Agenda Cover Memorandum

Transcription

1 Agenda Cover Memorandum Meeting Date: June 11, 2012 Item Title: Action Requested: Approval For discussion Feedback requested For your information Staff Contact: Allison Stutts Phone Number: Address: Background: The water and sewer rate study is complete. The rate study provides 5 possible rate scenarios in addition to a baseline scenario. The baseline scenario suggests that we make no changes to our current rate structure except for passing the City of Chicago water rate increase on to our residents. The rate scenarios include a bond issue for Phase II of the Sewer Construction program estimated at $15M. The scenarios also include the installation of a radio read meter system funded either through a pay as you go program or through bond funding. The rate recommended by Baxter & Woodman is rate scenario 2B. This rate scenario incorporates both a $15M sewer bond for Phase II Sewer Construction and a $3.5M bond for the radio read system. This rate structure for water includes a fixed charge for each account based on meter size with all meters 1 ½ inches and smaller as the base meter. In addition to the fixed charge, two separate variable charges are included. One variable charge for the City of Chicago water rate and a variable charge to account for the City s variable costs associated with operating the system. This rate structure for sewer includes a fixed charge for all customers to capture the fixed costs of operating the sewer system and a variable charge based on consumption to account for our variable costs to run the system. The sewer and water rates are separate rate calculations in all scenarios. If the Council decides to move forward with one of the bond issues for the Sewer or Water project, the sewer and water rates can be selected from the appropriate scenario to comply with the expenditures for each fund. The rate schedule for 2B is provided on the following page: Rev 03/07/12

2 Agenda Cover Memorandum RATE SCHEDULE 2013 Water Bi-Monthly Minimum Charge 1 1/2" Meter $ " Meter $ " Meter $ " Meter $ " Meter $ Water Usage Rates, per 1,000 gal Chicago Water Rate $2.51 Park Ridge Tier 1 Water Rate $2.85 Park Ridge Tier 2 Water Rate $2.85 Sewer Bi-Monthly Minimum Charge $2.98 Sewer Usage Rates, per 1,000 gal $1.27 If the Council wishes to implement a rate that excludes both the Phase II Sewer Construction Program funding and the radio read meter installation, then rate 1C is recommended. The rate schedule for 1C is provided below: RATE SCHEDULE 2013 Water Bi-Monthly Minimum Charge 1 1/2" Meter $ " Meter $ " Meter $ " Meter $ " Meter $ Water Usage Rates, per 1,000 gal Chicago Water Rate $2.51 Park Ridge Tier 1 Water Rate $2.79 Park Ridge Tier 2 Water Rate $2.79 Sewer Bi-Monthly Minimum Charge $2.98 Sewer Usage Rates, per 1,000 gal $1.22 The proposed modification to Article 11, Chapter 1, Section 9 are included. Points of clarification to the rate structure: All current customers receiving monthly bills will be moved to a bi-monthly billing period If a customer has a compound meter, they will only receive 1 fixed charge based on the meter size For accounts with one meter supporting multiple dwellings, they will only receive 1 fixed charged based on meter size For those customers that would like to determine the impact on their bi-monthly bill, a list of account numbers and meter sizes is posted on the City s website with the documentation for this agenda item Recommendation: Move to approve the change in water and sewer rate structure effective with the bi-monthly bills issued at the end of July 2012 to include a fixed charge according to meter size for water and add a fixed charge for sewer in the amount of $2.98 per bill and set the water rates at $2.51 per 1,000 for City of Chicago water PLUS $2.85 per 1,000 for Park Ridge variable water charges plus $1.27 per 1,000 for sewer variable charges. Rev 03/07/12

3 Agenda Cover Memorandum Budget Implications: Does Action Require an Expenditure of Funds: Yes No If Yes, Total Cost: If Yes, is this a Budgeted Item: Yes No If Budgeted, Budget Code (Fund, Dept, Object) Attachments: Rate Study Summary Rate Study Updated Article 11, Chapter 1, Section 9 Rev 03/07/12

4 City of Park Ridge - Utility Rate Study Summary Goals of Study Financial Stability: Maintain positive cash flow and reserve balances. Fairness: Rates must not place a disproportionate burden on any one segment of the customer base. Full Cost Pricing: Structure rates to cover the full cost of service, including operations, debt service and capital projects. Infrastructure Renewal: Provide funding for the City s short- and long- term capital improvement needs. Justifiable Rates: Set rates in accordance with best practices from the American Water Works Association (AWWA). Summary Conclusions The City s water and sewer rates must be increased annually in 2013 through 2017 in order to meet projected expenses during the five-year study period. In addition to raising rates to cover its own costs, the City will need to match increases in water rates adopted by the City of Chicago each year in May when Park Ridge s fiscal year begins. The need to provide a dedicated annual source of funding for infrastructure renewal is a key driver of the rate increases in Park Ridge, as in many communities in this area. Recommendations Rate Structure Distinguish between Chicago and Park Ridge water usage rates, in the rate ordinance, on customer bills and in public information. Charge uniform water and sewer usage rates (volume charges). Eliminate the minimum water billing volume. Establish fixed charges to recover overhead and administrative costs. Escalate water fixed charges by water meter capacity to cover the higher costs of maintaining larger water meters. Establish the base water fixed charge for all customers with a 1½-inch and smaller water meter. This rate structure is based on actual cost of service and it equitably distributes both fixed and variable costs among all rate payers. The base water fixed charge includes all customers with 1½-inch and smaller water meters to ensure that all single family customers pay the same fixed charges. May 2012 Page 1 of 4

5 City of Park Ridge - Utility Rate Study Summary Recommendations Rates Recommended Water and Sewer Rates Rate Scenario2 B Park Ridge Water Rates Minimum Bill $30.20 Tier 1 Rate $ 4.67 $ 2.85 $ 3.05 $ 3.26 $ 3.46 $ 3.67 Ti e r 2 Ra t e $ 5.21 Chicago Water Rate $ 2.51 $ 2.89 $ 3.32 $ 3.82 $ 3.93 Water Fixed Charges 1 ½ Meter $ $ $ $ $ Meter $ $ $ $ $ Meter $ $ $ $ $ Meter $ $ $ $ $ Meter $ $ $ $ $ Sewer Rate $ 1.22 $ 1.27 $ 1.32 $ 1.37 $ 1.42 $ 1.48 Sewer Fixed Charge $ 0.00 $ 2.98 $ 3.10 $ 3.22 $ 3.35 $ 3.49 The recommended schedule of water and sewer rates takes into account projected operating expenses, capital improvement costs and debt service Proposed rate increases are designed to cover these expenses while preventing excessive impacts on unrestricted net assets in the Water and Sewer Funds. The recommended rates are also designed to fund two additional projects. The first project is a multi-year effort to upgrade all existing water meters with automated reading interfaces. The second additional project is the Phase 2 Relief Sewer Improvements. This includes planning, design and construction of additional relief sewers to alleviate flooding. The estimated cost for this portion of the relief sewer project is $15 million. Future water and sewer rates are based on expenditure projections. Baxter & Woodman provided the Excel files that allow for the City to update future projected annual expenditures with actual annual expenditures allowing the City to calculate new rates each fiscal year without the need to employ outside services May 2012 Page 2 of 4

6 City of Park Ridge - Utility Rate Study Summary Rate Scenarios 1A 1B 1C 2A 2B No Change to Rate Structure X Base Charge Escalated based on Meter Size X X X X Fixed Charge Standard Meter 1" X Fixed Charge Standard Meter 1 1/2" X X X City of Chicago Water Increase X X X X X Separate Park Ridge and Chicago Water Usage Rates X X X X X Eliminate Minimum Water Billing Volume X X X X $15M Phase II Sewer Funded with Bonds X X $3.5M Water Meter Program Funded with Cash X $3.5M Water Meter Program Funded with Bond X Average Utility Bill 13 - Base Meter 4,000 gallon $39 $45 $46 $47 $46 Average Utility Bill 13 - Base Meter 12,000 gallon $87 $97 $98 $102 $99 13 Year End Water Projections Surplus/(Deficit) ($642K) $93 K ($118K) ($619 K) ($43 K) May 2012 Page 3 of 4

7 City of Park Ridge - Utility Rate Study Summary Rate Impact CITY OF PARK RIDGE, ILLINOIS WATER & SEWER RATE STUDY PROJECTED BI MONTHLY WATER & SEWER BILLS RESIDENTIAL CUSTOMERS 2012 bills are calculated at current rates. Future bills reflect Chicago water rate increases passed through each May along with Park Ridge rate increases. Low Residential (4,000 gallons bi monthly, 5/8" meter) Baseline $35 $35 $35 $35 $35 $35 Scenario 1A $35 $39 $42 $46 $51 $55 Scenario 1B $35 $45 $48 $50 $53 $54 Scenario 1C $35 $46 $48 $51 $54 $55 Scenario 2A $35 $47 $51 $54 $57 $59 Scenario 2B $35 $46 $49 $52 $56 $58 Average Residential (12,000 gallons bi monthly, 1" meter) Baseline $78 $81 $84 $87 $90 $91 Scenario 1A $78 $87 $96 $106 $117 $125 Scenario 1B $78 $97 $103 $109 $117 $119 Scenario 1C $78 $98 $104 $111 $119 $123 Scenario 2A $78 $102 $113 $121 $129 $133 Scenario 2B $78 $99 $107 $116 $125 $130 Average Residential (12,000 gallons bi monthly, 1 1/2" meter) Baseline $78 $81 $84 $87 $90 $91 Scenario 1A $78 $87 $96 $106 $117 $125 Scenario 1B $78 $114 $120 $127 $134 $137 Scenario 1C $78 $98 $104 $111 $119 $123 Scenario 2A $78 $102 $113 $121 $129 $133 Scenario 2B $78 $99 $107 $116 $125 $130 May 2012 Page 4 of 4

8 RATES AND FEES All properties connecting with the water system of the City or taking and using water from the City s system shall pay the following rates and fees established for various water services and sewer services as described: A. Rates for Water Services and Use in the City, per billing period: 1. Metered construction and regular service to a business unit or single dwelling unit: Formatted: Condensed by 0.1 pt a. Fixed charge based on meter size: 1 1/2" Meter $ " Meter $ " Meter $ " Meter $ " Meter $ b. City of Chicago water rate per 1,000 gallons $2.51 c. City of Park Ridge variable water rate per 1,000 gallons $2.85 (Ord , 4/16/07, S25), (Ord , 4/21/2008)(Ord , 5/18/2009) (Ord , 03/15/2010) 2. Where one meter delivers water to more than one dwelling unit or to a combination of dwelling units and a commercial or business unit, the above rates shall apply for fixed charges according to meter size and for variable rates according to usage.. 3. The fixed charge in subparagraph (A1a.) is applied to all properties, where a water meter is installedthe fixed charge in subparagraph (A1a.) continues to be charged while a property is vacant, in foreclosure, or the water service has been turned off because the fixed charge covers overhead and administrative costs that can be equally applied to all customers.. B. Rates for Sewer Use in the City, per billing period: 1. Fixed charge of $2.98 per account 2. Regular service to a business unit or single dwelling unit: $1.27 per each 1,000 gallons (Ord , 4/21/2008)(Ord , 5/18/2009), (Ord , 4/19/2010) 3. The fixed charge in subparagraph (B1) is applied to all properties, regardless of whether a water meter is installed, upon transfer of the property or upon issuance of a certificate of occupancy in the event that a demolition permit was approved by the City for the property. The fixed charge in subparagraph (B1) continues to be charged while a property is vacant, in foreclosure, or the water service has been turned off because the Deleted: <#>Up to but not exceeding 5,000 gallons $30.20 (basic rate) Formatted: Condensed by 0.1 pt Formatted: Bullets and Numbering Formatted: Bullets and Numbering Formatted: Condensed by 0.1 pt Deleted: Over 5,000 gallons but not exceeding 30,000 gallons $4.67 per 1,000 gallons Over 30,000 gallons $5.21 per 1,000 gallons Deleted: to each unit Deleted: basic rate Deleted: regardless of whether Deleted:, upon transfer of the property or upon issuance of a certificate of occupancy in the event that a demolition permit was approved by the City for the property. Deleted: basic rate Deleted: s Deleted: basic Deleted: rate Deleted: charges for the City s water system as a whole and includes the infrastructure that serves each property within the City Formatted: Bullets and Numbering Formatted: Condensed by 0.1 pt Deleted: $1.22 Deleted: <#>Where one meter delivers water to more than one dwelling unit or to a combination of dwelling units and a commercial or business unit, the above rates shall apply to each unit. Deleted: basic rate Deleted: basic rate

9 fixed charge covers overhead and administrative costs that can be equally applied to all customers. C. Construction Service Meter Fee: For metered construction water service, the applicant shall be required to post the sum of one thousand dollars ($1,000.00) upon the filing of his application for such water service, to guarantee payment for water used during construction and the prompt return in good condition of the construction water meter. Said amount shall not be returnable to the applicant in the event that said premises shall be occupied prior to the issuance of a certificate of occupancy or in violation of terms of this Code providing for the construction and equipment of buildings. Said amount shall be returnable to the applicant, or his assignee, less such amount to pay for water used during construction, upon termination of metered construction water service and the prompt return of the construction water meter in good condition. Deleted: basic rate Deleted: charges for the City s water system as a whole and includes the infrastructure that serves each property within the City. D. Delinquency Fee: A delinquency fee of ten percent (10%) of the amount billed for water service, sewer service and for any other fees and taxes included on the billing statement shall be added to the bill if payment is received after the due date appearing on the face of the bill. E. New Account Fee: A service fee of five dollars ($5.00) shall be paid by a new owner of property, upon transfer of the property for the initiation of metered regular water service. This new account fee shall also be paid for the initiation of metered regular water service upon issuance of a certificate of occupancy for any property for which the City has approved a demolition permit. F. Shut-Off Posting Fee: A service fee of ten dollars ($10.00) shall be added to the bill of any consumer each time the City delivers or posts a notice of impending termination of water service due to nonpayment by the consumer of the bill for water service and sewer service. G. Reinstatement Fee: In addition to any water service, sewer service or other fees due, a service fee of fifty dollars ($50.00) shall be paid by any consumer prior to reinstatement of water service following termination of such service for non-payment of fees or charges or for denial of access or for failure to repair a leak as provided herein or for illegal outdoor water use; provided that if reinstatement of water service is requested other than during regular business hours the fee shall be two hundred dollars ($200.00). (Ord , 4/3/06, S24) (Ord , 11/16/2009)

10 City of PARK RIDGE Water and Sewer Rate Study Prepared by: Baxter & Woodman, Inc. 39 S. LaSalle St., Ste. 816 Chicago, IL

11 City of Park Ridge, Illinois TABLE OF CONTENTS Section Page No. EXECUTIVE SUMMARY 1. PURPOSE OF STUDY 2. PRESENT CONDITIONS 2.1 Overview Water and Sewer Rates Water and Sewer Usage Capital Improvement Plan FUTURE CONDITIONS 3.1 Water and Sewer Usage Revenue Projections Expense Projections Operations and Maintenance Capital Improvement Projects Non-Operating BASELINE CASH FLOW ANALYSIS 5. RATE STRUCTURE ANALYSIS 5.1 Water Usage Rate Distribution Usage Rate Structure Fixed Charges RATE SCENARIO Rate Structure Scenario 1A Scenario 1B Scenario 1C Bi-Monthly Bills Cash Flow Projections /12 City of Park Ridge, Illinois Page 1

12 Section Page No. 7. RATE SCENARIO Rate Structure Capital Improvement Project Alternatives Scenario 2A Scenario 2B Bi-Monthly Bills Cash Flow Projections CONCLUSION AND RECOMMENDATIONS 8.1 Rate Structure Recommended Rate Scenario Implementation Plan 8-3 LIST OF TABLES Table Page No. 1 Existing Water and Sewer Rates Regional Water and Sewer Cost Comparison Water and Sewer Customer Breakdowns Water Pumpage and Billing Summary Water Fund - Baseline Revenue Projections Sewer Fund - Baseline Revenue Projections Water Fund - O&M Expense Projections Sewer Fund - O&M Expense Projections Baseline Five-Year Capital Improvement Plan Water & Sewer System Inventory Target Funding Levels for Long-Term System Renewal Water Fund - Non-Operating Expense Projections /12 City of Park Ridge, Illinois Page 2

13 Table Page No. 13 Sewer Fund - Non-Operating Expense Projections Additional Non-Operating Expenses - New Bonds Bi-Monthly Fixed Charges - Water Scenario 1A Water and Sewer Rates Scenario 1B Water and Sewer Rates Scenario 1C Water and Sewer Rates Scenario 1 - Bi-Monthly Bills for Low Residential Usage Scenario 1 - Bi-Monthly Bills for Average Residential Usage (1 Meter) Scenario 1 - Bi-Monthly Bills for Average Residential Usage (1½ Meter) Scenario 2A Water and Sewer Rates Scenario 2B Water and Sewer Rates Scenario 1 - Bi-Monthly Bills for Low Residential Usage Scenario 1 - Bi-Monthly Bills for Average Residential Usage 7-5 LIST OF FIGURES Figure Page No. 1 Water Fund Cumulative Financial Projections Sewer Fund Cumulative Financial Projections Water Fund Cash Flow Sewer Fund Cash Flow Water Fund Cash Flow Sewer Fund Cash Flow /12 City of Park Ridge, Illinois Page 3

14 LIST OF APPENDICES Appendix A B C D E F G H I J K Glossary of Terms and Acronyms Baseline Revenue and Expense Projections Water and Sewer System Inventory General Fund Transfer Formula for Shared Services Target Fund Balance Policy Bi-Monthly Fixed Charge Calculations Scenario 1A: Revenue and Expense Projections Scenario 1B: Revenue and Expense Projections Scenario 1C: Revenue and Expense Projections Scenario 2A: Revenue and Expense Projections Scenario 2B: Revenue and Expense Projections /12 City of Park Ridge, Illinois Page 4

