Financial Projections

2015 Update
Scenario #3
Actual Prelim. Budget
Description 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Proposed Rate Increase (%) 0.00% 0.00% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Operating Revenues 426,867 584,901 648,341 656,454 664,675 673,006 681,447 689,998 698,595 707,303 716,122 725,055 734,101 743,261 752,535 761,925 771,431 781,053 790,793 800,650 810,691 820,851 831,131
Operating and Maintenance Expense 619,357 677,325 748,900 771,367 794,508 818,343 842,894 868,180 894,226 921,053 948,684 977,145 1,006,459 1,036,653 1,067,752 1,099,785 1,132,778 1,166,762 1,201,765 1,237,818 1,274,952 1,313,201 1,352,597
Net Before Debt Service (192,490) (92,424) (100,559) (114,913) (129,833) (145,337) (161,446) (178,182) (195,631) (213,750) (232,562) (252,089) (272,358) (293,392) (315,217) (337,860) (361,347) (385,708) (410,972) (437,168) (464,261) (492,349) (521,466)
Existing Debt Service (P&I) 644,085 671,604 671,478 672,413 670,906 671,499 671,998 670,647 641,852 642,405 641,975 642,183 642,410 233,514 233,736 233,636 106,206 104,583 104,411 103,963 104,529 103,971 0
Projected Debt Service (P&I) 0 0 0 0 0 0 0 0 (73,975) (73,975) (73,975) (73,975) (73,975) (73,975) (135,620) (135,620) (135,620) (135,620) (61,645) (61,645) (123,291)
Total Debt Service 644,085 671,604 671,478 672,413 670,906 671,499 671,998 670,647 641,852 642,405 568,000 568,208 568,435 159,539 159,762 159,662 (29,415) (31,038) (31,209) (31,658) 42,883 42,326 (123,291)
Net Revenues (836,575) (764,028) (772,037) (787,326) (800,739) (816,836) (833,444) (848,829) (837,483) (856,155) (800,562) (820,298) (840,793) (452,931) (474,979) (497,522) (331,933) (354,671) (379,763) (405,510) (507,144) (534,675) (398,175)
Interest Income 1,276 2,451 12,831 17,313 15,320 15,634 15,957 16,289 16,632 17,015 17,360 17,209 17,077 16,958 16,852 16,876 13,990 13,249 14,116 15,040 16,006 17,945 15,225
Property Taxes 384,889 356,431 379,600 394,784 410,575 426,998 444,078 461,841 480,315 499,528 519,509 540,289 561,901 584,377 607,752 632,062 657,344 683,638 710,984 739,423 769,000 799,760 831,750
Other Non Operating Revenues/(Expenses) 606,713 483,580 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 0 0 0 0 0 0 0 0 0
Net Annual Cash Flow 156,303 78,434 20,395 24,770 25,156 25,796 26,590 29,301 59,464 60,388 136,306 137,200 138,185 548,403 149,625 151,416 339,401 342,216 345,337 348,953 277,861 283,030 448,800
Capital Projects (32,941) 0 0 (530,450) 0 0 0 0 0 (633,385) 0 0 0 0 0 (734,267) 0 0 0 0 0 (876,753) 0
Bond Proceeds 0 0 0 0 0 0 0 0 0 600,000 0 0 0 0 0 500,000 0 0 0 0 0 500,000 0
Net Cash Flow after Capital Projects 123,362 78,434 20,395 (505,680) 25,156 25,796 26,590 29,301 59,464 27,003 136,306 137,200 138,185 548,403 149,625 (82,851) 339,401 342,216 345,337 348,953 277,861 (93,723) 448,800
Ending Cash Balance 1,632,427 1,710,861 1,731,256 1,225,576 1,250,732 1,276,528 1,303,119 1,330,539 1,361,207 1,388,763 1,376,691 1,366,149 1,356,612 1,348,170 1,350,069 1,119,169 1,059,899 1,129,251 1,203,177 1,280,441 1,435,577 1,218,005 1,316,253
Targeted Working Capital 838,711 874,760 918,648 936,020 955,766 975,898 996,072 1,012,936 1,002,959 1,096,347 1,115,163 1,129,393 1,150,050 1,171,147 783,697 801,713 881,855 773,479 791,502 811,529 758,122 780,246 863,589
Over/(Under) Target Working Capital 793,717 836,102 812,608 289,556 294,966 300,631 307,047 317,602 358,248 292,416 261,528 236,756 206,562 177,023 566,372 317,455 178,043 355,772 411,674 468,912 677,456 437,760 452,663

Garrison, Kathio, West Mille Lacs Lake Sanitary Sewer District
Utility Rate Study
Base Model
Sewer Fund
Prelim. Budget
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
1 Rates Inflation 0.00% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
