP.docRaleigh PU Rate Options 4-16-09.pdfConnection Fees Inreases vs. Revenue.xlsCapacity Fees 2009 Major NC systems.xlsCapacity Fees 2009 Summary Wake County Towns.docCapacity Fees 2009 Spreadsheet.xlsw-s bill comparision @ 6ccf.xls

w-s bill comparision @ 8ccf.xlsMemo on credit rating gradations--DEC.docRate History and CIP FY 83- Current.xlsMonthly Water Sewer Charges Chart for Council Meeting - 3-17-09.xls

As a result of the discussion by the City Council of the subject Special Item at the April 7th Councilmeeting, staff reviewed the back-up material provided to the City Council in their agendanotebooks and confirmed that some City Councilors did not receive the comprehensive reportthat was prepared on April 2

ndby City staff and consultants to fully address questions and

requests for information that had been previously directed to staff when the Council first

discussed this subject issue at their March 17

th

Council meeting. In order to be sure that all theCouncilors received the entire report, you forwarded the report to them via e-mail on April 8th.

Also, as a result of the April 7th

City Council meeting discussion of the proposed water and sewerrate increase item, some additional questions and requests for information were made by CityCouncilors that the April 2

ndreport did not address. These additional questions and request for

additional information were referred to City staff. The following report is to respond to thosequestions and requests.

Regarding the City Councils questions about the final recommendations from the WaterConservation Advisory Council (WCAC) for the remaining items City Council referred to them, theWCAC has now completed their discussion of these items and their final recommendations arebeing submitted to the City Council as a separate agenda item for the April 21

stCouncil meeting.

Regarding the City Councils questions about the Public Utilities Departments CapitalImprovement Program Plan (CIP), the Council set a special City Council meeting workshop onApril 27th for a detailed discussion of the current and revised CIP with staff. However, theattached table is a summary of the totals of the updated detailed CIP information which we willpresent on the 27

th. City staff and consultants have used this revised CIP data to generate w/s

rate analysis and develop funding options that City Council has requested.

We have developed three funding options for the revised FY 2010 CIP total of $914,864,000. Therate analysis summaries from Raftelis Financial Consultants, the Citys current w/s rateconsultants, for each of these options are also attached to this report. Our goal in preparing theseoptions has been for the w/s rate increases to return as soon as possible to the w/s rateincreases that had been the Citys planned increases prior to the w/s revenue shortfall caused by


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Nutrient Fee was approved to fund the Water Conservation Incentive Initiative, effective July 1,2009. These increases raise the w/s connection fee total effective on July 1, 2009 to $1,938. IfCouncil chooses option #3 above which implements the 17% w/s rate increase effective on May1, 2009 and the phased additional connection fee increases for FY 2010 of $500 and $1,000 inFY 2011, the w/s connection fee totals would then be $2,438 and $3,438, respectively. Both ofthese total w/s connection fees values are still very competitive with the benchmarked w/ssystems averages for FY 2009.

City Council requested information regarding the cost to the average or typical residentialcustomer if the 17% w/s rate increase is approved. Historically we have considered the averageor typical residential customer uses 8 ccf per month of w/s service. This is approximately equal to6,000 gallons per month. However, our billing data now indicates with a water conservation

minded residential customer base likely resulting from the exceptional drought experience of FY2008, our average residential customer is using 6 ccf per month or approximately 4,500 gallonsper month. Attached is a summary table that compares the current w/s rates to the proposed 17%increase rates for the current average residential customer using 6 ccf per month. As you cansee, that average residential customer will pay $10.06 more per two month billing cycle period,equal to $5.03 per month or $60.36 per year with a 17% w/s rate increase than they currentlypay. As discussed earlier, we had originally projected that a 15% w/s rate increase would benecessary on July 1, 2009 rather than the 17% w/s rate increase now requested for May 1, 2009.The cost difference between these two different rate increases to the average residential

customer is also shown on the attached summary table. For a billing cycle the difference is $1.23,for a month the difference is $0.62 and for the entire 14 months of time difference, given the twomonth earlier effective date that has been proposed, the amount is $17.50.

For comparison purposes, I have also prepared a summary table based on a residential customerwho still uses 8 ccf per month and the cost differences are shown in a similar format to thepreviously described table and results. While the projected increases are greater with the higherwater and sewer consumption values as you would expect, they are not significantly higher.