15 EXECUTIVE SUMMARY Introduction This report was prepared to document the work performed by Baxter & Woodman, Inc. during the authorized by the City of Park Ridge (the City). The City owns and operates a water receiving and distribution system, as well as a combined sewer system consisting of sanitary and storm sewers, catch basins and manholes. These vast networks of piping, pumps and storage facilities require diligent maintenance and constant investment in order to function reliably. The City has undertaken this water and sewer rate study in order to ensure the systems are funded properly, with these key goals: Financial Stability: Maintain positive cash flow and reserve balances. Fairness: Rates must not place a disproportionate burden on any one segment of the customer base. Full Cost Pricing: Structure rates to cover the full cost of service, including operations, debt service and capital projects. Infrastructure Renewal: Provide funding for the City s short- and longterm capital improvement needs. Justifiable Rates: Set rates in accordance with best practices from the American Water Works Association (AWWA). Findings The City s existing water rates are not sufficient to fully cover all budgeted expenses in the Water Fund for the fiscal year ending April 30, 2012 ( 2012). Water billing volume has remained fairly constant since 2010 when the last water rate increase was implemented. Meanwhile, operating costs have been increasing, /12 City of Park Ridge, Illinois Page 1

16 particularly the 25 percent increase in Chicago water rates on January 1, The net result is that water rates are insufficient to fully cover budgeted expenses. This situation is not an immediate threat to the Water Fund s financial capacity, though failure to raise water rates in the future would completely deplete the Fund by 2015 (see figure below). $4,000,000 Water Fund Cumulative Financial Projections Baseline Rate Scenario $2,000,000 $0 ($2,000,000) ($4,000,000) ($6,000,000) Target Unrestricted Net Assets Unrestricted Net Assets ($8,000,000) In contrast, the Sewer Fund is projected to end 2012 with a surplus. However, this is primarily because the City has not yet begun repaying the Series 2012A G.O. Bonds (issued to fund the Phase 1 Relief Sewer Project). Interest-only payments in 2013 and 2014 will not impact the fund balance, but when the City begins repaying the principal in 2015, the unrestricted net assets in the Sewer Fund will decline if sewer rates are not increased (see the following figure) /12 City of Park Ridge, Illinois Page 2

17 $1,500,000 Sewer Fund Cumulative Financial Projections Baseline Rate Scenario - no rate increases $1,250,000 $1,000,000 $750,000 $500,000 $250,000 Target Unrestricted Net Assets Unrestricted Net Assets $0 Conclusions The City s water and sewer rates must be increased annually in 2013 through 2017 in order to meet projected expenses during the five-year study period. In addition to raising rates to cover its own costs, the City will need to match increases in water rates adopted by the City of Chicago each year in May when Park Ridge s fiscal year begins. Water purchase is the single largest cost to the Water Fund by far, and failure to pass through rate increases from Chicago has the potential to significantly affect cash flow and the City s ability to fund critical water main replacement projects. Rate increases are needed to provide for infrastructure renewal. This term refers to rehabilitating or replacing existing system components such as pumps, water mains, sewers and water storage tanks when they reach the end of their useful service life. Water and sewer utilities are capital-intensive enterprises that require continuous investment in order to maintain their integrity. Accordingly, the City s Public Works /12 City of Park Ridge, Illinois Page 3

18 Department has established annual funding targets for water main replacement and sewer rehabilitation for the next five years, which are higher than historic spending in these areas. These targets are $815,000 to $1,000,000 per year for water main replacement (slight increase each year), and $310,000 per year for sewer rehabilitation, in addition to the $5.4 million bond recently issued for relief sewer improvements. The need to provide a dedicated annual source of funding for infrastructure renewal is a key driver of the rate increases in Park Ridge, as in many communities in this area. The alternative of failing to fund critical infrastructure projects is gradual deterioration of infrastructure, which over time, will make service issues such as water main breaks, sewer backups, service outages and property damage more prevalent. Recommendations - Rate Structure The City has an inclining block rate structure for water rates, in which customers using over 30,000 gallons per bi-monthly billing period are charged a higher rate. Water bills also include a minimum usage of 5,000 gallons whether a customer uses that much water or not. Most customers use more than 5,000 gallons every two months, but the small percentage with very low consumption is actually paying for more water than they use. For sewer service, customers are charged a uniform rate per 1,000 gallons with no minimum usage. In order to standardize the rate structures between the two utilities and align the rates with actual cost centers, these changes are recommended: Distinguish between Chicago and Park Ridge water usage rates, in the rate ordinance, on customer bills and in public information; Charge uniform water and sewer usage rates (volume charges); /12 City of Park Ridge, Illinois Page 4

19 Eliminate the minimum water billing volume; Establish fixed charges to recover overhead and administrative costs; Escalate water fixed charges by water meter capacity to cover the higher costs of maintaining larger water meters; and Establish the base water fixed charge for all customers with a 1½-inch and smaller water meter. This rate structure is based on actual cost of service and it equitably distributes both fixed and variable costs among all rate payers. The base water fixed charge includes all customers with 1½-inch and smaller water meters to ensure that all single family customers pay the same fixed charges. The establishment of a fixed charge structure provides a guaranteed revenue base that is independent of the level of usage, which will provide more consistent cash flow year-round. This is especially important given the recent widespread reduction in water consumption resulting from a combination of economic factors and increased awareness of conservation measures. Nearby communities who already employ this rate structure include Evanston, Glenview and Lincolnwood. Several other Chicago area communities that have a fixed charge structure, with escalating charges based on meter size, include Bensenville, Carpentersville, Geneva, Gurnee, Itasca and Round Lake. Several other communities have uniform fixed charges that do not include any usage allowance. Distinguishing between the Chicago water rate and Park Ridge water rate in public information (City newsletter/web site) and on utility bills will help customers to better understand the drivers of water rate increases over the course of each year. The City s rate ordinance can reinforce this distinction and should be modified to /12 City of Park Ridge, Illinois Page 5

20 automatically pass through any future rate increases from Chicago, as this is the largest single expenditure in the Water Fund and delays in passing along these increases could have a significant impact on cash flow. Recommendations - Water and Sewer Rates The recommended schedule of water and sewer rates takes into account projected operating expenses, capital improvement costs and debt service. Proposed rate increases are designed to cover these expenses while preventing excessive impacts on unrestricted net assets in the Water and Sewer Funds. In particular, the rate increases will allow the City to increase funding for its annual infrastructure renewal program. This program allows the City to be proactive in addressing deficiencies in aging infrastructure, which is an important step toward sustainable, long-term asset management. The recommended rates are also designed to fund two additional projects. The first project is a multi-year effort to upgrade all existing water meters with automated reading interfaces. This will eliminate the need for customers to read their own water meters, improve the accuracy and timeliness of water meter readings, and streamline billing data upload and processing. This is a change that many Chicagoland communities have made in recent years to improve billing accuracy and efficiency. The Village of Lincolnwood and the Village of River Forest are two examples of nearby communities who have recently made this type of upgrade to their water metering system. The estimated cost for this project is $3.5 million spread evenly over four years ($875,000 per year in 2013 through 2016) /12 City of Park Ridge, Illinois Page 6

21 The second additional project is the Phase 2 Relief Sewer Improvements. This includes planning, design and construction of additional relief sewers to alleviate flooding. The estimated cost for this portion of the relief sewer project is $15 million. The recommended five-year rate schedule is outlined in the following table. The City s current water and sewer rates are listed for Rate increases would take effect May 1 of each year, with the first rate increase recommended for May 2012 ( 2013). The rate increases include funding for annual water main replacement and sewer rehabilitation, lift station upgrades and debt service for new bonds for a Citywide water meter upgrade and the Phase II Relief Sewer Improvements. Recommended Water and Sewer Rates Rate Scenario 2B Park Ridge Water Rates Minimum Bill $ Tier 1 Rate $04.67 $ $ $ $ $ Tier 2 Rate $05.21 Chicago Water Rate $ $ $ $ $ Water Fixed Charges 1 ½ Meter $ $ $ $ $ Meter $ $ $ $ $ Meter $ $ $ $ $ Meter $ $ $ $ $ Meter $ $ $ $ $ Sewer Rate $01.22 $ $ $ $ $ Sewer Fixed Charge $00.00 $ $ $ $ $ The following table outlines how typical bi-monthly water and sewer bills will increase each year throughout the study period under Scenario 2B. The most significant increase to water and sewer bills will occur in 2013, due to the larger /12 City of Park Ridge, Illinois Page 7

22 upfront water rate increase from Chicago and restructuring of Park Ridge s rates to include fixed charges. However, rate increases are phased in as gradually as possible over five years to minimize the year-to-year burden on customers while avoiding excessive drawdown of unrestricted net assets in the Water and Sewer Funds. Bills calculated at current rates are listed in the 2012 column. Each subsequent year includes rate increases each May. Customer Class Bi-Monthly Water and Sewer Bills Scenario 2B Low Residential Usage (4,000 gallons) $35 $46 $049 $052 $056 $058 Avg. Residential Usage* (12,000 gallons) $78 $99 $107 $116 $125 $130 * Based on a 1½-inch or smaller water meter /12 City of Park Ridge, Illinois Page 8

23 1. PURPOSE OF STUDY The primary purpose of this rate study is to allow the City to confirm that its water and sewer utilities are self-sustaining, meaning that recommended rates will not only provide consistent annual funding for critical infrastructure projects, but also maintain sufficient cash flow for routine operations and maintenance (O&M) and debt service. (See Appendix A for a full listing of terms used in this report.) To this end, the study includes an in-depth evaluation of present and projected revenues and expenses of the water and sewer utilities. A cash flow analysis, along with water and sewer billing projections, is used to determine the rates necessary to make these utilities fully self-supporting. Another goal of this rate study is to evaluate the rate structure to ensure that rates are equitable and defensible in accordance with AWWA guidelines. This part of the study considers such factors as financial impacts on various customer classes and overhead costs to the water and sewer utilities. Finally, this study includes an evaluation of current and projected spending for infrastructure renewal projects. This includes projects needed to maintain existing equipment and piping systems in good working condition, such as water main replacement, sewer lining, lift station improvements, water meter upgrades and water storage tank painting. Evaluating these future needs is crucial because proper system maintenance will allow the City to maintain a high level of service and minimize extra operating costs such as lost water, property restoration, and the labor, materials and contractual services associated with continual repairs of failing equipment and infrastructure /12 City of Park Ridge, Illinois Page 1-1

24 2. PRESENT CONDITIONS 2.1 Overview The City of Park Ridge is located approximately 15 miles northwest of Chicago in Cook County. Land use is predominantly residential, as well as a downtown business district and a large hospital campus. The City is fully developed and no major changes in future water usage are anticipated. The City purchases treated Lake Michigan water from the City of Chicago and distributes the water to its customers. The City s distribution system consists of approximately 138 miles of water main, 1,585 fire hydrants, 15.2 million gallons of storage capacity and over 12,600 water meters. All municipal wastewater and stormwater runoff is conveyed through a Cityowned and maintained combined sewer system consisting of approximately 133 miles of sanitary and storm sewers. Sewage is discharged to the Metropolitan Water Reclamation District of Greater Chicago (MWRDGC) for treatment. 2.2 Water and Sewer Rates The City has a multi-tiered water rate structure, in which the volume charges vary depending on how much water a customer uses. Water bills also include a minimum usage of 5,000 gallons per bi-monthly billing period, though approximately 86 percent of customers use more water than this. For sewer service, customers are charged a uniform rate per 1,000 gallons of water usage with no minimum usage /12 City of Park Ridge, Illinois Page 2-1

25 requirement. The existing rates, which were established in 2010, are summarized in Table 1. TABLE 1 Existing Water and Sewer Rates Description Existing Rate Water Rates Minimum Bill (0 5,000 gallons) $30.20 Usage Rate per 1,000 gallons (6,000 30,000 gallons) $04.67 Usage Rate per 1,000 gallons (above 30,000 gallons) $05.21 Sewer Usage Rate per 1,000 gallons $01.22 Table 2 shows the typical bi-monthly water and sewer bill for a Park Ridge resident compared to equivalent bi-monthly water and sewer costs for residents in other nearby communities. Costs for all communities include water purchase and distribution as well as wastewater conveyance; wastewater treatment costs are paid to MWRDGC through property tax bills. Water and sewer bills in Table 2 are calculated for a residential customer with a 1-inch or smaller water meter using 12,000 gallons bimonthly (in some communities, charges differ based on water meter size, so a specific meter size must be assumed for an equivalent comparison) /12 City of Park Ridge, Illinois Page 2-2

26 Municipality TABLE 2 Regional Water and Sewer Cost Comparison Equivalent Bi-Monthly Water Bill Equivalent Bi-Monthly Sewer Bill* Equivalent Bi-Monthly Water and Sewer Bill** Harwood Heights $042 $16 $058 Niles $061 $00 $061 Forest Park $076 $00 $076 Park Ridge $063 $15 $078 River Grove $069 $09 $078 Des Plaines $065 $15 $080 Lincolnwood $079 $12 $091 Evanston $032 $63 $095 Glenview $068 $27 $095 Oak Park $071 $27 $098 River Forest $074 $25 $099 Elmwood Park $102 $00 $102 Morton Grove $093 $13 $106 Averages $069 $17 $086 * Some communities recover both water and sewer costs solely through their water rate, without a separate sewer rate. ** Rates for communities billing on a monthly or quarterly cycle were converted to a bi-monthly basis for direct comparison to the City s rates. Park Ridge s combined water and sewer bill for average residential usage is about 10 percent below the average for communities in the surrounding area. While this provides a general indicator of water and sewer rate affordability in the area, comparison with other communities rates should not be the sole method for determining the fairness and affordability of the City s water and sewer rates. This is especially important because each community has different financial situations, revenue requirements and cost allocation methods. Furthermore, infrastructure replacement and rehabilitation spending, which is becoming an ever larger portion of total expenses for many municipal utilities, can vary widely between communities based on system age and condition /12 City of Park Ridge, Illinois Page 2-3

27 2.3 Water and Sewer Usage The City breaks down its water and sewer usage by customer type and by water meter size. Over 95 percent of water and sewer accounts are residential customers (includes single family and multi-family dwellings). The remaining accounts consist of commercial customers, park district facilities, schools, and several accounts associated with Lutheran General Hospital. Table 3 includes a more detailed breakdown of existing accounts by water meter size. Of the customers with water meters size 1½ inches and smaller, the vast majority are residential. Of residential customers, only multi-unit residential accounts have 2- inch and larger meters. TABLE 3 Water and Sewer Customer Breakdown Meter Size Number of Accounts % of Total Accounts 1 11, % 1½" 01, % 2 00, % 3 00, % 4 00, % 6 00, % Total 12, % Table 4 summarizes the City s total volume of water pumped from Chicago and total volume billed to customers in 2010, 2011, and /12 City of Park Ridge, Illinois Page 2-4

28 TABLE 4 Water Pumpage and Billing Summary Chicago Water Pumpage (gallons) Water Billed to Customers (gallons) Billed Water Use as % of Chicago Water Pumpage 2010 actual 1,598,017,000 1,251,321,000 78% 2011 actual 1,603,858,000 1,264,886,000 79% 2012 estimate 1,511,013,900 1,246,592,000 83% It is important to note the difference between unbilled water use and unaccounted for water use. Unbilled water use is the portion of water pumped from Chicago that is not captured as metered water consumption by individual customers water meters. Using the data from Table 4, unbilled water use has ranged from 17 percent to 22 percent of water pumpage in the last three years. The portion of Chicago water pumpage that is not accounted for as water billed to customers can still be accounted for in other ways. Unbillable municipal uses such as fire fighting, water main flushing, street cleaning, sewer cleaning and usage at municipal facilities make up some of the difference. There is also some water lost as leakage from pipe joints, which is normal and can be estimated based on pipe age using a formula provided by the State of Illinois (older pipes typically leak much more than newer pipes). The remainder of unbillable water use that cannot be accounted for, such as water lost during water main breaks and unrecorded usage from older water meters, must be limited to no more than eight percent of total water pumpage. This is a requirement from the Illinois Department of Natural Resources (IDNR) that all Illinois communities using Lake Michigan water must meet. Park Ridge has exceeded the eight percent threshold for the past three years. The City s reports to IDNR cited major water /12 City of Park Ridge, Illinois Page 2-5

29 main breaks, leaks from older water mains, and the lack of a City-administered water meter reading program as contributing factors to these excursions.. In response, the City has instituted an annual water main replacement program with plans to increase funding for water main replacements in the future. Water meters over 20 years old are also replaced each year. These improvements seem to have lessened water loss in recent years, as unbilled water use has decreased by five percent and unaccounted for water use has decreased by three percent in the last three years. However, the City still exceeded the unaccounted for water threshold in A proposed program to retrofit existing water meters with automated reading interfaces, to consistently and accurately capture water usage from all customers, should help to further reduce unaccounted for water and bring the City below IDNR s unaccounted for water threshold. 2.4 Capital Improvement Plan From 2008 through 2011, the City invested an average of $560,000 per year in water main replacement, which is the equivalent of about 0.6 miles of water mains replaced per year. The City has nearly 138 miles of water mains, so this rate corresponds to a 225-year replacement cycle. For comparison, the typical life of a water main installed in the post-wwii era is about 75 years (AWWA). Therefore, the Public Works Department proposes to increase funding for water main replacement over the next five years to between $815,000 and $1,000,000 per year (slight increase each year). The City recently issued a $5.4 million G.O. bond for Phase I Relief Sewer Improvements. The purpose of this project, which is already underway, is to increase capacity of the combined sewer system to alleviate flooding during major rainfall /12 City of Park Ridge, Illinois Page 2-6

30 events. All rate scenarios in this rate study include annual debt service payments on this bond, as well as $310,000 per year for an annual sewer lining program to address infiltration and inflow, as well as an annual allocation to lift station upgrades to replace obsolete controls, electrical panels and pumps. Additional improvements considered as alternatives in this rate study include retrofitting all water meters with automated meter reading interfaces (funded either with cash or a bond issue), as well as a $15 million bond issue for the Phase 2 Relief Sewer Improvements /12 City of Park Ridge, Illinois Page 2-7

31 3. FUTURE CONDITIONS 3.1 Water and Sewer Usage No appreciable changes are anticipated in Park Ridge s water and sewer usage in the next five years. pumpage and billing totals for the next five years are as follows: Chicago Water Pumpage: 1,520,000,000 gallons per year (rounded up from 2012 total of 1,511,000,000 gallons) Park Ridge Water/Sewer Billing: 1,246,592,000 gallons per year (matches 2012 total) These projections should be reviewed annually, so if a major redevelopment project occurs that will have significant impacts on water usage, or if declining water consumption trends are observed, the usage projections can be revised accordingly. 3.2 Revenue Projections Several resources provided by the City were used to project future revenues for the Water and Sewer Funds. These include: Audited revenues for 2008 through 2011 and year-end estimated revenues for Water pumpage and billing records from January 2009 through March Estimated employee contributions for health insurance premiums. rates of return on cash held in the enterprise funds. This information was used to create baseline five-year revenue projections for the Water and Sewer Fund. The term baseline refers to existing revenue sources only /12 City of Park Ridge, Illinois Page 3-1

