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6.7 Motion to Waive The Rule Requiring Two Readings Of An Ordinance and Adopt AN ORDINANCE AMENDING THE WATER AND SEWER RATES SET FORTH IN APPENDIX A, DIVISION II OF THE CODE OF THE VILLAGE OF MOUNT PROSPECT, ILLINOIS.
Mr�GauC �'d'+rt;�iect Subject Motion to Waive The Rule Requiring Two Readings Of An Ordinance and Adopt AN ORDINANCE AMENDING THE WATER AND SEWE• RATES SET FORTH■ ■DIVISION 11 OF THE CODEOF THE VILLAGE OF • PROSPECT,, ILLINOIS. Meeting December 7, 2021 - REGULAR MEETING OF THE MOUNT PROSPECT VILLAGE BOARD - Fiscal Impact Dollar Amount Budget Source Category CONSENT AGENDA Type Ordinance Information The Village concluded its first water rate study in 2017, which identified that the Village was not investing enough in water and sewer infrastructure. The rate of investment prior to the water rate study was at a 600 -year replacement cycle for Village's water and sewer infrastructure, while the estimated life of water and sewer infrastructure typically ranges from 80 to 100 years. The Village has executed rate increases as planned in the study from 2018 to 2021. The rate study (as attached) was revised in November 2021 and recommends an increase of 8% in 2022 and 2023. Comprehensive financial planning conducted for the water and sewer utilities indicates that revenues under existing rates are not sufficient to meet the projected cash obligations of the utilities over the ten-year study period. The need for revenue adjustments is influenced by the following factors: 1. Anticipated decline in customer usage, forecasted to be approximately 1 percent per year and also offset slightly by growth in number of customers. 2. Implementation of proposed capital plan, including renewal and replacement programs from aging water and sewer infrastructure. 1 3. Inflationary adjustments for operational and maintenance expenditures. While conducting the above planning, various factors were considered including: 1. Minimizing the need for a sudden and substantial revenue adjustments. 2. Maintaining Operating reserves equal to a 90 days of operating and maintenance expenditures. 3. Reduce Capital funding reliance on debt issuance over time. 4. Funding the system renewal/replacement program as targeted. The attached ordinance codifies the approved plan and adopts rate increases for the year 2022 and 2023. Its impact is summarized as below: Water Base Fee - Fixed (Monthly) Volumetric Fee (per 1,000 gallons) Sewer Base Fee - Fixed (Monthly) Volumetric Fee (per 1,000 gallons) Combined Base Fee - Fixed Volumetric Fee (per 1,000 gallons) Monthly Bill - 5,000 gallons Annual Water/Sewer Bill 2021 2022 2023 (Current) $ 6.00 $ $ 11.85 $ $ 5.00 $ $ 2.54 $ $ 11.00 $ $ 14.39 $ 7.00 $ 8.00 12.71 $ 13.66 5.00 $ 5.40 2.79 $ 3.02 12.00 $ 13.40 15.50 $ 16.68 $ 82.95 $ 89.50 $ 96.80 $ 995.40 $ 1,074.00 $ 1,161.60 With the above rate increases, an average household using 5,000 gallons will see a monthly increase of $6.55 in the combined water/sewer bill during the year 2022. For the year 2023, a monthly increase in the water/sewer bill will be $7.30, which equates to an annual increase of $87.60 compared to the proposed 2022 charges. Alternatives 1. Approve the attached Ordinance amending the water and sewer rates as identified in the water/sewer rate study. 2. Action at the discretion of the Village Board. 2 Staff Recommendation Approve the attached Ordinance amending the water and sewer rates per the approved budget and updated water rate study. ATTACHMENTS: Village_of mt_Prospect_Finance_ordinance_amending_water_and_sewer rates_for_2022_z Mt Prospect Rate Study - Final Report 11.23.21.pdf KI ORDINANCE NO. AN ORDINANCE TO AMEND WATER AND SEWER RATES SET FORTH IN APPENDIX A, DIVISION II, VILLAGE CODE OF MOUNT PROSPECT, ILLINOIS WHEREAS, the Village of Mount Prospect is a home rule municipality as defined by Article VII, § 6 of the Illinois Constitution of 1970; and WHEREAS, the President and Board of Trustees of the Village of Mount Prospect desire to make certain amendments to the Village Code of Mount Prospect as set forth below; and WHEREAS, pursuant to the authority granted under the Illinois Municipal Code and in accordance with home rule authority granted to home rule municipalities, the President and Board of Trustees of the Village of Mount Prospect approve the amendments set forth below. NOW, THEREFORE, BE IT ORDAINED BY THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF MOUNT PROSPECT, COOK COUNTY, ILLINOIS: SECTION ONE: Appendix A, Section 9.410, "Water Rates," to Division II, "Fees, Rates and Taxes," to Chapter 9, "Public Utilities, Pavement and Tree Regulations," to the Mount Prospect Village Code shall be amended to read in its entirety as follows: Sec. 9.410 WATER RATES: The following rates are effective for water bills rendered on or after January 1, 2022: A. All village water users within the village, having a direct or indirect connection with village water mains or pipes: $12.71 per 1,000 gallons of water consumed or portion thereof. All village water users within the village shall have the following monthly Base Fees per account: 5/8 inch meter $7.00 3/4 inch meter $7.00 1 inch meter $7.00 1 '/2 inch meter $11.00 2 inch meter $15.00 3 inch meter $51.00 4 inch meter $65.00 6 inch meter $96.00 8 inch meter 131.00 All village water users outside the corporate limits of the village having a direct or indirect connection with village water mains or pipes: $25.42 per 1,000 gallons of water consumed or portion thereof. 4 All village water users outside the village shall have the following monthly Base Fees per account: 5/8 inch meter $14.00 3/4 inch meter $14.00 1 inch meter $14.00 1 '/2 inch meter $22.00 2 inch meter $30.00 3 inch meter $102.00 4 inch meter $130.00 6 inch meter $192.00 8 inch meter $262.00 B. Hookup charge for water furnished by truckload: $12.71 The following rates are effective for water bills rendered on or after January 1, 2023: A. All village water users within the village, having a direct or indirect connection with village water mains or pipes: $13.66 per 1,000 gallons of water consumed or portion thereof. All village water users within the village shall have the following monthly Base Fees per account: 5/8 inch meter $8.00 3/4 inch meter $8.00 1 inch meter $8.00 1 '/2 inch meter $12.00 2 inch meter $18.00 3 inch meter $59.00 4 inch meter $74.00 6 inch meter $109.00 8 inch meter $150.00 All village water users outside the corporate limits of the village having a direct or indirect connection with village water mains or pipes: $27.32 per 1,000 gallons of water consumed or portion thereof. All village water users outside the village shall have the following monthly Base Fees per account: 5/8 inch meter $16.00 3/4 inch meter $16.00 1 inch meter $16.00 1 '/2 inch meter $24.00 2 inch meter $36.00 3 inch meter $118.00 4 inch meter $148.00 6 inch meter $218.00 8 inch meter $300.00 5 B. Hookup charge for water furnished by truckload: $13.66. SECTION TWO: Appendix A, Section 9.507, "Sewer Rates," to Division II, "Fees, Rates and Taxes," to Chapter 9, "Public Utilities, Pavement and Tree Regulations," to the Mount Prospect Village Code shall be amended to read in its entirety as follows: Sec. 9.507 SEWER RATES: The following rates are effective for sewer bills rendered on or after January 1, 2022: C. All village sewer users within the corporate limits of the village having a direct or indirect connection with the village sewer and water mains or pipes: $2.79 per 1,000 gallons of water consumed or portion thereof. All village sewer users within the corporate limits of the village having a direct or indirect connection with the village's sewer mains or pipes but not with village water mains or pipes: $6.80 utilization fee per month per account. All village sewer users outside the corporate limits of the village having a direct or indirect connection with the village's water and sewer mains or pipes: $5.58 per 1,000 gallons of water consumed or portion thereof. All village sewer users outside the corporate limits of the village having a direct or indirect connection with the village's sewer mains or pipes, but not with village water mains or pipes: $13.61 utilization fee per month per account. The monthly Base Fee per account for sewer users within the village shall be $5.00. The monthly Base Fee per account for sewer users outside the village shall be $10.00. The following rates are effective for sewer bills rendered on or after January 1, 2023: D. All village sewer users within the corporate limits of the village having a direct or indirect connection with the village sewer and water mains or pipes: $3.02 per 1,000 gallons of water consumed or portion thereof. All village sewer users within the corporate limits of the village having a direct or indirect connection with the village's sewer mains or pipes but not with village water mains or pipes: $7.34 utilization fee per month per account. All village sewer users outside the corporate limits of the village having a direct or indirect connection with the village's water and sewer mains or pipes: $6.04 per 1,000 gallons of water consumed or portion thereof. All village sewer users outside the corporate limits of the village having a direct or indirect connection with the village's sewer mains or pipes, but not with village water mains or pipes: $14.70 utilization fee per month per account. The monthly Base Fee per account for sewer users within the village shall be $5.40. The monthly Base Fee per account for sewer users outside the village shall be $10.80. C:1 SECTION THREE: that this Ordinance shall be in full force and effect from and after its passage, approval and publication in pamphlet form in the manner provided by law. AYES: NAYS: ABSENT: PASSED and APPROVED this day of 12021. ATTEST: Karen M. Agoranos, Village Clerk GI Paul Wm. Hoefert, Mayor 7 -3r Water and Sewer Rate Study Village of Mount Prospect, Illinois Water and Sewer Rate Study Project No. 136553 Final Report 11/23/2021 0 Water and Sewer Rate Study prepared for Village of Mount Prospect, Illinois Water and Sewer Rate Study Mount Prospect, Illinois Project No. 136553 Final Report 11/23/2021 prepared by Burns & McDonnell Engineering Company, Inc. COPYRIGHT © 2021 BURNS & McDONNELL ENGINEERING COMPANY, INC. 0 Water and Sewer Rate Study Final Report Table of Contents TABLE OF CONTENTS Page No. 1.0 EXECUTIVE SUMMARY...................................................................................1-1 1.1 Project Background.............................................................................................. 1-1 1.2 Industry Trends in Water and Sewer Rates.......................................................... 1-1 1.3 Financial Planning............................................................................................... 1-2 1.4 Proposed Rates..................................................................................................... 1-3 2.0 FINANCIAL PLANNING ANALYSIS................................................................2-1 2.1 Project Approach................................................................................................. 2-1 2.2 Introduction to Financial Planning....................................................................... 2-2 2.3 Water and Sewer Utility Revenues under Existing Rates .................................... 2-2 2.3.1 Historical and Projected Customers...................................................... 