Additional questions were raised by Council regarding the financial impact of the City W/S UtilityFunds AAA revenue bond credit rating being downgraded in gradations. I have attached a reportmemo regarding this issue also from the Citys Chief Financial Officer, Perry James, and we haveasked the Citys financial consultants at DEC who contributed to the report to attend the April 27thCity Council CIP workshop meeting in case there are additional questions regarding bond ratings.

Finally there was discussion by the City Council at the April 7th

meeting about the history theCitys Public Utilities CIP. Attached is a 25 year history spreadsheet that we have prepared thatcompares the w/s rate increases to the Public Utilities Departments adopted total CIP funding. Asyou can see, the City has raised w/s rates in previous years at levels equal to or greater than the

15% and 17% increase implemented last year and proposed for FY 2010. Also, you can see thatthe CIP planning period has grown from 5 years to 10 years to now 15 years and that theinvestment needed has increased with these greater planning periods as well as a result of thesignificant amount of comprehensive engineering studies that have been performed in recentyears at City Council direction to access the condition and necessary improvements for entirewater supply, water treatment, water distribution, sewer collection, wastewater treatment andreuse water systems of the seven service areas of the Raleigh Public Utilities Department since


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Neuse River Wastewater Treatment Plant Expansion Preliminary EngineeringReport - Hazen & Sawyer/CDM Feb 2009

Smith Creek Wastewater Treatment Plant Process Improvements Engineering -Evaluations Report - Brown and Caldwell - March 2007

Little Creek Wastewater Treatment Plant Expansion and Upgrade PreliminaryEngineering Report - Green Engineering/Hazen & Sawyer- Aug 2008

Sanitary Sewer System Capacity Study - CDM/Hazen & Sawyer - August 2008 Reuse Water System Master Plan - Black & Veatch - Feb 2007 Biosolids Management Master Plan - CDM/Hazen & Sawyer - August 2008

For reference on the Rate and CIP History Spreadsheet I have highlighted the years where theCity has sold w/s revenue bonds in order to fund the approved CIP expenditures. Note that priorto 1996 the City used General Obligation bonds as the debt funding mechanism for its moderateCIP appropriations. In reviewing the CIP appropriation totals prior 2000, the projects that wereincluded were almost all growth related projects only with many years containing funding for largew/s system extension projects for City initiated annexation areas. Another clear observation fromthis review is that by not investing in w/s infrastructure rehabilitation and replacement projects inmany adopted CIPs, plus experiencing tremendous customer growth, the City was able to havemany years where w/s rate increases were not required.

RECOMMENDATION:Public Utilities recommends City Council approval of the 17% water and sewer rate increase asearlier proposed, but with an effective date of May 1, 2009, along with approval of therecommendations for an additional $500 increase per connection to the Water Nutrient Fee in2010, beyond the w/s connection fee amounts set previously for FY 2010, and concurrence with aplanned additional increase of $1,000 effective in FY 2011, as outlined in the option #3 w/s rateanalysis summary. Thanks, Dale.

H. Dale CrispH. Dale Crisp, P.E.

Raleigh Public Utilities DirectorOne Exchange Plaza, Suite 620

(919)-857-4540 fax (919)-857-4545
http://www.wateruseitwisely.com/


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Public Utilities CIP Budget TotalsPhase I Phase II Total Phase III New Total

Adopted FY 2009 $546,529,000 $856,824,000 $1,403,353,000 $0 $0

Initial FY 2010 $457,256,500 $944,312,000 $1,401,568,500 $0 $0

Revised FY 2010 $361,403,500 $553,461,000 $ 914,864,000 $692,502,000 $1,604,366,500

Note: Officially there is only two (2) phases to the PUD CIP for a 10 year total plan, but due to the revenue variance from priorcapital financing projections, we have added a third 5 year period to indicate that we have not deleted any w/s projects from theapproved CIP to address the revenue variance, we have simply shifted some w/s projects totaling $483,704,500 to a Phase III. Wealso included some w/s projects that have been projected for construction in Phase III, such as the Little River Reservoir WaterTreatment Plant.