32 and does not include increases to Park Ridge water and sewer rates (excludes rate increases proposed by City staff for 2013). The baseline scenario does include the water rate increases from Chicago, as this is a direct pass-through cost. The baseline revenue forecasts are summarized in Table 5 and Table 6, with details provided in Appendix B TABLE 5 Water Fund - Baseline Revenue Projections Chicago Water Rates $1,741,000 $2,175,000 $2,504,000 $2,876,000 $3,310,000 $3,405,000 Park Ridge Usage Rates $2,472,000 $2,472,000 $2,472,000 $2,472,000 $2,472,000 $2,472,000 Park Ridge Min. Charges $2,297,000 $2,297,000 $2,297,000 $2,297,000 $2,297,000 $2,297,000 Penalties $0,113,200 $0,118,000 $0,118,000 $0,118,000 $0,118,000 $0,118,000 Water Meters $0,041,500 $0,015,000 $0,015,000 $0,015,000 $0,015,000 $0,015,000 Interest $0,008,000 $0,006,000 $0,014,400 $0,007,000 $0,000,000 $0,000,000 Empl. Contrib. $0,012,400 $0,011,024 $0,012,700 $0,014,600 $0,016,800 $0,019,300 Miscellaneous $0,011,000 $0,011,000 $0,011,000 $0,011,000 $0,011,000 $0,011,000 Total Revenues $6,696,100 $7,105,024 $7,444,100 $7,810,600 $8,239,800 $8,337, TABLE 6 Sewer Fund - Baseline Revenue Projections Sewer Charges $1,481,284 $1,521,000 $1,521,000 $1,521,000 $1,521,000 $1,521,000 Devel. Fees $0,014,000 $0,025,000 $0,025,000 $0,025,000 $0,025,000 $0,025,000 Grants $0,431,250 $0,225,000 $0,000,000 $0,000,000 $0,000,000 $0,000,000 Interest $0,000,300 $0,004,000 $0,006,100 $0,007,000 $0,006,200 $0,004,400 Empl. Contrib. $0,006,418 $0,005,110 $0,005,880 $0,006,760 $0,007,770 $0,008,940 Total Revenues $1,933,252 $1,780,110 $1,557,980 $1,559,760 $1,559,970 $1,559, /12 City of Park Ridge, Illinois Page 3-2

33 The only significant growth in revenues expected to occur over the next five years is the result of passing on water rate increases from Chicago. Without increases to Park Ridge s own water and sewer rates, usage revenues are expected to remain fairly consistent over the next five years. 3.3 Expense Projections Several resources provided by the City were used to project future expenses for the Water and Sewer Funds. These include: Audited expenses for 2008 through 2011, year-end estimated expenses for 2012 and budgeted expenses for Input from City staff on inflation factors for operating expenses. Five-year water and sewer system capital improvement plan. Repayment schedules for existing debt. transfers to the motorized and computer equipment replacement funds. water rate increases from the City of Chicago are also utilized through Beyond 2016, it is assumed that Chicago will increase water rates by an inflationary measure only (estimated at three percent per year). Expense projections are separated into three categories: routine operations and maintenance, capital improvement projects and non-operating (includes debt service and inter-fund transfers). These expense categories are discussed in the following subsections, with additional detail provided in Appendix B Operations and Maintenance - Routine O&M expenses include the dayto-day costs of keeping the water and sewer systems in operation. These include administrative and overhead costs, salaries and benefits for operations and /12 City of Park Ridge, Illinois Page 3-3

34 maintenance staff, commodities such as chemicals and fuel, utilities such as electric and gas, and contractual services. These expenses typically increase at regular intervals due to inflation, but can sometimes increase or decrease significantly due to situations such as increasing or reducing staffing levels, or making a major operational change. O&M expenses from previous years and those budgeted in 2012 were compared to assess inflation trends. These observed trends and City staff input on future conditions were used to develop individual inflation rates for each operating expense line item. This information was used to create detailed five-year expense projections for the Water and Sewer Funds. These projections are summarized by budget division in Table 7 and Table 8, with details provided in Appendix B. Each of the rate scenarios discussed later in this report includes these O&M expense projections. Expense Description 2012 TABLE 7 Water Fund - O&M Expense Projections Administration $0,307,700 $0,316,492 $0,327,040 $0,337,780 $0,349,520 $0,363,260 Water Supply and Treatment* $3,718,289 $4,370,826 $4,985,340 $5,689,680 $6,284,520 $6,470,860 Fire Hydrant Services** $0,092,536 $0,055,649 $0,057,900 $0,060,300 $0,063,000 $0,065,900 Water Main Services $0,524,461 $0,570,470 $0,596,500 $0,622,500 $0,649,800 $0,679,800 Water Meter Services*** $0,138,966 $0,185,320 $0,192,400 $0,200,300 $0,208,800 $0,217,900 Totals $4,781,952 $5,498,757 $6,159,180 $6,910,560 $7,555,640 $7,797,720 % Increase 15% 12% 12% 9% 3% * Purchase of water from Chicago constitutes 93% of Water Supply & Treatment costs. Water purchase costs are estimated based on annual pumpage of 1,520,000,000 gallons and Chicago s proposed four-year water rate increase schedule. ** Cost decrease from 2012 to 2013 is due to re-allocation of expenses to other budget divisions. *** Includes $50,000 to $60,000 per year for replacement of water meters in service 20 years or longer /12 City of Park Ridge, Illinois Page 3-4

35 Chicago water rate increases account for approximately 90 percent of projected Water Fund O&M cost increases over the next five years. This is the single largest cost to the Water Fund and, therefore, has a significant impact on the City s O&M costs. Most other O&M expenses are projected to increase annually due to inflation and cost of living increases. Expense Description 2012 TABLE 8 Sewer Fund - O&M Expense Projections Personnel* $379,500 $364,940 $386,950 $403,250 $420,950 $440,350 Contractual Services $187,500 $129,250 $132,000 $135,000 $138,000 $141,000 Sewer Clean and Televise $014,050 $020,000 $020,400 $020,800 $021,200 $021,600 Materials $094,000 $090,000 $092,000 $094,000 $096,000 $098,000 Electricity $005,400 $006,000 $006,300 $006,600 $006,900 $007,200 Totals $680,450 $610,190 $637,650 $659,650 $683,050 $708,150 % Increase -10% 5% 3% 4% 4% * Includes Regular Salaries, Extra Help, Overtime, Insurance, and Uniforms line items. Reduction in Sewer Fund O&M costs in 2013 is mainly the result of decreased costs for contractual services. After 2013, a fairly straight line inflationary cost increase is projected Capital Improvement Projects - The City s baseline five-year capital improvement plan (CIP) includes continuation of ongoing programs including water main replacement, sewer lining and replacement fund contributions for motorized equipment and computers. It also includes repainting a water storage tank and upgrading obsolete equipment in sewage lift stations. Table 9 summarizes the baseline five-year CIP /12 City of Park Ridge, Illinois Page 3-5

36 Water System TABLE 9 Baseline Five-Year Capital Improvement Plan Water Mains $0,815,000 $0,860,000 $0,903,000 $0,950,000 $0,998,000 Storage Tank $0,000,000 $0,225,000 $0,000,000 $0,000,000 $0,000,000 Motor Equipment $0,079,800 $0,082,900 $0,086,100 $0,089,500 $0,093,000 Computers $0,003,800 $0,003,800 $0,003,800 $0,003,800 $0,003,800 Water System Total $0,898,600 $1,171,700 $0,992,900 $1,043,300 $1,094,800 Sewer System Sewer Lining $0,399,000 $0,310,000 $0,310,000 $0,310,000 $0,310,000 Lift Stations $0,030,000 $0,200,000 $0,200,000 $0,200,000 $0,200,000 Motor Equipment $0,022,800 $0,023,600 $0,024,400 $0,025,300 $0,026,200 Sewer System Total $0,451,800 $0,533,600 $0,534,400 $0,535,300 $0,536,200 Grand Total $1,350,400 $1,705,300 $1,527,300 $1,578,600 $1,631,000 A detailed inventory of the City s water and sewer systems was prepared to determine total system renewal cost in comparison to the annual funding levels included in the five-year CIP. The total estimated costs for replacement of water mains and lining of sewers (in 2012 dollars) are outlined in Table 10. Additional detail on existing projected system renewal costs is provided in Appendix C. TABLE 10 Water & Sewer System Inventory System Component Water Main Replacement Sewer Rehabilitation Description and Quantity Estimated System Renewal Cost 138 miles of water main, ranging from 3-inch to 24-inch diameter $126,400, miles of combined sewers, ranging from 6-inch to 102-inch diameter $080,550, /12 City of Park Ridge, Illinois Page 3-6

37 Table 11 summarizes target annual spending levels for long-term renewal of water mains and sewers. These values were calculated by dividing the total renewal costs from Table 10 by an industry average renewal cycle of 75 years (Table 11). This represents a long-term average annual investment; annual spending may be slightly higher or lower depending on specific project needs. TABLE 11 Target Funding Levels for Long-Term System Renewal System Component Target Renewal Cycle* Target Annual Spending Annual Spending** Resulting Renewal Cycle Water Main Replacement 75 years $1,685,000 $905, years Sewer Rehabilitation 75 years $1,074,000 $310, years * Based on AWWA recommended planning cycles and typical life cycles observed in the Chicago region. ** Five-year average from the baseline CIP. Though the water main replacement and sewer lining allocations in the baseline CIP represent an improvement by increasing spending over previous years, the resulting renewal cycles of 140 years and 260 years are not sustainable in the long term. At some point, the pace of deterioration will overtake the pace of system renewal and service issues will become more prevalent. The consequences of water and sewer pipe failure can be serious: service outages, damage to public and private property, water boil orders, street closures, insufficient fire flows and business disruption are just a few. Water main breaks also increase water purchase costs through lost water and can entail significant emergency repair and overtime costs. Therefore, it is recommended that the City annually evaluate available funding for water main replacement and sewer lining, and increase funding if possible on a year by year basis /12 City of Park Ridge, Illinois Page 3-7

38 An additional capital improvement funding scenario considered in this study includes all projects listed in Table 9 plus funding for two additional projects. The first project is a multi-year upgrade of all existing water meters with automated reading interfaces. This will eliminate the need for customers to read their own water meters, improve the accuracy and timeliness of water meter readings, and streamline billing data upload and processing. This is a change that many Chicagoland communities have made in recent years to improve billing accuracy and efficiency. The Village of Lincolnwood and the Village of River Forest are two examples of nearby communities who have recently made this type of upgrade to their water metering system. The estimated cost for this project is $3.5 million spread evenly over four years ($875,000 per year in 2013 through 2016). The second additional project is the Phase 2 Relief Sewer Improvements. This includes planning, design and construction of additional relief sewers to alleviate flooding. The estimated cost for this portion of the relief sewer project is $15 million Non-Operating - Non-operating expenses include debt service and interfund transfers. The Water Fund currently has one outstanding bond, which was issued in 2006 to fund water system improvements. The Sewer Fund has one outstanding bond, which was recently issued to fund the Phase 1 Relief Sewer Improvements. Interfund transfers from each fund include transfers to the General Fund for overhead services (see Appendix D) and transfers to the IMRF Fund. These expenses are summarized in Table 12 and Table /12 City of Park Ridge, Illinois Page 3-8

39 TABLE 12 Water Fund - Non-Operating Expense Projections Debt Service $0,885,566 $0,889,116 $0,926,350 $0,884,550 $0,888,550 $0,886,550 Transfer to General Fund $0,800,000 $0,806,472 $0,806,500 $0,806,500 $0,800,000 $0,800,000 Transfer to IMRF Fund $0,158,000 $0,176,254 $0,190,000 $0,205,000 $0,221,000 $0,239,000 Totals $1,843,566 $1,871,842 $1,922,850 $1,896,050 $1,909,550 $1,925,550 % Increase 2% 3% -1% 1% 1% TABLE 13 Sewer Fund - Non-Operating Expense Projections Debt Service $072,779 $130,380 $156,450 $451,450 $455,550 $454,450 Transfer to General Fund $154,062 $154,060 $157,100 $160,200 $163,400 $166,700 Transfer to IMRF Fund $130,375 $072,780 $078,600 $084,900 $091,700 $099,000 Totals $357,216 $357,220 $392,150 $696,550 $710,650 $720,150 % Increase 0% 10% 78% 2% 1% A major increase in Sewer Fund non-operating costs is projected in 2015 because the City will begin repaying principal on the Phase 1 Relief Sewer bonds that year (interest-only payments are scheduled for 2013 and 2014). The baseline non-operating expense projections in Table 12 and Table 13are common to all rate scenarios in this study. The alternative capital improvement projects described in subsection of this report would add new debt service costs to the five-year expense projections. This includes a $3.5 million bond issued in /12 City of Park Ridge, Illinois Page 3-9

40 2014 to fund a water meter upgrade program, and a $15 million bond issued in 2016 to fund the Phase 2 Relief Sewer Improvements. The resulting changes to nonoperating expenses are outlined in Table 14. The impacts of the increased debt service costs on water and sewer rates are evaluated in a later section of this report. Water Fund TABLE 14 Additional Non-Operating Expenses - New Bonds Baseline $1,871,842 $1,922,850 $1,896,050 $1,909,550 $1,925,550 Water Meter Bond $0,000,000 $0,085,200 $0,390,200 $0,392,150 $0,390,950 Total $1,871,842 $2,008,050 $2,286,250 $2,301,700 $2,316,500 Sewer Fund Baseline $0,357,216 $0,357,220 $0,392,150 $0,696,550 $0,710,650 Phase 2 Sewer Bond $0,000,000 $0,000,000 $0,000,000 $0,092,062 $0,591,830 Total $0,357,216 $0,357,220 $0,392,150 $0,788,612 $1,302, /12 City of Park Ridge, Illinois Page 3-10

41 4. BASELINE CASH FLOW ANALYSIS The City s existing water rates are not sufficient to fully cover all budgeted Water Fund expenses for Budgeted revenues were sufficient to cover O&M and nonoperating expenses. However, necessary capital improvements along with an unbudgeted increase in water purchase costs led to an overall budget deficit. The net result is that water rates are insufficient to fully cover budgeted expenses. This situation is not an immediate threat to the Water Fund s financial capacity, though failure to raise water rates in the future would completely deplete the Fund by 2015 (Figure 1). FIGURE 1 Water Fund Cumulative Financial Projections $4,000,000 Water Fund Cumulative Financial Projections Baseline Rate Scenario $2,000,000 $0 ($2,000,000) ($4,000,000) ($6,000,000) Target Unrestricted Net Assets Unrestricted Net Assets ($8,000,000) /12 City of Park Ridge, Illinois Page 4-1

42 In contrast, the Sewer Fund is projected to end 2012 with a surplus. However, this is primarily because the City has not yet begun repaying the Series 2012A G.O. Bonds (issued to fund the Phase 1 Relief Sewer Project). Interest-only payments scheduled for 2013 and 2014 will not impact the fund balance. However, when the City begins repaying the principal in 2015, unrestricted net assets in the Sewer Fund will decline if sewer rates are not increased (Figure 2). Based on the trend observed in Figure 2, it is anticipated that the Sewer Fund will be completely depleted by FIGURE 2 Sewer Fund Cumulative Financial Projections $1,500,000 Sewer Fund Cumulative Financial Projections Baseline Rate Scenario - no rate increases $1,250,000 $1,000,000 $750,000 $500,000 $250,000 Target Unrestricted Net Assets Unrestricted Net Assets $0 The target unrestricted net asset levels in the Water and Sewer Funds are equivalent to two months of expenses plus an allocation for emergency system repairs ($570,000 for the water utility and $300,000 for the sewer utility). Appendix E outlines /12 City of Park Ridge, Illinois Page 4-2

43 the City s target fund balance policy in greater detail. Figure 1 and Figure 2 illustrate projected cash flow as compared to target unrestricted net assets in a baseline financial scenario: Maintain existing operating spending levels (plus inflation). Implement the baseline CIP projects and programs. Pass through Chicago water rate increases. No increases to Park Ridge water rate and sewer rate over the next five years. The need for increased investment in infrastructure renewal has made it necessary to revise rates to fully reflect the actual cost of service. Sections 5 through 7 of this report outline various alternatives for increasing rates to reverse the projected cash flow deficits in the Water and Sewer Funds, as well as methods for revising the rate structure to better reflect the actual costs of service and improve cash flow /12 City of Park Ridge, Illinois Page 4-3

44 5. RATE STRUCTURE ANALYSIS Rate structures were reviewed in advance of preparing the detailed rate scenarios, including the distinction between the Chicago water rate and Park Ridge water rate, usage rate structure and fixed charges. 5.1 Water Usage Rate Distribution Water purchase from the City of Chicago is the single largest cost to the Water Fund, and changes in Chicago s water rate have a significant impact on Water Fund financials. Therefore, it is recommended that the City revise its rate ordinance to automatically pass through any rate change from Chicago, effective May 1 each year to coincide with the start of the fiscal year. This will prevent excessive cash flow deficits by ensuring the City keeps pace with increases in its largest utility cost center. It is also recommended that the City s portion of the water usage rate be listed separately in the rate ordinance from Chicago s portion, with clarification that this rate is intended only to cover the costs of operating and maintaining the City s water distribution system. The Chicago component of the water usage rate should be listed separately with clarification that it is set by Chicago. Any change in Chicago s rates would then automatically be reflected in the City s water bills the following May. It may also be helpful to break out the Chicago component and the City component separately on water bills so customers can easily see which rate increases come from Chicago versus those that come from Park Ridge. The rate scenarios evaluated in Sections 6 and 7 of this report assume that the water rate is apportioned between Chicago and the City as described above, and that /12 City of Park Ridge, Illinois Page 5-1