2 Revenue growth assumption – non-usage 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
3 Investment income yield 0.50% 0.75% 1.00% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
4 Expense growth – general and administrative 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
5 Expense growth – contractual 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
6 Expense growth – non personnel 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
10 Beginning net assets 10,266,315 10,087,016 11,676,325 11,323,609 11,075,443 10,859,883 10,640,923 10,412,134 10,175,319 9,930,163 9,675,867 9,410,636 9,133,721 8,844,240 8,541,180
11
12 Operating Revenues
14 Sewer charges 521,601 495,535 426,296 456,326 511,592 517,995 524,485 531,064 537,730 544,485 551,262 558,128 565,083 572,128 579,262
15 Miscellaneous Revenues 25,404 3,490 571 61 62 63 64 65 66 67 68 69 70 71 72
16 SPC Charge 128,514 136,688 138,396 140,126 141,878 143,651 145,447 147,265 149,106 150,969 152,857 154,767
17 Total Operating Revenues 547,005 499,025 426,867 584,901 648,341 656,454 664,675 673,006 681,447 689,998 698,595 707,303 716,122 725,055 734,101
18
19 Operating Expenses
20 Wages and Benefits 74,331 78,577 95,427 76,735 95,000 97,850 100,786 103,809 106,923 110,131 113,435 116,838 120,343 123,953 127,672
21 Sewage Treatment Fees 507,405 206,826 258,104 344,933 350,000 360,500 371,315 382,454 393,928 405,746 417,918 430,456 443,370 456,671 470,371
22 Repairs and Maintenance 135,196 169,191 171,733 188,231 209,000 215,270 221,728 228,380 235,231 242,288 249,557 257,044 264,755 272,698 280,879
23 Professional Fees 52,663 48,923 65,111 36,856 65,000 66,950 68,959 71,027 73,158 75,353 77,613 79,942 82,340 84,810 87,355
24 Printing and Publishing 158 0 172 387 500 515 530 546 563 580 597 615 633 652 672
25 Rent 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
26 Postage 457 907 841 1,614 1,000 1,030 1,061 1,093 1,126 1,159 1,194 1,230 1,267 1,305 1,344
27 Office Expense 4,142 1,200 2,566 3,079 2,700 2,781 2,864 2,950 3,039 3,130 3,224 3,321 3,420 3,523 3,629
28 Other 19,101 21,276 25,403 25,490 25,700 26,471 27,265 28,083 28,926 29,793 30,687 31,608 32,556 33,533 34,539
29 Depreciation 442,848 529,206 529,206 529,206 529,206 545,082 561,435 578,278 595,626 613,495 631,900 650,857 670,382 690,494 711,209
30 Total Operating Expenses 1,236,301 1,056,106 1,148,563 1,206,531 1,278,106 1,316,449 1,355,943 1,396,621 1,438,520 1,481,675 1,526,125 1,571,909 1,619,066 1,667,638 1,717,668
31
32 Net Operations (689,296) (557,081) (721,696) (621,630) (629,765) (659,995) (691,267) (723,615) (757,072) (791,677) (827,531) (864,607) (902,944) (942,583) (983,566)
33 Non operating revenues (expenses)
34 Interest income 3,220 1,774 1,276 2,451 12,831 17,313 15,320 15,634 15,957 16,289 16,632 17,015 17,360 17,209 17,077
35 Taxes 163,654 267,362 384,889 356,431 379,600 394,784 410,575 426,998 444,078 461,841 480,315 499,528 519,509 540,289 561,901
36 Intergovernmental – Market Value Credit 7,084 42 55 0 0 0 0 0 0 0 0 0 0 0
37 Special Assessments 233,225 141,539 126,216 157,154 157,154 157,154 157,154 157,154 157,154 157,154 157,154 157,154 157,154 157,154 157,154
38 Intergovernmental Grants 248,573 109,377 0 0 0 0 0 0 0 0 0 0 0 0 0
39 Interest and Other Expenses (145,759) (145,575) (143,456) (142,572) (135,381) (128,215) (120,570) (112,987) (105,272) (97,903) (91,801) (86,006) (80,559) (75,129) (69,337)
40 Gain on Renegotiated Sewer Contract 0 1,771,871
41 Transfers in / (out) 0 0
42 Total non operating revenue (expenses) 509,997 2,146,390 368,980 373,464 414,204 441,036 462,479 486,799 511,917 537,381 562,300 587,691 613,464 639,523 666,795
43
44 Net increase (decrease) in resources (179,299) 1,589,309 (352,716) (248,166) (215,560) (218,960) (228,789) (236,815) (245,156) (254,296) (265,231) (276,916) (289,480) (303,061) (316,772)
