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i <br />Firm Approach to the Rate Analvsis 7 <br />— Develop a five -year forecast of revenues and expenditures for <br />each utility to determine the adequacy of revenues provided by <br />existing rates and SAC/WAC charges <br />— Evaluate the impact of anticipated capital improvement financing <br />' options on rates, fees and charges; including SAC/WAC charges <br />— Develop recommendations for the financing of the anticipated <br />capital improvements based on the above impact analysis <br />— Identify the overall change in' revenue required to provide for <br />adequate funding for major capital improvement programs, to <br />meet all recurring annual operating and capital expenditures, to <br />cover all debt service requirements, to comply with any existing <br />revenue bond covenants, and to maintain sufficient cash balances <br />and capital reserves (as defined by the City) for each utility The <br />projections will be made using an income statement approach <br />and will include a yearly cash flow analysis <br />— Develop preliminary rate schedules for each utility that provides <br />` revenue recovery at levels necessary to support the utility's <br />operation as defined above. Rates developed will include user <br />fees, SAC/WAC fees, and other fees and charges that provide <br />sources of revenue to the utility <br />— Perform a sensitivity analysis to illustrate the impacts of adverse <br />assumption changes (e.g. future growth, operating costs) <br />➢ Evaluate each utility's current service fees and charges to determine <br />whether there are additional service fees and charges that are <br />i currently not assessed and that may be applicable to the utility's <br />provision of services and, conversely, whether there are fees and <br />charges that can be reduced or eliminated <br />' z Project the fiscal impact of proposed changes to fees and charges on <br />each utility's current rates, fees and charges <br />— Develop recommendations for any changes to fees and charges, <br />together with the impact on current rates and charges <br />— Make recommendations for changes in existing ordinances, <br />resolutions and policies necessary to implement any new fees <br />and charges recommended <br />If we make a recommendation to increase rates or charges, <br />Springsted will: <br />— Evaluate and compare the proposed fee structure with the <br />utility's current fee structure with the fee structure of five other <br />similarly -sized local government utility operations in the area <br />— Prepare sample bills for customers from representative customer <br />classes, comparing existing rates and charges to proposed rates <br />` and charges <br />— Review and make recommendations for changes needed in <br />existing ordinances, resolutions and policies <br />Springsted <br />City of Pequot Lakes, Minnesota. Proposal to Provide a Utility Rate Analysis — Water and Sewer <br />