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City of Raleigh

Public Utilities Rate Options

Assumptions used in EACH OPTION

1. Reduced annual department-wide operating budget.- [Line No. 21]

2. Reduced 10-year CIP ($1.4 billion reduced to $914 million).3. Implementation of monthly billing on December 1, 2009 and DE Benton Water

Treatment Plant start-up in February 2010. O&M Cost impacts of:

a. FY 2010 - $2 millionb. FY 2011 and after - $6 million- [Line No. 22]

4. Additional acreage fee reimbursements for oversized city water and sewer mainprojects completed, in the following amounts (In addition to the $1.0 million annual

amount already built into the rate model):

a. FY 2009 - $3.9 millionb. FY 2010 - $9 millionc. FY 2011 - $6 million- [Line No. 19]

Assumptions used in OPTION #1

1. Maintain 15% water and sewer across-the-board rate increase effective July 1, 2009.- [Line Nos. 8 & 9]

2. Conservative outlook for consumption growth: Consumption returns to FY 2008 levelsin FY 2011, and then grows at 1% per year thereafter.

- [Line Nos. 11 & 12]

Projected Summary Rate Increases FY 2010 FY 2014: 15%, 21%, 9%, 7%, 7%Assumptions used in OPTION #2

1. Maintain 15% water and sewer across-the-board rate increase effective July 1, 2009.- [Line Nos. 8 & 9]

2. Less-conservative outlook for consumption growth: Consumption returns to FY 08levels in FY 11, and then grows at 3% per year thereafter.

- [Line Nos. 11 & 12]

3.

$6 million in additional annual revenue beginning in FY 11 from a new $2,500 capacityfee on new connections ($1 million additional in FY 2010 for phase-in period).

- [Line No. 19]

Projected Summary Rate Increases FY 2010 FY 2014: 15%, 9%, 9%, 7%, 7%

Assumptions used in OPTION #3


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Revenue Sufficiency Summary - Option #1Actual Estimated Projected Projected Proje

Line No. FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Total System Revenue

Water Revenue1. User Charges 49,351,707$ 53,631,972$ 60,774,088$ 72,192,300$ 78,240,486$ 83,422,880$ 88,972,867$

2. Miscellaneous Revenue 11,622,530 11,263,220 11,392,246 11,523,207 11,656,132 11,791,051 11,927,995

3. Subtotal: Water Revenue 60,974,237$ 64,895,192$ 72,166,334$ 83,715,507$ 89,896,618$ 95,213,931$ 100,900,862$

Sewer Revenue

4. User Charges 41,084,575$ 43,885,081$ 49,424,009$ 58,259,008$ 62,948,586$ 66,968,374$ 71,269,063$


6. Subtotal: Sewer Revenue 54,002,654$ 55,258,512$ 60,930,639$ 69,900,835$ 74,727,638$ 78,886,708$ 83,328,770$

7. Total: Revenue All Sources 114,976,891$ 120,153,704$ 133,096,973$ 153,616,341$ 164,624,256$ 174,100,639$ 184,229,631$

8. Raleigh Water Rate Increase 15.00% 15.00% 21.00% 9.00% 7.00% 7.00%

9. Raleigh Sewer Rate Increase 15.00% 15.00% 21.00% 9.00% 7.00% 7.00%10. Previous Model: 15.00% 15.00% 9.00% 9.00% 7.00% 7.00%

Mid-Year Adjustment to Test Coverage

11. Total Water Revenue 0.00% -8.00% -3.50% 0.00% 1.00% 2.00% 3.00%

12. Total Sewer Revenue 0.00% -8.00% -3.50% 0.00% 1.00% 2.00% 3.00%

Adjusted Water Revenue

13. User Charges 49,351,707$ 49,341,414$ 58,646,995$ 72,192,300$ 79,022,891$ 85,091,337$ 91,642,053$



Adjusted Sewer Revenue

16. User Charges 41,084,575$ 40,374,274$ 47,694,169$ 58,259,008$ 63,578,072$ 68,307,741$ 73,407,135$



19. Additional Revenue Adjustment -$ 3,900,000$ 9,000,000$ 6,000,000$ -$ -$ -$

20. Total: Adjusted Revenue All Sources 114,976,891$ 116,252,340$ 138,240,040$ 159,616,341$ 166,036,146$ 177,108,464$ 189,036,889$

21. Total Operating Expense (80,709,066)$ (86,694,777)$ (87,450,609)$ (88,677,565)$ (91,215,736)$ (93,843,170)$ (96,563,343)$22. Additional Expense for Benton WTP & Monthly Billing - - (2,000,000) (6,000,000) (6,000,000) (6,000,000) (6,000,000)

23. Revenue Available for Debt Service 34,267,824$ 29,557,563$ 48,789,431$ 64,938,776$ 68,820,410$ 77,265,295$ 86,473,547$