45
46 Ending net assets 10,087,016 11,676,325 11,323,609 11,075,443 10,859,883 10,640,923 10,412,134 10,175,319 9,930,163 9,675,867 9,410,636 9,133,721 8,844,240 8,541,180 8,224,408
47 CIP Funding
48 Purchase of Capital Assets (665,467) 0 (32,941) 0 0 (530,450) 0 0 0 0 0 (633,385) 0 0 0
49 Note Proceeds 198,947 3,774 0 600,000
50 Special Assessment Principal Term Rate 189,033 371,116 480,442 326,426 242,846 242,846 242,846 242,846 242,846 242,846 242,846 242,846 242,846 242,846 242,846
51 Bond P&I – Future 10 4% 0 0 0 0 0 0 (73,975) (73,975) (73,975)
52 Bond P&I – Future 10 4%
53 Bond P&I – Future 10 4% 0
54 Bond Prin – Existing (397,000) (465,782) (466,107) (529,032) (536,097) (544,198) (550,336) (558,512) (566,726) (574,625) (578,846) (555,846) (561,846) (566,846) (572,846)
55
56 Beginning Cash 1,180,337 1,276,624 1,510,747 1,632,427 1,710,861 1,731,256 1,225,576 1,250,732 1,276,528 1,303,119 1,330,539 1,361,207 1,388,763 1,376,691 1,366,149
57 Add net operations (line 28) (689,296) (557,081) (721,696) (621,630) (629,765) (659,995) (691,267) (723,615) (757,072) (791,677) (827,531) (864,607) (902,944) (942,583) (983,566)
58 Add back depreciation (line 25) 442,848 529,206 529,206 529,206 529,206 545,082 561,435 578,278 595,626 613,495 631,900 650,857 670,382 690,494 711,209
59 Add net non operating (line 35) 509,997 2,146,390 368,980 373,464 414,204 441,036 462,479 486,799 511,917 537,381 562,300 587,691 613,464 639,523 666,795
60 Add capital and bond (lines 41-47) (674,487) (90,892) (18,606) (202,606) (293,251) (831,802) (307,490) (315,666) (323,880) (331,779) (336,000) (346,385) (392,975) (397,975) (403,975)
61 Net change in balance sheet items 507,225 (1,793,500) (36,204)
63 Ending Cash 1,276,624 1,510,747 1,632,427 1,710,861 1,731,256 1,225,576 1,250,732 1,276,528 1,303,119 1,330,539 1,361,207 1,388,763 1,376,691 1,366,149 1,356,612
64 Unrestricted Cash 413,867 576,832 738,574 817,008 837,403 331,723 356,879 382,675 409,266 436,686 467,354 494,910 482,838 472,296 462,759
65 Restricted Cash 862,757 933,915 893,853 893,853 893,853 893,853 893,853 893,853 893,853 893,853 893,853 893,853 893,853 893,853 893,853
66
67 Ending net assets 10,087,016 11,676,325 11,323,609 11,075,443 10,859,883 10,640,923 10,412,134 10,175,319 9,930,163 9,675,867 9,410,636 9,133,721 8,844,240 8,541,180 8,224,408
68
69 Target minimum working capital 862,509 729,557 838,711 874,760 918,648 936,020 955,766 975,898 996,072 1,012,936 1,002,959 1,096,347 1,115,163 1,129,393 1,150,050
70 Actual working capital-cash balance 1,276,624 1,510,747 1,632,427 1,710,861 1,731,256 1,225,576 1,250,732 1,276,528 1,303,119 1,330,539 1,361,207 1,388,763 1,376,691 1,366,149 1,356,612
71 Over (Under) target working capital 414,116 781,190 793,717 836,102 812,608 289,556 294,966 300,631 307,047 317,602 358,248 292,416 261,528 236,756 206,562

Garrison, Kathio, West Mille Lacs Sanitary Sewer District
Sanitary Sewer Rate Analysis
Executive Summary
May 14, 2014
Introduction
The Garrision, Kathio, West Mille Lacs Sanitary Sewer District (“The District”) has requested Ehlers to
complete a rate analysis to review sanitary sewer rates for 2014 and beyond.
The District has established rates that are adequate to meet operating expenses. In addition, the operating
and construction funds are financially healthy and have established solid cash reserves. The District
currently has four debt issues currently outstanding for projects with payments through 2047. There are
no major construction fund projects planned within the next five years. The study reflects assumptions
that approximately $500,000 in capital projects would occur every six years. This placeholder amount
allows the District to plan for emergencies and unexpected issues.