45 Chicago water rate increases are passed through automatically each May. This includes 15 percent water rate increases planned by Chicago for January 1 of 2013, 2014 and 2015, followed by estimated three percent annual increases thereafter. 5.2 Usage Rate Structure The usage rate (volume charge) structure for the sewer utility is a uniform rate structure, meaning that customers pay the same rate ($1.22 per 1,000 gallons) regardless of their level of water usage. In contrast, the water utility uses a tiered rate structure, in which the rate per 1,000 gallons varies based on the amount of water used during a bi-monthly billing cycle: 0 5,000 gallons: $30.20 (equivalent rate of $6.04/1,000 gallons) 5,001 30,000 gallons: $4.67/1,000 gallons Above 30,000 gallons: $5.21/1,000 gallons Tiered rate structures are typically used for one of two reasons: (1) documented difference in costs for certain levels of usage; and (2) to send price signals to customers with higher water usage (i.e. to encourage conservation). For Park Ridge s water system, which is not overly complex in that it has no treatment facilities and operates on a single pressure zone, it is difficult to document specific cost differences for different levels of usage. Furthermore, the City s annual water use audit forms indicate that water pumpage has decreased by 13 percent in the last four years. This condition is common in the Chicago region, and is reflective of a combination of factors including proliferation of water-efficient plumbing fixtures, increased awareness of outdoor water conservation measures, and the effect of the economic downturn on water usage in non-residential sectors. Therefore, a more complicated conservation rate structure /12 City of Park Ridge, Illinois Page 5-2

46 is not necessarily needed at this time to encourage water use reductions, as they are already occurring due to other drivers. In recognition of these existing conditions, and in order to standardize the usage rate structures between the utilities and make the structure easier for customers to understand, it is recommended that the City use a uniform rate structure for both the water and sewer utilities. This change will also make the switch to breaking out the Chicago and Park Ridge components of the water usage rate simpler to implement. 5.3 Fixed Charges The City s existing rate structure mostly generates revenues from usage (volume-based) rates for every 1,000 gallons of metered water consumption. All customers are billed for a minimum of 5,000 gallons per bi-monthly billing cycle whether they use that much water or not. This generates a small amount of fixed revenues, though most customers meet or exceed this threshold. Therefore, water and sewer revenues are still very sensitive to changes in water usage, i.e. the City is dependent on maintaining a certain level of usage in order to generate most revenues. An alternate rate structure incorporates a fixed charge assessed to all customers, with usage billed on top of the fixed charge (eliminates the minimum water bill of 5,000 gallons). The purpose of adding a fixed charge to bi-monthly water and sewer bills is to generate a stable base of revenue that does not fluctuate due to changing water usage patterns. This improves cash flow and overall financial stability as compared to the current practice of charging a minimum bill. This structure segregates the rates based on the type of expenses they cover. The fixed charge is calculated to cover overhead costs that can be applied equally to all /12 City of Park Ridge, Illinois Page 5-3

47 customers and are not a function of usage, such as administrative staff compensation, meter reading, billing, state-mandated water quality testing and inter-fund transfers for shared services (Appendix F). The usage rates then cover the remainder of expenses that are driven more by system demands and improvement needs, such as operating staff compensation, commodities, most contractual services and debt service. The fixed charges calculated for various water meter sizes are listed in Table 15 (based on projected overhead costs for 2013). The fees are escalated by water meter size to cover additional costs inherent to larger water services, such as more frequent water meter testing and repairs, and shorter meter replacement life cycle. The charges are calculated two ways: (1) with the base fee applied to all customers with 1- inch and smaller meters; and (2) with the base fee applied to all customers with 1½inch and smaller meters. Starting at the 1-inch meter size is more typical, as most single-family residential customers have 1-inch and smaller meters and this approach ensures they all pay the same fixed charge. However, Park Ridge has a significant number of single family residential customers with 1½-inch water meters (971 accounts or approximately eight percent of single family residential customers). Establishing the base fixed charge at the 1½-inch meter size will apply the same fixed charge to all single family residential customers; however, the downside of escalating charges for larger meters in proportion to the capacity of a 1½-inch meter is that the escalation factors are smaller, resulting in lower charges for larger meter sizes (see Table 15) /12 City of Park Ridge, Illinois Page 5-4

48 Base Charge for 1 Meter Meter Size Escalation Factor TABLE 15 Bi-Monthly Fixed Charges - Water Fixed Charge Base Charge for 1 1/2 Meter Meter Size Escalation Factor Fixed Charge $ ½" 1.0 $ ½" 2.0 $ $ $ $ $ $ $ $ $ In contrast, proposed sewer fixed charges are uniform for all customers, as there are no associated meter maintenance costs to justify escalating the fixed charges for customers with higher usage. The recommended sewer fixed charge based on 2013 overhead costs is $2.98 per bi-monthly billing period /12 City of Park Ridge, Illinois Page 5-5

49 6. RATE SCENARIO Rate Structure Scenario 1 utilizes the O&M and existing debt service cost projections outlined in Section 3 of this report, as well as the baseline CIP (Scenario 2 evaluates the impact of additional projects in addition to the baseline CIP). The proposed separation of the water usage rate into Chicago and Park Ridge components and automatic updates to the Chicago component each May are also incorporated into this scenario. Three subalternatives are evaluated within this rate scenario: Scenario 1A: Retain the existing rate structure (tiered water usage rates, no fixed charges) Scenario 1B: Switch to uniform water usage rates, establish bi-monthly fixed charges, set base water fixed charge at 1-inch water meter size Scenario 1C: Switch to uniform water usage rates, establish bi-monthly fixed charges, set base water fixed charge at 1½-inch water meter size In Scenarios 1B and 1C, the minimum water usage volume is eliminated. That is, the fixed charges are assessed each billing period regardless if a customer uses any water or not. All metered water/sewer usage is billed on top of the fixed charges. Subsections 6.2 through 6.4 of this report summarize the results of the three sub-alternatives, with a comparison of bi-monthly bills and projected cash flow provided in subsections 6.5 and 6.6, respectively. Detailed financial projections are provided in Appendices G, H and I /12 City of Park Ridge, Illinois Page 6-1

50 6.2 Scenario 1A This scenario retains the existing rate structure and applies a uniform rate increase factor to Park Ridge s rates each year for five years, to moderate the year to year impacts on customers as much as possible. The Chicago portion of the water rates is broken out separately as recommended in Section 5. Segregating the Chicago and Park Ridge portions of the water rate clarifies the impact that Chicago s rate increase program is having on rates versus the increases the City must make to ensure reliability of its own system. Table 16 provides a five-year schedule of water and sewer rates needed to meet projected expenses including the baseline CIP. Existing rates are listed in the 2012 column. Chicago water rates are shown to increase as recently proposed by Chicago: 25 percent in 2013 and 15 percent per year in 2014 through A three percent Chicago water rate increase is assumed in TABLE 16 Scenario 1A Water and Sewer Rates Park Ridge Water Rates Minimum Bill $30.20 $33.52 $37.21 $40.93 $45.02 $49.07 Tier 1 Rate $04.67 $02.95 $03.27 $03.60 $03.96 $04.32 Tier 2 Rate $05.21 $03.55 $03.94 $04.33 $04.76 $05.19 Chicago Water Rate $02.51 $02.89 $03.32 $03.82 $03.93 Sewer Rate $01.22 $01.27 $01.32 $01.37 $01.42 $ Scenario 1B This scenario eliminates the minimum water bill and tiered water usage rates and adds a bi-monthly fixed charge to both the water and sewer rate structures. No usage is included with the fixed charges because they are intended to cover overhead /12 City of Park Ridge, Illinois Page 6-2

51 and meter maintenance costs that do not vary with changing usage patterns. The fixed charges provide a considerable base revenue stream, with the result that the needed usage rate increases are considerably lower than in Scenario 1A. In fact, projections indicate that the sewer usage rate may not need to be increased at all over the next five years if the sewer fixed charge is implemented. Table 17 provides a five-year schedule of water and sewer rates needed to meet projected expenses including the baseline CIP. Existing rates are listed in the 2012 column, with the Chicago portion of the water rates broken out separately as recommended in Section 5. Chicago water rates are shown to increase as recently proposed by Chicago: 25 percent in 2013 and 15 percent per year in 2014 through A three percent Chicago water rate increase is assumed in Park Ridge Water Rates TABLE 17 Scenario 1B Water and Sewer Rates Minimum Bill $ Tier 1 Rate $04.67 $ $ $ $ $ Tier 2 Rate $ Chicago Water Rate $ $ $ $ $ Water Fixed Charges 1 Meter - $16.53 $16.83 $17.16 $17.43 $ ½ Meter - $33.06 $33.66 $34.32 $34.86 $ Meter - $53.00 $54.00 $55.00 $56.00 $ Meter - $ $ $ $ $ Meter - $ $ $ $ $ Meter - $ $ $ $ $ Sewer Rate $01.22 $ $ $ $ $ Sewer Fixed Charge $00.00 $ $ $ $ $ /12 City of Park Ridge, Illinois Page 6-3

52 6.4 Scenario 1C This scenario incorporates the same rate structure changes as Scenario 1B, though the base water fixed charge starts at the 1½-inch water meter size, as opposed to the 1-inch meter size, in order to include all single family residential customers in the base charge category. Higher water usage rate increases are needed to compensate for the reduced revenue from fixed charges as compared to Scenario 1B. The fixed charge revenue is lower in Scenario 1C because the escalation factors for larger meter sizes are based on their proportionally higher capacity with respect to a 1½-inch water meter as opposed to a 1-inch meter, which has a lower capacity. Sewer rate increases are identical to Scenario 1B. Table 18 provides a five-year schedule of water and sewer rates needed to meet projected expenses including the baseline CIP. Existing rates are listed in the 2012 column, with the Chicago portion of the water rates broken out separately as recommended in Section 5. Chicago water rates are shown to increase as recently proposed by Chicago: 25 percent in 2013 and 15 percent per year in 2014 through A three percent Chicago water rate increase is assumed in /12 City of Park Ridge, Illinois Page 6-4

53 TABLE 18 Scenario 1C Water and Sewer Rates Park Ridge Water Rates Minimum Bill $ Tier 1 Rate $04.67 $ $ $ $ $ Tier 2 Rate $ Chicago Water Rate $ $ $ $ $ Water Fixed Charges 1 ½ Meter - $16.53 $16.83 $17.16 $17.43 $ Meter - $26.45 $26.93 $27.46 $27.89 $ Meter - $74.00 $76.00 $77.00 $78.00 $ Meter - $ $ $ $ $ Meter - $ $ $ $ $ Sewer Rate $01.22 $ $ $ $ $ Sewer Fixed Charge $00.00 $ $ $ $ $ Bi-Monthly Bills Scenario 1A results in the most gradual increases in bi-monthly bills. With no changes to the rate structure, Scenario 1A basically exhibits a linear cost increase pattern over the next five years. Scenarios 1B and 1C have a more significant impact on water and sewer bills in 2013, due to the restructuring of water and sewer rates to more closely match major cost centers (overhead versus variable costs). However, rate increases are still phased in as gradually as possible over five years, and by year five ( 2017) the resulting bimonthly bills are no higher than in Scenario 1A in most instances. Table 19, Table 20 and Table 21 compare bi-monthly water and sewer bills for low residential usage (4,000 gallons) and average residential usage (12,000 gallons with 1-inch or 1½-inch water meter). Bills calculated at existing rates are listed in the /12 City of Park Ridge, Illinois Page 6-5

54 2012 column. Each subsequent year includes increases to the City s rates each May, including passing on water rate increases from Chicago. TABLE 19 Scenario 1 - Bi-Monthly Bills for Low Residential Usage Scenario 1A $35 $39 $42 $46 $51 $55 Scenario 1B $35 $45 $48 $50 $53 $54 Scenario 1C $35 $46 $48 $51 $54 $55 TABLE 20 Scenario 1 - Bi-Monthly Bills for Average Residential Usage (1 Meter) Scenario 1A $78 $87 $096 $106 $117 $125 Scenario 1B $78 $97 $103 $109 $117 $119 Scenario 1C $78 $98 $104 $112 $119 $123 TABLE 21 Scenario 1 - Bi-Monthly Bills for Average Residential Usage (1½ Meter) Scenario 1A $78 $087 $096 $106 $117 $125 Scenario 1B $78 $114 $120 $127 $134 $137 Scenario 1C $78 $098 $104 $112 $119 $123 Besides the more significant first-year cost increase in Scenarios 1B and 1C, the other key difference to note is the higher cost for residential customers with 1½-inch water meters in Scenario 1B. In this scenario, the base water fixed charge applies to all customers with a 1-inch or smaller water meter, which leaves customers with a 1½ /12 City of Park Ridge, Illinois Page 6-6

55 inch meter paying a higher fixed charge with each bill. In Scenario 1C, where the base fixed charge starts at the 1½-inch meter size, customers with 1½-inch meters pay the same fixed charge as all other residential customers. However, in order to compensate for the lower fixed charge revenue in Scenario 1C, the usage rate increases must be a little higher across the board. This results in slightly higher costs for other residential customers as compared to Scenario 1B. 6.6 Cash Flow Projections Figure 3 and Figure 4 demonstrate how the Water and Sewer Fund balances are expected to change over the next five years as rates are increased and/or restructured. The graph shows the range of projected cash flows among Scenarios 1A, 1B and 1C. See Appendices G, H and I for detailed revenue and expense projections for the three rate scenarios. In all scenarios, existing Water Fund assets are utilized to supplement revenues over the next five years to mitigate rate increases as much as possible. The goal is that, by year five, the rates will be fully capable of supporting planned levels of annual infrastructure renewal and cash flow will be stabilized. The Water Fund cash flow projections demonstrate that Scenario 1A, which has the lowest upfront impact on customers, actually results in the most significant drawdown in unrestricted net assets. Scenarios 1B and 1C, which provide an additional revenue stream from fixed charges, keep the Water Fund much more financially stable and allow for a measured, gradual drawdown over five years to supplement revenues while rates are being increased (Figure 3) /12 City of Park Ridge, Illinois Page 6-7

56 FIGURE 3 Water Fund Cash Flow $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Water Fund - Cash Flow Rate Scenario 1 Summary Target Unrestricted Net Assets Scenario 1A Unrestricted Net Assets Scenario 1B Unrestricted Net Assets Scenario 1C Unrestricted Net Assets In contrast, the proposed sewer rates are designed to keep the Sewer Fund balance elevated for the next five years, as a drawdown will begin in 2015 once debt service for the Phase 1 Relief Sewer Project is completely phased in (Figure 4) /12 City of Park Ridge, Illinois Page 6-8

57 FIGURE 4 Sewer Fund Cash Flow $2,000,000 $1,750,000 $1,500,000 $1,250,000 $1,000,000 $750,000 $500,000 $250,000 $0 Sewer Fund - Cash Flow Rate Scenario 1 Summary Target Unrestricted Net Assets Scenario 1A Unrestricted Net Assets Scenario 1B/1C Unrestricted Net Assets The recommendation is to start increasing sewer rates immediately to prepare for the eventual burden of the new debt service payments. This is a proactive approach that will avoid the necessity of a large sewer rate increase several years from now. If the City continues with annual inflationary sewer rate increases beyond 2017 and no other major expenses arise, cash flow will eventually stabilize and the unrestricted net assets will not be drawn down below the target level /12 City of Park Ridge, Illinois Page 6-9

58 7. RATE SCENARIO Rate Structure Scenario 2 builds on Scenario 1C by utilizing the same rate structure and adding two additional capital improvement projects. This includes instituting bi-monthly fixed charges with all usage billed on top of the fixed charges and establishing an escalated water fixed charge structure with the base charge applying to all customers with 1½inch and smaller water meters. The proposed separation of the water usage rate into Chicago and Park Ridge components and automatic updates to the Chicago component each May are also incorporated into this scenario. 7.2 Capital Improvement Project Alternatives Scenario 2 includes the baseline CIP plus two additional projects. The first project is a multi-year effort to upgrade all existing water meters with automated reading interfaces. This will eliminate the need for customers to read their own water meters, improve the accuracy and timeliness of water meter readings and streamline billing data upload and processing. This is a change that many Chicagoland communities have made in recent years to improve billing accuracy and efficiency. The Village of Lincolnwood and the Village of River Forest are two examples of nearby communities who have made this type of upgrade to their water metering system. The estimated cost for this project is $3.5 million spread evenly over four years ($875,000 per year in 2013 through 2016) /12 City of Park Ridge, Illinois Page 7-1

59 The second additional project is the Phase 2 Relief Sewer Improvements. This includes planning, design and construction of additional relief sewers to alleviate flooding. The estimated cost for this portion of the relief sewer project is $15 million. The rate scenarios prepared to document the rate impacts from these two projects are as follows: Scenario 2A: Fund the relief sewer project with a G.O. bond, fund the water meter upgrade with cash. Scenario 2B: Fund both the relief sewer project and the water meter upgrade with G.O. bonds. Subsections 7.3 and 7.4 of this report summarize the results of the two subalternatives, with a comparison of bi-monthly bills and projected cash flow provided in subsections 7.5 and 7.6, respectively. Detailed financial projections are provided in Appendices J and K. 7.3 Scenario 2A This scenario relies heavily on the existing surplus of unrestricted net assets in the Water Fund to help fund the water meter upgrade project from cash. Despite the existing surplus, this scenario still requires more substantial rate increases in the early years than any of the other rate scenarios in order to fund the entire meter upgrade with cash over four years. The debt service for the second phase relief sewer project will not be in full effect until 2017, therefore, adding this project does not have a major impact on sewer rates in the next five years. A small annual increase to the sewer usage rate is recommended to work towards a rate that will ultimately be able to support the annual debt service for both the Phase 1 and Phase 2 improvements. Continuation of annual /12 City of Park Ridge, Illinois Page 7-2

60 sewer rate increases on the order of five percent per year will be needed for approximately five years beyond 2017 to bring revenues in line with debt service costs before the unrestricted net assets in the Sewer Fund are drawn down below the target level (more on this in subsection 7.6). Table 22 outlines projected rate increases for this scenario, with emphasis added for the components that are different from Scenario 1C. TABLE 22 Scenario 2A Water and Sewer Rates Park Ridge Water Rates Minimum Bill $ Tier 1 Rate $04.67 $ $ $ $ $ Tier 2 Rate $ Chicago Water Rate $ $ $ $ $ Water Fixed Charges 1 ½ Meter - $16.53 $16.83 $17.16 $17.43 $ Meter - $26.45 $26.93 $27.46 $27.89 $ Meter - $74.00 $76.00 $77.00 $78.00 $ Meter - $ $ $ $ $ Meter - $ $ $ $ $ Sewer Rate $01.22 $ $ $ $ $ Sewer Fixed Charge $00.00 $ $ $ $ $ Scenario 2B The only difference between Scenarios 2A and 2B is that in Scenario 2B, the water meter upgrade project is funded with a $3.5 million G.O. bond issued in 2013, with repayment beginning in This increases the long-term cost of the project as the City must pay interest on the cost, but it will significantly reduce near-term rate /12 City of Park Ridge, Illinois Page 7-3

