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SummaryMemorandum <br />Re: Sewer Revenue Adequacy <br />October 21, 2021 <br />REVENUE ADEQUACY SCENARIOS <br />Revenue adequacy is evaluated to determine the short-term and long-term adequacy of the <br />existing rate schedule, and to propose potential rate adjustments to ensure that the existing <br />s financial position <br />in the future. <br />Figure 4depicts the Baseline revenue adequacy scenario, in which no changes to the existing <br />rates are madeand revenue requirements are as presented in Table 7. Figure 5 shows the <br />projected cash balances under the Baseline Scenario. Under the Baseline Scenario, the utility <br />would experience a revenue deficiency each year of the study period. Because the Sewer Utility <br />currently has strong reserve funds, cash balances would remain at or exceeding target levels <br />through the study period. However, full cost recovery would not be achieved. It is important to <br />note that the existing CIP may not be fully developed, and that additional capital renewal needs <br />may become apparent within the study period, which could quickly deplete existing reserve <br />funds. The Baseline Revenue Adequacy approach, which does not involve changes to the <br />existing rates, is not recommended. <br />Total Revenues vs. Total Expenses <br />υЎͲЉЉЉͲЉЉЉ <br />υЍͲЉЉЉͲЉЉЉ <br />υЌͲЉЉЉͲЉЉЉ <br />υЋͲЉЉЉͲЉЉЉ <br />υЊͲЉЉЉͲЉЉЉ <br />υЉ <br />ЋЉЋЊЋЉЋЋЋЉЋЌЋЉЋЍЋЉЋЎЋЉЋЏ <br />ΏυЊͲЉЉЉͲЉЉЉ <br />ƚƷğƌ wĻǝĻƓǒĻƭƚƷğƌ wĻǝĻƓǒĻ wĻƨǒźƩĻƒĻƓƷƭtƩƚƆĻĭƷĻķ wĻǝĻƓǒĻ {ǒƩƦƌǒƭΉΛ5ĻŅźĭźĻƓĭǤΜ <br />Figure 4: Baseline Revenue Adequacy Projections <br />Although the revenue requirements associated with Figures 4and 5are based on contributions <br />to R&R reserves listed in Table 7, actual contributions to R&R reserves for the Baseline scenario <br />are less due to the revenue deficiency (Table 8). <br />Project Number Page 9of 20 <br />Think Big. Go Beyond.www.ae2s.com <br />