In conjunction with current economic conditions, assumptions regarding growth and future development
remain flat. The chart below reflects the number of future connections assumed in the study.
2015 2016 2017 2018 2019
Residential 0 0 0 0 0
Commercial 0 0 0 0 0
Sanitary Sewer Utility
The District owns and maintains the wastewater collection system that flows to the treatment plant owned
and operated by ML Wastewater Management. The District also makes payments to ML Wastewater
Management for capital, operational, and equipment replacement costs. The utility’s financial activity is
accounted for in the Districts Operating and Construction funds. By looking at the funds as a whole, we
can see key features of the utility operations.
Capital and debt costs nearly match operating expenditures for the District. As a rule, utilities are capital
intensive operations. Operating costs account for 52% of the total utility expenses. Capital costs and
principal and interest on outstanding debt issued to finance capital projects accounts for 48%.
2
The District has three bond issues outstanding, along with an agreement to pay capital and operational
expenses to ML Wastewater Management. The District currently has two Public Facilities Authority
(PFA) loans from 2001 and 2007 and a Rural Development loan from 2007. The 2001 loan was to
finance the construction of the wastewater collection system, the 2007 loans extended the collection
system around the west side of Mille Lacs Lake and a portion going towards capital costs the District was
obligated to pay to ML Wastewater Management.
The District employs a combination of utility rates and property taxes to pay for the operational and
capital costs incurred by the District. In addition, special assessments will be levied for at least the next
10 years. New for 2014, the District adopted a SPC charge based on the front footage of properties. This
charge has been met with some push-back from property owners.
As a result of comments from the community, the District has asked for three (3) scenarios to explore
future funding options that include various combinations of sewer rates, property taxes, and the SPC
charge.
Each scenario is “revenue neutral”, meaning all would generate roughly the same amount of revenues
each year. We are recommending the District maintain a minimum cash balance equal to 50% of
operating expenses (excluding depreciation) and 100% of next year’s debt service payment. This is
similar to a General Fund balance policy many local governments use to allow for emergencies.
The cash flow projection for each scenario can be found in Exhibit A.
Proposed Sanitary Sewer Rates
Scenario #1: Increase Sanitary Sewer User Rates Only
Scenario #1 considers only an increase in the sanitary sewer rates, with no increase in property taxes and
not implementing the SPC charge. The current rates would see an annual increase of 8.0% beginning in
2015. This rate increase would generate sufficient revenues to operate the utility, make annual debt
payments, and pay for capital projects.
The table below shows the projected rate increases through 2019.
Existing
2014 2015 2016 2017 2018 2019
Percentage Increase 8.00% 8.00% 8.00% 8.00% 8.00%
Flat Rates
Residential
All Users 56.00 60.48 65.32 70.55 76.19 82.29
Commercial
1.1 – 3.0 EDU’s 57.40 61.99 66.95 72.31 78.09 84.34
3.1 – 6.0 EDU’s 127.40 137.59 148.60 160.49 173.33 187.19
6.1 – 10.0 EDU’s 225.40 243.43 262.91 283.94 306.65 331.19
10.1 – 20.0 EDU’s 421.40 455.11 491.52 530.84 573.31 619.17
20.1 – 30.0 EDU’s 701.40 757.51 818.11 883.56 954.25 1030.59
Over 30 EDU’s 981.40 1059.91 1144.70 1236.28 1335.18 1442.00
Unmetered Properties (per EDU) 56.00 60.48 65.32 70.54 76.19 82.28
Usage Rates
All Usage, per 1,000 gallons 7.50 8.10 8.75 9.45 10.20 11.02
Monthly Wastewater Rates
Proposed Monthly Rates
3
The chart below shows the existing sanitary sewer rate for 2014 and the proposed rates for 2015 and
beyond. Residential properties would see an increase in their flat monthly charge of $4.48 per month.
For commercial properties, we are calculating impacts on a property with a meter that uses an average
of 15,000 gallons per month and has an EDU of 3.70. This type of property would see an increase of
$19.19 increase in their monthly sewer bill. The chart below shows the annual impact of the proposed
rates for 2015 through 2019.
Scenario #2: Increase Sanitary Sewer User Rates and Property Taxes
This scenario looks at only an inflationary annual increase in the sewer rates of 1.25% with the
remaining coming from an annual increase in property taxes of 9.75% each year. The SPC charge
would not be implemented in this scenario.
The result of increasing property taxes and user rates spreads the increase to current and potential
future users of the system. Current users would see increases in both user rates and property taxes,
while potential future users would only see slight increases in their property taxes.