2-2 2.3.2 Historical and Projected Volumes........................................................ 2-3 2.3.3 Existing Water and Sewer Rates........................................................... 2-4 2.3.4 User Revenues under Existing Rates .................................................... 2-5 2.4 Water and Sewer Utility Expenditures................................................................ 2-6 2.4.1 O&M Expenses..................................................................................... 2-6 2.4.2 Projected Capital Improvement Expenditures ...................................... 2-7 2.4.3 Existing and Proposed Debt Service Requirements .............................. 2-8 2.4.4 Water Utility Flow of Funds................................................................. 2-8 2.4.5 Sewer Utility Flow of Funds............................................................... 2-11 2.4.6 Consolidated Utility Flow of Funds .................................................... 2-13 3.0 PROPOSED RATES......................................................................................... 3-1 3.1 Introduction.......................................................................................................... 3-1 3.2 Existing Water and Sewer Rates.......................................................................... 3-1 3.3 Proposed Water and Sewer Rates........................................................................ 3-2 3.4 Regional Water and Sewer Typical Bills............................................................. 3-4 3.5 Water and Sewer Service Affordability............................................................... 3-5 3.6 Statement of Limitations...................................................................................... 3-7 Village of Mount Prospect TOC -1 Burns & McDonnell 10 Water and Sewer Rate Study Final Report Table of Contents LIST OF TABLES Page No. Table 1-1: Existing and Proposed Water and Sewer Rates.......................................................... 1-4 Table 1-2: Typical Water and Sewer Bills Under Existing and Proposed Rates ......................... 1-4 Table 2-1: Historical and Projected Water Accounts and Volume .............................................. 2-3 Table 2-2: Historical and Projected Sewer Accounts and Volume .............................................. 2-3 Table 2-3: Existing Water and Sewer Rates................................................................................ 2-4 Table 2-4: Historical and Projected Water User Revenues......................................................... 2-5 Table 2-5: Historical and Projected Sewer User Revenues......................................................... 2-6 Table 2-6: Historical and Projected Operation and Maintenance Expenses ................................ 2-7 Table 2-7: Capital Improvement Program................................................................................... 2-7 Table 2-8: Existing and Proposed Debt Service.......................................................................... 2-8 Table 2-9: Water Utility Financial Plan..................................................................................... 2-10 Table 2-10: Sewer Utility Financial Plan................................................................................... 2-12 Table 2-11: Combined Water and Sewer Utility Financial Plan ............................................... 2-13 Table 3-1: Existing Water and Sewer Rates................................................................................ 3-1 Table 3-2: Existing and Proposed Water and Sewer Rates.......................................................... 3-2 Table 3-3: Typical Water Bills Under Existing and Proposed Rates ........................................... 3-3 Table 3-4: Typical Sewer Bills Under Existing and Proposed Rates .......................................... 3-3 Table 3-5: Typical Combined Water and Sewer Bills Under Existing and Proposed Rates....................................................................................................................... 3-4 Table 3-6: Mount Prospect Affordability Analysis..................................................................... 3-6 LIST OF FIGURES Page No. Figure 1-1: Changes in General Inflation and Water and Sewer Rates ....................................... 1-1 Figure2-1: Study Methodology................................................................................................... 2-1 Figure 3-1: Residential Sewer Bill Comparison at 5,000 Gallons per Month ............................. 3-4 Village of Mount Prospect TOC -2 Burns & McDonnell 11 Water and Sewer Rate Study Final Report List of Abbreviations LIST OF ABBREVIATIONS Abbreviation Term/Phrase/Name AWWA American Water Works Association BLS Bureau of Labor Statistics CIP Capital Improvement Program CPI -U Consumer Price Index for all Urban Consumers DSC Debt Service Coverage FY Fiscal Year Kgal Thousand Gallons of Water MHI Median Household Income MWRDGC Metropolitan Water Reclamation District of Greater Chicago NACWA National Association of Clean Water Agencies O&M Operation & Maintenance Expense the Study Water and Sewer Rate Study the Village Village of Mount Prospect, Illinois WEF Water Environment Federation Village of Mount Prospect i Burns & McDonnell 12 Water and Sewer Rate Study Final Report Executive Summa 1.0 EXECUTIVE SUMMARY 1.1 Project Background Burns & McDonnell was engaged by the Village of Mount Prospect (the Village) in 2016 to conduct a water and sewer rate study that (i) evaluated the financial planning implications of the recommended capital improvements, and (ii) proposed rates to recover costs for the water and sewer utilities. In 2021 the Village requested Burns & McDonnell refresh the rate study (the Study) to reflect current conditions and provide a new 10 -year forecast. This Report summarizes the results of the Study. 1.2 Industry Trends in Water and Sewer Rates Replacement of aging infrastructure is one of several dynamics impacting water and sewer utility rates. Other dynamics may include regulatory requirements, inflation on operating and capital costs, and a general trend in declining consumption most often associated with more efficient fixtures and appliances and greater awareness of water conservation. Each utility is different, and the relative importance of these dynamics will vary by utility. However, there is no doubt that water and sewer rate increases have substantially outpaced general inflation in the United States. The United States Bureau of Labor Statistics (BLS) tracks many facets of inflation. The most commonly referenced measure is the Consumer Price Index for all Urban Consumers (CPI -U) which measures inflation at the consumer level. The BLS also tracks a combined inflation index for consumer water and sewer costs. Figure 1-1 compares changes in the consumer price index to changes in the water and sewer cost index. Figure 1-1: Changes in General Inflation and Water and Sewer Rates Village of Mount Prospect 1-1 Burns & McDonnell 13 Water and Sewer Rate Study Final Report Executive Summa Annually, since 2000 the water and sewer index has been increasing at nearly 5 percent per year, while CPI's annual rate of change is about 2 percent per year. Other industry surveys reach similar conclusions regarding water and/or sewer rates. The National Association of Clean Water (NACWA) annually updates its Cost of Clean Water Index, which specifically surveys sewer utilities across the nation regarding the cost of residential sewer service. From 1985 through 2020, the annual increase according to this survey has been 4.8 percent per year. American Water Works Association (AWWA) also conducts a broad, biennial water and sewer rate survey with results indicating average annual rate increases of 5.1 percent per year for water and 5.6 percent per year for sewer from 1996 to 2018. Every utility is unique, and the dynamics impacting rates can vary widely. However, funding renewal and replacement of underground infrastructure is a consistent and substantial influence on costs for most water and sewer utilities. Since 2017, the Village has raised water and sewer rates 8 percent per year, approving a program of annual 8 percent increases through 2025. Increasing funding of renewal and replacement of water and sewer mains has been a primary driver of these increases and is likely to continue for the foreseeable future. 1.3 Financial Planning Comprehensive financial planning conducted for the water and sewer utilities indicates that revenues under existing rates are not sufficient to meet the projected cash obligations of the utilities over the ten- year study period. The need for revenue adjustments is influenced by the following factors: • Anticipated declines in customer usage, forecasted to be approximately 1 percent per year, offset slightly by growth in customers; • Implementation of the proposed capital plans, including renewal and replacement programs for the aging water distribution system and the sewer collection system, and lead water line replacement; • Inflationary impacts on operation and maintenance expenses and future capital improvements. Several financial planning scenarios were evaluated to fund the operating and capital needs of the utilities. Financial planning assumptions are described in Section 2 of this report. Financial plans were evaluated based on the following guiding principles: 1. Minimize the need for sudden and substantial revenue adjustments. Village of Mount Prospect 1-2 Burns & McDonnell 14 Water and Sewer Rate Study Final Report Executive Summa 2. Maintain projected operating reserves each year in an amount equal to a minimum of 90 days of O&M. 3. Reduce capital funding reliance on new debt issuance over time. 4. Funding the system renewal/replacement program targets. Based on its ability to meet the guiding principles, the recommended financial plan detailed in this report proposes the following revenue increases to be effective January 1 of each year indicated. The Village has already approved increases of 8% annually for 2021 through 2025. Adopted 2021 8% 8% Adopted 2022 8% 8% Adopted 2023 8% 8% Adopted 2024 8% 8% Adopted 2025 8% 8% Proposed 2026 8% 8% Proposed 2027 8% 5% Proposed 2028 8% 5% Proposed 2029 8% 5% Proposed 2030 8% 5% Proposed 2031 8% 5% 1.4 Proposed Rates Proposed rates have been developed for 2026 through 2031. Existing and proposed water and sewer rates are shown in Table 1-1. Village of Mount Prospect 1-3 Burns & McDonnell 15 Water and Sewer Rate Study Final Report Executive Summa Table 1-1: Existing and Proposed Water and Sewer Rates Water- Outside Village Table 1-2: Typical Water and Sewer Bills Under Existing and Proposed Rates Existing I Adopted I Proposed Monthly Line $/Kgal 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 No. Description 11 3/4" $ 12.00 $ 14.00 Base Charge $ 18.00 $ 20.00 $ 21.60 $ 23.40 $ 25.20 $ 27.20 $ 29.40 $/bill $/bill $/bill $/biII $/bill $/bill $/bill $/bill $/bill $/bill $/bill $ 27.20 Water- Inside Village $ 31.80 13 1.5" $ 18.00 $ 22.00 $ 24.00 $ 28.00 $ 30.00 $ 32.40 $ 35.00 $ 37.80 1 5/8" $ 6.00 $ 7.00 $ 8.00 $ 9.00 $ 10.00 $ 10.80 $ 11.70 $ 12.60 $ 13.60 $ 14.70 $ 15.90 2 3/4" $ 6.00 $ 7.00 $ 8.00 $ 9.00 $ 10.00 $ 10.80 $ 11.70 $ 12.60 $ 13.60 $ 14.70 $ 15.90 3 1" $ 6.00 $ 7.00 $ 8.00 $ 9.00 $ 10.00 $ 10.80 $ 11.70 $ 12.60 $ 13.60 $ 14.70 $ 15.90 4 1.5" $ 9.00 $ 11.00 $ 12.00 $ 14.00 $ 15.00 $ 16.20 $ 