Implementing the Rate Study
Parker Water and Sanitation District requires a comprehensive financial planning, cost-of-service and tap fee analysis. Technically these tasks are straight-forward and commonly conducted for utilities of all sizes. But when combined with the need to transition from a groundwater to a surface water dependent system, this study takes on a complex and important set of attributes. Three key aspects of the project will make it successful:
- Transparency. The study must be conducted in a manner that integrates the public in a meaningful way.
- Technical Acumen. To be successful, this study must be done by experts who know how to develop the financial analysis that will lead to solid cost-of-service and debt service recommendations.
- Schedule. This project must proceed with urgency. The District faces significant financial challenges not only in planning for its future but also in managing current operations that have seen significant increases in outside costs such as chemicals and energy. The way forward must be identified quickly so that appropriate actions can be taken.
A Financial Plan
The rate study focuses significant attention on the development of a financial plan. A long-term financial plan allows the District to meet capital funding requirements and balance the use of debt, rates, tap fees, reserves and mill levies to minimize the impacts on customers. The financial plan will project detailed revenue requirements for a 20-year period.
This plan will provide a road map to determine rates and when they should be applied. It consolidates the effects of various policies and translates them into rate increases that are required. For example, the long-term financial plan can evaluate the impact of funding a portion or all of the Reuter-Hess debt service through property taxes, as one option.
Cost-of-Service Analysis
Once the revenue requirements are determined, the consultant will develop alternative rate scenarios that meet the District’s needs. The first element is allocating the revenue requirements from the financial plan to the District’s customer types. The second element is designing rates that recover the cost of serving each customer class.
With these steps completed, the consultant will prepare a rate impact model that will allow the District and the community working group to compare proposed alternative rate designs.
Tap Fee Analysis
The study will analyze tap fees (connection fees), which the District relies on to fund much of its growth-related costs. It will examine whether current tap fees will be sufficient to cover the cost of future growth-related projects. The community working group will review tap fee findings.
Reports and Presentations
The consultant will prepare a draft and final report documenting the results of the financial plans, cost-of-service analyses, rate designs and tap fees. The report will include a complete documentation of the public process and meetings with the community working group.