The table below shows the projected sewer rates through 2019.
Impact Analysis on Rate and Tax Payers
Existing Annual
2014 2015 2016 2017 2018 2019 Average
Residential Property (valued at $100k)
Monthly Sewer (Fixed Rate) $ 56.00 $ 60.48 $ 65.32 $ 70.55 $ 76.19 $ 82.29 $ 65.71
Total Annual Utility Bill $ 672.00 $ 725.76 $ 783.84 $ 846.60 $ 914.28 $ 9 87.48 $ 788.50
Annual Property Tax Bill ($100k value) 156.00 154.00 152.00 152.00 152.00 152.00 153.00
Annual SPC Charge (100 Feet Frontage) – – – – – – –
Total Annual Utility & Property Tax Bills $ 828.00 $ 879.76 $ 935.84 $ 998.60 $ 1,066.28 $ 1,139.48 $ 941.50
$ Increase/(Decrease) 51.76 56.08 62.76 67.68 73.20 59.57
% Increase/(Decrease) 6.3% 6.4% 6.7% 6.8% 6.9% 6.6%
Commercial Property (valued at $350k)
Sewer (15,000 gallons/month) $ 239.90 $ 259.09 $ 279.82 $ 302.20 $ 326.38 $ 352.49 $ 281.48
Total Annual Utility Bill $ 2 ,878.80 $ 3,109.08 $ 3,357.84 $ 3,626.40 $ 3,916.56 $ 4,229.88 $ 3 ,377.74
Annual Property Tax Bill ($350k value) 1,354.77 1,351.45 1,347.43 1,347.43 1,347.43 1 ,347.43 1,349.32
Annual SPC Charge (100 Feet Frontage) – – – – – – –
Total Annual Utility & Property Tax Bills $ 4,233.57 $ 4,460.53 $ 4,705.27 $ 4,973.83 $ 5,263.99 $ 5,577.31 $ 4 ,727.06
$ Increase/(Decrease) 226.96 244.74 268.56 290.16 313.32 257.61
% Increase/(Decrease) 5.4% 5.5% 5.7% 5.8% 6.0% 5.6%
Utility Rates
Proposed Monthly Bills
Existing
2014 2015 2016 2017 2018 2019
Percentage Increase 1.25% 1.25% 1.25% 1.25% 1.25%
Flat Rates
Residential
All Users 56.00 56.70 57.41 58.13 58.86 59.60
Commercial
1.1 – 3.0 EDU’s 57.40 58.12 58.84 59.58 60.32 61.08
3.1 – 6.0 EDU’s 127.40 128.99 130.60 132.24 133.89 135.56
6.1 – 10.0 EDU’s 225.40 228.22 231.07 233.96 236.88 239.84
10.1 – 20.0 EDU’s 421.40 426.67 432.00 437.40 442.87 448.40
20.1 – 30.0 EDU’s 701.40 710.17 719.04 728.03 737.13 746.35
Over 30 EDU’s 981.40 993.67 1006.09 1018.66 1031.40 1044.29
Unmetered Properties (per EDU) 56.00 56.70 57.41 58.13 58.85 59.59
Usage Rates
All Usage, per 1,000 gallons 7.50 7.59 7.69 7.78 7.88 7.98
Monthly Wastewater Rates
Proposed Monthly Rates
4
The impact analysis has the same constants as Scenario #1 for Scenario #2. Residential properties
would see an increase in their flat monthly charge of $0.70 per month, along with an annual increase
in property taxes of $13.00 for 2015. The average commercial would see an increase in sewer rates of
$3.00 per month and an annual increase in property taxes of $128.45 in 2015.
Scenario #3: Increase Sanitary Sewer User Rates and Property Taxes; Implement SPC Charge
This scenario incorporates all three revenue options available to The District. The SPC charge would be
implemented at the previously approved rate of $3/year/foot. (2014 would be at 50%, starting mid-year.
Full implementation would be in 2015.) An annual increase in sewer rates would remain at 1.25%, as
presented in Scenario #2. Property taxes would have an annual increase of 4.0%.
Below are the projected sewer utility rate increases through 2019.