61 increases as compared to Scenario 2A. Table 23 outlines projected rate increases for Scenario 2B, with emphasis added for the components that are different from Scenario 2A. TABLE 23 Scenario 2B Water and Sewer Rates Park Ridge Water Rates Minimum Bill $ Tier 1 Rate $04.67 $ $ $ $ $ Tier 2 Rate $ Chicago Water Rate $ $ $ $ $ Water Fixed Charges 1 ½ Meter - $16.53 $16.83 $17.16 $17.43 $ Meter - $26.45 $26.93 $27.46 $27.89 $ Meter - $74.00 $76.00 $77.00 $78.00 $ Meter - $ $ $ $ $ Meter - $ $ $ $ $ Sewer Rate $01.22 $ $ $ $ $ Sewer Fixed Charge $00.00 $ $ $ $ $ Bi-Monthly Bills Scenario 2B results in lower rate increases over the next five years than Scenario 2A, as the bond issued to fund the water meter upgrade under Scenario 2B creates a lower short-term financial burden on customers than funding the entire program with cash in Scenario 2A. Table 24 and Table 25 compare bi-monthly water and sewer bills for low residential usage (4,000 gallons) and average residential usage (12,000 gallons). Bills calculated at existing rates are listed in the 2012 column. Each subsequent year /12 City of Park Ridge, Illinois Page 7-4

62 includes increases to the City s rates each May, including passing on water rate increases from Chicago. TABLE 24 Scenario 2 - Bi-Monthly Bills for Low Residential Usage Scenario 2A $35 $47 $51 $54 $57 $59 Scenario 2B $35 $46 $49 $52 $56 $58 TABLE 25 Scenario 2 - Bi-Monthly Bills for Average Residential Usage Scenario 2A $78 $102 $113 $121 $129 $133 Scenario 2B $78 $099 $107 $116 $125 $ Cash Flow Projections Figure 5 and Figure 6 demonstrate how the Water and Sewer Fund balances are expected to change over the next five years as rates are increased and/or restructured. The graph shows the range of projected cash flows among Scenarios 2A and 2B. See Appendices J and K for detailed revenue and expense projections for the three rate scenarios. In all scenarios, existing Water Fund assets are utilized to supplement revenues over the next five years to mitigate rate increases as much as possible. The goal is that, by year five, the rates will be fully capable of supporting planned levels of annual infrastructure renewal and cash flow will be stabilized /12 City of Park Ridge, Illinois Page 7-5

63 The Water Fund cash flow projections demonstrate that Scenario 2A has a more significant negative impact on unrestricted net assets, as it relies more heavily on the existing fund balance surplus than Scenario 2B (Figure 5). FIGURE 5 Water Fund Cash Flow $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Water Fund - Cash Flow Rate Scenario 2 Summary Target Unrestricted Net Assets Scenario 2A Unrestricted Net Assets Scenario 2B Unrestricted Net Assets In contrast, the proposed sewer rates are designed to keep the Sewer Fund balance elevated initially, as a drawdown will begin in 2017 once debt service for the Phase 2 Relief Sewer Project is completely phased in (Figure 6) /12 City of Park Ridge, Illinois Page 7-6

64 FIGURE 6 Sewer Fund Cash Flow The recommendation is to start increasing sewer rates immediately to prepare for the eventual burden of the new debt service payments. This is a proactive approach that will avoid the necessity of a large sewer rate increase several years from now. If the City continues with moderate sewer rate increases beyond 2017 and no other major expenses arise, cash flow will eventually stabilize and the unrestricted net assets will not be drawn down below the target level /12 City of Park Ridge, Illinois Page 7-7

65 8. CONCLUSION AND RECOMMENDATIONS 8.1 Rate Structure The rate structure changes evaluated in Section 5 are proposed for the City s water and sewer rates, including the following: Distinguish between Chicago and Park Ridge water usage rates, in the rate ordinance, on customer bills and in public information; Standardize with a uniform usage rate structure for both the water and sewer rates; Eliminate the minimum water billing volume; Establish fixed charges to recover overhead and administrative costs; Escalate water fixed charges by water meter capacity to cover the higher costs of maintaining larger water meters; and Establish the base water fixed charge for all customers with a 1½-inch and smaller water meter. This rate structure is based on actual cost of service and it equitably distributes both fixed and variable costs among all rate payers. The base water fixed charge includes all customers with 1½-inch and smaller water meters to ensure that all single family customers pay the same fixed charges. The establishment of a fixed charge structure provides a guaranteed revenue base that is independent of the level of usage, which will provide more consistent cash flow year-round. This is especially important given the recent widespread reduction in water consumption resulting from a combination of economic factors and increased awareness of conservation measures. Nearby communities who already employ this /12 City of Park Ridge, Illinois Page 8-1

66 rate structure include Evanston, Glenview and Lincolnwood. Several other Chicagoarea communities that have a fixed charge structure, with escalating charges based on meter size, include Bensenville, Carpentersville, Geneva, Gurnee, Itasca and Round Lake. Several other communities have uniform fixed charges that do not include any usage allowance. Distinguishing between the Chicago water rate and Park Ridge water rate will help customers better understand the drivers of water rate increases over the course of each year. The City s rate ordinance can reinforce this distinction and should be modified to automatically pass through any future rate increases from Chicago, as this is the largest single expenditure in the Water Fund and delays in passing along these increases could have a significant impact on cash flow. 8.2 Recommended Rate Scenario Though the existing water and sewer rates are sufficient to recover routine O&M and debt service costs, they will not be able to also fund the entirety of the baseline CIP, nor the additional costs of a water meter upgrade and Phase 2 Relief Sewer Improvements, without depleting the Water and Sewer Fund balances. Scenario 2 is recommended, as it will provide funding for both the baseline CIP and additional projects, as well as modifying the rate structure as described above. The five-year rate increase program proposed under Scenario 2B will result in more consistent impacts on residential customers as compared to the alternate rate structure in Scenario 2A. Selection of Scenario 2B would allow the City to immediately move forward with critical infrastructure renewal projects such as water main replacement and sewer rehabilitation programs, as well as improve the financial stability of the Water and /12 City of Park Ridge, Illinois Page 8-2

67 Sewer Funds and their ability to cover new debt service payments. These changes will allow the City to be more proactive about long-term infrastructure renewal, as well as completing two other large-scale projects that will considerably improve the operation of the water and sewer systems. 8.3 Implementation Plan The recommended rate increases should be adopted with new rates set to become effective for all usage on and after May 1, 2012, to coincide with the start of Other recommended changes, such as distinguishing between Chicago and Park Ridge water rates, switching to uniform water usage rates and establishing bi-monthly fixed charges, should be completed concurrently. The rate ordinance should also be modified to stipulate that water rate increases from Chicago will be passed through each year in May without the need for Council action. An annual review of revenues, expenses and rates is recommended to keep annual rate increases in line with revenue needs. The rate model, which was built using Excel spreadsheets, will be turned over to City staff at the conclusion of this project for use in updating the rates annually as part of the budgeting process, or at any other time should unique circumstances arise /12 City of Park Ridge, Illinois Page 8-3

68 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX A: GLOSSARY OF TERMS AND ACRONYMS Term AWWA Replacement Fund Capital Improvement Plan (CIP) Cash Flow Analysis Debt Service Expenses Enterprise Fund Fixed Charge Generally Accepted Accounting Principles (GAAP) Definition The acronym for the American Water Works Association. AWWA is a recognized authority on utility rate setting and infrastructure operation, maintenance, and replacement. A separate account reserved for replacement of the City's fleet vehicles, major maintenance equipment, and computer equipment. Annual contributions are made from the Water & Sewer Funds to fund replacement of equipment for the water and sewer utilities. The City's multi-year plan to make improvements to the water and sewer systems, including water main replacements, sewer rehabilitation, and lift station improvements. The "baseline" CIP includes currently planned projects. The rate study evaluates alternatives that provide additional funding for water meter upgrades and additional relief sewer improvements. Study of the cycle of cash inflows and outflows, with the purpose of maintaining an adequate cash flow to cover expenses as they occur, and maintain a specified balance of unrestricted net assets. Payments made to repay a loan or bond. In governmental accounting, a fund that provides goods or services to the public for a fee that makes the fund self-supporting. The City's Water and Sewer Funds are enterprise funds, and the City's water and sewer rates are set to cover expenses payable from these funds. A charge assessed to each customer with every bill to recover the basic overhead and administrative costs to operate and maintain the water and sewer systems. Because these costs typically do not vary with usage, fixed charges do not include a usage component (i.e. all usage is billed on top of the fixed charges). The common set of accounting principles, standards and procedures use to compile corporate financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information. Page 1 of 11

69 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX A: GLOSSARY OF TERMS AND ACRONYMS Term Infrastructure Renewal Metropolitan Water Reclamation District of Greater Chicago (MWRDGC) Operations and Maintenance (O&M) Expenses Overhead Expenses Sewer System Tiered Rate Structure Unaccounted-for Water Loss Unbilled Water Use Uniform Rate Structure Definition Investments in the water and sewer systems to replace or rehabilitate major equipment and infrastructure. This includes such projects as water main replacement, water tower painting, pump replacement, and sewer lining. The regional agency, based in Chicago, that provides wastewater treatment services to communities in Cook County. MWRDGC recovers costs through charges on customers' property tax bills. The costs of everyday operations. These expenses include salaries, benefits, commodities, contractual services, and routine maintenance of infrastructure and equipment. These expenses are not affected based on the level of water/sewer usage. Examples include administrative salaries and benefits, meter reading and billing, postage, government-mandated testing and monitoring, and inter-fund transfers. These costs are a subset of Operations and Maintenance expenses. The City's system of storm and sanitary sewers that collects wastewater and conveys it to MWRDGC for treatment. The structure that currently applies to the City's water usage rates, in which rates escalate for higher levels of water consumption (above 30,000 gallons per bi-monthly billing period). Treated water that is pumped to the distribution system, but is not recorded as billable water consumption. Further, this water typically cannot be directly measured or even reliably estimated. Causes include water main breaks, service leaks, and underreading by water meters. Treated water that is pumped to the distribution system, but not recorded as billable water consumption. This water typically can be accounted for by direct measurement or estimation. Unbilled water uses include consumption at municipal facilities, irrigation of public property, hydrant flushing, street cleaning, and sewer cleaning. The structure that currently applies to the City's sewer usage rates, in which rates are the same for all customers, i.e. rates do not vary based on water meter size or level of water consumption. Page 2 of 11

70 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX A: GLOSSARY OF TERMS AND ACRONYMS Term Unrestricted Net Assets Usage Rates Water Distribution System Water Meter Fees Definition Reserve cash balances held in the Water and Sewer Funds. The purpose of these reserves is to supplement revenues in situations such as unexpected decreases in water usage, relocation of a large water user to another community, or uneven cash flow. The rates charged by the City to recover the costs of operating and maintaining its water and sewer systems. These are volume-based rates charged for every 1,000 gallons of usage. The City's system of water mains, fire hydrants, isolation valves, and water storage facilities that delivers water to residents and businesses in sufficient quantities and at sufficient pressures. Fees charged by the City to provide and install water meters for new customers. Page 3 of 11

71 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX B: BASELINE REVENUE AND EXPENSE PROJECTIONS CONTROLLING ASSUMPTIONS: No changes to Park Ridge water and sewer rates other than passing through Chicago water rate increases each year. Routine operations and maintenance expenses increase each year due to inflation. Capital costs include the City's baseline CIP. WATER FUND REVENUES Operating Revenues Water Sales - Chicago Rates $2,175,000 $2,504,000 $2,876,000 $3,310,000 $3,405,000 Water Sales - Park Ridge Rates $2,472,000 $2,472,000 $2,472,000 $2,472,000 $2,472,000 Water Sales - Minimum Charges $2,297,000 $2,297,000 $2,297,000 $2,297,000 $2,297,000 Late Payment Penalties $118,000 $118,000 $118,000 $118,000 $118,000 Water Meters $15,000 $15,000 $15,000 $15,000 $15,000 Total Operating Revenues $7,077,000 $7,406,000 $7,778,000 $8,212,000 $8,307,000 Non-Operating Revenues Interest Income $6,000 $14,500 $7,200 $0 $0 Employee Contributions $11,024 $12,700 $14,600 $16,800 $19,300 Miscellaneous $11,000 $11,000 $11,000 $11,000 $11,000 Total Non-Operating Revenues $28,024 $38,200 $32,800 $27,800 $30,300 TOTAL REVENUES $7,105,024 $7,444,200 $7,810,800 $8,239,800 $8,337,300 EXPENSES Operating Expenses Administration Inflation Factor Regular Salaries 2% $167,468 $171,000 $174,000 $177,000 $181,000 Overtime 2% $1,000 $1,020 $1,040 $1,060 $1,080 Page 4 of 11

72 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX B: BASELINE REVENUE AND EXPENSE PROJECTIONS WATER FUND Insurance 15% $31,389 $36,100 $41,500 $47,700 $54,900 Telecommunications 2% $15,100 $15,400 $15,700 $16,000 $16,300 Data Processing Services 2% $22,000 $22,400 $22,800 $23,300 $23,800 Postal Charges 2% $32,285 $32,900 $33,600 $34,300 $35,000 General Contractual Services 2% $46,250 $47,200 $48,100 $49,100 $50,100 Materials 2% $1,000 $1,020 $1,040 $1,060 $1,080 Water Supply and Treatment Regular Salaries 2% $110,456 $113,000 $115,000 $117,000 $119,000 Overtime 2% $30,000 $30,600 $31,200 $31,800 $32,400 Insurance 15% $15,943 $18,300 $21,000 $24,200 $27,800 Uniforms 0% $6,426 $6,400 $6,400 $6,400 $6,400 Purchase of Water varies $3,990,000 $4,590,000 $5,280,000 $5,860,000 $6,030,000 Testing 2% $8,000 $8,200 $8,400 $8,600 $8,800 Building Maintenance 2% $8,000 $8,200 $8,400 $8,600 $8,800 Training 2% $2,000 $2,040 $2,080 $2,120 $2,160 General Contractual Services 2% $50,000 $51,000 $52,000 $53,000 $54,100 Materials 2% $15,000 $15,300 $15,600 $15,900 $16,200 Natural Gas 5% $5,000 $5,300 $5,600 $5,900 $6,200 Electricity 5% $130,000 $137,000 $144,000 $151,000 $159,000 Fire Hydrant Services Inflation Factor Regular Salaries 2% $44,681 $45,600 $46,500 $47,400 $48,300 Overtime 0% $2,000 $2,000 $2,000 $2,000 $2,000 Insurance 15% $8,968 $10,300 $11,800 $13,600 $15,600 Page 5 of 11

73 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX B: BASELINE REVENUE AND EXPENSE PROJECTIONS WATER FUND Water Main Services Regular Salaries 2% $252,947 $258,000 $263,000 $268,000 $273,000 Extra Help 2% $5,700 $8,000 $8,200 $8,400 $8,600 Overtime 2% $50,000 $51,000 $52,000 $53,000 $54,100 Insurance 15% $49,823 $57,300 $65,900 $75,800 $87,200 Water Surveys 2% $12,000 $12,200 $12,400 $12,600 $12,900 Materials 5% $200,000 $210,000 $221,000 $232,000 $244,000 Water Meter Services Regular Salaries 2% $74,370 $76,000 $78,000 $80,000 $82,000 Overtime 2% $2,000 $2,000 $2,000 $2,000 $2,000 Insurance 15% $13,951 $16,000 $18,400 $21,200 $24,400 General Contractual Services 2% $45,000 $45,900 $46,800 $47,700 $48,700 Meters 5% $50,000 $52,500 $55,100 $57,900 $60,800 Capital Improvements Inflation Factor Water Main Construction N/A $815,000 $860,000 $903,000 $950,000 $998,000 Water Storage Tank Painting N/A $0 $225,000 $0 $0 $0 Computer Equipment Replacement 0% $3,800 $3,800 $3,800 $3,800 $3,800 Motor Equipment Replacement 4% $79,800 $82,900 $86,100 $89,500 $93,000 Total Operating Expenses $6,397,357 $7,330,880 $7,903,460 $8,598,940 $8,892,520 Page 6 of 11

74 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX B: BASELINE REVENUE AND EXPENSE PROJECTIONS WATER FUND Non-Operating Expenses Inflation Factor Transfer Out - Debt Service N/A $889,116 $926,350 $884,550 $888,550 $886,550 Transfer Out - Overhead varies $806,472 $806,500 $806,500 $800,000 $800,000 Transfer Out - IMRF 8% $176,254 $190,000 $205,000 $221,000 $239,000 Total Non-Operating Expenses $1,871,842 $1,922,850 $1,896,050 $1,909,550 $1,925,550 TOTAL EXPENSES $8,269,199 $9,253,730 $9,799,510 $10,508,490 $10,818,070 WATER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $3,465,600 $2,301,425 $491,795 ($1,497,115) ($3,765,805) Revenues $7,105,024 $7,444,100 $7,810,600 $8,239,800 $8,337,300 Expenses $8,269,199 $9,253,730 $9,799,510 $10,508,490 $10,818,070 Year-End Surplus (Deficit) ($1,164,175) ($1,809,630) ($1,988,910) ($2,268,690) ($2,480,770) Ending Unrestricted Net Assets $2,301,425 $491,795 ($1,497,115) ($3,765,805) ($6,246,575) Target Unrestricted Net Assets* $1,948,000 $2,112,000 $2,203,000 $2,321,000 $2,373,000 Page 7 of 11

