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APPROPRIATION COMMITTEE-2019 ATM
<br /> annual debt service costs of the Water Enterprise Fund,both in dollar and percentage terms, as illustrated
<br /> below. In effect, one is artificially lowering the rates today at the expense of higher rates in the future.'I
<br /> Growth in Debt Service for the Water Enterprise Fund
<br /> Fiscal Water Debt Total BudDebt Service
<br /> Year Service get Ratio
<br /> 2006 $213,150 $6,237,235 3.4%
<br /> 2007 $358,301 $6,514,502 5.5%
<br /> 2008 $425,565 $6,469,388 6.6%
<br /> 2009 $757,247 $7,190,800 10.5%
<br /> 2010 $1,074,551 $7,241,304 14.8%
<br /> 2011 $1,137,075 $7,619,919 14.9%
<br /> 2012 $1,258,968 $8,039,413 15.7%
<br /> 2013 $1,299,091 $8,124,846 16.0%
<br /> 2014 $1,260,655 $8,707,219 14.5%
<br /> 2015 $1,379,622 $9,270,880 14.9%
<br /> 2016 $1,307,938 $9,895,640 13.2%
<br /> 2017 $1,374,696 $10,663,218 12.9%
<br /> 2018 $1,470,783 $10,722,659 13.7%
<br /> 2019 $1,476,402 $10,800,973 13.7%
<br /> 2020 $1,277,412 $10,883,355 11.7%
<br /> Regardless of the debt funding options, the new policy recommendation from the Wright-Pierce study as-
<br /> sumes a significant and lasting increase in the annual program costs, and this must eventually be reflected
<br /> in water rates. A sustainable funding strategy would rely on cash capital, funded directly by rate revenue,
<br /> for the most predictable components of the program.
<br /> Given the ongoing and consistent nature of the water system's upkeep and improvement program, an alter-
<br /> native to borrowing would be to return to at least a partial cash capital program and raise part or all of the
<br /> funds needed for each year's capital program needs in the rates,while continuing to include excess retained
<br /> earnings in the mix if, as and when they are available.
<br /> Making such a changeover in a single year would result in a significant one-time rate boost, so a gradual
<br /> transition from debt-based financing to cash capital financing would be preferable. However,if a switch to
<br /> cash capital could be accommodated on a one-time basis in the FY2020 rates to be set in the fall, which
<br /> seems feasible this year with a combined water enterprise budget increase of only 1.37%, funding the pro-
<br /> gram thereafter on a level basis with cash capital would generate no further pressure on rates. Indeed, as
<br /> older debt is retired, annual debt service costs would drop, mitigating potential future rate pressure.
<br /> The Committee recommends approval of this request(9-0).
<br /> "In the last several years,judicious use of some of the fund's accumulated retained earnings as cash capital has helped
<br /> to defray the impact of these growing debt service costs and maintain long-term rate stability. For a more complete
<br /> discussion of the status and use of water and sewer enterprise fund retained earnings, see the discussion of the
<br /> enterprise funds' operating budget under Article 12.
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