Outstanding and Estimated Debt Funding Needs24. Revenue Bond and Parity Debt (13,673,778)$ (13,659,633)$ (28,108,451)$ (36,598,838)$ (37,026,961)$ (37,567,439)$ (49,288,428)$

25. Subordinate Debt (SRF & GO Bonds) (4,916,845) (4,094,934) (3,358,618) (3,614,212) (2,985,316) (2,562,069) (2,390,708)

26. Other Installment Financing (11,054,271) (11,643,189) (11,623,514) (9,637,767) (9,332,932) (4,155,934) (4,006,297)

27. Total Debt All Sources (29,644,894)$ (29,397,756)$ (43,090,582)$ (49,850,818)$ (49,345,209)$ (44,285,443)$ (55,685,433)$

28. Annual Surplus / Deficit 4,622,930$ 159,807$ 5,698,849$ 15,087,959$ 19,475,202$ 32,979,852$ 30,788,114$

29. Total Budgeted Annual PAYGO -$ (7,250,000)$ (3,000,000)$ (5,000,000)$ (15,000,000)$ (30,000,000)$ (30,000,000)$30. Total Surplus / (Deficit) Including PAYGO 4,622,930 (7,090,193) 2,698,849 10,087,959 4,475,202 2,979,852 788,114

31. Unrestricted Net Assets - Beginning Balance 50,742,908$ 50,742,908$ 43,652,715$ 46,351,564$ 56,439,523$ 60,914,724$ 63,894,576$Legal

Covenant

32. Debt Service Coverage Parity Indebtedness 1.20 2.51 2.16 1.74 1.77 1.86 2.06 1.75

33. Exclusive of 15% of Unrestricted Net Assets City Policy 1.75 1.75 1.75 1.75 1.75 1.75 1.75

34. Debt Service Coverage on Parity, Subordinated, 1.00 1.84 1.66 1.55 1.61 1.72 1.93 1.67

35. & G.O. Indebtedness City Policy 1.25 1.25 1.25 1.25 1.25 1.25 1.25


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Sewer Revenue

4. User Charges 41,084,575$ 43,885,081$ 49,424,009$ 53,313,950$ 57,550,936$ 61,184,744$ 65,071,787$










13. User Charges 49,351,707$ 49,341,414$ 58,646,995$ 65,781,818$ 73,378,619$ 80,476,447$ 88,216,188$




16. User Charges 41,084,575$ 40,374,274$ 47,694,169$ 53,313,950$ 59,277,464$ 64,855,829$ 70,928,248$



19. Additional Revenue Adjustment -$ 3,900,000$ 10,000,000$ 12,000,000$ 6,000,000$ 6,000,000$ 6,000,000$








28. Annual Surplus / Deficit 4,622,930$ 159,807$ 6,698,849$ 9,732,418$ 15,530,321$ 30,913,049$ 30,883,361$

29. Total Budgeted Annual PAYGO -$ (7,250,000)$ (3,000,000)$ (5,000,000)$ (15,000,000)$ (30,000,000)$ (30,000,000)$30. Total Surplus / (Deficit) Including PAYGO 4,622,930 (7,090,193) 3,698,849 4,732,418 530,321 913,049 883,361


Covenant






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Sewer Revenue

4. User Charges 41,084,575$ 43,885,081$ 50,139,692$ 54,095,126$ 58,403,608$ 62,098,390$ 66,050,777$










13. User Charges 49,351,707$ 50,145,894$ 59,542,046$ 66,794,488$ 74,879,180$ 82,889,195$ 91,244,732$




16. User Charges 41,084,575$ 41,032,551$ 48,384,803$ 54,095,126$ 60,447,735$ 66,755,769$ 73,316,362$



19. Additional Revenue Adjustment -$ 3,900,000$ 10,000,000$ 10,000,000$ 4,000,000$ 4,000,000$ 4,000,000$








28. Annual Surplus / Deficit 4,622,930$ 1,622,562$ 8,284,533$ 9,526,264$ 16,201,153$ 33,225,738$ 34,300,021$

29. Total Budgeted Annual PAYGO -$ (7,250,000)$ (3,000,000)$ (5,000,000)$ (15,000,000)$ (30,000,000)$ (30,000,000)$30. Total Surplus / (Deficit) Including PAYGO 4,622,930 (5,627,438) 5,284,533 4,526,264 1,201,153 3,225,738 4,300,021


