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stated, We expect that in 2017 what cost us $10,800,000 will cost us $478,000 more. Our first
<br />planning number for the financial plan is that we need to have enough money to take care of the
<br />day -to -day operating costs, and the working number is just under $11,300,000. He explained that
<br />after you've covered your day -to -day operating costs, you have to have enough money to pay off
<br />your bonds. You also need to have enough money to reinvest in the utility to replace critical
<br />equipment. He stated, The amount that you're going to pay on your bonds is fixed, it's not going
<br />to change from year to year. We know that that is going to run about $2,000,000. We know that,
<br />based upon the analysis, on a pay -as- you -go basis you've got about $30,000,000 worth of
<br />investments that are needed. With that, if we plug those numbers in, we come up with a gap. To
<br />get rid of the gap, you're going to reevaluate spending and see what you can do to control costs.
<br />Once you've exhausted that solution, your only other option is to raise revenue, which is a rate
<br />increase. Mr. Julien directed the members of the Committee and Council to Slide Six (6) of the
<br />Powerpoint. He stated, We are talking about an adjustment of forty -three percent (43 %), which
<br />would take the average residential bill up about $5.70. He then explained how that rate increase
<br />was calculated. He stated, A forty -three percent (43 %) increase is going to generate an additional
<br />$4,900,000. There are some miscellaneous revenues that bring $3,000,000 into the coffers.
<br />Committeemember Dr. Varner asked, What were they?
<br />Mr. Julien responded, The lion's share of that is a contribution for a management fee from the
<br />Sewage Works, to recognize that in the $11,300,000 of day -to -day operating costs are the
<br />expenses for the billing, meter - reading, collection —the business side of the business. It's all
<br />reflected in the $11,300,000 budget number, and the Sewage Works then pays a management fee
<br />so that they have a fair sharing of those costs. So, the majority of that $3,000,000 comes from
<br />that. You do have other miscellaneous sources— interest income, connection fees, things of that
<br />nature —that round out that $3,000,000.
<br />Committeemember Dr. Varner asked, Is that $3,000,000 in any shape or form related to billing
<br />dollars? If you have a bill of $11,400,000, how is that fee determined?
<br />Mr. Julien responded, It's based upon a reasonable splitting -out of the actual business
<br />department's expenses.
<br />A discussion ensued between Committeemember Dr. Varner, Mr. Julien, and Mr. Greek,
<br />breaking down the numbers even further.
<br />Committeemember Dr. Varner stated, It just seems to me that if you keep using a formula which
<br />is driven by something which is continually getting larger —and I'm not talking about the cost of
<br />water, I'm talking about the net assets or the billings —it's like compound interest. You're
<br />compounding the return of everything rather than letting it relate to cost. I think if this is how it's
<br />driven, maybe there is a better way. I don't know what that is, but these expenses are getting
<br />pretty large collectively for everybody.
<br />Mr. Julien responded that he felt the points raised were good ones, and that he wanted to come
<br />back to them.
<br />on
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