17.50 $ 18.90 $ 20.40 $ 22.00 $ 23.80 5 2" $ 13.00 $ 15.00 $ 18.00 $ 20.00 $ 22.00 $ 23.80 $ 25.70 $ 27.80 $ 30.00 $ 32.40 $ 35.00 6 3" $ 44.00 $ 51.00 $ 59.00 $ 66.00 $ 73.00 $ 78.80 $ 85.10 $ 91.90 $ 99.30 $ 107.20 $ 115.80 7 4" $ 55.00 $ 65.00 $ 74.00 $ 83.00 $ 92.00 $ 99.40 $ 107.40 $ 116.00 $ 125.30 $ 135.30 $ 146.10 8 6" $ 82.00 $ 96.00 $ 109.00 $ 123.00 $ 137.00 $ 148.00 $ 159.80 $ 172.60 $ 186.40 $ 201.30 $ 217.40 9 8" $ 112.00 $ 131.00 $ 150.00 $ 169.00 $ 187.00 $ 202.00 $ 218.20 $ 235.70 $ 254.60 $ 275.00 $ 297.00 Water- Outside Village Table 1-2: Typical Water and Sewer Bills Under Existing and Proposed Rates Volume Charge Monthly Bill Under $/Kgal 10 5/8" $ 12.00 $ 14.00 $ 16.00 $ 18.00 $ 20.00 $ 21.60 $ 23.40 $ 25.20 $ 27.20 $ 29.40 $ 31.80 11 3/4" $ 12.00 $ 14.00 $ 16.00 $ 18.00 $ 20.00 $ 21.60 $ 23.40 $ 25.20 $ 27.20 $ 29.40 $ 31.80 12 1" $ 12.00 $ 14.00 $ 16.00 $ 18.00 $ 20.00 $ 21.60 $ 23.40 $ 25.20 $ 27.20 $ 29.40 $ 31.80 13 1.5" $ 18.00 $ 22.00 $ 24.00 $ 28.00 $ 30.00 $ 32.40 $ 35.00 $ 37.80 $ 40.80 $ 44.00 $ 47.60 14 2" $ 26.00 $ 30.00 $ 36.00 $ 40.00 $ 44.00 $ 47.60 $ 51.40 $ 55.60 $ 60.00 $ 64.80 $ 70.00 15 3" $ 88.00 $ 102.00 $ 118.00 $ 132.00 $ 146.00 $ 157.60 $ 170.20 $ 183.80 $ 198.60 $ 214.40 $ 231.60 16 4" $ 110.00 $ 130.00 $ 148.00 $ 166.00 $ 184.00 $ 198.80 $ 214.80 $ 232.00 $ 250.60 $ 270.60 $ 292.20 17 6" $ 164.00 $ 192.00 $ 218.00 $ 246.00 $ 274.00 $ 296.00 $ 319.60 $ 345.20 $ 372.80 $ 402.60 $ 434.80 18 8" $ 224.00 $ 262.00 $ 300.00 $ 338.00 $ 374.00 $ 404.00 $ 436.40 $ 471.40 $ 509.20 $ 550.00 $ 594.00 19 Sewer- Inside Village $ 5.00 $ 5.00 $ 5.40 $ 5.80 $ 6.30 $ 6.80 $ 7.10 $ 7.50 $ 7.90 $ 8.30 $ 8.70 20 Sewer - Outside Village $ 10.00 $ 10.00 $ 10.80 $ 11.60 $ 12.60 $ 13.60 $ 14.20 $ 15.00 $ 15.80 $ 16.60 $ 17.40 The impact of proposed water and sewer rates on typical customers is shown in Table 1-2. Table 1-2: Typical Water and Sewer Bills Under Existing and Proposed Rates Volume Charge Monthly Bill Under $/Kgal $/Kgal $/Kgal $/Kgal $/Kgal $/Kgal $/Kgal $/Kgal $/Kgal $/Kgal $/Kgal 21 Water- Inside Village $ 11.85 $ 12.71 $ 13.66 $ 14.69 $ 15.81 $ 17.07 $ 18.44 $ 19.92 $ 21.51 $ 23.23 $ 25.09 22 Water- Outside Village $ 23.70 $ 25.42 $ 27.32 $ 29.38 $ 31.62 $ 34.14 $ 36.88 $ 39.84 $ 43.02 $ 46.46 $ 50.18 23 Sewer- Inside Village $ 2.54 $ 2.79 $ 3.02 $ 3.26 $ 3.52 $ 3.80 $ 3.99 $ 4.19 $ 4.40 $ 4.62 $ 4.85 24 Sewer - Outside Village $ 5.08 $ 5.58 $ 6.04 $ 6.52 $ 7.04 $ 7.60 $ 7.98 $ 8.38 $ 8.80 $ 9.24 $ 9.70 The impact of proposed water and sewer rates on typical customers is shown in Table 1-2. As a part of its budget process, the Village evaluates the sufficiency of revenues and proposed debt issuance in meeting budget year expenses and capital costs and providing desired reserves and debt service coverage. As a matter of practice, Burns & McDonnell encourages the Village to continue this Village of Mount Prospect 1-4 Burns & McDonnell iF Table 1-2: Typical Water and Sewer Bills Under Existing and Proposed Rates Billable Monthly Bill Under Rates Line Flow Existing Adopted F Proposed No. Customer Type &Meter Size Kgal 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Water and Sewer Utility 1 SM.. 5.0 $ 82.95 $ 89.50 $ 96.80 $ 104.55 $ 112.95 $ 121.95 $ 130.95 $ 140.65 $ 151.05 $ 162.25 $ 174.30 2 3/4" 10.0 $ 154.90 $ 167.00 $ 180.20 $ 194.30 $ 209.60 $ 226.30 $ 243.10 $ 261.20 $ 280.60 $ 301.50 $ 324.00 3 1" 15.0 $ 226.85 $ 244.50 $ 263.60 $ 284.05 $ 306.25 $ 330.65 $ 355.25 $ 381.75 $ 410.15 $ 440.75 $ 473.70 Change in $ over prior year 4 5/8" $ 6.55 $ 7.30 $ 7.75 $ 8.40 $ 9.00 $ 9.00 $ 9.70 $ 10.40 $ 11.20 $ 12.05 5 3/4" $ 12.10 $ 13.20 $ 14.10 $ 15.30 $ 16.70 $ 16.80 $ 18.10 $ 19.40 $ 20.90 $ 22.50 6 V. $ 17.65 $ 19.10 $ 20.45 $ 22.20 $ 24.40 $ 24.60 $ 26.50 $ 28.40 $ 30.60 $ 32.95 Change in % over prior year 7 5/8" 7.9% 8.2% 8.0% 8.0% 8.0% 7.4% 7.4% 7.4% 7.4% 7.4% 8 3/4" 7.8% 7.9% 7.8% 7.9% 8.0% 7.4% 7.4% 7.4% 7.4% 7.5% 9 V. 7.8% 7.8% 7.8% 7.8% 8.0% 7.4% 7.5% 7.4% 7.5% 7.5% As a part of its budget process, the Village evaluates the sufficiency of revenues and proposed debt issuance in meeting budget year expenses and capital costs and providing desired reserves and debt service coverage. As a matter of practice, Burns & McDonnell encourages the Village to continue this Village of Mount Prospect 1-4 Burns & McDonnell iF Water and Sewer Rate Study Final Report Executive Summa process, and consider a more comprehensive update to its financial plan every five years, or sooner if conditions change. Village of Mount Prospect 1-5 Burns & McDonnell 17 Water and Sewer Rate Study Final Report Financial Planning Analysis 2.0 FINANCIAL PLANNING ANALYSIS 2.1 Project Approach To meet the project objectives identified by the Village, Burns & McDonnell conducted the rate study in a two-step approach. This approach, depicted in Figure 2-1, is grounded in the principles established by the American Water Works Association (AWWA) MI Rate Manual and the Water Environment Federation (WEE) Financing and Charges for Wastewater Systems. Figure 2-1: Study Methodology INI�11011 ; j Step 1: Financial Planning provides an indication of the adequacy of the revenue generated by current rates. The results of the financial forecast analysis answer the questions "Are the existing rates adequate?" and "If not, what level of overall revenue increase is needed?" The Financial Planning Analysis is presented in this section of our report. Step 2: Rate Design provides for the required revenue recovery. Once the overall level of revenue required is identified and customer class responsibility for that level of revenue is determined, schedules of rates for each rate class are developed that will generate revenues accordingly. The Rate Design Analysis is detailed in Section 3.0 of this report. Village of Mount Prospect 2-1 Burns & McDonnell 18 Water and Sewer Rate Study Final Report Financial Plannin 2.2 Introduction to Financial Planning The primary issue addressed in the Financial Planning Analysis is revenue sufficiency. The results of the Financial Planning Analysis answer the questions: • Are the existing rates sufficient to fund anticipated operating and capital costs? • If not, what level of overall revenue increase is needed? To determine if the existing schedule of rates can generate revenues to meet the Village's operating and capital costs, Burns & McDonnell prepared a ten-year financial projection of revenues and expenditures for the water and sewer utilities. A comparison of projected revenues and expenditures provides insight into the adequacy of overall revenue levels. Our approach to Financial Planning involves the following basic steps: 1. Project revenues under existing rates. 2. Project water and sewer utility expenditures, including operating and capital costs. 3. Develop a ten-year financial plan, including the budget year and a nine-year forecast period. The planning period includes the current fiscal year (FY) 2021 as a budget year and a ten-year forecast period, FY 2022 through FY 2031. The Village's fiscal year ends on December 31, and the projected periods in the financial plan recognize the same fiscal year ending December 31. 2.3 Water and Sewer Utility Revenues under Existing Rates The first step in the Financial Plan Analysis was to project revenues under the existing schedule of rates. To complete this effort required an analysis of water and sewer customers, volumes, and revenues. 2.3.1 Historical and Projected Customers Table 2-1 presents the historical water customers served by the Village from 2018 to 2020 and the projection of customers for the 2021 to 2031 planning period. In recent years, Mount Prospect has experienced minimal change in the number of accounts. Considering this trend in account growth, the projection of accounts assumes a small allowance for annual growth in customer accounts for 2021 through 2031. Table 2-2 presents the historical sewer customers served by the Village from 2018 to 2020 and the projection of customers for the 2021 to 2031 planning period. Similar to the water utility, Mount Prospect has experienced minimal change in the number of sewer accounts in recent years. The projection of sewer Village of Mount Prospect 2-2 Burns & McDonnell 19 Water and Sewer Rate Final Report Financial Planninq Analvsis accounts assumes a small allowance for growth in customer accounts for 2021 through 2031, consistent with the approach to forecasting water accounts. Table 2-1: Historical and Projected Water Accounts and Volume Histo rival I Protected 1WATER N/C-Water NO Chargr 11 11 14 14 14 14 14 14 14 14 14 14 14 14 2 -11- nside Village2 2 10 216 2 2,203 2,189 2,198 11,202 2 234 25 12, ,243 12 261 1252 2, 2 270 279 12288 3 Water -Outside IN— 8 10 10 10 10 2 10 10 10 10 10 10 10 10 10 4 Total Accounts 12,166 12,224 12,213 12,222 12,231 12,240 12,249 12,258 12,26] 12,2]6 12,285 12,294 12,303 12,312 Billetl Volume (3,000 Gopons) 5 WATER N/C-Water NO Charge 4,043 3,842 5,458 5,458 5,458 5,458 5,458 5,458 5,458 5,458 5,458 5,458 5,458 5,458 6 Water Inside 111-1,108,43] 1,080,955 1,118,401 1,108,035 1,097,764 1,08],58] 1,0]),505 1,06),515 1,05],61] 1,047,811 1,038,095 1,028,468 1,018,930 1,009,480 J Water -Outside Village 312 664 873 823 823 8]3 823 823 823 823 873 873 823 823 8 Total Billed Volume 1,112,792 1,085,461 1,124,232 1,114,366 1,104,095 1,093,918 1,083,836 1,023,846 1,063,948 1,054,142 1,44,426 1,034,799 1,025,261 1,015,811 Table 2-2: Historical and Projected Sewer Accounts and Volume Line H, -,n al Projected No, Accounts 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 1 Sewer Inside (w/water) 12,07612,133 12,124 12,133 12,142 12,151 12,160 12,169 12,1]8 12,187 12,196 12,205 12,214 12,223 2 Sewer Inside (w/o water) 39 36 33 33 33 33 33 33 33 33 33 33 33 33 3 Sewer NO Charge 4 Sewer Outside water) 11 1 9 - 12 - 12 - 12 - 12 - 12 - 12 - 12 - 12 - 12 - 12 - 12 - 12 - 5 Sewer Outside �w/o ware r) 6 Total Accounts 13 13 13 13 13 13 13 13 13 13 13 13 13 13 12,140 12,191 12,182 12,191 12,200 12,209 12,218 12,227 12,236 12,245 12,259 12,263 12,272 12,281 Gilled volume (1,000 Gallons) ] Sewer Inside (w/water) 1,108,526 1,071,725 1,108,634 1,098,362 1,088,185 1,078,102 1,068,112 1,058,213 1,048,406 1,038,689 1,029,061 1,019,522 1,010,072 1,000,708 8 5ewer lnside(w/o water) - - - - - - - - - - - - - - O Charge 9 Sewer ",,I'd,: 4,043 3,820 5,341 5,341 5,341 5,341 5,341 5,341 5,341 5,341 5,341 5,341 5,341 5,341 10 Sewer Outside(,,/water) 312 - - - - - - - - - - - - - 11 Sewer Outside �w/o water) 12 Total Billed Volume 1,112,881 1,075,545 1,113,975 1,103,703 1,093,526 1,083,443 1,073,453 1,063,554 1,053,747 1,044,030 1,034,402 1,024,863 1,015,413 1,006,049 2.3.2 Historical and Projected Volumes Table 2-1 and Table 2-2 also present the historical and projected volumes. Table 2-1 presents historical water volumes based on water sales for 2018 to 2020, and the projection of volumes for the 2021 to 2031 planning period. Based on recent historical data Inside Village use per account was estimated to decline 1.0 percent annually beginning in 2021. This decrease in average use per account reflects an industry trend associated with the prevalence of more efficient appliances and fixtures, and a greater customer awareness regarding water use and conservation. Forecasting use per account to decline provides a slightly more conservative forecast of water sales and ultimately, revenue under existing rates. Other classes were estimated to remain at 2020 levels of usage per account. The impact of declining use per account