Covenant






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Annual W/S Revenue Projections from Varying Capacity Fee Increases and Varying New Connection Totals

2,000 2,500 3,000 3,500 4,000 4,500 5,000

$200 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000$500 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000

$1,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000$1,500 $3,000,000 $3,750,000 $4,500,000 $5,250,000 $6,000,000 $6,750,000 $7,500,000$2,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000$2,500 $5,000,000 $6,250,000 $7,500,000 $8,750,000 $10,000,000 $11,250,000 $12,500,000


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Wastewater (Sewer) Capacity Fees

Water Capacity Fees: (based on water meter size): Total SFR

inch 415 inch 1,420 1,835

1 inch 1,038 1 inch 3,5501 inch 2,075 1 inch 7,100

2 inch 3,320 2 inch 11,360

3 inch "Compound" 6,640 3 inch "Compound" 22,720

4 inch "Compound" 10,375 4 inch "Compound" 35,500

6 inch FMCT 25,938 6 inch FMCT 24,850



10" X 12" X 6" FMCT 89,225 10" X 12" X 6" FMCT 205,900

4 inch Fire Line 6,225 4 inch Fire Line N/A6 inch FMCT 12,969 6 inch FMCT N/A

8 inch FMCT 18,675 8 inch FMCT N/A



*Effective 7/1/08 - 6/30/09 - information found on website and confirmed with Cam Coley

Capacity Fees - Combined Water and Sewer*

Residential homes

Inside city maximum 1,970Outside city maximum 5,910

*Applies to all buildings and homes built after 1989, based on the heated square footage of the property

and whether or not it is located inside or outside the city limits. The fee for a non-residential buildingis based on the size of the meter and whether the property is located inside or outside the city.

*Effective 8/1/08 - information found on website.

City/County of Winston-Salem

Analysis of the Use of Capacity Fees

In Charlotte, Greensboro, Winston-Salem and Durham

Charlotte-Mecklenburg

City of Greensboro


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Summary of Water and Sewer Capacity Fees in Wake County

The following is a summary of the water and sewer capacity fees for Towns which havethem in each Wake County (data obtained from Towns websites 3/17/2009). The total feeamount for each Town is based on a single family residence using 250 GPD of water andsewer capacity or their equivalent methodology was used to calculate the underlined Totalsince the Towns determine their w/s capacity fees in varying ways. Other water and sewerfees apply such as acreage fees, irrigation fees, tap fees, etc. and rates for out-of-town usersand multi-family residences are collected by the Towns but are not shown.

Apex Capacity FeesCombined water/sewer $17 per GPD (GPD based on supplied list of

usage by land use category)

Total w/s capacity fee $4,250 per SFR unit

Fuquay Varina

Capacity Fees

Water $1,000/lot

Sewer $2,000/lot

Capacity Fees (non-residential)

Water and Sewer combined $3,000 166,666 depending on size of tap


Holly Springs

Capacity Fees (residential)

Water $4,000 30,000/unit based on meter size

Sewer $4,000 30,000/unit based on meter size

Capacity Fees (non-residential)

Water $5,000 - $45,000 based on meter size

Sewer $5,000 - $45,000 based on meter size

Total w/s capacity fee $8,000 per SFR unit meter


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Zebulon

Capacity and Development Fees

Water $1,695 - $3,017 based on meter size

Sewer $1,746 - $3,108 based on meter size


Garner

Capacity Replacement Fees

Water Residential/Non-Residential $4.10 per gallon for new construction reservedor projected.

Sewer Residential/Non-Residential $5.50 per gallon for new construction reserved

or projected.


Knightdale

Capacity Fees

Water $887.50 per unit or $3.55 gpd

Sewer $900 per unit or $3.60 gpd

Total w/s capacity fee $1,787.50 per SFR unit

Rolesville

WaterSingle and Two-Family Residential $675 per unit


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Wake Forest

Residential Water and Sewer Availability Fees as follows:

TYPE GPD WATER FEE SEWER FEE

Two Bedroom 119 $960.33 $655.69

Three Bedroom 168 $1,355.76 $925.68

Four Bedroom 279 $2,251.53 $1,537.29

Greater than Four Bedroom 279 + 60

perbedroom

$2,735.73 $1,867.89

Mobile Home 228 $1,839.96 $1,256.28

One Bedroom Apartment 84 $677.88 $462.84

Two Bedroom Apartment 125 $1,008.75 $688.75

Three Bedroom Apartment 166 $1,339.62 $914.66

x 5/8 irrigation meter 166 $1,630.14 + fee for split watermeter($430 if installed at time housemeter is installed; $650 if installedlater than house)

----

Total w/s capacity fee $3,788.82 per SFR unit

Cary

Cary charges a single Development Fee for both acreage and capacity replacement fees.

