08.01 - Water/Sewer Rate Study - Laserfiche WebLink

Home Browse Search

Pequot Lakes,Minnesota Rate Analysis Proposal,May 26,2006,Page 2 of 4 Based upon the investments detailed in this proposal,my services would provide you several benefits or returns,most of which are difficult to reduce to dollars or percentage gains. These un-measurable benefits include: 1. Gaining a high level of confidence that your rates and finances will adequately fund the water and sewer systems for a substantial period of time, 2. Knowing that being adequately funded you will more easily be able to satisfy your customers'service and public health desires and maintain compliance with your permit to dispense water,your discharge permit and other requirements from the regulatory agencies, 3. Knowing that you will give potential funders a high level of confidence to make grant and loan decisions in your favor,and 4. If state and federal agencies do not give you grant funds,you will have a high level of confidence that you will be able to pay the additional debt service required to construct and operate new system components with borrowed funds. My final rate analyses will include calculations of returns on investment based upon the rates and estimated additional net rate revenues generated by the proposed rates.Therefore,not having the final product available yet,the following estimates are only illustrative.However, they should be useful in your decision-making process. Your water and sewer systems have a total annual budget of approximately$400,000.It is my understanding that these systems are roughly breaking even on an operating cost basis. However,the systems may not be fully covering the needed costs for equipment replacement and the city is facing substantial capital improvements in the next io years.If you have me determine the rates necessary to pay all expenses,including future estimated debt service,plus build reasonable reserves and get your replacement schedules on track,your returns on investment will likely be whimsically high.The fast year the return on investment will likely be over 1,000 percent and rise by roughly that amount each year for two to three years.If the rate analyses playa significant role in helping you acquire capital improvement financing,the returns will go markedly higher. Work Coordination I would like for you to designate one contact person to be the primary contact for me to correspond and speak with.That would facilitate good communication and coordination.I will communicate primarily through that person but there will be times when I will need to communicate with others,as well.Certainly,near the end of the project I will discuss the analyses and present my findings to everyone you think needs to be involved.In all likelihood you,your council members,I and others you think it would be useful to involve would participate in a conference call or several calls to go over the analysis results and plan next steps. Action Item:Whoever your primary contact person will be,I need their name, e-mail address and other contact information. If I am to make an on-site visit to make a presentation of my findings at a meeting and you desire handouts,you will arrange for production of those materials.I will provide master copies of my materials to you for reproduction.I also prefer that you provide a data projector for that presentation. For these analyses I will gather volume usage,rates,costs,revenues,replacement schedules, capital improvement planning information and other data concerning your system.I will analyze this information,coordinating periodically with your contact person.Jointly,we will arrive at a set of financial goals for your system.I will then devise proposed adjusted rates and give you my recommendations for activities you should complete to achieve those financial goals.