75 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX B: BASELINE REVENUE AND EXPENSE PROJECTIONS SEWER FUND REVENUES Operating Revenues Charges for Services $1,521,000 $1,521,000 $1,521,000 $1,521,000 $1,521,000 Developer Fees $25,000 $25,000 $25,000 $25,000 $25,000 Total Operating Revenues $1,546,000 $1,546,000 $1,546,000 $1,546,000 $1,546,000 Non-Operating Revenues Grants $225,000 $0 $0 $0 $0 Interest Income $4,000 $6,100 $7,000 $6,200 $4,400 Employee Contributions $5,110 $5,880 $6,760 $7,770 $8,940 Total Non-Operating Revenues $234,110 $11,980 $13,760 $13,970 $13,340 TOTAL REVENUES $1,780,110 $1,557,980 $1,559,760 $1,559,970 $1,559,340 EXPENSES Operating Expenses Sewer Line and Drainage Inflation Factor Regular Salaries 2% $281,840 $287,000 $293,000 $299,000 $305,000 Extra Help 2% $6,870 $15,000 $15,300 $15,600 $15,900 Overtime 2% $20,000 $20,400 $20,800 $21,200 $21,600 Insurance 15% $55,580 $63,900 $73,500 $84,500 $97,200 Uniforms 0% $650 $650 $650 $650 $650 General Contractual Services 2% $129,250 $132,000 $135,000 $138,000 $141,000 Sewer Clean and Televise 2% $20,000 $20,400 $20,800 $21,200 $21,600 Materials 2% $90,000 $92,000 $94,000 $96,000 $98,000 Electricity 5% $6,000 $6,300 $6,600 $6,900 $7,200 Page 8 of 11

76 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX B: BASELINE REVENUE AND EXPENSE PROJECTIONS SEWER FUND Capital Improvements Sewer Lining and Rehabilitation N/A $399,000 $310,000 $310,000 $310,000 $310,000 Lift Station Improvements N/A $30,000 $200,000 $200,000 $200,000 $200,000 Motor Equipment 4% $22,800 $23,600 $24,400 $25,300 $26,200 Total Operating Expenses $1,061,990 $1,171,250 $1,194,050 $1,218,350 $1,244,350 Non-Operating Expenses Inflation Factor Transfer Out - Debt Service N/A $130,380 $156,450 $451,450 $455,550 $454,450 Transfer Out - Overhead 2% $154,060 $157,100 $160,200 $163,400 $166,700 Transfer Out - IMRF 8% $72,780 $78,600 $84,900 $91,700 $99,000 Total Non-Operating Expenses $357,220 $392,150 $696,550 $710,650 $720,150 TOTAL EXPENSES $1,419,210 $1,563,400 $1,890,600 $1,929,000 $1,964,500 SEWER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $1,046,330 $1,407,230 $1,401,810 $1,070,970 $701,940 Revenues $1,780,110 $1,557,980 $1,559,760 $1,559,970 $1,559,340 Expenses $1,419,210 $1,563,400 $1,890,600 $1,929,000 $1,964,500 Year-End Surplus (Deficit) $360,900 ($5,420) ($330,840) ($369,030) ($405,160) Ending Unrestricted Net Assets $1,407,230 $1,401,810 $1,070,970 $701,940 $296,780 Target Unrestricted Net Assets* $537,000 $561,000 $615,000 $622,000 $627,000 NOTES: 1. Cash flow analysis includes all revenues, and O&M, debt service, and capital improvement expenses. Depreciation is excluded. 2. The target unrestricted net assets for the Water Fund equals 2 months of expenses plus $570, The target unrestricted net assets for the Sewer Fund equals 2 months of expenses plus $300,000. Page 9 of 11

77 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX C: WATER AND SEWER SYSTEM INVENTORY SEWER SYSTEM Diameter Length Install Cost (inches) (feet) (per foot) 1 Totals $30 $22, ,616 $34 $1,958, ,150 $40 $46, ,420 $47 $2,369, ,291 $53 $8,654, ,637 $59 $5,878, ,343 $82 $4,948, ,841 $89 $4,613, ,883 $126 $5,403, ,880 $142 $1,828, ,920 $158 $3,305, ,645 $174 $982, ,063 $190 $7,801, ,233 $222 $2,937, ,438 $254 $2,397, ,342 $286 $4,387, ,883 $318 $3,460, ,907 $350 $1,717, ,699 $382 $5,233, ,647 $414 $1,923, ,050 $446 $4,036, ,935 $510 $3,026,850 72x42 1,325 $414 $548,550 72x48 1,285 $414 $531, ,676 $542 $2,534,392 Totals 702,844 $80,549, year cycle $1,073,993 Page 10 of 11

78 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX C: WATER AND SEWER SYSTEM INVENTORY WATER DISTRIBUTION SYSTEM Diameter Length Replacement Cost Total (inches) (feet) (per foot) Costs 3 50 $160 $8, ,416 $160 $3,426, ,617 $160 $55,138, ,959 $170 $27,873, ,215 $180 $7,598, ,666 $200 $23,533, $215 $25, ,280 $230 $5,124, ,700 $250 $3,675,000 Totals 727,023 $126,400, year cycle $1,685,000 NOTES: 1. Water main replacement costs include design engineering, construction observation, and replacement of all hydrants and valves connected to water main. 2. IEPA typically requires a minimum water main size of 6", so costs for replacing 3" and 4" water mains assume they will be upsized to 6" when replaced. 3. Unit costs for sewer lining are extrapolated based on historical sewer lining bids in Park Ridge. Page 11 of 11

79 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX D: General Fund Transfer Formula for Shared Services

80 City of Park Ridge 2012/13 Shared Services Budget Total Cost Basis for Allocation General Water Sewer Parking Library Admin Fleet Waste PW Admin & Eng Total City Administration Description 2012/13 Budgeted Figures $30,404,325 $9,399,666 $1,358,921 $946,982 $42,109,894 72% 22% 3% 2% 100% Hock City Manager $178, /13 Budget $129,194 $39,941 $5,774 $4,024 $178,934 Maller Deputy City Manager $158, /13 Budget $114,471 $35,389 $5,116 $3,565 $158,542 Peterson Deputy City Clerk $67, /13 Budget $48,417 $14,968 $2,164 $1,508 $67,057 Cannon Admin $51, /13 Budget $36,900 $11,408 $1,649 $1,149 $51,107 Vehicle City Manager Vehicle $6, /13 Budget $4,685 $1,449 $209 $146 $6,489 Public Official Bond Insurance Insurance $ /13 Budget $72 $22 $3 $2 $100 City Council City Council and City Clerk $29, /13 Budget $21,227 $6,563 $949 $661 $29,400 Total $491, $354,967 $109,740 $15,865 $11,056 $0 $0 $0 $0 $0 $491,629 City Wide Costs Description 2012/13 Budgeted Figures $30,404,325 $9,399,666 $1,358,921 $946,982 $4,739,077 $46,848,971 65% 20% 3% 2% 10% 100% General Liability Insurance GL Insurance $106, /13 Budget $69,252 $21,410 $3,095 $2,157 $10,794 $106,708 Brokerage Fee Insurance Broker $20, /13 Budget $13,426 $4,151 $600 $418 $2,093 $20,688 Crime Insurance $3, /13 Budget $2,458 $760 $110 $77 $383 $3,787 Terrorism Insurance $7, /13 Budget $4,545 $1,405 $203 $142 $708 $7,003 HELP Insurance POOL $60, /13 Budget $38,939 $12,038 $1,740 $1,213 $6,069 $60,000 Nugent Insurance Consultant $8, /13 Budget $5,192 $1,605 $232 $162 $809 $8,000 Klein, Thorpe, Jenkins External Attorney $75, Monthly Retainer Only $6250/month $48,674 $15,048 $2,175 $1,516 $7,587 $75,000 Miller, Cooper Auditor $40, /13 Budget $25,959 $8,026 $1,160 $809 $4,046 $40,000 OPEB Consultant Audit required $5, /13 Budget $3,245 $1,003 $145 $101 $506 $5,000 Total $326, $211,690 $65,445 $9,461 $6,593 $32,996 $0 $0 $0 $0 $326,186 HR and Payroll Description Allocated Headcount % 4% 1% 1% 29% 100% Reeves HR Administrator $110, /13 Budget $70,853 $4,635 $1,655 $1,324 $32,447 $110,915 Mohr Payroll Clerk $68, /13 Budget $43,796 $2,865 $1,023 $819 $20,056 $68,559 Ceridian External Payroll Vendor $60, /13 Budget $38,328 $2,507 $896 $716 $17,552 $60,000 Excess Workers Comp Insurance $44, /13 Budget $28,380 $1,857 $663 $530 $12,997 $44,427 Total $283, $181,357 $11,864 $4,237 $3,390 $83,051 $0 $0 $0 $0 $283,900 Information Technology Description Allocated Headcount % 5% 3% 2% 100% Nelson Director $138, /13 Budget $126,127 $6,943 $3,471 $2,314 $138,855 Malkov Staff $72, /13 Budget $65,609 $3,612 $1,806 $1,204 $72,230 Cardenas Staff $92, /13 Budget $84,364 $4,644 $2,322 $1,548 $92,878 Material & Contracting External Vendors $186, /13 Budget $169,327 $9,321 $4,660 $3,107 $186,415 Total $490, $445,427 $24,519 $12,259 $8,173 $0 $0 $0 $0 $0 $490,378 Accounts Payable Description AP Transaction Count ,965 80% 11% 4% 2% 2% 100% Wolford AP $58, /13 Budget $47,011 $6,560 $2,180 $1,442 $1,384 $58,577 Bostrom AP review, PO $66, /13 Budget $53,201 $7,424 $2,467 $1,632 $1,566 $66,290 Total $124, $100,212 $13,984 $4,646 $3,075 $0 $0 $0 $2,949 $0 $124,866 Cashier Description Receipt Transaction Count % 10% 10% 6% 100% VandenBosch Cashier $64, /13 Budget $48,575 $6,209 $6,209 $3,614 $64,609 Total $64, $48,575 $6,209 $6,209 $3,614 $0 $0 $0 $0 $0 $64,609 Finance Administration Description Fund Expenditure Budget $30,404,325 $9,399,666 $1,358,921 $946,982 $4,739,077 $46,848,971 65% 20% 3% 2% 10% 100%

81 City of Park Ridge 2012/13 Shared Services Budget Total Cost Basis for Allocation General Water Sewer Parking Library Admin Fleet Waste PW Admin & Eng Total Stutts Director $126, /13 Budget $81,931 $25,329 $3,662 $2,552 $12,770 $126,245 Lazarra Asst. Director $105, /13 Budget $68,726 $21,247 $3,072 $2,141 $10,712 $105,898 Kain Accountant $75, /13 Budget $48,795 $15,085 $2,181 $1,520 $7,606 $75,187 Beil Admin $55, /13 Budget $36,076 $11,153 $1,612 $1,124 $5,623 $55,588 Total $362, $235,529 $72,815 $10,527 $7,336 $36,712 $0 $0 $0 $0 $362,918 Finance Software Description Fund Expenditure Budget $30,404,325 $9,399,666 $1,358,921 $946,982 $4,739,077 $46,848,971 65% 20% 3% 2% 10% 100% MUNIS Acctg Software $53, /13 Budget $34,911 $10,793 $1,560 $1,087 $5,442 $53,794 Total $53, $34,911 $10,793 $1,560 $1,087 $5,442 $0 $0 $0 $0 $53,794 PW Admin & Eng Description 2012/13 General Fund PW (not Admin, Eng, Veh) Sewer, Water, Parking $3,808,612 $9,399,666 $1,358,921 $946,982 $15,514,181 25% 61% 9% 6% 100% Zingsheim Director $150, /13 Budget $37,062 $91,468 $13,224 $9,215 $150,969 Tedeschi Asst to Director $64, /13 Budget $15,855 $39,130 $5,657 $3,942 $64,584 Mitchell City Engineer $99, /13 Budget $24,470 $60,392 $8,731 $6,084 $99,677 Tomlinson Admin $53, /13 Budget $13,098 $32,327 $4,674 $3,257 $53,355 Alexander Engineer Staff $92, /13 Budget $22,782 $56,226 $8,129 $5,665 $92,802 Webber Engineer Staff $81, /13 Budget $19,909 $49,135 $7,104 $4,950 $81,098 Fleet Vehicles $32, See below $7,965 $19,659 $2,842 $1,981 $32,446 Total $574, $141,141 $348,337 $50,359 $35,094 $0 $0 $0 $0 $0 $574,931 Fleet Maintenance Description Vehicle/Equipment Count % 17% 5% 4% 1% 1% 1% 1% 4% 100% McGrath Manager $104, /13 Budget $70, $17, $4, $4, $ $ $ $ $4, $104, Dziwulski Supervisor $98, /13 Budget $67, $16, $4, $3, $ $ $ $ $3, $98, Burns Mechanic $98, /13 Budget $66, $16, $4, $3, $ $ $ $ $3, $98, Johson, J. Mechanic $98, /13 Budget $66, $16, $4, $3, $ $ $ $ $3, $98, Scholz Mechanic $90, /13 Budget $61, $15, $4, $3, $ $ $ $ $3, $90, Fleet Maintenance Vehicle $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Property / Auto Insurance Insurance $52, /13 Budget $35, $8, $2, $2, $ $ $ $ $2, $52, Fuel Costs Fuel purchases $300, /13 Budget $203, $50, $13, $11, $2, $2, $2, $2, $11, $300, Total $843, $571, $142, $38, $32, $6, $6, $6, $6, $32, $843, $3,616, $2,324, $806, $154, $111, $164, $6, $6, $9, $32, $3,616, * For 2012/13 - $1,072, will be transferred from the Water, Sewer and Parking Funds to the General Fund, in previous years, $800,000 was transferred from the Water Fund to the General Fund $2,324, $806, $154, $111, $3,397, $164, $6, $6, $9, $32, $219, % 22% 4% 3% 5% 0% 0% 0% 1% $3,616,819

82 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX E: Target Fund Balance Policy

83 COUNCIL POLICY STATEMENT Policy No. 40 General Subject: Finance Specific Subject: Fund Balance and Target Fund Balance Date Approved: August 15, 2005 Date Revised: December 19, 2011 PURPOSE The Governmental Accounting Standards Board (GASB) has issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions (GASB 54), which was adopted by the City as of the fiscal year ended April 30, In the fund financial statements, governmental funds now report five components of fund balance: nonspendable, restricted, committed, assigned, and unassigned. This policy establishes guidelines for the appropriate level of fiscal year end (a) unassigned General Fund balance; (b) assigned fund balances for all special revenue funds; and (c) unrestricted net asset balance for all Enterprise Funds ( Target Fund Balances ). RATIONALE Having a policy for Target Fund Balances will provide ongoing guidance to the City Council and senior staff regarding the appropriate relationship between an available balance in any individual fund and revenues and expenditures with respect to that fund. It is essential that the City maintain an adequate level of available fund balance to mitigate risks and provide a backup for revenue shortfalls. Adherence to an appropriate policy will also help the City maintain and improve its credit rating. POLICY STATEMENT FUND BALANCE POLICIES It is neither sufficient nor advisable to monitor only the aggregate balance of all the City s accounting funds. The balance in each individual fund must be separately monitored. A fund balance shall be the difference between assets and liabilities reported as to any particular fund. A fund balance must measure the net current financial resources in a fund that may be available to finance expenditures to be made from that fund in present and future accounting periods. Fund balance reporting will be accomplished in accordance with the most recent authoritative pronouncements and each Fund may be defined according to the following categories of funds: Nonspendable Funds: refers to amounts that cannot be spent because they are either not in spendable form or are legally or contractually required to be kept intact. This would include, but is not limited to, inventory prepayments and non-current receivables. Restricted Funds: refers to amounts that are subject to externally imposed restrictions such as those imposed by creditors, grantors, contributors and/or laws and regulations of the City or state or federal government. Bonded capital project funds and debt service funds are included in this category. Special revenue funds are, by definition, Restricted Funds. CPS 40 1 OF 2

84 Committed Funds: refers to amounts that can only be used for specific purposes pursuant to constraints imposed by specific formal action of the City Council. The City Council may commit funds by a resolution or ordinance. Committed Funds cannot be used for any purpose other than that specified by Council action unless the Council removes or changes the specific allowable use by taking the same type of formal action it employed to previously commit those funds. Assigned Funds: refers to amounts for which the Council has expressed an intention for use for specific purposes; but which are not Restricted or Committed as defined above. An Assigned Fund balance does not lapse at fiscal year end, but is carried over into the next fiscal year. Unassigned Funds: refers to all spendable monies not contained in the other four classifications set forth above. In funds other than the General Fund, the unassigned classification may be used only to indicate that a deficit balance has resulted from overspending for specific purposes for which amounts had been Restricted, Committed or Assigned. TARGET FUND BALANCE POLICIES For the General Fund, the Target Fund Balance shall be equal to three months of budgeted operating expenditures. For all non Enterprise Funds with the exception of the General Fund, the Target Fund Balance shall be zero (0). For Enterprise Funds the City s Target Fund Balance shall be equal to two months of budgeted operating expenditures, plus an additional amount to cover emergency expenditures. For the Parking Fund this emergency amount shall be $50,000, for the Water Fund this emergency amount shall be $570,000 and for the Sewer Fund this emergency amount shall be $300,000. According to law, the Library Fund Target Fund Balance must be set by the Library Board. CPS 40 2 OF 2

85 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX F: FIXED CHARGE ANALYSIS WATER FUND OVERHEAD AND ADMINISTRATIVE COSTS Expense Description Administrative Salaries and Benefits $199,857 $208,120 $216,540 $225,760 $236,980 Data Processing (Billing) $22,000 $22,400 $22,800 $23,300 $23,800 Postage $32,285 $32,900 $33,600 $34,300 $35,000 Water Quality Testing $8,000 $8,000 $8,200 $8,400 $8,600 Water Surveys $12,000 $12,200 $12,400 $12,600 $12,900 Transfer Out - Overhead $806,472 $806,500 $806,500 $800,000 $800,000 Transfer Out - IMRF $176,254 $190,000 $205,000 $221,000 $239,000 Total Annual Overhead Costs $1,256,868 $1,280,120 $1,305,040 $1,325,360 $1,356,280 Number of Customers 12,674 12,674 12,674 12,674 12,674 Bi-Monthly Overhead Cost per Customer $16.53 $16.83 $17.16 $17.43 $17.84 Average Annual Increase 1.9% Page 12 of 39

86 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX F: FIXED CHARGE ANALYSIS WATER BI-MONTHLY FIXED CHARGES - SCENARIO 1B Water Meter Max Flow Max Flow Sizes (gpm) Proportion " Meter $16.53 $16.83 $17.16 $17.43 $ /2" Meter $33.06 $33.66 $34.32 $34.86 $ " Meter $52.90 $53.86 $54.91 $55.78 $ " Meter $ $ $ $ $ " Meter 1, $ $ $ $ $ " Meter 2, $ $ $ $ $ WATER BI-MONTHLY FIXED CHARGES - SCENARIOS 1C, 2A, AND 2B Water Meter Max Flow Max Flow Sizes (gpm) Proportion /2" Meter $16.53 $16.83 $17.16 $17.43 $ " Meter $26.45 $26.93 $27.46 $27.89 $ " Meter $74.00 $76.00 $77.00 $78.00 $ " Meter 1, $ $ $ $ $ " Meter 2, $ $ $ $ $ Page 13 of 39