Residential Water Sewer

3 800 $2 783 $4 904


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Morrisville

Fees are charged by Cary, as owner of the merged utility system. Fees will match Cary fees

after recovery of merger costs.

Residential Water Sewer

3,800 $2,839 $4,904

Non-Residential

Fees are the same as those in Cary (once change in Cary non-residential fee structureimplemented).

Water Calculated using $4.15/peak day gallon

Sewer Calculated using $9.93/peak day gallon

Total w/s capacity fee $5,297 per SFR unit (using 2401-3,100 median)


16/21

W/S Capacity Fee Spreadsheet for FY 2009

Durham $0Winston-Salem $0Charlotte $1,835Greensboro $1,970Apex $4,250Fuquay Varina $3,000Holly Springs $8,000

Wendell $2,060Zebulon $3,441Garner $2,400Knightdale $1,787.50

Rolesville $3,355Wake Forest $3,788.82Cary $5,261Morrisville $5,297

$3,573 $3,096

Raleigh Connection fees= $1,666


17/21

water availability $7.77 per bill (2 months)water consumption $1.96 per ccf 1 ccf = 748.1 gallonssewer availability $6.24 per bill (2 months)

sewer consumption $1.82 per ccf 1 ccf = 748.1 gallons

The average residential type customer in the Raleigh service is currently using 6 ccf per month or 12 ccf per bill.4489 gallons 8977 gallons

Therefore the average residential customer's current w/s bill is indicated below:$7.77 $3.89

$23.52 $11.76$6.24 $3.12

$21.84 $10.92$59.37 or on a monthly basis $29.69 or on an annual basis $356.22

The 15 % water and sewer rate increase previously projected for FY 2010 and effective on July 1, 2009 would generate an average residentialcustomer's bill as indicated below:

$8.94 $4.47

$27.00 $13.50$7.18 $3.59

$25.08 $12.54$68.20 or on a monthly basis $34.10 or on an annual basis $409.20$8.83 increase $4.41 increase $52.98 increase

The 17 % water and sewer rate increase proposed for 2 months in FY 2009 and all of FY 2010 and effective on May 1, 2009 would generatean average residential customer's bill as indicated below:

$9.09 $4.55$27.48 $13.74

$7.30 $3.65$25.56 $12.78$69.43 or on a monthly basis $34.72 or on an annual basis $416.58$10.06 increase $5.03 increase $60.36 increase

$1.23 increase above 15% $0.62 increase above 15% $17.50 increase above 15% on July 1, 2009


18/21

water availability $7.77 per bill (2 months)water consumption $1.96 per ccf 1 ccf = 748.1 gallonssewer availability $6.24 per bill (2 months)

sewer consumption $1.82 per ccf 1 ccf = 748.1 gallons

A residential type customer in the Raleigh service currently using 8 ccf per month or 16 ccf per bill.5,985 gallons 11,970 gallons

Therefore the average residential customer's current w/s bill is indicated below:$7.77 $3.89

$31.36 $15.68$6.24 $3.12

$29.12 $14.56$74.49 or on a monthly basis $37.25 or on an annual basis $447.00

The 15 % water and sewer rate increase previously projected for FY 2010 and effective on July 1, 2009 would generate an average residentialcustomer's bill as indicated below:

$8.94 $4.47

$36.00 $18.00$7.18 $3.59

$33.44 $16.72$85.56 or on a monthly basis $42.78 or on an annual basis $513.36$11.07 increase $5.53 increase $66.36 increase

The 17 % water and sewer rate increase proposed for 2 months in FY 2009 and all of FY 2010 and effective on May 1, 2009 would generatean average residential customer's bill as indicated below:

$9.09 $4.55$36.64 $18.32

$7.30 $3.65$34.08 $17.04$87.11 or on a monthly basis $43.56 or on an annual basis $522.72$12.62 increase $6.31 increase $75.72 increase

$1.55 increase above 15% $0.78 increase above 15% $21.98 increase above 15% on July 1, 2009


