1. 1 City of Cocoa Michael Burton - President Andrew Burnham - Sr. Vice President Eric Grau - Project Consultant Presented by: Water, Sewer & Reclaimed Water Rates Discussion April 28, 2010

2. Introduction and Overview  Burton & Associates  Multi-year financial planning and rate services to local governments  Emphasis in water resources rate making  Some of our other similar clients in FL  St. Pete, Pinellas County, Deltona, Lake Worth, St. Cloud, Fort Lauderdale  Michael Burton – President – 30 yrs of industry experience  Co-author of AWWA manual M54 Rate Making for Small Systems  Andrew Burnham – Sr. Vice President – 10 yrs of industry experience  Over 300 water and wastewater rate/financial planning projects  Overview of presentation  Scope of Rate Study  Results of each component of the Rate Study 2

3. Scope of Study Components of the Rate Study: 1. Development of a plan(s) of multi-year rate revenue adjustments  Applicable to Water, Sewer, and Reclaimed Water services 2. Evaluation of current rate structure and development of recommended modifications as appropriate 3. Preparation of comparative monthly residential rate survey 4. Update of water and sewer impact fees 5. Assist City staff with cost computation templates for the update of certain miscellaneous service charges 3

4. Multi-Year Rate Revenue Adjustments - Overview  Key Financial Parameters  3 Month Operating Reserve  Common Industry Target & Level for Good Utility Systems per Rating Agencies  Minimum Debt Service Coverage of 1.50x net income  Target of Rating Agencies for Good Utility Systems  Funding or renewal and replacement requirements  $10 million per year per CH2MHill asset inventory/assessment  Total expenditures currently exceed total revenues  FY 2010 operating cash flow shortfall of over $3 million 4

5. Multi-Year Rate Revenue Adjustments - Results  Plan of annual rate revenue adjustments are required  Higher near-term adjustment(s) for cash flow and to maintain reserves  Annual 5% increases starting on 10/1/11 to fund R&R requirements, increases in O&M and to maintain reserves and debt coverage  Developed two alternative plans for near-term  Option 1: 17% rate revenue increase on 10/1/10  Option 2: 9% rate revenue increase on 7/1/10, 8% increase on 10/1/10  Rate structure changes can be implemented with either option and will result in different customer impacts  Staff & Consultant recommend Option 2 w/rate structure changes on 7/1/10 5

6. Rate Structure Modifications  Current rate structure is generally fair and equitable  Recommend minor modifications to water rate structure to:  Provide stronger price signal to discretionary use to promote conservation and maintain affordability for low volume users  Reflect current average use for all customers by meter size  Water rate structure modifications include:  Changing tiers for 3/4” customers from 8/16/24/24+ to 6/12/24/24+  Adjusting rates in each tier to provide greater price signal to discretionary use  Adjusting consumption in tiers for all other meter sizes based upon average use by meter size  Recommended rates embody 9% revenue increase from Option 2 and would be effective 7/1/10  No rate structure changes for sewer or reclaimed water rates  Existing rates adjusted for 9% rate revenue increase and price elasticity effects 6

7. Customer Impacts – Outside City Water Only Option 2 (Includes 9% Revenue Increase)  Low volume users (41%)  Up to 3,000 gal. / mo.  $.10 to $.40 increase  Typical/Avg. users (32%)  4,000 - 6,000 gal. / mo.  $.50 - $.70 increase  Higher volume users (27%)  >6,000 gal. / mo.  Bills increase at same use  Conserve to avoid increase 7

8. Customer Impacts – Inside City Water & Sewer Option 2 (Includes 9% Revenue Increase)  Low volume users (51%)  Up to 3,000 gal. / mo.  $1 to $2.50 increase  Typical/Avg. users (30%)  4,000 - 6,000 gal. / mo.  $3 - $4 increase  Higher volume users (29%)  >6,000 gal. / mo.  Bills increase at same use  Conserve to avoid increase 8

9. Other Customer Impacts Option 2 (Includes 9% Revenue Increase) 9

10. Water Residential Rate Survey Results 10

11. Water & Sewer Residential Rate Survey Results 11

12. Update of Impact Fees  Definition:  Charges intended to recover unit cost of expansion-related facilities from new connections  Calculation:  Based upon reconstruction cost new less depreciation of existing facilities (these facilities will be used to serve growth in the near-term)  Results - $ per ERC (Equivalent Residential Connection):  Water Impact Fee:  Current = $1,000  New = $1,802  Sewer Impact Fee:  Current = $1,250 + $1,450 = $2,700  New = $2,715  Results are in-line with others  Discretionary fees 12

13. Water Impact Fee Survey Results  Average Water Fee (Excluding Cocoa) = $1,725  Updated Water Fee for Cocoa = $1,802 13

14. Water & Sewer Impact Fee Survey Results  Average Water Fee (Excluding Cocoa) = $1,725  Average Sewer Fee (Excluding Cocoa) = $2,475  Updated Water Fee for Cocoa = $1,802  Updated Sewer Fee For Cocoa = $2,715 14

15. Miscellaneous Service Charges  Charges to individual customers for specific services requested  Include such things as meter testing, service initiation, reconnection, service charges, etc.  Provided cost computation templates to City staff to update costs of providing various services  City staff will populate the templates and bring back appropriate ordinance/resolution amendments 15

16. 16 Discussion