is offset slightly by assumed growth in customer accounts, resulting in an annual reduction in billed water volume of about 0.9 percent per year. Table 2-2 presents historical sewer volumes based on billed sewer volume for 2018 to 2020, and the projection of volumes for the 2021 to 2031 planning period. Consistent with the forecasting approach with the water volume projection, Inside Village sewer use per account was estimated to decline 1.0 percent annually beginning in 2021. The other classes were estimated to remain at the 2020 level of sewer use per account. Comparable to the water volume projection, the impact of declining use per account is offset slightly by assumed growth in customer accounts, resulting in an annual reduction in billed sewer volume of about 0.9 percent per year. Village of Mount Prospect 2-3 Burns & McDonnell 20 Water and Sewer Rate Study Final Report Financial Planning Analysis 2.3.3 Existing Water and Sewer Rates The water and sewer rate schedule is shown in Table 2-3. The water rate consists of a base charge per bill that varies by meter size and a volumetric charge per thousand gallons of usage for both Inside and Outside Village customers. The sewer rate also consists of a base charge per bill and a volumetric charge per thousand gallons. Volume Charge $/I<ga I 21 Table 2-3: Existing Water and Sewer Rates -Inside Village $ 11.85 Existing Line -Outside Village $ 23.70 2021 No. Description $ 2.54 Base Charge Sewer- Outside Village $ 5.08 $/bill Water - Inside Village 1 5/8" $ 6.00 2 3/4" $ 6.00 3 1" $ 6.00 4 1.5" $ 9.00 5 2" $ 13.00 6 3" $ 44.00 7 4" $ 55.00 8 6" $ 82.00 9 8" $ 112.00 Water - Outside Village 10 5/8" $ 12.00 11 3/4" $ 12.00 12 1" $ 12.00 13 1.5" $ 18.00 14 2" $ 26.00 15 3" $ 88.00 16 4" $ 110.00 17 6" $ 164.00 18 8" $ 224.00 19 Sewer -Inside Village $ 5.00 20 Sewer- Outside Village $ 10.00 Volume Charge $/I<ga I 21 Water -Inside Village $ 11.85 22 Water -Outside Village $ 23.70 23 Sewer- Inside Village $ 2.54 24 Sewer- Outside Village $ 5.08 Village of Mount Prospect 2-4 Burns & McDonnell 21 Water and Sewer Rate Study Final Report Financial Plannin As a matter of practice, rates for service provided to Outside Village customers are set at 2.0 times Inside Village rates. Water and sewer rates applicable to Outside Village customers are reflective of this multiplier for both base and volume charges. The Village has implemented annual rate increases in recent years, prompted in part by inflation in operating costs but largely driven by capital investment in renewal and replacement. The 2021 water and sewer volumetric and base rates in Table 2-3 reflect an 8.0 percent increase over 2020 rates. 2.3.4 User Revenues under Existing Rates Table 2-4 and Table 2-5 present historical user charge revenues for 2018 to 2020 and a projection of user charge revenues under 2020 rates for the 2021 to 2031 planning period. The projection of user charge revenues was estimated based on the forecasted accounts and volumes factored by the schedule of 2020 water and sewer rates. The impact related to the adopted 2021 water rate increase is discussed later in this section. As shown in Table 2-4, historical water user charge revenues increased from $11.3 million to $13.1 million from 2018 to 2020, impacted by implemented rate increases and actual water demand. Forecasted user charge revenues are based on projected accounts and water volume presented in Table 2-1 and the 2020 water rates. The impact of water rates adopted for 2021 through 2025 is shown later in Table 2-9. Overall, water user charge revenues under 2020 rates are projected to decline from $13.0 million in 2021 to $11.9 million in 2031. Table 2-4: Historical and Projected Water User Revenues Une Hismriczl -j-',2018 2019 2020 2021 2022 2023 2024 2025 2026 202] 2028 2029 2030 2031 User Charee Revenues 1 —TERN/c-W--C-g, -liufde Nllage $ 1,3,5$ 1 e$ 1,A,1 5 1 0$ 1 0$ 1 0$ 1 0$ 1 0 5 1 0 5 1 O$ 1 0$ 1 0$ 1 0$ 1 281,30 6100 41,80 23,]0 06,60 90,]0 ]5,80 61,90 4920 1�3J 40 3 Water -Outside Nllage $ 2Z, $ 14,]50 $ 22,941 $ 22,900 $ 22,900 $ 22,900 $ 22,900 $ 22,900 $ 22,900 $ 22,900 $ 22,900 $ 22,900 $ 22,900 $ 22$00 4 Totel UC Revenue $ 11,259,995 $ 11,]80,208 $ 13,125,]32 $ 13,—,200 $ 12,883,900 $ 12,]64,]00 $ 12,646,600 $ 12,529,500 $ 12,413,600 $ 12,298,]00 $ 12,184,800 $ 12,0]2,100 $ 11,960,A0 $ 11,849,600 111 Forecasted slight account growth for water inside village "'t—, d—, I2) Water Inside Nllage volume declining by 1% per year, all other class' forecasted usage held -b-nt at 20201evels. As shown in Table 2-5 historical sewer user charge revenues increased from $2.8 million to $3.3 million from 2018 to 2020. Forecasted user charge revenues are based on projected accounts and sewer volume presented in Table 2-2 and the 2020 sewer rates. Overall, sewer user revenues under 2020 rates are projected to decline from $3.2 million in 2021 to $2.9 million in 2031. Village of Mount Prospect 2-5 Burns & McDonnell 22 Water and Sewer Rate Study Final Report Financial Planning Analysis Table 2-5: Historical and Projected Sewer User Revenues Line Hirto rlcal Pro'ectetl No• User Charee Revenues 2018 2019 2020 2021 2022 2023 2024 2025 202fi 2027 2028 2029 2030 2031 1 Sew er Inside(./water) 2,786,448 2,922,346 3,243,161 3,213,100 3,183,341 3,153,844 3,124,618 3,095,661 3,066,971 3,038,545 3,010,382 2,982,477 2,954,830 2,927,437 2Sewerl —d, (./o water) 2,005 2,075 2,259 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 3 Sever1, charge - - - - - - - - - - - - - - 4 Sewer Outside ('/water) 1,306 - - - - - - - - - - - - - 5 Sewer Outside (w/o water) 1,560 11685 1,821 1,800 1,600 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 11800 6 Total UC Revenues $ 2,791,318 $ 2,926,105 $ 3,247,241 $ 3,217,200 $ 3,187,441 $ 3,157,944 $ 3,128,718 $ 3,099,761 $ 3,071,071 $ 3,042,645 $ 3,014,482 $ 2,986,577 $ 2,958,930 $ 2,931,537 (1] Forecasted slight account growth for water Inside vl Mage curtomer class. (2]SewerInside Village volume decll ning by 1%per ,,all oth,rd—''fo,--d usage held constant et 20201evels 2.4 Water and Sewer Utility Expenditures Typically, a municipal water or sewer utility's primary cash expenditures include the following direct operating and capital costs: • Operation and Maintenance (O&M) Expenses • Capital Improvement Program Expenditures • Debt Service Principal and Interest Payments Each of these cash obligations is described further below. 2.4.1 O&M Expenses Table 2-6 presents the recent water and sewer O&M expense history and the projection of water and sewer system O&M expenses through the 2031 planning period. Expenses summarized on Table 2-6 reflect operating costs only; costs related to capital projects are excluded from Table 2-6 and are addressed later in this report. In recent history, water O&M expenses ranged from $10.8 million in 2018 to $11.9 million in 2020. Sewer O&M expenses ranged from $1.7 million in 2018 to $2.2 million in 2020. Anticipated 2021 O&M costs are based on the Village's approved budget. In general, projected O&M expenses are anticipated to increase from budgeted 2021 amounts at approximately 3.4 percent annually. The overall inflationary increase is a function of the following inflation rate assumptions developed in collaboration with Public Works staff. • Lake Michigan Water Supply Costs: 4.0 percent annually • Personal Services, Salaries & Wages: 2.0 percent annually • All other operating expenses: 3.0 percent annually Village of Mount Prospect 2-6 Burns & McDonnell 23 Water and Sewer Rate Final Report Financial Planninq Analvsis Table 2-6: Historical and Projected Operation and Maintenance Expenses Line I 6,500,000 Historical I Budgeted I 6,762,000 6,910,000 65,000 185,000 185,000 Projected 185,000 185,00' 185,000 185,000 Na 2014 2014 2424 2421 2422 2423 2424 2025 2425 24ZZ 242$ 2424 2430 2431 Water O&M 1Banking Fees 21,231 26,083 28,549 30,DOD 30,500 31,212 31,835 32,473 33,122 33,785 34,461 35,150 35,853 35,570 2 Customer Service 128,707 131,421 138592 141,800 144,535 147,529 150,479 153,489 156,559 159,690 162,884 165,141 169,464 172,853 3 Water Administration' 479,940 440,999 924,110 493,018 505,859 519,047 532,591 546,500 560,736 575,457 590,526 605,003 621,900 638,228 4Equipment Maintenance 462,539 539,017 499,154 5D8,572 523,829 539,544 555,730 572,402 589,574 607,262 625,479 644,244 663,571 683,478 5 LA-tenance of Buildings 285,874 257,434 251,955 287,081 293,843 300,771 307,870 315,142 322,594 330,229 338,052 345,068 354,282 362,700 6 Maintenanre of Grounds 144,277 112,171 92,704 129,386 132,727 136,158 139,680 143,297 147,011 150,825 154,741 158,763 162,893 167,134 7 Lake Michigan Water Supply 6,642,177 6,585,555 7,517,582 7,234,300 7,523,672 7,824,619 8,137,604 8,463,108 8,801,632 9,153,697 9,519,845 9,900,639 10,296,665 10,708,531 8 Water Sup ply Maint.&Repair 888,000 715,923 729,416 846,771 868,414 890,631 913,437 936,850 960,885 985,560 1,010,892 1,036,900 1,063,601 1,091,015 9 Water Distribution Ma'mt. & Rep 736,851 996,170 1,079,228 1,187,665 1,217,210 1,247,519 1,278,614 1,310,515 1,343,243 1376,822 1,411,274 1,446,622 1,482,891 1,520,105 10 Water Meter Ma'mtenance&Repair 496,444 236,773 241,624 277,694 285,465 293,458 301,680 310,136 318,834 327,781 336,985 346,451 356,189 366,206 11 Water Valve/Hydrant Maint. & Rep 506,303 404,677 410,232 451,838 463,205 474,869 486,838 499,121 511,726 524,661 537,937 551,561 565,544 579,895 12 Total Water O&M 10,792,342 10,446,224 11,913,146 11,588,125 11,989,460 12,405,357 12,836,359 13,283,033 13,745,967 14,225,770 14,723,076 15,238,542 15,772,852 16,326,715 Sewer D&M i 1 IAOl -z 1x s.se �I s'a 3sx Asx 3sx ssw "I Asx esr, 13 Banking Fees 21,231 26,083 28,549 30,00D 30,600 31,212 31,836 32,473 33,122 33,785 34,461 35,150 35,853 36,570 14 Customer Service 128,707 131,421 138,592 141,800 144,636 147,529 150,479 153,489 156,559 159,690 162,884 166,141 169,464 172,853 15 Sewer Administration" 479,940 440,999 924,110 493,018 505,859 519,047 532,591 546,500 560,786 575,457 590,526 606,003 621,900 638,228 16Equipment Maintenance 462,539 539,017 499,154 508,572 523,829 539,544 555,730 572,402 589,574 607,262 625,479 644,244 663,571 683,478 17 San itai-V Sewer Ma'mt. & Repair 570,844 673,674 598,420 808,010 828,357 849,236 870,662 892,650 915,215 938,373 962,140 986,531 1,011,565 1,037,259 18 Total Sewer O&M 1,663,261 1,811,194 2,188,825 1,981,400 2,033,281 2,086,568 2,141,299 2,197,515 2,255,256 2,314,567 2,375,489 2,438,069 2,502,353 2,568,388 19 Total Water&Sewer O&M Expenses 12,455,604 12,257,417 14,101,970 13,569,524 14,022,741 14,491,924 14,977,658 15,480,548 16,001,223 16,540,336 17,098,565 17,676,612 18,275,205 18,895,103 [1] lake Michigan Water Su pp lV Costs are Inflated at percent peryea.. [2] Personal Services, Scheduled Salaries & Wages are inflated at 2 percent per year. [3] All other costs are inflated at 3 percent per rear. [4] 2020 0&M ox pense'md,des roughly $8401, in NOPEBO and OPER exp,- - NOPE80 catch-up expenses in 2020 2.4.2 Projected Capital Improvement Expenditures Table 2-7 shows the projected capital improvement expenditures (C1P) for the 2021 to 2031 planning period. Projected capital investment totals approximately $104.7 million from 2021 through 2031, as shown on Line 27 of Table 2-7. The majority of this investment is targeted to water and sewer main rehabilitation (Lines 8 and 25, respectively), lead water service line replacement (Line 10), and combined sewer improvements (Line 23). L - No. Water I'll l Imorovemen[ Pro'ec[s 1 Wireless Telemetry System