19/21

Memorandum

To: City Manager Russell AllenPublic Utilities Director Dale Crisp

From:Chief Financial Officer Perry James

Date: 4/16/2009

Re: Information on Credit Rating Gradations

At the request of Councilor Koopman at the April 7 Council Meeting, we have reviewed

further the financial impacts of having City of Raleigh utility revenue bonds rated at

gradations between major categories (such as AA1, AA2, or AA3). To obtain further

information on the specific impacts of individual graduations of rates, I again asked the

Citys Financial Advisor, Douglas Carter of DEC Associates, to review and comment on

this. The following is his response:

Perry, you have asked me to comment on a question raised concerning potential costincreases as a result of rating reduction. In my earlier written communication to you Ioutlined currently estimated cost impacts for rating reduction to the double A and single Acategories and the question now raised deals with the specific cost impacts by thegradations within each letter category. Each rating category, as you know, has threegradations within the category and taking the estimated cost impact for the major categoriesand estimating them for the individual gradations is difficult to measure. A mathematicalmethod, by taking the estimated change and multiplying by three (since there are threegradations within each category) is problematic and not applicable, in my opinion.

Additionally, the potential gradation economic change occurs most commonly when a ratingis increasing from one major category to the other, from triple B to single A, single A todouble A and so on. For a credit that is in a downward movement, the estimated costimpact of this would be very similar within a category, without regard to gradation, sincedownward movement would impact investor perceptions and concerns for the future. Forthe multiple reasons mentioned in our earlier communication to you, including increasedcost, it is my sincere belief that the continuation of revenue bond credit ratings at highestlevels achieved by the City Water and Sewer operation is of great importance.

In summary, while there would naturally seem to be different pricing impacts from thedifferent gradations, such is more normally seen in an upward rating progression. Once theCitys revenue bonds began a downward rating movement, such would likely cast an overallnegative shadow over not only new issues but also existing issues owned by investors.Such a situation is not advisable and I certainly agree with Doug Carters overall conclusionon the importance of the highest level bond ratings for the Water and Sewer operation.


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City of Raleigh

History of Water and Sewer Rate Changes and Capital Improvement Plan Investment

Fiscal Year 1983 to Present

Percent Percent

Effective Date Change Effective Date Change Totals No. Years

July 1, 1983 +37.7% July 1, 1983 +8% 26,990,000$ 5July 1, 1984 +13.9% July 1, 1984 +11.9% 30,823,000$ 5

July 1, 1985 No change July 1, 1985 No change 36,439,000$ 5

July 1, 1986 +5% July 1, 1986 +5% 58,543,000$ 5July 1, 1987 No change July 1, 1987 No change 81,292,000$ 5

July 1, 1988 No change July 1, 1988 +16% 73,775,000$ 5

July 1, 1989 No change July 1, 1989 No change 73,579,000$ 5July 1, 1990 No change July 1, 1990 No change 182,300,000$ 10July 1, 1991 No change July 1, 1991 No change 141,262,000$ 10

July 1, 1992 No change July 1, 1992 +16% 156,557,000$ 10

July 1, 1993 No change July 1, 1993 No change 165,243,000$ 10

July 1, 1994 No change July 1, 1994 No change 146,632,000$ 10July 1, 1995 No change July 1, 1995 No change 109,835,000$ 10

July 1, 1996 No change July 1, 1996 No change 110,443,000$ 10July 1, 1997 No change July 1, 1997 No change 84,770,500$ 10

July 1, 1998 +5% July 1, 1998 +5% 92,557,000$ 10

July 1, 1999 +5% July 1, 1999 +5% 108,122,000$ 10July 1, 2000 No change July 1, 2000 No change 136,669,700$ 10July 1, 2001 No change July 1, 2001 No change 185,155,000$ 10

July 1, 2002 No change July 1, 2002 No change 375,776,000$ 10July 1, 2003 +5% July 1, 2003 +5% 431,198,000$ 10July 1, 2004 +9% July 1, 2004 +9% 472,086,000$ 10

July 1, 2005 +9% July 1, 2005 +9% 484,445,000$ 10

July 1, 2006 +9% July 1, 2006 +9% 651,914,000$ 10July 1, 2007 +9% July 1, 2007 +9% 878,306,325$ 10

July 1, 2008 +15% July 1, 2008 +15% 1,403,353,000$ 10

CIP BudgetsWater Rate Changes Sewer Rate Changes


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Documents

28PU SI Water and Sewer Rates