87 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX F: FIXED CHARGE ANALYSIS SEWER BI-MONTHLY FIXED CHARGES Expense Description Transfer Out - Overhead $154,060 $157,100 $160,200 $163,400 $166,700 Transfer Out - IMRF $72,780 $78,600 $84,900 $91,700 $99,000 Total Annual Overhead Costs $226,840 $235,700 $245,100 $255,100 $265,700 Number of Customers 12,674 12,674 12,674 12,674 12,674 Bi-Monthly Overhead Cost per Customer $2.98 $3.10 $3.22 $3.35 $3.49 Average Annual Increase 4.0% Page 14 of 39

88 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX G: SCENARIO 1A REVENUE AND EXPENSE PROJECTIONS CONTROLLING ASSUMPTIONS: Annual increases to Chicago and Park Ridge rates. No changes to the water or sewer rate structure. Routine operations and maintenance expenses increase each year due to inflation. Capital costs include the City's baseline CIP. NOTE: SEE APPENDIX B FOR DETAILED LINE ITEM O&M EXPENSES, WHICH ARE IDENTICAL IN EACH SCENARIO. VARIATIONS IN CAPITAL OR DEBT SERVICE COSTS FROM THE BASELINE SCENARIO ARE HIGHLIGHTED IN YELLOW. WATER FUND REVENUES Operating Revenues Water Sales - Chicago Rates $2,175,000 $2,504,000 $2,876,000 $3,310,000 $3,405,000 Water Sales - Park Ridge Rates $2,742,000 $3,041,000 $3,345,000 $3,679,000 $4,012,000 Water Sales - Minimum Charges $2,549,000 $2,830,000 $3,112,000 $3,424,000 $3,731,000 Late Payment Penalties $118,000 $118,000 $118,000 $118,000 $118,000 Water Meters $15,000 $15,000 $15,000 $15,000 $15,000 Total Operating Revenues $7,599,000 $8,508,000 $9,466,000 $10,546,000 $11,281,000 Non-Operating Revenues Interest Income $6,000 $15,700 $12,400 $9,800 $9,300 Employee Contributions $11,024 $12,700 $14,600 $16,800 $19,300 Miscellaneous $11,000 $11,000 $11,000 $11,000 $11,000 Total Non-Operating Revenues $28,024 $39,400 $38,000 $37,600 $39,600 TOTAL REVENUES $7,627,024 $8,547,400 $9,504,000 $10,583,600 $11,320,600 Page 15 of 39

89 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX G: SCENARIO 1A REVENUE AND EXPENSE PROJECTIONS WATER FUND EXPENSES Operating Expenses Administration $316,492 $327,040 $337,780 $349,520 $363,260 Water Supply and Treatment $4,370,826 $4,985,340 $5,689,680 $6,284,520 $6,470,860 Fire Hydrant Services $55,649 $57,900 $60,300 $63,000 $65,900 Water Main Services $570,470 $596,500 $622,500 $649,800 $679,800 Water Meter Services $185,320 $192,400 $200,300 $208,800 $217,900 Capital Improvements Water Main Construction $815,000 $860,000 $903,000 $950,000 $998,000 Water Storage Tank Painting $0 $225,000 $0 $0 $0 Computer Equipment Replacement $3,800 $3,800 $3,800 $3,800 $3,800 Motor Equipment Replacement $79,800 $82,900 $86,100 $89,500 $93,000 Total Operating Expenses $6,397,357 $7,330,880 $7,903,460 $8,598,940 $8,892,520 Non-Operating Expenses Transfer Out - Debt Service $889,116 $926,350 $884,550 $888,550 $886,550 Transfer Out - Overhead $806,472 $806,500 $806,500 $800,000 $800,000 Transfer Out - IMRF $176,254 $190,000 $205,000 $221,000 $239,000 Total Non-Operating Expenses $1,871,842 $1,922,850 $1,896,050 $1,909,550 $1,925,550 TOTAL EXPENSES $8,269,199 $9,253,730 $9,799,510 $10,508,490 $10,818,070 Page 16 of 39

90 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX G: SCENARIO 1A REVENUE AND EXPENSE PROJECTIONS WATER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $3,465,600 $2,823,425 $2,117,095 $1,821,585 $1,896,695 Revenues $7,627,024 $8,547,400 $9,504,000 $10,583,600 $11,320,600 Expenses $8,269,199 $9,253,730 $9,799,510 $10,508,490 $10,818,070 Year-End Surplus (Deficit) ($642,175) ($706,330) ($295,510) $75,110 $502,530 Ending Unrestricted Net Assets $2,823,425 $2,117,095 $1,821,585 $1,896,695 $2,399,225 Target Unrestricted Net Assets* $1,948,000 $2,112,000 $2,203,000 $2,321,000 $2,373,000 SEWER FUND REVENUES Operating Revenues Charges for Services $1,583,000 $1,646,000 $1,708,000 $1,770,000 $1,845,000 Developer Fees $25,000 $25,000 $25,000 $25,000 $25,000 Total Operating Revenues $1,608,000 $1,671,000 $1,733,000 $1,795,000 $1,870,000 Non-Operating Revenues Grants $225,000 $0 $0 $0 $0 Interest Income $4,000 $6,300 $7,600 $7,600 $6,900 Employee Contributions $5,106 $5,870 $6,750 $7,760 $8,920 Total Non-Operating Revenues $234,106 $12,170 $14,350 $15,360 $15,820 TOTAL REVENUES $1,842,106 $1,683,170 $1,747,350 $1,810,360 $1,885,820 Page 17 of 39

91 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX G: SCENARIO 1A REVENUE AND EXPENSE PROJECTIONS SEWER FUND EXPENSES Operating Expenses Sewer Line and Drainage $610,190 $637,650 $659,650 $683,050 $708,150 Capital Improvements Sewer Lining and Rehabilitation $399,000 $310,000 $310,000 $310,000 $310,000 Lift Station Improvements $30,000 $200,000 $200,000 $200,000 $200,000 Motor Equipment $22,800 $23,600 $24,400 $25,300 $26,200 Total Operating Expenses $1,061,990 $1,171,250 $1,194,050 $1,218,350 $1,244,350 Non-Operating Expenses Transfer Out - Debt Service $130,380 $156,450 $451,450 $455,550 $454,450 Transfer Out - Overhead $154,060 $157,100 $160,200 $163,400 $166,700 Transfer Out - IMRF $72,780 $78,600 $84,900 $91,700 $99,000 Total Non-Operating Expenses $357,220 $392,150 $696,550 $710,650 $720,150 TOTAL EXPENSES $1,419,210 $1,563,400 $1,890,600 $1,929,000 $1,964,500 Page 18 of 39

92 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX G: SCENARIO 1A REVENUE AND EXPENSE PROJECTIONS SEWER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $1,046,330 $1,469,228 $1,588,998 $1,445,748 $1,327,108 Revenues $1,842,106 $1,683,170 $1,747,350 $1,810,360 $1,885,820 Expenses $1,419,208 $1,563,400 $1,890,600 $1,929,000 $1,964,500 Year-End Surplus (Deficit) $422,898 $119,770 ($143,250) ($118,640) ($78,680) Ending Unrestricted Net Assets $1,469,228 $1,588,998 $1,445,748 $1,327,108 $1,248,428 Target Unrestricted Net Assets* $537,000 $561,000 $615,000 $622,000 $627,000 NOTES: 1. Cash flow analysis includes all revenues, and O&M, debt service, and capital improvement expenses. Depreciation is excluded. 2. The target unrestricted net assets for the Water Fund equals 2 months of expenses plus $570, The target unrestricted net assets for the Sewer Fund equals 2 months of expenses plus $300,000. Page 19 of 39

93 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX H: SCENARIO 1B REVENUE AND EXPENSE PROJECTIONS CONTROLLING ASSUMPTIONS: Annual increases to Chicago and Park Ridge rates. Rate restructuring to include fixed charges and uniform usage rates. Routine operations and maintenance expenses increase each year due to inflation. Capital costs include the City's baseline CIP. NOTE: SEE APPENDIX B FOR DETAILED LINE ITEM O&M EXPENSES, WHICH ARE IDENTICAL IN EACH SCENARIO. VARIATIONS IN CAPITAL OR DEBT SERVICE COSTS FROM THE BASELINE SCENARIO ARE HIGHLIGHTED IN YELLOW. WATER FUND REVENUES Operating Revenues Water Sales - Chicago Rates $3,128,946 $3,602,651 $4,138,685 $4,761,981 $4,899,107 Water Sales - Park Ridge Rates $3,415,662 $3,515,389 $3,590,185 $3,664,980 $3,739,776 Water Sales - Fixed Charges $1,656,877 $1,686,623 $1,719,369 $1,747,170 $1,787,967 Late Payment Penalties $118,000 $118,000 $118,000 $118,000 $118,000 Water Meters $15,000 $15,000 $15,000 $15,000 $15,000 Total Operating Revenues $8,334,485 $8,937,663 $9,581,240 $10,307,132 $10,559,849 Non-Operating Revenues Interest Income $6,000 $17,600 $17,100 $16,000 $15,100 Employee Contributions $11,024 $12,700 $14,600 $16,800 $19,300 Miscellaneous $11,000 $11,000 $11,000 $11,000 $11,000 Total Non-Operating Revenues $28,024 $41,300 $42,700 $43,800 $45,400 TOTAL REVENUES $8,362,509 $8,978,963 $9,623,940 $10,350,932 $10,605,249 Page 20 of 39

94 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX H: SCENARIO 1B REVENUE AND EXPENSE PROJECTIONS WATER FUND EXPENSES Operating Expenses Administration $316,492 $327,040 $337,780 $349,520 $363,260 Water Supply and Treatment $4,370,826 $4,985,340 $5,689,680 $6,284,520 $6,470,860 Fire Hydrant Services $55,649 $57,900 $60,300 $63,000 $65,900 Water Main Services $570,470 $596,500 $622,500 $649,800 $679,800 Water Meter Services $185,320 $192,400 $200,300 $208,800 $217,900 Capital Improvements Water Main Construction $815,000 $860,000 $903,000 $950,000 $998,000 Water Storage Tank Painting $0 $225,000 $0 $0 $0 Computer Equipment Replacement $3,800 $3,800 $3,800 $3,800 $3,800 Motor Equipment Replacement $79,800 $82,900 $86,100 $89,500 $93,000 Total Operating Expenses $6,397,357 $7,330,880 $7,903,460 $8,598,940 $8,892,520 Non-Operating Expenses Transfer Out - Debt Service $889,116 $926,350 $884,550 $888,550 $886,550 Transfer Out - Overhead $806,472 $806,500 $806,500 $800,000 $800,000 Transfer Out - IMRF $176,254 $190,000 $205,000 $221,000 $239,000 Total Non-Operating Expenses $1,871,842 $1,922,850 $1,896,050 $1,909,550 $1,925,550 TOTAL EXPENSES $8,269,199 $9,253,730 $9,799,510 $10,508,490 $10,818,070 Page 21 of 39

95 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX H: SCENARIO 1B REVENUE AND EXPENSE PROJECTIONS WATER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $3,465,600 $3,558,910 $3,284,143 $3,108,572 $2,951,014 Revenues $8,362,509 $8,978,963 $9,623,940 $10,350,932 $10,605,249 Expenses $8,269,199 $9,253,730 $9,799,510 $10,508,490 $10,818,070 Year-End Surplus (Deficit) $93,310 ($274,767) ($175,570) ($157,558) ($212,821) Ending Unrestricted Net Assets $3,558,910 $3,284,143 $3,108,572 $2,951,014 $2,738,193 Target Unrestricted Net Assets* $1,948,000 $2,112,000 $2,203,000 $2,321,000 $2,373,000 SEWER FUND REVENUES Operating Revenues Sewer Charges - Usage $1,520,842 $1,520,842 $1,520,842 $1,520,842 $1,520,842 Sewer Charges - Fixed $226,611 $235,736 $244,862 $254,747 $265,394 Developer Fees $25,000 $25,000 $25,000 $25,000 $25,000 Total Operating Revenues $1,772,453 $1,781,579 $1,790,704 $1,800,590 $1,811,236 Non-Operating Revenues Grants $225,000 $0 $0 $0 $0 Interest Income $4,000 $6,700 $8,700 $9,100 $8,600 Employee Contributions $5,106 $5,870 $6,750 $7,760 $8,920 Total Non-Operating Revenues $234,106 $12,570 $15,450 $16,860 $17,520 TOTAL REVENUES $2,006,559 $1,794,149 $1,806,154 $1,817,450 $1,828,756 Page 22 of 39

96 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX H: SCENARIO 1B REVENUE AND EXPENSE PROJECTIONS SEWER FUND EXPENSES Operating Expenses Sewer Line and Drainage $610,190 $637,650 $659,650 $683,050 $708,150 Capital Improvements Sewer Lining and Rehabilitation $399,000 $310,000 $310,000 $310,000 $310,000 Lift Station Improvements $30,000 $200,000 $200,000 $200,000 $200,000 Motor Equipment $22,800 $23,600 $24,400 $25,300 $26,200 Total Operating Expenses $1,061,990 $1,171,250 $1,194,050 $1,218,350 $1,244,350 Non-Operating Expenses Transfer Out - Debt Service $130,380 $156,450 $451,450 $455,550 $454,450 Transfer Out - Overhead $154,060 $157,100 $160,200 $163,400 $166,700 Transfer Out - IMRF $72,780 $78,600 $84,900 $91,700 $99,000 Total Non-Operating Expenses $357,220 $392,150 $696,550 $710,650 $720,150 TOTAL EXPENSES $1,419,210 $1,563,400 $1,890,600 $1,929,000 $1,964,500 Page 23 of 39

97 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX H: SCENARIO 1B REVENUE AND EXPENSE PROJECTIONS SEWER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $1,046,330 $1,633,681 $1,864,430 $1,779,984 $1,668,434 Revenues $2,006,559 $1,794,149 $1,806,154 $1,817,450 $1,828,756 Expenses $1,419,208 $1,563,400 $1,890,600 $1,929,000 $1,964,500 Year-End Surplus (Deficit) $587,351 $230,749 ($84,446) ($111,550) ($135,744) Ending Unrestricted Net Assets $1,633,681 $1,864,430 $1,779,984 $1,668,434 $1,532,689 Target Unrestricted Net Assets* $537,000 $561,000 $615,000 $622,000 $627,000 NOTES: 1. Cash flow analysis includes all revenues, and O&M, debt service, and capital improvement expenses. Depreciation is excluded. 2. The target unrestricted net assets for the Water Fund equals 2 months of expenses plus $570, The target unrestricted net assets for the Sewer Fund equals 2 months of expenses plus $300,000. Page 24 of 39

98 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX I: SCENARIO 1C REVENUE AND EXPENSE PROJECTIONS CONTROLLING ASSUMPTIONS: Annual increases to Chicago and Park Ridge rates. Rate restructuring to include fixed charges and uniform usage rates. Routine operations and maintenance expenses increase each year due to inflation. Capital costs include the City's baseline CIP. NOTE: SEE APPENDIX B FOR DETAILED LINE ITEM O&M EXPENSES, WHICH ARE IDENTICAL IN EACH SCENARIO. VARIATIONS IN CAPITAL OR DEBT SERVICE COSTS FROM THE BASELINE SCENARIO ARE HIGHLIGHTED IN YELLOW. WATER FUND REVENUES Operating Revenues Water Sales - Chicago Rates $3,128,946 $3,602,651 $4,138,685 $4,761,981 $4,899,107 Water Sales - Park Ridge Rates $3,477,992 $3,652,515 $3,802,106 $3,951,697 $4,113,754 Water Sales - Fixed Charges $1,383,439 $1,408,896 $1,436,521 $1,458,753 $1,493,093 Late Payment Penalties $118,000 $118,000 $118,000 $118,000 $118,000 Water Meters $15,000 $15,000 $15,000 $15,000 $15,000 Total Operating Revenues $8,123,377 $8,797,061 $9,510,312 $10,305,431 $10,638,953 Non-Operating Revenues Interest Income $6,000 $17,000 $15,700 $14,000 $13,000 Employee Contributions $11,024 $12,700 $14,600 $16,800 $19,300 Miscellaneous $11,000 $11,000 $11,000 $11,000 $11,000 Total Non-Operating Revenues $28,024 $40,700 $41,300 $41,800 $43,300 TOTAL REVENUES $8,151,401 $8,837,761 $9,551,612 $10,347,231 $10,682,253 Page 25 of 39

99 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX I: SCENARIO 1C REVENUE AND EXPENSE PROJECTIONS WATER FUND EXPENSES Operating Expenses Administration $316,492 $327,040 $337,780 $349,520 $363,260 Water Supply and Treatment $4,370,826 $4,985,340 $5,689,680 $6,284,520 $6,470,860 Fire Hydrant Services $55,649 $57,900 $60,300 $63,000 $65,900 Water Main Services $570,470 $596,500 $622,500 $649,800 $679,800 Water Meter Services $185,320 $192,400 $200,300 $208,800 $217,900 Capital Improvements Water Main Construction $815,000 $860,000 $903,000 $950,000 $998,000 Water Storage Tank Painting $0 $225,000 $0 $0 $0 Computer Equipment Replacement $3,800 $3,800 $3,800 $3,800 $3,800 Motor Equipment Replacement $79,800 $82,900 $86,100 $89,500 $93,000 Total Operating Expenses $6,397,357 $7,330,880 $7,903,460 $8,598,940 $8,892,520 Non-Operating Expenses Transfer Out - Debt Service $889,116 $926,350 $884,550 $888,550 $886,550 Transfer Out - Overhead $806,472 $806,500 $806,500 $800,000 $800,000 Transfer Out - IMRF $176,254 $190,000 $205,000 $221,000 $239,000 Total Non-Operating Expenses $1,871,842 $1,922,850 $1,896,050 $1,909,550 $1,925,550 TOTAL EXPENSES $8,269,199 $9,253,730 $9,799,510 $10,508,490 $10,818,070 Page 26 of 39