The impact analysis has the same constants as Scenario #1 for Scenario #3. Residential properties
would see an increase in their flat monthly charge of $0.70 per month, along with an annual increase
in property taxes of $4.00 for 2015. The average commercial would see an increase in sewer rates of
Impact Analysis on Rate and Tax Payers
Existing Annual
2014 2015 2016 2017 2018 2019 Average
Residential Property (valued at $100k)
Monthly Sewer (Fixed Rate) $ 56.00 $ 56.70 $ 57.41 $ 58.13 $ 58.86 $ 59.60 $ 57.42
Total Annual Utility Bill $ 672.00 $ 680.40 $ 688.92 $ 697.56 $ 706.32 $ 7 15.20 $ 689.04
Annual Property Tax Bill ($100k value) 156.00 169.00 183.00 201.00 221.00 242.00 195.33
Annual SPC Charge (100 Feet Frontage) – – – – – – –
Total Annual Utility & Property Tax Bills $ 828.00 $ 849.40 $ 871.92 $ 898.56 $ 927.32 $ 9 57.20 $ 884.37
$ Increase/(Decrease) 21.40 22.52 26.64 28.76 29.88 24.83
% Increase/(Decrease) 2.6% 2.7% 3.1% 3.2% 3.2% 2.9%
Commercial Property (valued at $350k)
Sewer (15,000 gallons/month) $ 239.90 $ 242.90 $ 245.93 $ 249.01 $ 252.12 $ 255.27 $ 245.97
Total Annual Utility Bill $ 2 ,878.80 $ 2,914.80 $ 2,951.16 $ 2,988.12 $ 3,025.44 $ 3,063.24 $ 2 ,951.66
Annual Property Tax Bill ($350k value) 1,354.77 1,483.22 1,622.99 1,781.24 1,954.91 2 ,145.51 1,723.77
Annual SPC Charge (100 Feet Frontage) – – – – – – –
Total Annual Utility & Property Tax Bills $ 4,233.57 $ 4,398.02 $ 4,574.15 $ 4,769.36 $ 4,980.35 $ 5,208.75 $ 4 ,675.44
$ Increase/(Decrease) 164.45 176.13 195.21 210.99 228.40 186.70
% Increase/(Decrease) 3.9% 4.0% 4.3% 4.4% 4.6% 4.2%
Utility Rates
Proposed Monthly Bills
Existing
2014 2015 2016 2017 2018 2019
Percentage Increase 1.25% 1.25% 1.25% 1.25% 1.25%
Flat Rates
Residential
All Users 56.00 56.70 57.41 58.13 58.86 59.60
Commercial
1.1 – 3.0 EDU’s 57.40 58.12 58.84 59.58 60.32 61.08
3.1 – 6.0 EDU’s 127.40 128.99 130.60 132.24 133.89 135.56
6.1 – 10.0 EDU’s 225.40 228.22 231.07 233.96 236.88 239.84
10.1 – 20.0 EDU’s 421.40 426.67 432.00 437.40 442.87 448.40
20.1 – 30.0 EDU’s 701.40 710.17 719.04 728.03 737.13 746.35
Over 30 EDU’s 981.40 993.67 1006.09 1018.66 1031.40 1044.29
Unmetered Properties (per EDU) 56.00 56.70 57.41 58.13 58.85 59.59
Usage Rates
All Usage, per 1,000 gallons 7.50 7.59 7.69 7.78 7.88 7.98
Monthly Wastewater Rates
Proposed Monthly Rates
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$3.00 per month and an annual increase in property taxes of $50.74 in 2015. Both properties are
assumed to have the same average front footage of 100 feet, which would equate to an SPC charge of
$150.00 in 2014 and $303.75 in 2015.
Cash Balances and Financing Capital Improvements
The capital improvement plans for the District is attached in Exhibit B.
The District currently does not have any projects for the next five years in the CIP. Ehlers is proposing to
include placeholder amounts of $500,000 every six years to allow for emergencies and unexpected
projects. For the purposes of this study, capital costs are inflated by 3% every year.
Target Cash Reserves
All three scenarios will leave the District’s utility system in good financial health. The projected cash
balances, a measure of financial health, are shown in following graph.
