Study by HDR Engineering on the impact of a new Clean Water Facility on future utility rates.

1. Sept. 30, 2015
Sewer Rate Study
Update
Presented by:
Shawn Koorn
Associate Vice President
HDR Engineering, Inc.
City of Oak Harbor

2. 2
Overview of the Presentation
• Review of the previous
sewer rate analyses
• Summary of the updated
analysis
• Overview of the rate
scenarios
• Questions and answers

3. 3
Prior Sewer Rate Analyses
3
• Established initial projections during the 2009 rate
study
– Used conservative borrowing assumptions and
estimated capital costs
• Updated the analysis for financing scenarios in
2012 for the feasibility study
– Updated O&M and other capital assumptions
– Updated revenue projections
– Various funding sources (loans/bonds/grants)
– Based on project cost estimates at that time
• Updated the analyses for planned long-term debt
issuance

4. 4
Overview of the Updated Sewer Analysis
4
• Analysis reviews the 2016 – 2021 time period
• Updated revenue projections based on current
customer information and adopted rates
– Rates were adopted through 2016 (last adjustment in
December 2015)
• Updated O&M expenses
– Based on current budgeted O&M
– Estimated O&M for the new WWTF
– Annual inflation assumed at 3.5%
• Updated the capital improvement plan
– Items other than the WWTF
• Updated fund balances (reserves)

5. 5
WWTF Capital Cost Scenarios
5
• Based on the current financing scenarios
– 2015 and 2016 SRF loans
– 2015/16 revenue bond and close-out bond
– Grants
– Use of reserves (capital and SDCs)
• Developed three rate scenarios
– Low project cost ($90 million)
– Mid project cost ($98 million)
– High project cost ($110 million)
• Each scenario results in different long-term debt
amounts and annual debt service payments
• Developed rate adjustments to meet DSC ratios
and minimum target reserve funds

6. 6
Capital Plan Summary
• Project costs are based on preliminary estimates
– May not reflect actual year of total costs
• 2018 through 2021 reflects typical annual capital
– Approximately $500,000 per year on average
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
2015 2016 2017 2018 2019 2020 2021
Low Mid High

7. 7
• Key difference is the annual debt service payments
– Ability to maintain required DSC ratios
• All three options maintain target minimum reserve
levels
• Rate adjustments would be implemented the December
prior to the year effective
• Reserves are utilized in several years (2018 & 2019) to
fund annual deficiencies (both O&M and capital needs)
Summary of the Proposed
Sewer Rate Transition Plans
7
2017 2018 2019 2020 2021
Low Estimate 15.0% 12.0% 10.0% 10.0% 8.0%
Mid Estimate 15.0% 15.0% 15.0% 10.0% 9.5%
High Estimate 20.0% 15.0% 15.0% 15.0% 15.0%

8. 8
Residential Customer Bill Impacts
• Developed approximate monthly residential
customer bill impacts based the scenarios
• 2015 is the current residential customer rate
• 2016 is the adopted residential customer rate
– 12.5% adjustment effective Jan 1, 2016
8
2015 2016 2017 2018 2019 2020 2021
Low Estimate $57.50 $64.75 $74.46 $83.40 $91.74 $100.91 $108.98
Mid Estimate $57.50 $64.75 $74.46 $85.63 $98.48 $108.32 $118.62
High Estimate $57.50 $64.75 $77.70 $89.36 $102.76 $118.17 $135.90

9. 9
Residential Customer Bill Impacts
(cont’d)
9
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
$110.00
$120.00
$130.00
$140.00
2015 2016 2017 2018 2019 2020 2021
Low Mid High

10. 10
Preliminary Debt Service Coverage Ratios
• Combined utility (water and sewer) calculation
– Actual calculation will exclude utility taxes
• Minimum of 1.0
• Target of 1.25 and above
0
0.5
1
1.5
2
2.5
3
3.5
2016 2017 2018 2019 2020 2021
Low Mid High

11. 11
Summary of the Reserve Funds
• Target minimums vary based on total revenue
– Operating fund is 25% of total revenues, including
additional revenues from rate adjustments
– Target is approximately $2.2 million in 2015
increasing to $3.6 million in 2021
• Reserve funds exclude the SDC fund
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
2015 2016 2017 2018 2019 2020 2021
Low Mid High Target

12. 12
Summary of the Updated Analysis
• Annual rate adjustments vary depending on final
project cost and total borrowing
• Rates provide required DSC ratios and meet
minimum target reserve funds
• Additional low cost borrowing (low interest loans)
and grants will reduce overall rate impacts
• Through 2018 rate impacts are similar to what was
provided during the feasibility study
– Final three years (2019 – 2021) were not included in
the prior analyses

13. 13