Upgrade-PLCllpgrades 2VFD Replacement 3 Deep Well Rehabilitation-Well#4 4 Deep Well Rehabilitation-Well#16 5 Deep Well Rehab IRtation-Well#17 6 NorthwestWaterCommissonlnterconn- 7 D"P Well Rehabilitation-Well#11 8 Water Main Replacement 9 Boos ter Station Pump Rehalilitation 10 Lead Water Service Line Replacement 11 Water Reservoir Number 4 Rehabilitation 12Deep Well Rehabilitation-Well#5 13 Elevated Tank Painting 14 Water Reservoir Number 16 Painting 15 Water Reservoir Number 17 Painting 16 Elevated Tank 17 Total Water Capital lmp roveme.t Projects Sewer Cao tai Improvement Pro'ec[s 18 Fairview Gardens Footing The Disconnection 19 Lift Station"'a b - Cottonwood 20 Llft Station Re Lab -Lincoln-Wego 21 Lift Station Rehabl litlon-Maple-Berkshire 22 LIR Relief 5tatlon Rehab -Fairview 23 Combined Sewer Improvements 24 Overhead Sewer Program 25 Sewer Main Rehabilitation 26 Total Se-, Capital Improvement Projects 27 Total Water and Sewer Capital Improvement Projects Village of Mount Prospect Table 2-7: Capital Improvement Program Prn;eeted 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Totals - - - 80,000 - - - 100,OOD - - - 180,000 525,000 535,000 - 5,500,000 535,0D0 - 3,300,000 65,000 65,0'0 4,500,000 5,400,000 6,500,000 6,500,000 5,500,000 6,630,000 6,762,000 6,910,000 65,000 185,000 185,000 185,000 185,000 185,00' 185,000 185,000 - - 100,000 700,000 700,0'0 700,'00 7'0,000 700,000 - 685,000 - - - - - - - - - - - - - 550,000 - - - - - 700,00D - - - - - - 500,000 - - - 500 ODD 590,000 12,435,000 4,565,000 6,350,000 7,970,000 7,385,000 7,885,000 8,315,000 7,727,000 8,445,000 130,000 525,000 535,000 535,000 - 5,500,000 535,000 7,040,000 60,042,000 185,000 1,675,000 700,000 4,900,000 685,000 650,000 700,000 500,000 500,000 500,000 2,500,000 8,425,000 80,092,000 2-7 Burns & McDonnell 24 1,850,000 680,000 - - - - - - - - - - 680,000 - 620,000 - - - - - - - - - 620,000 - - 630,000 - - - - - - - - 630,000 - - 875,000 - - - - - - - - 875,000 - 800,DD0 800,000 800,000 800,000 800,000 800,000 800,000 800,000 800,000 800,000 8,000,000 - 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 1,000,000 11000,000 11000,000 11000,000 11000,000 11000,000 11000,000 11000,000 11000,000 11000,000 11000,000 1,000,000 11,000,000 1,680,000 4,370,000 3,405,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 24,655,000 2,270,000 16,805,000 7,970,000 8,250,000 9,870,000 9,285,000 9,785,000 10,215,000 9,627,000 10,345,000 10,325,000 104,747,000 2-7 Burns & McDonnell 24 Water and Sewer Rate Study Final Report Financial Plannin 2.4.3 Existing and Proposed Debt Service Requirements Table 2-8 shows the existing and proposed debt service for the Village water and sewer utilities. Line Ne. Existing Water Debt 1 2017 2 2018A 3 2019A 4 Total Existing Debt Existing Sewer Debt 5 2017 6 2018A 7 2019A 8 Total Existing Debt Proposed Debt 9 Water Debt 10 Sewer Debt 11 Total Proposed Debt Existing and Proposed Debt 12 Total Water Debt 13 Total Sewer Debt 14 Totat Debt Service Table 2-8: Existing and Proposed Debt Service Projected 2421 2422 2423 7074 2425 2424 2427 242& 2423 24.3.4 2431 182,700 187,860 192,660 197,100 201,180 203,220 208,800 213,960 218,640 222,900 224,940 190,800 192,300 196,500 200,280 206,580 209,280 212,880 216,120 222,000 227,400 230,640 354,480 361,560 367,860 376,380 384,060 390,780 399,060 406,620 413,460 422,580 431,100 727,980 741,720 757,020 773,760 791,820 803,280 820,740 836,700 854,100 872,880 886,680 121,800 125,240 128,440 131,400 134,120 135,480 139,200 142,540 145,760 148,600 149,960 127,200 128,200 131,000 133,520 137,720 139,520 141,920 144,080 148,000 151,600 153,760 236.320 241.040 245.240 250.920 256.040 260.520 266.040 271.080 275.640 281.720 287.400 485,320 494,480 504,680 515,840 527,880 535,520 547,160 557,800 569,400 581,920 591,120 291,500 291,500 291,500 1,004,200 1,004,200 1,004,200 1,004,200 1,004,200 1,004,200 356,300 356,300 356,300 356,300 356,300 356,300 356,300 356,300 356,300 647,800 647,800 647,800 1,360,500 1,360,500 1,360,500 1,360,500 1,360,500 1,360,500 727,980 741,720 1,048,520 1,065,260 1,083,320 1,807,480 1,824,940 1,840,900 1,858,300 1,877,080 1,890,880 485,320 494,480 860,980 872,140 884,180 891,820 903,460 914,100 925,700 938,220 947,420 $ 1,213,300 $ 1,236,200 $ 1,909,500 $ 1,937,400 $ 1,967,500 $ 2,699,300 $ 2,728,400 $ 2,755,000 $ 2,784,000 $ 2,815,300 $ 2,838,300 [1] Proposed debt terms assumes 20 year term, 2.5% interest, and 1% bond issuance cost As shown on Lines 1 through 8, the Village has three outstanding debt series which provided funding for improvements on the water and sewer systems. Based on Village staff guidance the existing debt was split with 60 percent attributed to water and 40 percent attributed to sewer. The proposed plan includes two debt issues, the first in 2022 amounting to $10 million and the second in 2025 amounting to $11 million. The 2022 issue is anticipated to fund improvements on both the water and sewer systems, whereas the 2025 issue is targeted to the water system only. Proposed debt service payments are assumed to start in the year following debt issuance, based on an equal annual payment structure with a 20 -year term, an annual interest rate of 2.5 percent with a 1.0 percent issuance expense. 2.4.4 Water Utility Flow of Funds Detailed cash flow tables were developed individually for the water and sewer utility, and then combined to show the consolidated utility cash flow under the proposed plan. Table 2-9 presents the water utility cash flow, Table 2-10 presents the sewer utility cash flow, and Table 2-11 shows the consolidated utility cash flow. Beginning with the water utility, Line 1 of Table 2-9 shows user revenues under 2020 rates, identified previously in Table 2-4. Lines 2 through 12 present the revenue increases including the approved 8 percent increases from 2021 through 2025 and the proposed increases from 2026 through 2031. All revenue increases are assumed to be effective January 1 of each year indicated. As shown on Lines 7 Village of Mount Prospect 2-8 Burns & McDonnell 25 Water and Sewer Rate Study Final Report Financial Plannin through 12, 8 percent rate increases are proposed to continue through 2031. Total user revenues are summarized on Line 14. All other water revenues are summarized on Line 15 and are estimated to remain at 2021 budgeted levels, with the exception of water penalties and interest income. Water penalties are assumed to increase in proportion to the increase in user charge revenues. Interest income is calculated based on annual fund balances. Total water O&M expenses are shown on Line 17, shown previously in Table 2-6. The Village's outstanding and proposed debt is shown on Lines 18 through 20 and are identified previously in Table 2- 8. Total revenue requirements are summarized on Line 21. This amount is deducted from Line 16, total revenue, to determine the annual operating balance. With the proposed revenue adjustments, the operating balance on Line 22 is positive throughout the forecast and increasing to provide the funding needed to mitigate future debt issuance and achieve a pay-as-you-go strategy for capital improvements over time. Lines 23 through 26 project future operating reserves for the water utility. For 2021, a beginning balance of approximately $15.2 million was determined to be available for the water utility, as shown on Line 23. The annual operating balance is added to this amount to reflect cash produced by ongoing operations of the water utility. The utility intends to maintain a minimum operating balance of 90 days (or about 25 percent) of the next fiscal year's O&M, shown as the target on Line 27. Any balances exceeding this minimum are considered available for use on capital projects and are transferred for that purpose on Line 25. The water capital flow of funds is shown in Table 2-9 on Lines 28 through 34. Sources of funds for the capital plan includes the transfer of available cash from operations and the issuance of debt. As noted previously, two debt issues are proposed for the water utility amounting to $4.5 million in proceeds in 2022 and $11.0 million in proceeds in 2025. Issuance expense associated with the proposed debt issues is assumed to be capitalized and reflected in the debt service payment. Water capital improvement projects shown on Line 32 are consistent with those shown previously in Table 2-7. Line 34 of Table 2-9 shows the annual capital balance. As can be seen, the forecast shows funding sources sufficient to cover the capital uses in each year, leaving a positive capital balance on Line 34. Balances accumulate over the study period but eventually decrease as the capital funding strategy shifts to Village of Mount Prospect 2-9 Burns & McDonnell Water and Sewer Rate Study Final Report Financial Planning Analysis a pay-as-you-go capital funding approach. Table 2-9: Water Utility Financial Plan Une of Funds Projected No. 7421 2422 2423 2424 2425 241Cx 2922 2M 2473 2434 2431 Water Utility Operating Flow of Funds - 13,472,400 7,798,700 5,821,700 2,735,300 9,766,800 6,480,700 3,574,200 1,198,000 453,600 124,900 1 Revenue Under Existing Rates 13,004,200 12,883,900 12,764,700 12,646,600 12,529,500 12,413,600 12,298,700 12,184,800 12,072,100 11,960,300 11,849,600 Proposed Revenue Adjustments 4,500,000 291,500 291,500 291,500 1,004,200 1,004,200 1,004,200 1,004,200 1,004,200 1,004,200 Year Month Increase 728,000 741,700 1,048,500 1,065,300 1,083,300 1,807,500 1,824,900 1,840,900 1,858,300 1,877,100 1,890,900 2 2021 2 8.0% 953,600 1,030,700 1,021,200 1,011,700 1,002,400 993,100 983,900 974,800 965,800 956,800 948,000 3 2022 2 8.0% 1,855,900 1,020,400 1,102,900 1,092,700 1,082,600 1,072,500 1,062,600 1,052,800 1,043,000 1,033,400 1,023,800 4 2023 2 8.0% 15,162,800 2,956,300 1,091,800 1,180,100 1,169,200 1,158,300 1,147,600 1,137,000 1,126,500 1,116,000 1,105,700 5 2024 2 8.0% 1,855,900 2,363,900 2,694,200 1,168,300 1,262,700 1,251,000 1,239,400 1,228,000 1,216,600 1,205,300 1,194,200 6 2025 2 8.0% (14,062,400) (2,261,300) (2,588,000) (3,263,600) 1,250,100 1,351,100 1,338,600 1,326,20D 1,313,900 1,301,700 1,289,700 7 2026 2 8.0% 2,956,300 3,058,900 3,165,10D 3,275,300 3,389,400 1,337,600 1,445,700 1,432,300 1,419,000 1,405,900 1,392,900 8 2027 2 8.0% 1,431,200 1,546,900 1,532,600 1,518,400 1,504,300 9 2028 2 8.0% 1,531,400 1,655,200 1,639,800 1,624,700 10 2029 2 8.0% 1,638,600 1,771,000 1,754,600 11 2030 2 8.0% 1,753,300 1,895,000 12 2031 2 8.0% 1,876,100 13 Total Proposed Additional Revenue 953,600 2,051,100 3,215,900 4,452,800 5,767,000 7,163,600 8,649,000 10,229,400 11,911,200 13,701,600 15,609,000 14 Total Water User Charge Revenue 13,957,800 14,935,000 15,980,600 17,099,400 18,296,500 19,577,200 20,947,700 22,414,200 23,983,300 25,661,900 27,458,600 15 Other Water Fund Revenue 214,200 160,100 167,500 176,100 185,400 193,500 204,200 215,600 227,900 241,000 255,100 16 Grand Total Water Revenue 14,172,000 15,095,100 16,148,100 17,275,500 18,481,900 19,770,700 21,151,900 21,629,800 24,211,200 25,902,900 27,713,700 Revenue Reauirements of Funds 17 Operation and Maintenance Expense 11,588,100 11,989,500 12,405,400 12,836,400 13,283,000 13,746,000 14,225,800 14,723,100 15,238,500 15,772,900 16,326,700 Debt Service - 13,472,400 7,798,700 5,821,700 2,735,300 9,766,800 6,480,700 3,574,200 1,198,000 453,600 124,900 18 Existing G.O. Debt 728,000 741,700 757,000 773,800 791,800 803,300 820,700 836,700 854,100 872,900 886,700 19 Proposed Debt 4,500,000 291,500 291,500 291,500 1,004,200 1,004,200 1,004,200 1,004,200 1,004,200 