Impact Analysis on Rate and Tax Payers
Existing Annual
2014 2015 2016 2017 2018 2019 Average
Residential Property (valued at $100k)
Monthly Sewer (Fixed Rate) $ 56.00 $ 56.70 $ 57.41 $ 58.13 $ 58.86 $ 59.60 $ 57.42
Total Annual Utility Bill $ 672.00 $ 680.40 $ 688.92 $ 697.56 $ 706.32 $ 7 15.20 $ 689.04
Annual Property Tax Bill ($100k value) 156.00 160.00 165.00 171.00 178.00 185.00 169.17
Annual SPC Charge (100 Feet Frontage) 150.00 303.75 307.55 311.39 315.28 319.22 284.53
Total Annual Utility & Property Tax Bills $ 978.00 $ 1,144.15 $ 1,161.47 $ 1,179.95 $ 1,199.60 $ 1,219.42 $ 1 ,142.74
$ Increase/(Decrease) 166.15 17.32 18.48 19.65 19.82 55.40
% Increase/(Decrease) 17.0% 1.5% 1.6% 1.7% 1.7% 5.5%
Commercial Property (valued at $350k)
Sewer (15,000 gallons/month) $ 239.90 $ 242.90 $ 245.93 $ 249.01 $ 252.12 $ 255.27 $ 245.97
Total Annual Utility Bill $ 2 ,878.80 $ 2,914.80 $ 2,951.16 $ 2,988.12 $ 3,025.44 $ 3,063.24 $ 2 ,951.66
Annual Property Tax Bill ($350k value) 1,354.77 1,405.51 1,457.38 1,515.68 1,576.31 1 ,639.36 1,491.50
Annual SPC Charge (100 Feet Frontage) 150.00 303.75 307.55 311.39 315.28 319.22 284.53
Total Annual Utility & Property Tax Bills $ 4,383.57 $ 4,624.06 $ 4,716.09 $ 4,815.19 $ 4,917.03 $ 5,021.82 $ 4 ,727.70
$ Increase/(Decrease) 240.49 92.03 99.10 101.84 104.79 133.37
% Increase/(Decrease) 5.5% 2.0% 2.1% 2.1% 2.1% 2.9%
Utility Rates
Proposed Monthly Bills
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The drop in Projected Cash for Scenario #3 in 2016 (light blue bar) is because the District would be able
to pay cash for up to $500,000 in capital projects, should they arise. The other two scenarios would
require the issuance of debt in 2016.
The Targeted Working Capital is made up of 50% of operating expenses, plus 100% of next year’s debt
service payments. All three scenarios would keep the District near this target through 2019.
The proposed rates for all scenarios will continue to provide sufficient revenue to pay routine operating
expenses, pay for capital improvements to upgrade the system, if necessary, and provide prudent cash
balances. Adequate cash balances allow the District to:
 Survive changing circumstances in the economy without rapidly increasing rates;
 Use cash to pay for a portion of capital improvements and reduce the frequency of borrowing.
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Summary
Ehlers is recommending a dual-pronged approach to maintain the financial health of the District’s
utilities.
1. Consider the proposed changes in the rates for sewer for 2015:
a. Scenario #1: 8.0% increase in sewer rates
b. Scenario #2: 1.25% increase in sewer rates and a 9.75% increase in property taxes
c. Scenario #3: 1.25% increase in sewer rates; 4.0% increase in property taxes; implement
the $3/foot/year SPC charge
2. Consider annual updates to the sewer rate study to ensure continued financial health of the funds.
The study assumes the District will finance major utility improvements in order to keep cash balances
relatively steady from year to year. This study is not a debt plan. In practice, the District staff will
continue to use the rate study’s financing plan as a guide and, in consultation with its financial advisor,
consider when and how much debt to incur in any given year.
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Exhibit A – Operating Fund Projections
Below are the charts by scenario that show the cash flow projections through 2019 for the District.
Scenario #1
Prelim. Budget
Description 2013 2014 2015 2016 2017 2018 2019
Proposed Rate Increase (%) 0.00% 0.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Operating Revenues 512,456 510,546 551,073 594,847 642,135 693,144 748,285
Operating and Maintenance Expense 689,007 715,500 736,965 759,074 781,846 805,302 829,461
Net Before Debt Service (176,551) (204,954) (185,892) (164,227) (139,711) (112,157) (81,176)
Existing Debt Service (P&I) 644,085 671,604 671,478 672,413 670,906 671,499 671,998
Projected Debt Service (P&I) 0 0 (58,615) (58,615) (58,615)
Total Debt Service 644,085 671,604 671,478 672,413 612,291 612,884 613,383
Net Revenues (820,636) (876,558) (857,370) (836,640) (752,002) (725,041) (694,558)