100 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX I: SCENARIO 1C REVENUE AND EXPENSE PROJECTIONS WATER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $3,465,600 $3,347,802 $2,931,833 $2,683,935 $2,522,676 Revenues $8,151,401 $8,837,761 $9,551,612 $10,347,231 $10,682,253 Expenses $8,269,199 $9,253,730 $9,799,510 $10,508,490 $10,818,070 Year-End Surplus (Deficit) ($117,798) ($415,969) ($247,898) ($161,259) ($135,817) Ending Unrestricted Net Assets $3,347,802 $2,931,833 $2,683,935 $2,522,676 $2,386,859 Target Unrestricted Net Assets* $1,948,000 $2,112,000 $2,203,000 $2,321,000 $2,373,000 SEWER FUND REVENUES Operating Revenues Sewer Charges - Usage $1,520,842 $1,520,842 $1,520,842 $1,520,842 $1,520,842 Sewer Charges - Fixed $226,611 $235,736 $244,862 $254,747 $265,394 Developer Fees $25,000 $25,000 $25,000 $25,000 $25,000 Total Operating Revenues $1,772,453 $1,781,579 $1,790,704 $1,800,590 $1,811,236 Non-Operating Revenues Grants $225,000 $0 $0 $0 $0 Interest Income $4,000 $6,700 $8,700 $9,100 $8,600 Employee Contributions $5,106 $5,870 $6,750 $7,760 $8,920 Total Non-Operating Revenues $234,106 $12,570 $15,450 $16,860 $17,520 TOTAL REVENUES $2,006,559 $1,794,149 $1,806,154 $1,817,450 $1,828,756 Page 27 of 39

101 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX I: SCENARIO 1C REVENUE AND EXPENSE PROJECTIONS SEWER FUND EXPENSES Operating Expenses Sewer Line and Drainage $610,190 $637,650 $659,650 $683,050 $708,150 Capital Improvements Sewer Lining and Rehabilitation $399,000 $310,000 $310,000 $310,000 $310,000 Lift Station Improvements $30,000 $200,000 $200,000 $200,000 $200,000 Motor Equipment $22,800 $23,600 $24,400 $25,300 $26,200 Total Operating Expenses $1,061,990 $1,171,250 $1,194,050 $1,218,350 $1,244,350 Non-Operating Expenses Transfer Out - Debt Service $130,380 $156,450 $451,450 $455,550 $454,450 Transfer Out - Overhead $154,060 $157,100 $160,200 $163,400 $166,700 Transfer Out - IMRF $72,780 $78,600 $84,900 $91,700 $99,000 Total Non-Operating Expenses $357,220 $392,150 $696,550 $710,650 $720,150 TOTAL EXPENSES $1,419,210 $1,563,400 $1,890,600 $1,929,000 $1,964,500 Page 28 of 39

102 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX I: SCENARIO 1C REVENUE AND EXPENSE PROJECTIONS SEWER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $1,046,330 $1,633,681 $1,864,430 $1,779,984 $1,668,434 Revenues $2,006,559 $1,794,149 $1,806,154 $1,817,450 $1,828,756 Expenses $1,419,208 $1,563,400 $1,890,600 $1,929,000 $1,964,500 Year-End Surplus (Deficit) $587,351 $230,749 ($84,446) ($111,550) ($135,744) Ending Unrestricted Net Assets $1,633,681 $1,864,430 $1,779,984 $1,668,434 $1,532,689 Target Unrestricted Net Assets* $537,000 $561,000 $615,000 $622,000 $627,000 NOTES: 1. Cash flow analysis includes all revenues, and O&M, debt service, and capital improvement expenses. Depreciation is excluded. 2. The target unrestricted net assets for the Water Fund equals 2 months of expenses plus $570, The target unrestricted net assets for the Sewer Fund equals 2 months of expenses plus $300,000. Page 29 of 39

103 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX J: SCENARIO 2A REVENUE AND EXPENSE PROJECTIONS CONTROLLING ASSUMPTIONS: Annual increases to Chicago and Park Ridge rates. Rate restructuring to include fixed charges and uniform usage rates. Routine operations and maintenance expenses increase each year due to inflation. Capital costs include the City's baseline CIP + water meter upgrade (cash funded) and Phase 2 Relief Sewer Project (bonded). NOTE: SEE APPENDIX B FOR DETAILED LINE ITEM O&M EXPENSES, WHICH ARE IDENTICAL IN EACH SCENARIO. VARIATIONS IN CAPITAL OR DEBT SERVICE COSTS FROM THE BASELINE SCENARIO ARE HIGHLIGHTED IN YELLOW. WATER FUND REVENUES Operating Revenues Water Sales - Chicago Rates $3,128,946 $3,602,651 $4,138,685 $4,761,981 $4,899,107 Water Sales - Park Ridge Rates $3,851,969 $4,462,799 $4,599,924 $4,737,050 $4,874,175 Water Sales - Fixed Charges $1,383,439 $1,408,896 $1,436,521 $1,458,753 $1,493,093 Late Payment Penalties $118,000 $118,000 $118,000 $118,000 $118,000 Water Meters $15,000 $15,000 $15,000 $15,000 $15,000 Total Operating Revenues $8,497,354 $9,607,346 $10,308,131 $11,090,784 $11,399,374 Non-Operating Revenues Interest Income $6,000 $15,800 $13,000 $11,000 $9,600 Employee Contributions $11,024 $12,700 $14,600 $16,800 $19,300 Miscellaneous $11,000 $11,000 $11,000 $11,000 $11,000 Total Non-Operating Revenues $28,024 $39,500 $38,600 $38,800 $39,900 TOTAL REVENUES $8,525,378 $9,646,846 $10,346,731 $11,129,584 $11,439,274 Page 30 of 39

104 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX J: SCENARIO 2A REVENUE AND EXPENSE PROJECTIONS WATER FUND EXPENSES Operating Expenses Administration $316,492 $327,040 $337,780 $349,520 $363,260 Water Supply and Treatment $4,370,826 $4,985,340 $5,689,680 $6,284,520 $6,470,860 Fire Hydrant Services $55,649 $57,900 $60,300 $63,000 $65,900 Water Main Services $570,470 $596,500 $622,500 $649,800 $679,800 Water Meter Services $185,320 $192,400 $200,300 $208,800 $217,900 Capital Improvements Water Main Construction $815,000 $860,000 $903,000 $950,000 $998,000 Water Storage Tank Painting $0 $225,000 $0 $0 $0 Water Meter Upgrade $875,000 $875,000 $875,000 $875,000 $0 Computer Equipment Replacement $3,800 $3,800 $3,800 $3,800 $3,800 Motor Equipment Replacement $79,800 $82,900 $86,100 $89,500 $93,000 Total Operating Expenses $7,272,357 $8,205,880 $8,778,460 $9,473,940 $8,892,520 Non-Operating Expenses Transfer Out - Debt Service $889,116 $926,350 $884,550 $888,550 $886,550 Transfer Out - Overhead $806,472 $806,500 $806,500 $800,000 $800,000 Transfer Out - IMRF $176,254 $190,000 $205,000 $221,000 $239,000 Total Non-Operating Expenses $1,871,842 $1,922,850 $1,896,050 $1,909,550 $1,925,550 TOTAL EXPENSES $9,144,199 $10,128,730 $10,674,510 $11,383,490 $10,818,070 Page 31 of 39

105 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX J: SCENARIO 2A REVENUE AND EXPENSE PROJECTIONS WATER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $3,465,600 $2,846,779 $2,364,895 $2,037,116 $1,783,210 Revenues $8,525,378 $9,646,846 $10,346,731 $11,129,584 $11,439,274 Expenses $9,144,199 $10,128,730 $10,674,510 $11,383,490 $10,818,070 Year-End Surplus (Deficit) ($618,821) ($481,884) ($327,779) ($253,906) $621,204 Ending Unrestricted Net Assets $2,846,779 $2,364,895 $2,037,116 $1,783,210 $2,404,414 Target Unrestricted Net Assets* $2,094,000 $2,258,000 $2,349,000 $2,467,000 $2,373,000 SEWER FUND REVENUES Operating Revenues Sewer Charges - Usage $1,583,172 $1,645,501 $1,707,831 $1,770,161 $1,844,956 Sewer Charges - Fixed $226,611 $235,736 $244,862 $254,747 $265,394 Developer Fees $25,000 $25,000 $25,000 $25,000 $25,000 Total Operating Revenues $1,834,783 $1,906,238 $1,977,693 $2,049,908 $2,135,350 Non-Operating Revenues Grants $225,000 $0 $0 $0 $0 Interest Income $4,000 $6,900 $9,400 $10,500 $10,900 Employee Contributions $5,106 $5,870 $6,750 $7,760 $8,920 Total Non-Operating Revenues $234,106 $12,770 $16,150 $18,260 $19,820 TOTAL REVENUES $2,068,889 $1,919,008 $1,993,843 $2,068,168 $2,155,170 Page 32 of 39

106 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX J: SCENARIO 2A REVENUE AND EXPENSE PROJECTIONS SEWER FUND EXPENSES Operating Expenses Sewer Line and Drainage $610,190 $637,650 $659,650 $683,050 $708,150 Capital Improvements Sewer Lining and Rehabilitation $399,000 $310,000 $310,000 $310,000 $310,000 Lift Station Improvements $30,000 $200,000 $200,000 $200,000 $200,000 Motor Equipment $22,800 $23,600 $24,400 $25,300 $26,200 Total Operating Expenses $1,061,990 $1,171,250 $1,194,050 $1,218,350 $1,244,350 Non-Operating Expenses Transfer Out - Debt Service $130,380 $156,450 $451,450 $455,550 $454,450 Transfer Out - Overhead $154,060 $157,100 $160,200 $163,400 $166,700 Transfer Out - IMRF $72,780 $78,600 $84,900 $91,700 $99,000 Phase II Relief Sewer Debt Service $0 $0 $0 $92,062 $591,830 Total Non-Operating Expenses $357,216 $392,150 $696,550 $802,712 $1,311,980 TOTAL EXPENSES $1,419,208 $1,563,400 $1,890,600 $2,021,062 $2,556,330 Page 33 of 39

107 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX J: SCENARIO 2A REVENUE AND EXPENSE PROJECTIONS SEWER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $1,046,330 $1,696,011 $2,051,619 $2,154,862 $2,201,968 Revenues $2,068,889 $1,919,008 $1,993,843 $2,068,168 $2,155,170 Expenses $1,419,208 $1,563,400 $1,890,600 $2,021,062 $2,556,330 Year-End Surplus (Deficit) $649,681 $355,608 $103,243 $47,106 ($401,160) Ending Unrestricted Net Assets $1,696,011 $2,051,619 $2,154,862 $2,201,968 $1,800,807 Target Unrestricted Net Assets* $537,000 $561,000 $615,000 $637,000 $726,000 NOTES: 1. Cash flow analysis includes all revenues, and O&M, debt service, and capital improvement expenses. Depreciation is excluded. 2. The target unrestricted net assets for the Water Fund equals 2 months of expenses plus $570, The target unrestricted net assets for the Sewer Fund equals 2 months of expenses plus $300,000. Page 34 of 39

108 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX K: SCENARIO 2B REVENUE AND EXPENSE PROJECTIONS CONTROLLING ASSUMPTIONS: Annual increases to Chicago and Park Ridge rates. Rate restructuring to include fixed charges and uniform usage rates. Routine operations and maintenance expenses increase each year due to inflation. Capital costs include the City's baseline CIP + water meter upgrade (bonded) and Phase 2 Relief Sewer Project (bonded). NOTE: SEE APPENDIX B FOR DETAILED LINE ITEM O&M EXPENSES, WHICH ARE IDENTICAL IN EACH SCENARIO. VARIATIONS IN CAPITAL OR DEBT SERVICE COSTS FROM THE BASELINE SCENARIO ARE HIGHLIGHTED IN YELLOW. WATER FUND REVENUES Operating Revenues Water Sales - Chicago Rates $3,128,946 $3,602,651 $4,138,685 $4,761,981 $4,899,107 Water Sales - Park Ridge Rates $3,552,787 $3,802,106 $4,063,890 $4,313,208 $4,574,993 Water Sales - Fixed Charges $1,383,439 $1,408,896 $1,436,521 $1,458,753 $1,493,093 Late Payment Penalties $118,000 $118,000 $118,000 $118,000 $118,000 Water Meters $15,000 $15,000 $15,000 $15,000 $15,000 Total Operating Revenues $8,198,172 $8,946,652 $9,772,097 $10,666,942 $11,100,192 Non-Operating Revenues Interest Income $6,000 $17,200 $16,200 $14,400 $13,000 Employee Contributions $11,024 $12,700 $14,600 $16,800 $19,300 Miscellaneous $11,000 $11,000 $11,000 $11,000 $11,000 Total Non-Operating Revenues $28,024 $40,900 $41,800 $42,200 $43,300 TOTAL REVENUES $8,226,196 $8,987,552 $9,813,897 $10,709,142 $11,143,492 Page 35 of 39

109 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX K: SCENARIO 2B REVENUE AND EXPENSE PROJECTIONS WATER FUND EXPENSES Operating Expenses Administration $316,492 $327,040 $337,780 $349,520 $363,260 Water Supply and Treatment $4,370,826 $4,985,340 $5,689,680 $6,284,520 $6,470,860 Fire Hydrant Services $55,649 $57,900 $60,300 $63,000 $65,900 Water Main Services $570,470 $596,500 $622,500 $649,800 $679,800 Water Meter Services $185,320 $192,400 $200,300 $208,800 $217,900 Capital Improvements Water Main Construction $815,000 $860,000 $903,000 $950,000 $998,000 Water Storage Tank Painting $0 $225,000 $0 $0 $0 Computer Equipment Replacement $3,800 $3,800 $3,800 $3,800 $3,800 Motor Equipment Replacement $79,800 $82,900 $86,100 $89,500 $93,000 Total Operating Expenses $6,397,357 $7,330,880 $7,903,460 $8,598,940 $8,892,520 Non-Operating Expenses Transfer Out - Debt Service $889,116 $926,350 $884,550 $888,550 $886,550 Transfer Out - Overhead $806,472 $806,500 $806,500 $800,000 $800,000 Transfer Out - IMRF $176,254 $190,000 $205,000 $221,000 $239,000 Water Meter Debt Service $0 $85,200 $390,200 $392,150 $390,950 Total Non-Operating Expenses $1,871,842 $2,008,050 $2,286,250 $2,301,700 $2,316,500 TOTAL EXPENSES $8,269,199 $9,338,930 $10,189,710 $10,900,640 $11,209,020 Page 36 of 39

110 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX K: SCENARIO 2B REVENUE AND EXPENSE PROJECTIONS WATER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $3,465,600 $3,422,597 $3,071,219 $2,695,406 $2,503,908 Revenues $8,226,196 $8,987,552 $9,813,897 $10,709,142 $11,143,492 Expenses $8,269,199 $9,338,930 $10,189,710 $10,900,640 $11,209,020 Year-End Surplus (Deficit) ($43,003) ($351,378) ($375,813) ($191,498) ($65,528) Ending Unrestricted Net Assets $3,422,597 $3,071,219 $2,695,406 $2,503,908 $2,438,380 Target Unrestricted Net Assets* $1,948,000 $2,126,000 $2,268,000 $2,387,000 $2,438,000 SEWER FUND REVENUES Operating Revenues Sewer Charges - Usage $1,583,172 $1,645,501 $1,707,831 $1,770,161 $1,844,956 Sewer Charges - Fixed $226,611 $235,736 $244,862 $254,747 $265,394 Developer Fees $25,000 $25,000 $25,000 $25,000 $25,000 Total Operating Revenues $1,834,783 $1,906,238 $1,977,693 $2,049,908 $2,135,350 Non-Operating Revenues Grants $225,000 $0 $0 $0 $0 Interest Income $4,000 $6,900 $9,400 $10,500 $10,900 Employee Contributions $5,106 $5,870 $6,750 $7,760 $8,920 Total Non-Operating Revenues $234,106 $12,770 $16,150 $18,260 $19,820 TOTAL REVENUES $2,068,889 $1,919,008 $1,993,843 $2,068,168 $2,155,170 Page 37 of 39

111 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX K: SCENARIO 2B REVENUE AND EXPENSE PROJECTIONS SEWER FUND EXPENSES Operating Expenses Sewer Line and Drainage $610,190 $637,650 $659,650 $683,050 $708,150 Capital Improvements Sewer Lining and Rehabilitation $399,000 $310,000 $310,000 $310,000 $310,000 Lift Station Improvements $30,000 $200,000 $200,000 $200,000 $200,000 Motor Equipment $22,800 $23,600 $24,400 $25,300 $26,200 Total Operating Expenses $1,061,990 $1,171,250 $1,194,050 $1,218,350 $1,244,350 Non-Operating Expenses Transfer Out - Debt Service $130,380 $156,450 $451,450 $455,550 $454,450 Transfer Out - Overhead $154,060 $157,100 $160,200 $163,400 $166,700 Transfer Out - IMRF $72,780 $78,600 $84,900 $91,700 $99,000 Phase II Relief Sewer Debt Service $0 $0 $0 $92,062 $591,830 Total Non-Operating Expenses $357,216 $392,150 $696,550 $802,712 $1,311,980 TOTAL EXPENSES $1,419,208 $1,563,400 $1,890,600 $2,021,062 $2,556,330 Page 38 of 39

112 CITY OF PARK RIDGE, ILLINOIS WATER AND SEWER RATE STUDY APPENDIX K: SCENARIO 2B REVENUE AND EXPENSE PROJECTIONS SEWER FUND YEAR-END SUMMARY Starting Unrestricted Net Assets $1,046,330 $1,696,011 $2,051,619 $2,154,862 $2,201,968 Revenues $2,068,889 $1,919,008 $1,993,843 $2,068,168 $2,155,170 Expenses $1,419,208 $1,563,400 $1,890,600 $2,021,062 $2,556,330 Year-End Surplus (Deficit) $649,681 $355,608 $103,243 $47,106 ($401,160) Ending Unrestricted Net Assets $1,696,011 $2,051,619 $2,154,862 $2,201,968 $1,800,807 Target Unrestricted Net Assets* $537,000 $561,000 $615,000 $637,000 $726,000 NOTES: 1. Cash flow analysis includes all revenues, and O&M, debt service, and capital improvement expenses. Depreciation is excluded. 2. The target unrestricted net assets for the Water Fund equals 2 months of expenses plus $570, The target unrestricted net assets for the Sewer Fund equals 2 months of expenses plus $300,000. Page 39 of 39