1,004,200 20 Total Debt Service 728,000 741,700 1,048,500 1,065,300 1,083,300 1,807,500 1,824,900 1,840,900 1,858,300 1,877,100 1,890,900 21 Total Revenue Requirements 12,316,100 12,731,200 13,453,900 13,901,700 14,366,300 15,553,500 16,050,700 16,564,000 17,096,800 17,650,000 18,217,600 22 Annual Operating Balance 1,855,900 2,363,900 2,694,200 3,373,800 4,115,600 4,217,200 5,101,200 6,065,800 7,114,400 8,252,900 9,496,100 23 Beginning Balance Operating Funds 15,162,800 2,956,300 3,058,900 3,165,100 3,275,300 3,389,400 3,507,700 3,630,400 3,757,400 3,889,200 4,025,800 24 Annual Operating Balance 1,855,900 2,363,900 2,694,200 3,373,800 4,115,600 4,217,200 5,101,200 6,065,800 7,114,400 8,252,900 9,496,100 25 Transfers to Capital (14,062,400) (2,261,300) (2,588,000) (3,263,600) (4,001,500) (4,098,900) (4,978,500) (5,938,800) (6,982,600) (8,116,300) (9,354,800) 26 Ending Operating Balance 2,956,300 3,058,900 3,165,10D 3,275,300 3,389,400 3,507,700 3,630,400 3,757,400 3,889,200 4,025,800 4,167,100 27 Target Annual Operating Balance [1] 2,956,300 3,058,900 3,165,100 3,275,300 3,389,400 3,507,700 3,630,400 3,757,400 3,889,200 4,025,800 4,167,100 Water Utility Capital Flow of Funds Sources 28 Beginning Capital Balance - 13,472,400 7,798,700 5,821,700 2,735,300 9,766,800 6,480,700 3,574,200 1,198,000 453,600 124,900 29 Transfer from Operations 14,062,400 2,261,300 2,588,000 3,263,600 4,001,500 4,098,900 4,978,500 5,938,800 6,982,600 8,116,300 9,354,800 30 Debt Issuance 4,500,000 11,000,000 31 Total Capital Sources 14,062,400 20,233,700 10,386,700 9,085,300 17,736,800 13,865,700 11,459,200 9,513,000 8,180,600 8,569,900 9,479,700 Uses 32 CIP 590,000 12,435,000 4,565,000 6,350,000 71970,000 7,385,000 7,885,000 8,315,000 7,727,000 8,445,000 8,425,000 33 Total Capital Uses 590,000 12,435,000 4,565,000 6,350,000 7,970,000 7,385,000 7,885,000 8,315,000 7,727,000 8,445,000 8,425,000 34 Ending Capital Balance 13,472,400 7,798,700 5,821,700 2,735,300 9,766,800 6,480,700 3,574,200 1,198,000 453,600 124,900 1,054,700 35 Debt Service Coverage 3.55 4.19 3.57 4.17 4.80 3.33 3.80 4.30 4.83 5.40 6.02 [1] Annual Operating Balance target of 90 days O&M Existing utility debt service has been issued in the form of General Obligation bonds, to be paid from utility rate revenues. Future debt issues are assumed to be similarly structured. Although these bonds do not include covenants regarding debt service coverage (DSC), as a matter of prudent planning debt service coverage is evaluated and is shown on Line 35. DSC requirements are commonly associated with revenue bonds and generally require net revenues (defined as total utility revenue less O&M) to exceed annual debt service payments by a minimum factor that may range from 1. l Ox to 1.35x. This minimum DSC level provides assurances to bond holders that the utility has the financial wherewithal to meet its Village of Mount Prospect 2-10 Burns & McDonnell 27 Water and Sewer Rate Study Final Report Financial Planning Analys annual debt payment. Municipal bond rating agencies evaluate many criteria regarding the creditworthiness of utility debt. Debt service coverage is one of the primary indicators that is examined, and rating agencies generally reserve their stronger ratings for debt service coverage ratios that exceed 1.5x to 2.0x. As shown on Line 35, the water utility is anticipated to have DSC exceeding 1.5x to 2.Ox in each year of the forecast. 2.4.5 Sewer Utility Flow of Funds Table 2-10 presents the sewer utility cash flow. Line 1 of Table 2-10 shows user revenues under 2021 rates, identified previously in Table 2-5. Lines 2 through 6 present the revenue increases including the approved 8 percent increases from 2021 through 2025 and the proposed increases from 2026 through 2031. As shown on Line 8, sewer rate increases are anticipated to decline from 8 percent to 5 percent per year beginning in 2027. All revenue increases are assumed to be effective January 1 of each year indicated. Total user revenues are summarized on Line 14. Line 15 summarizes other sewer fund revenue, which is projected to remain at 2021 budget levels, with the exception of sewer penalties and interest income. Sewer penalties which are assumed to increase in proportion to the increase in user charge revenues and interest income are calculated based on annual balances. Line 16 shows the total operating revenue forecasted over the study period. Total sewer O&M expenses are shown on Line 17, shown previously in Table 2-6. The Village's outstanding and proposed debt is shown on Lines 18 through 20 and are identified previously in Table 2- 8. Total revenue requirements are summarized on Line 21. This amount is deducted from Line 16, total revenue, to determine the annual operating balance. With the proposed revenue adjustments, the operating balance on Line 22 is positive throughout the forecast. Lines 23 through 26 project future operating reserves for the sewer utility. For 2021, a beginning balance of approximately $2.5 million was determined to be available for the sewer utility, as shown on Line 23. The annual operating balance is added to this amount to reflect cash produced by ongoing operations of the sewer utility. The utility intends to maintain a minimum operating balance of 90 days (or about 25 percent) of the next fiscal year's O&M, shown as the target on Line 27. Any balances exceeding this minimum are considered available for use on capital projects and are transferred for that purpose on Line 25. Village of Mount Prospect 2-11 Burns & McDonnell Water and Sewer Rate Final Report Financial Planninq Analvsis The sewer capital flow of funds is shown in Table 2-10 on Lines 28 through 34. Sources of funds for the capital plan includes the transfer of available cash from operations and the issuance of debt. As noted previously, one debt issue is proposed for the sewer utility amounting to $5.5 million in proceeds in 2022. Comparable to the water utility, issuance expense associated with the proposed debt issue is assumed to be capitalized and reflected in the debt service payment. Sewer capital improvement projects shown on Line 32 are consistent with those shown in Table 2-7. Line 252,600 250,300 N.. 245,700 243,400 Sewer Utility Operating Flow of Funds 1 Revenue Under Existing Rates Proposed Revenue Adiustments Year Month Increase 262,900 2 2021 2 8.0% 3 2022 2 8.0% 4 2023 2 8.0% 5 2024 2 8.0% 6 2025 2 8.0% 7 2026 2 8.0% 8 2027 2 5.0% 9 2028 2 5.0% 10 2029 2 5.0% 11 2030 2 5.0% 12 2031 2 5.0% 13 Total Proposed Additional Revenue 14 Total Sewer User Charge Revenue 15 Other Sewer Fund Revenue 16 Grand Total Sewer Revenue Revenue Requirements 17 Operation and Maintenance Expense Debt Service 18 Existing G.O. Debt 19 Proposed Debt 20 Total Debt Service 21 Total Revenue Requirements 22 Annual Operating Balance 23 Beginning Balance Operating Funds 24 Annual Operating Balance 25 Transfers to Capital 26 Ending Operating Balance 27 Target Annual Operating Balance [1] Table 2-10: Sewer Utility Financial Plan Projected 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 3,217,200 3,187,400 3,157,900 3,128,700 3,099,800 3,071,100 3,042,600 3,014,500 2,986,600 2,958,900 2,931,500 235,900 255,000 252,600 250,300 248,000 245,700 243,400 241,200 238,900 236,700 234,500 252,400 272,800 270,300 267,800 265,300 262,900 260,500 258,000 255,600 253,300 2,285,000 270,100 291,900 289,200 286,600 283,900 281,300 278,700 276,100 273,500 (2,146,000) (2,268,700) 289,000 312,400 309,500 306,600 303,800 301,000 298,200 295,400 601,200 617,000 633,300 309,300 334,300 331,200 328,100 325,100 322,000 319,100 555,700 601,200 617,000 633,300 330,900 357,600 354,400 351,100 347,800 344,600 31 Total Capital Sources 3,009,200 8,030,900 4,702,200 2,551,400 221,300 239,200 237,000 234,800 232,600 2,669,300 3,154,800 Uses 230,200 248,800 246,500 244,200 32 CIP 1,680,000 4370,000 239,500 237,300 235,100 11900,000 11900,000 1,900,000 11900,000 11900,000 11900,000 33 Total Capital Uses 1,680,000 248,100 245,800 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 34 Ending Capital Balance 257,100 235,900 507,400 795,500 1,101,500 1,426,700 1,772,300 2,006,900 2,238,700 2,478,100 2,703,100 2,935,200 3,453,100 3,694,800 3,953,400 4,230,200 4,526,500 4,843,400 5,049,500 5,253,200 5,464,700 5,662,000 5,866,700 55,800 47,800 49,000 51,200 53,500 56,000 57,700 59,300 60,900 63,600 51,300 3,508,900 3,742,600 4,002,400 4,281,400 4,580,000 4,899,400 5,107,200 5,312,500 5,525,600 5,725,600 5,918,000 1,981,400 2,033,300 2,086,600 2,141,300 2,197,500 2,255,300 2,314,600 2,375,500 2,438,100 2,502,400 2,568,400 485,300 494,500 504,700 515,800 527,900 535,500 547,200 557,800 569,400 581,900 591,100 - - 356,300 355,300 356,300 356,300 356,300 356,300 356,300 356,300 356,300 485,300 494,500 861,000 872,100 884,200 891,500 903,500 914,100 925,700 938,200 947,400 2,466,700 2,527,800 2,947,600 3,013,400 3,081,700 3,147,100 3,218,100 3,289,600 3,363,800 3,440,600 3,515,800 1,042,200 1,214,800 1,054,800 1,268,000 1,498,300 1,752,300 1,889,100 2,022,900 2,161,800 2,285,000 2,402,200 2,468,400 501,400 514,500 528,000 541,800 556,100 570,700 585,700 601,200 617,000 633,300 1,042,200 1,214,800 1,054,800 1,268,000 1,498,300 1,752,300 1,889,100 2,022,900 2,161,800 2,285,000 2,402,200 (3,009,200) (1,201,700) (1,041,300) (1,254,200) (1,484,000) (1,737,700) (1,874,100) (2,007,400) (2,146,000) (2,268,700) (2,385,500) 501,400 514,500 528,000 541,800 556,100 570,700 555,700 601,200 617,000 633,300 650,000 501,400 514,500 528,000 541,800 556,100 570,700 555,700 601,200 617,000 633,300 650,000 Sewer Utility Capital Flow of Funds Sources 28 Beginning Capital Balance - 1,329,200 3,660,900 1,297,200 651,400 235,400 73,100 47,200 154,600 400,600 769,300 29 Transfer from Operations 3,009,200 1,201,700 1,041,300 1,254,200 1,484,000 1,737,700 1,874,100 2,007,400 2,146,000 2,268,700 2,385,500 30 Debt Issuance 5,500,000 31 Total Capital Sources 3,009,200 8,030,900 4,702,200 2,551,400 2,135,400 1,973,100 1,947,200 2,054,600 2,300,600 2,669,300 3,154,800 Uses 32 CIP 1,680,000 4370,000 3,405,000 1,900,000 11900,000 11900,000 11900,000 1,900,000 11900,000 11900,000 11900,000 33 Total Capital Uses 1,680,000 4,370,000 3,405,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 1,900,000 34 Ending Capital Balance 1,329,200 3,660,900 1,297,200 651,400 235,400 73,100 47,200 154,600 400,600 769,300 1,254,800 35 Debt Service Coverage 3.15 3.46 2.23 2.45 2.69 2.96 3.09 3.21 3.34 3.44 3.54 [1] Annual Operating Balance target of 90 days O&M Line 34 of Table 2-10 shows the annual capital balance. As can be seen, the forecast shows funding sources sufficient to cover the capital uses in each year, leaving a positive capital balance on Line 34. Similar to the water utility, sewer DSC is projected to remain above 1.5x to 2.Ox during the study period. Village of Mount Prospect 2-12 Burns & McDonnell Water and Sewer Rate Study Final Report Financial Planning Analysis 2.4.6 Consolidated Utility Flow of Funds A combined water and sewer utility detailed cash flow table is presented in Table 2-11. On a consolidated basis, proposed revenue adjustments range from 8.0 percent to about 7.4 percent for 2021 through 2031, as shown on Lines 3 through 13. Ending operating balances meet the 90 -day operating reserve in each year. The CTP is fully funded by the available cash and proposed debt issuance. The plan relies on debt initially but over time allows for the utility to achieve a pay-as-you-go strategy for capital projects over time. Table 2-11: Combined Water and Sewer Utility Financial Plan Line Projected No. 