Interest Income 1,276 7,670 10,614 13,184 15,182 13,881 12,901
Property Taxes 364,995 350,000 350,000 350,000 350,000 350,000 350,000
Other Non Operating Revenues/(Expenses) 477,691 400,000 400,000 400,000 400,000 400,000 400,000
Net Annual Cash Flow 23,326 (118,888) (96,756) (73,456) 13,180 38,840 68,343
Capital Projects 0 0 0 (530,450) 0 0 0
Bond Proceeds 0 0 0 500,000 0 0 0
Net Cash Flow after Capital Projects 23,326 (118,888) (96,756) (103,906) 13,180 38,840 68,343
Ending Cash Balance 1,534,073 1,415,185 1,318,429 1,214,523 1,110,473 1,032,082 983,195
Targeted Working Capital 873,535 893,847 912,681 988,488 1,008,050 1,027,992 1,047,971
Over/(Under) Target Working Capital 660,538 521,338 405,749 226,035 102,423 4,090 (64,776)
Projected
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Scenario #2
Prelim. Budget
Description 2013 2014 2015 2016 2017 2018 2019
Proposed Rate Increase (%) 0.00% 0.00% 1.25% 1.25% 1.25% 1.25% 1.25%
Operating Revenues 512,456 510,546 516,967 523,478 530,078 536,769 543,549
Operating and Maintenance Expense 689,007 715,500 736,965 759,074 781,846 805,302 829,461
Net Before Debt Service (176,551) (204,954) (219,998) (235,596) (251,768) (268,533) (285,912)
Existing Debt Service (P&I) 644,085 671,604 671,478 672,413 670,906 671,499 671,998
Projected Debt Service (P&I) 0 0 (58,615) (58,615) (58,615)
Total Debt Service 644,085 671,604 671,478 672,413 612,291 612,884 613,383
Net Revenues (820,636) (876,558) (891,476) (908,009) (864,059) (881,417) (899,294)
Interest Income 1,276 7,670 10,614 13,184 15,184 13,892 12,930
Property Taxes 364,995 350,000 384,125 421,577 462,681 507,792 557,302
Other Non Operating Revenues/(Expenses) 477,691 400,000 400,000 400,000 400,000 400,000 400,000
Net Annual Cash Flow 23,326 (118,888) (96,737) (73,248) 13,807 40,267 70,937
Capital Projects 0 0 0 (530,450) 0 0 0
Bond Proceeds 0 0 0 500,000 0 0 0
Net Cash Flow after Capital Projects 23,326 (118,888) (96,737) (103,698) 13,807 40,267 70,937
Ending Cash Balance 1,534,073 1,415,185 1,318,448 1,214,750 1,111,327 1,034,363 988,070
Targeted Working Capital 873,535 893,847 912,681 988,488 1,008,050 1,027,992 1,047,971
Over/(Under) Target Working Capital 660,538 521,338 405,767 226,262 103,276 6,371 (59,901)
Projected
Scenario #3
Prelim. Budget
Description 2013 2014 2015 2016 2017 2018 2019
Proposed Rate Increase (%) 0.00% 0.00% 1.25% 1.25% 1.25% 1.25% 1.25%
Operating Revenues 512,456 578,046 653,654 661,874 670,204 678,646 687,200
Operating and Maintenance Expense 689,007 715,500 736,965 759,074 781,846 805,302 829,461
Net Before Debt Service (176,551) (137,454) (83,311) (97,200) (111,642) (126,655) (142,260)
Existing Debt Service (P&I) 644,085 671,604 671,478 672,413 670,906 671,499 671,998
Projected Debt Service (P&I) 0 0 0 0 0
Total Debt Service 644,085 671,604 671,478 672,413 670,906 671,499 671,998
Net Revenues (820,636) (809,058) (754,789) (769,613) (782,548) (798,154) (814,258)
Interest Income 1,276 7,670 11,120 15,030 12,457 12,752 13,053
Property Taxes 364,995 350,000 364,000 378,560 393,702 409,450 425,828
Other Non Operating Revenues/(Expenses) 477,691 400,000 400,000 400,000 400,000 400,000 400,000
Net Annual Cash Flow 23,326 (51,388) 20,331 23,977 23,611 24,048 24,622
Capital Projects 0 0 0 (530,450) 0 0 0
Bond Proceeds 0 0 0 0 0 0 0
Net Cash Flow after Capital Projects 23,326 (51,388) 20,331 (506,473) 23,611 24,048 24,622
Ending Cash Balance 1,534,073 1,482,685 1,503,017 996,544 1,020,155 1,044,203 1,068,825
Targeted Working Capital 873,535 893,847 912,681 929,873 949,435 969,377 989,355
Over/(Under) Target Working Capital 660,538 588,838 590,336 66,671 70,720 74,826 79,469
Projected
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Exhibit B – Capital Improvement Projects
Garrison, Kathio, West Mille Lacs Lake Sanitary Sewer District
Sanitary Sewer System
Capital Improvement Program
Projects 2013 2014 2015 2016 2017 2018 2019
CAPITAL EQUIPMENT
PROJECTS
Future capital 500,000
Actual CIP (2014 Dollars) 0 0 0 500,000 0 0 0
Percent Inflation 3% 3% 3% 3% 3% 3% 3%
Inflate d Project Costs 0 0 0 530,450 0 0 0

The Board feels scenario # 3 is the option the Sanitary District should implement.