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Water & Sewer Utility Operating Flow of Funds - 14,801,600 11,459,600 7,118,900 3,386,700 10,002,200 6,553,800 3,621,400 1,352,600 854,200 1 Water Revenue Under Existing Rates 13,004,200 12,883,900 12,764,700 12,646,600 12,529,500 12,413,600 12,298,700 12,184,800 12,072,100 11,960,300 11,849,600 2 Sewer Revenue Under Existing Rates 3,217,200 3,157,400 3,157,900 3,12S,700 3,099,800 3,071,100 3,042,600 3,014,500 2,986,600 2,958,900 2,931,500 Proposed Revenue Adjustments 32 Total Capital Sources 17,071,600 28,264,600 15,088,900 11,636,700 19,872,200 15,838,800 13,406,400 11,567,600 10,481,200 11,239,200 Year Month Increase Uses 3 2021 2 8.0% 1,189,500 1,285,700 1,273,800 1,262,000 1,250,400 1,238,800 1,227,300 1,216,000 1,204,700 1,193,500 1,182,500 4 2022 2 8.0% 34 Sewer CIP 1,272,800 1,375,700 1,363,000 1,350,400 1,337,800 1,325,500 1,313,300 1,301,000 1,289,000 1,277,100 5 2023 2 8.0% 35 Total Capital Uses 2,270,000 1,361,900 1,472,000 1,458,400 1,444,900 1,431,500 1,418,300 1,405,200 1,392,100 1,379,200 6 2024 2 8.0% 36 Ending Capital Balance 14,801,600 11,459,600 1,457,300 1,575,100 1,560,500 1,546,000 1,531,800 1,517,600 1,503,500 1,489,600 7 2025 2 8.0% 37 Debt Service Coverage 3.39 3.89 2.96 1,559,400 1,685,400 1,669,800 1,654,300 1,639,000 1,623,700 1,608,800 8 2026 2 8.0% [1] Annual Operating Balance target of 90 days O&M 1,668,500 1,803,300 1,786,700 1,770,100 1,753,700 1,737,500 9 2027 2 7.4% 1,652,500 1,786,100 1,769,600 1,753,200 1,736,900 10 2028 2 7.4% 1,761,600 1,904,000 1,886,300 1,868,900 11 2029 2 7.4% 1,878,100 2,008,300 1,989,700 12 2030 2 7.4% 2,001,400 2,140,800 13 2031 2 7.5% 2,133,200 14 Total Proposed Additional Revenue 1,189,500 2,558,500 4,011,400 5,554,300 7,193,700 8,935,900 10,655,900 12,468,100 14,389,300 16,404,700 18,544,200 15 Total Utility User Charge Revenue 17,410,900 18,629,800 19,934,000 21,329,600 22,823,000 24,420,600 25,997,200 27,667,400 29,448,000 31,323,900 33,325,300 16 Other Water Fund Revenue 270,000 207,900 216,500 227,300 238,900 249,500 261,900 274,900 288,800 304,600 306,400 17 Grand Total Water Revenue 17,680,900 18,837,700 20,150,500 21,556,900 23,061,900 24,670,100 26,259,100 27,942,300 29,736,800 31,628,500 33,631,700 Revenue Requirements 18 Operation and Maintenance Expense 13,569,500 14,022,800 14,492,000 14,977,700 15,480,500 16,001,300 16,540,400 17,098,600 17,676,600 18,275,300 18,895,100 Debt Service 19 Existing G.O. Debt 1,213,300 1,236,200 1,261,700 1,289,600 1,319,700 1,338,800 1,367,900 1,394,500 1,423,500 1,454,800 1,477,800 20 Proposed Debt 647,800 647,800 647,800 1,360,500 1,360,500 1,360,500 1,360,500 1,360,500 1,360,500 21 Tota l Debt Service 1,213,300 1,236,200 1,909,500 1,937,400 1,967,500 2,699,300 2,728,400 2,755,000 2,784,000 2,815,300 2,838,300 22 Total Revenue Requirements 14,782,800 15,259,000 16,401,500 16,915,100 17,448,000 18,700,600 19,268,800 19,853,600 20,460,600 21,090,600 21,733,400 23 Annual Operating Balance 2,898,100 3,578,700 3,749,000 4,641,800 5,613,900 5,969,500 6,990,300 8,088,700 9,276,200 10,537,900 11,898,300 24 Beginning Balance Operating Funds 17,631,200 3,457,700 3,573,400 3,693,100 3,817,100 3,945,500 4,078,400 4,216,100 4,358,600 4,506,200 4,659,100 25 Annual Operating Balance 2,898,100 3,578,700 3,749,000 4,641,800 5,613,900 5,969,500 6,990,300 8,088,700 9,276,200 10,537,900 11,898,300 25 Transfers to Capital (17,071,600) (3,463,000) (3,629,300) (4,517,800) (5,485,500) (5,836,600) (6,852,600) (7,946,200) (9,128,600) (10,385,000) (11,740,300) 27 Ending Operating Balance 3,457,700 3,573,400 3,693,100 3,817,100 3,945,500 4,078,400 4,216,100 4,358,600 4,506,200 4,659,100 4,817,100 28 Target Annual Operating Balance [1] 3,457,700 3,573,400 3,693,100 3,817,100 3,945,500 4,078,400 4,216,100 4,358,600 4,506,200 4,659,100 4,817,100 Utility Capital Flow of Funds Sources 29 Beginning Capita l Balance - 14,801,600 11,459,600 7,118,900 3,386,700 10,002,200 6,553,800 3,621,400 1,352,600 854,200 894,200 30 Transfer from Operations 17,071,600 3,463,000 3,629,300 4,517,800 5,485,500 5,836,600 6,852,600 7,946,200 9,128,600 10,385,000 11,740,300 31 Debt Issuance 10,000,000 11,000,000 32 Total Capital Sources 17,071,600 28,264,600 15,088,900 11,636,700 19,872,200 15,838,800 13,406,400 11,567,600 10,481,200 11,239,200 12,634,500 Uses 33 Water CIP 590,000 12,435,000 4,565,000 6,350,000 7,970,000 7,385,000 7,885,000 8,315,000 7,727,000 8,445,000 8,425,000 34 Sewer CIP 1,680,000 4,370,000 3,405,000 1,900,000 11900,000 11900,000 11900,000 11900,000 11900,000 11900,000 11900,000 35 Total Capital Uses 2,270,000 16,805,000 7,970,000 8,250,000 9,870,000 9,285,000 9,785,000 10,215,000 9,627,000 10,345,000 10,325,000 36 Ending Capital Balance 14,801,600 11,459,600 7,118,900 3,386,700 10,002,200 6,553,800 3,621,400 1,352,600 854,200 894,200 2,309,500 37 Debt Service Coverage 3.39 3.89 2.96 3.40 3.85 3.21 3.56 3.94 4.33 4.74 5.19 [1] Annual Operating Balance target of 90 days O&M Village of Mount Prospect 2-13 Burns & McDonnell 30 Water and Sewer Rate Study Final Report Proposed Rates 3.0 PROPOSED RATES 3.1 Introduction The primary focus of Step 2, Rate Design, is the examination of revenue recovery. Generally speaking, the objective is to design rates for each utility to progress toward the following goals: • Generate adequate revenues to meet the projected operating and capital costs, while maintaining sound financial performance. • Provide revenue stability. 3.2 Existing Water and Sewer Rates The current 2021 water and sewer rate schedule is shown in Table 3-1. The water rate consists of a fixed fee that varies by meter size and a volumetric charge per thousand gallons for both Inside and Outside Village customers. The sewer rate consists of a uniform fixed fee and a volumetric charge per thousand gallons for both Inside and Outside Village customers. Village of Mount Prospect Table 3-1: Existing Water and Sewer Rates Line 2021 No. Description Base Charge $/bill Water - Inside Village 1 5/8" $ 6.00 2 3/4" $ 6.00 3 1" $ 6.00 4 1.5" $ 9.00 5 2" $ 13.00 6 3" $ 44.00 7 4" $ 55.00 8 6" $ 82.00 9 8" $ 112.00 Water - Outside Village 10 5/8" $ 12.00 11 3/4" $ 12.00 12 1" $ 12.00 13 1.5" $ 18.00 14 2" $ 26.00 15 3" $ 88.00 16 4" $ 110.00 17 6" $ 164.00 18 8" $ 224.00 19 Sewer - Inside Village $ 5.00 20 Sewer -Outside Village $ 10.00 Volume Charge $/I(gal 21 Water - Inside Village $ 11.85 22 Water - Outside Village $ 23.70 23 Sewer - Inside Village $ 2.54 24 Sewer -Outside Village $ 5.08 CIE Burns & McDonnell 31 Water and Sewer Rate Study Final Report Proposed Rates As a matter of practice, rates for service provided to Outside Village customers are set at 2.0 times Inside Village rates. Water and sewer rates applicable to Outside Village customers are reflective of this multiplier for both base and volume charges. 3.3 Proposed Water and Sewer Rates Table 3-2 shows existing and proposed water and sewer rates. Rates for 2022 through 2025 are unchanged from recommendations made in the prior rate study, reflecting the 8 percent per year increase previously approved. Water and sewer rates for 2026 through 2031 are anticipated to maintain the existing rate structure and increase in accordance with water and sewer rate increases shown previously in Table 2-9 and Table 2-10, respectively. Table 3-2: Existing and Proposed Water and Sewer Rates Table 3-3 shows the changes in monthly water bills over the study period, assuming all proposed rates are implemented through 2031. As shown on Lines 7 through 9, the impact of proposed rate increases is approximately 8 percent per year, aligning with percentage increases shown previously on Table 2-9. Village of Mount Prospect 3-2 Burns & McDonnell 32 6x''.istdro AcirntraeCi Proposed Lim 2621 2022 2023 2624 2625 2626 20127 2028 2029 2030 2031 No. Description Base Charge $/bill 5/bi11 S/bill $/b�'ll S/Ibdll S/tlbM S/bill S/b ll 5/b,11 5ji'01 5/b(II w'atse• . irnmde Village 1 5/8" $ 6.00 $ 7.00 $ 8.66 $ 9.00 $ 16.66 S 101.80 5 11.70 $ 12.6 $ 13.60 $ 14.700 $ 15.90 2 3/4" $ 6.66 $ 7.60 $ 8.60 $ 9.60 $ 10.00 $ 16.86 $ 11.70 $ 12.60 $ 13.60 $ 14.70 $ 1.5.90 3 1°` $ 6.66 $ 7,CCi� $ 8.60 $ 9.60 $ 10,00 $ 16.80 $ 11.70 $ 12.6�d1 $ 13.6�fl1 $ 14.70 $ 15.90 4 1.5" $ 9.00 $ 11.00 $ 12.06 $ 14.00 $ 15.00 $ 16.20 $ 17.50 $ 18.96 $ 20.40 $ 22.00 $ 23.50 S 2" $ 13.00 $ 15.00 $ 18.00 $ 26.00 $ 22.00 $ 23.80 $ 25.70 $ 27.80 $ 30.06 $ 32.40 $ 35.06 6 3" $ 44.00 $ 51.003 $ 59.00 $ 66.60 $ 73,00 $ 78,30 $ 85.10 $ 91.90 $ 99.30 $167.20 $115.50 7 4" $ 55.66 $ 65.60 $ 74.00 $ 53.00 $ 92.00 $ 99.401 5 167.40 $ 116.0141 $ 225.30 $135.30 $146.101 8 6" $ 82.66 $ 96.60 $ 1002,00 $ 123.00 $ 137,601 $ 148,00 5 159.801 $ 172.61 $ 486.40 $201,30 $21.7.40 9 8" $ 112.00 $ 131.00 $ 150.66 $ 169.60 5 157,00 $ 202,00 $ 218.20 $ 235.76 $ 254M $275.06 $297.0'0 Water - Outside Village 10 5/8' $ 12.00 $ 14.010 $ 16.603 $ 15.66 S 26.641 $ 21.61 $ 23,40 $ 25.20 $ 2720 $ 29.401 $ 31,80 11 3/4" $ 12.00 $ 14.010 $ 16.603 $ IBM S 26.06 $ 21.61 5 23,40 $ 25,20 $ 2720 $ 29.401 $ 31,80 12 1`" $ 12.601 $ 14. 00 $ 16.00 S 18.0]11 $ 201.66 $ 2L60 $ 23.40 $ 25,20 $ 2720 $ 29,407 $ 31,80 13 1,51" $ 15.00 $ 22.06 $ 24.00 $ 28.00 S MOO $ 32.40 5 35.6'6 S 37,80 $ 40.80 5 44,00" $ 47.66 14 2" $ 26.00 $ 34M.00 $ 36.00 $ 40.00 S 44.66 $ 47.67 S 51.40 $ 55,60 $ 60,00 $ 64.43; $ 76,60 15 3" $ 58.00 $ 162.000 $ 115.00 $ 132.00 S 146.66 $ 157.607 $ 176.20 $ 183.50 $ 195.6 $ 214A0 $ 231,60 16 4" $ 116.00 $ 136.0.'00 $ 145.00 $ 166.603 S 154.00 $ 195.50 S 214.56 $ 232.00 $ 250.6 $270.66 $292.20 17 6" $ 164.00 $ 192.00 $ 218.60 S 246.003 S 274.66 S 29&00 S 3719.60 $ 345.20 $ 372,80 $402,60 $434.80 18 8" $ 224.00 S 262.00 $ 3010,00 $ 336.103 S 374.66 S 404M S 436.46 S 471.40 $ S09,20 $550,00 5594.6 19 Sevwer- insi& Village $ 5.00 $ 5.00¢ $ 5.40 S &.840 $ 6.36 S &80 S 7.16 S 7.50 $ 7.90 $ 5.300 $ 5.70 20 Sevwer- Outside Village $ 16.00 $ 16.00 S 10,90 $ 1166 $ 12.66 S 13.60 S 14.26 S 1&.0D $ 15,80 $ 16,60 $ 17.40 VoiLirrie Charge "s/KgM 5/Kpi SjKpl S(Kpl S/M.5a1 i: g.4 51H'.g,aI 1,1K9'a1 slkgal S/Kpi 21 water . inside Village $ 11.95 $ 12.71 $ 13.66 $ 14.69 S 15.31 $ 17.67 $ 18.44 S 1992. $ 21,.51 $ 23.23 $ 2S a) 2.2 water . Outside Village $ 23.70 $ 25.42 $ 27.32 S 29.38 S 31.62 S 34.14 S 36.33 $ 39.84 $ 43.02 $ 407.46 $ 50.18 23 Sews r - inside Village $ 2.54 $ 2.79 $ 3.02 $ 3,26 $ 3.52 $ 3.8 0 $ 3.99 $ 4.1:h $ 4.40 $ 4.62 $ 4.85 2.4 Sewver- OtAs'ideVilla $ 5.09 $ 5.58 $ 6.04 $ 6.52 $ 7.64 $ 7.60 $ 7.98 $ 8.38 $ 5.6 $ 9.29 $ 9 7 Table 3-3 shows the changes in monthly water bills over the study period, assuming all proposed rates are implemented through 2031. As shown on Lines 7 through 9, the impact of proposed rate increases is approximately 8 percent per year, aligning with percentage increases shown previously on Table 2-9. Village of Mount Prospect 3-2 Burns & McDonnell 32 Water and Sewer Rate Final Report Table 3-3: Typical Water Bills Under Existing and Proposed Rates Proposed Rates Table 3-4 shows the changes in sewer bills over the study period, assuming all rate increases and proposed rates are implemented through 2031. As shown on Lines 7 through 9 the impact of proposed rate increases is approximately 8 percent per year through 2026, and then declines to 5 percent per year through 2031, aligning with percentage increases shown previously on Table 2-10. Table 3-4: Typical Sewer Bills Under Existing and Proposed Rates Billable Billable Monthly Bill Under Rates Monthly Bill Under Rates Line Flow Existing Flow Adopted I F Proposed Proposed No. No. Customer Tvoe & Meter Size Kgal 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Water Utility 1 Residential (5/8" - 1") 5.0 $ 17.70 $ 18.95 $ 20.50 $ 22.10 $ 23.90 $ 25.80 $ 27.05 $ 28.45 $ 29.90 1 Residential (5/8" - 1") 5.0 $ 65.25 $ 70.55 $ 76.30 $ 82.45 $ 89.05 $ 96.15 $ 103.90 $ 112.20 $ 121.15 $ 130.85 $ 141.35 2 Residential (5/8" - 1") 10.0 $ 124.50 $ 134.10 $ 144.60 $ 155.90 $ 168.10 $ 181.50 $ 196.10 $ 211.80 $ 228.70 $ 247.00 $ 266.80 3 Residential (5/8" - 1") 15.0 $ 183.75 $ 197.65 $ 212.90 $ 229.35 $ 247.15 $ 266.85 $ 288.30 $ 311.40 $ 336.25 $ 363.15 $ 392.25 5 Change in $ over prior year $ 2.50 $ 2.70 $ 2.80 $ 3.10 $ 3.30 $ 2.20 $ 2.40 $ 2.50 $ 2.60 $ 2.70 6 Residential (5/8" - 1") 4 Residential (5/8" - 1") $ 4.40 $ 4.70 $ 3.15 $ 3.40 $ 3.55 $ 5.30 $ 5.75 $ 6.15 $ 6.60 $ 7.10 $ 7.75 $ 8.30 $ 8.95 $ 9.70 $ 10.50 5 Residential (5/8" - 1") $ 9.60 $ 10.50 $ 11.30 $ 12.20 $ 13.40 $ 14.60 $ 15.70 $ 16.90 $ 18.30 $ 19.80 6 Residential (5/8"-1") $ 13.90 $ 15.25 $ 16.45 $ 17.80 $ 19.70 $ 21.45 $ 23.10 $ 24.85 $ 26.90 $ 29.10 Change in % over prior year 7 Residential (5/8" - 1") 8.1% 8.2% 8.1% 8.0% 8.0% 8.1% 8.0% 8.0% 8.0% 8.0% 8 Residential (5/8" - 1") 7.7% 7.8% 7.8% 7.8% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 9 Residential (5/8" - 1") 7.6% 7.7% 7.7% 7.8% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% Table 3-4 shows the changes in sewer bills over the study period, assuming all rate increases and proposed rates are implemented through 2031. As shown on Lines 7 through 9 the impact of proposed rate increases is approximately 8 percent per year through 2026, and then declines to 5 percent per year through 2031, aligning with percentage increases shown previously on Table 2-10. Change in % over prior year 7 Residential (5/8" - 1") 7.1% 8.2% 7.8% 8.1% 7.9% 4.8% 5.2% 5.1% 5.0% 4.9% 8 Residential (5/8" - 1") 8.2% 8.2% 7.9% 8.1% 8.0% 4.956 5.1% 5.1% 5.0% 5.0% 9 Residential (5/8" - 1") 8.7% 8.2% 7.9% 8.0% 8.0% 4.90/ 5.1% 5.0% 5.0% 5.0% Table 3-5 shows the combined changes in water and sewer bills over the study period, assuming all rate increases and proposed rates are implemented through 2031. Lines 7 through 9 show the percentage change from year to year which consolidates the impact of proposed water and sewer rate increases. Village of Mount Prospect 3-3 Burns & McDonnell 33 Table 3-4: Typical Sewer Bills Under Existing and Proposed Rates Billable Monthly Bill Under Rates Line Flow Existing Adopted F Proposed No. Customer Tyne &Meter Size ICgal 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Sewer Utility 1 Residential (5/8" - 1") 5.0 $ 17.70 $ 18.95 $ 20.50 $ 22.10 $ 23.90 $ 25.80 $ 27.05 $ 28.45 $ 29.90 $ 31.40 $ 32.95 2 Residential (5/8" - 1") 10.0 $ 30.40 $ 32.90 $ 35.60 $ 38.40 $ 41.50 $ 44.80 $ 47.00 $ 49.40 $ 51.90 $ 54.50 $ 57.20 3 Residential (5/8" - 1") 15.0 $ 43.10 $ 46.85 $ 50.70 $ 54.70 $ 59.10 $ 63.80 $ 66.95 $ 70.35 $ 73.90 $ 77.60 $ 81.45 Change in $ over prior year 4 Residential (5/8" - 1") $ 1.25 $ 1.55 $ 1.60 $ 1.80 $ 1.90 $ 1.25 $ 1.40 $ 1.45 $ 1.50 $ 1.55 5 Residential (5/8" - 1") $ 2.50 $ 2.70 $ 2.80 $ 3.10 $ 3.30 $ 2.20 $ 2.40 $ 2.50 $ 2.60 $ 2.70 6 Residential (5/8" - 1") $ 3.75 $ 3.85 $ 4.00 $ 4.40 $ 4.70 $ 3.15 $ 3.40 $ 3.55 $ 3.70 $ 3.85 Change in % over prior year 7 Residential (5/8" - 1") 7.1% 8.2% 7.8% 8.1% 7.9% 4.8% 5.2% 5.1% 5.0% 4.9% 8 Residential (5/8" - 1") 8.2% 8.2% 7.9% 8.1% 8.0% 4.956 5.1% 5.1% 5.0% 5.0% 9 Residential (5/8" - 1") 8.7% 8.2% 7.9% 8.0% 8.0% 4.90/ 5.1% 5.0% 5.0% 5.0% Table 3-5 shows the combined changes in water and sewer bills over the study period, assuming all rate increases and proposed rates are implemented through 2031. Lines 7 through 9 show the percentage change from year to year which consolidates the impact of proposed water and sewer rate increases. Village of Mount Prospect 3-3 Burns & McDonnell 33 Water and Sewer Rate Final Report Proposed Rates 3.4 Regional Water and Sewer Typical Bills A comparison of rates for fifteen regional utilities (including Mount Prospect) was conducted based on rates in effect as of September 30, 2021. Figure 3-1 shows a combined water and sewer bill for a 5/8 -inch meter using 5,000 gallons a month for these regional providers. As shown in Figure 3-1, the regional typical bill ranges from about $35 per month to about $100 per month, with Mount Prospect currently at about $83 a month. The average across this survey is nearly $60 per month. Figure 3-1: Residential Sewer Bill Comparison at 5,000 Gallons per Month N •11.0i /// gallons • Village of Mount Prospect 3-4 Burns & McDonnell 34 Table 3-5: Typical Combined Water and Sewer Bills Under Existing and Proposed Rates Billable Monthly Bill Under Rates Line Flow Existing Adopted I Proposed No. Customer Typeg, Meter Size Kgal 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Water and Sewer Utility 1 5/8" 5.0 $ 82.95 $ 89.50 $ 96.80 $ 104.55 $ 112.95 $ 121.95 $ 130.95 $ 140.65 $ 151.05 $ 162.25 $ 174.30 2 3/4" 10.0 $ 154.90 $ 167.00 $ 180.20 $ 194.30 $ 209.60 $ 226.30 $ 243.10 $ 261.20 $ 280.60 $ 301.50 $ 324.00 3 V. 15.0 $ 226.85 $ 244.50 $ 263.60 $ 284.05 $ 306.25 $ 330.65 $ 355.25 $ 381.75 $ 410.15 $ 440.75 $ 473.70 Change in $ over prior year 4 5/8" $ 6.55 $ 7.30 $ 7.75 $ 8.40 $ 9.00 $ 9.00 $ 9.70 $ 10.40 $ 11.20 $ 12.05 S 3/4" $ 12.10 $ 13.20 $ 14.10 $ 15.30 $ 16.70 $ 16.80 $ 18.10 $ 19.40 $ 20.90 $ 22.50 6 1" $ 17.65 $ 19.10 $ 20.45 $ 22.20 $ 24.40 $ 24.60 $ 26.50 $ 28.40 $ 30.60 $ 32.95 Change in % over prior year 7 5/8" 7.9% 8.2% 8.0% 8.0% 8.0% 7.4% 7.4% 7.4% 7.4% 7.4% 8 3/4" 7.8% 7.9% 7.8% 7.9% 8.0% 7.4% 7.4% 7.4% 7.4% 7.5% 9 1" 7.8% 7.8% 7.8% 7.8% 8.0% 7.4% 7.5% 7.4% 7.5% 7.5% 3.4 Regional Water and Sewer Typical Bills A comparison of rates for fifteen regional utilities (including Mount Prospect) was conducted based on rates in effect as of September 30, 2021. Figure 3-1 shows a combined water and sewer bill for a 5/8 -inch meter using 5,000 gallons a month for these regional providers. As shown in Figure 3-1, the regional typical bill ranges from about $35 per month to about $100 per month, with Mount Prospect currently at about $83 a month. The average across this survey is nearly $60 per month. Figure 3-1: Residential Sewer Bill Comparison at 5,000 Gallons per Month N •11.0i /// gallons • Village of Mount Prospect 3-4 Burns & McDonnell 34 Water and Sewer Rate Study Final Report Proposed Rates 3.5 Water and Sewer Service Affordability Many communities experience concerns over affordability with providing their water and sewer services to customers. The US EPA provides guidance for interpreting annual water and sewer costs as a percent of median household income (MHI) to evaluate affordability. The methodology developed by the EPA and reflected herein was designed to consider the impact of compliance with the Clean Water Act. Generally speaking, affordability in this context is viewed as "low burden" if the total water and sewer bill per year is less than 2 percent of MHI; "medium burden" if the total annual bill is between 2 percent and 4 percent of MHI; and "high burden" if the total annual bill is greater than 4 percent of MHI. Mount Prospect bills its customers for water treatment and distribution services and sewer collection services. However, sewer treatment set -vice for Mount Prospect customers is provided by the Metropolitan Water Reclamation District of Greater Chicago (MWRDGC), and their associated costs of sewer treatment are recovered through property taxes. The EPA's affordability methodology and perspective on relative "burden" reflects the total cost of sewer service, including both collection and treatment. To understand the total cost for water and sewer service provided to a typical residential customer, the cost of MWRDGC treatment has been estimated. Table 3-6 shows affordability analysis of a residential water and sewer customer, including sewer treatment. Line 1 represents the costs paid by a residential customer using 5 kgal per month for water treatment and distribution and sewer collection service provided by Mount Prospect. Lines 3 through 5 show the estimated cost of sewer treatment provided by MWRDGC applied to a median household value in Mount Prospect and MWRDGC's rate. Line 6 shows the total cost of water and sewer service for a 5 kgal residential customer with a median household value of $330,000 to be about $1,400 per year. As shown on Line 8, the total cost for water and sewer set vice represents about 1.7 percent of the projected 2021 Mount Prospect MHI, indicating the combined annual water and sewer cost to be "low burden" in terms of affordability. Village of Mount Prospect 3-5 Burns & McDonnell 35 Water and Sewer Rate Final Report Proposed Rates [1] Mount Prospect monthly residential cost for water service and sewer collection service [2] 2019 5 -Yr ACS inflated to 2021 using average annual growth rates since 2010 (1.8%) Village of Mount Prospect 3-6 Burns & McDonnell 36 Table 3-6: Mount Prospect Affordability Analysis Line No. Existing Mount Prospect Water & Sewer Costs [11 2021 1 Monthly Bill: 5/8" using 5kgal/month $ 82.95 2 Annualized Bill $ 995.40 Estimated Sewer Treatment Costs (MWRDGC) 3 Equalized Assessed Property Value $ 106,436 4 MWRDGC Levy ($/$100 assessed property value) $ 0.3784 5 Total Annual Cost of Sewer Treatment (Line 3/ 100 * Line 4) $ 402.75 6 Total Water and Sewer Service Cost per Year (Line 2 + Line 5) $ 1,398.15 7 M H I [21 $ 82,629 8 Annual Water and Sewer cost as % of MHI (Line 6/ Line 7) 1.7% [1] Mount Prospect monthly residential cost for water service and sewer collection service [2] 2019 5 -Yr ACS inflated to 2021 using average annual growth rates since 2010 (1.8%) Village of Mount Prospect 3-6 Burns & McDonnell 36 Water and Sewer Rate Study Final Report Proposed Rates 3.6 Statement of Limitations In preparation of the Village of Mount Prospect Rate Study (Study), Burns & McDonnell relied upon information provided by the Village. The information included various analyses, computer-generated information and reports, audited financial reports, and other financial and statistical information, as well as other documents such as operating budgets and current rate schedules. In addition, input to key assumptions regarding expected future levels of revenue, sales, and expenditures was provided by Village staff to Burns & McDonnell. While Burns & McDonnell has no reason to believe that the information provided, and upon which Burns & McDonnell has relied, is inaccurate or incomplete in any material respect, Burns & McDonnell has not independently verified such information and cannot guarantee its accuracy or completeness. Estimates and projections prepared by Burns & McDonnell relating to financial forecasting and costs are based on Burns & McDonnell's experience, qualifications, and judgment as a professional consultant. Since Burns & McDonnell has no control over weather, cost and availability of labor, material and equipment, labor productivity, contractors' procedures and methods, unavoidable delays, economic conditions, government regulations and laws (including interpretation thereof), competitive bidding, and market conditions or other factors affecting such estimates or projections, Burns & McDonnell does not guarantee the accuracy of its estimates or predictions. Village of Mount Prospect 3-7 Burns & McDonnell 37 BURNS `MSDONNELL. CREATE AMAZING. Burns & McDonnell World Headquarters 9400 Ward Parkway Kansas City, MO 64114 O 816-333-9400 F 816-333-3690 www.burnsmcd.com