1. MOUNTAIN REGIONAL WATER
2018 Budget Recommendations
and
2017 Budget Amendments
to the
Summit County Council
November 1, 2017

2. 2018 Ongoing Budget Issues Revenue Fluctuates Significantly
Water Sales Impacted by Weather
Development Related Collections Affected by Building Economy
Mitigate Risk from Fluctuating Revenue
Revenue Projections Based Upon Long-term Averages
Include Contingencies in Revenue Budgets
Maintain Cash Reserves
Future Rate Increases Driven By:
Increasing Debt Payments
Higher Weber Basin Lease Fees
Expenses Largely Fixed or Defined
Debt Service
Weber Basin Lease Fees
Power

3. 1.08 Allocation of Cash Payments
58% of Cash Payments Locked In
Debt Payments 35%
Weber Basin Lease Fees 14%
Power Costs 9%
Efficiency Measures – Power Costs Are Only 9% of 2018 Budget According to State DDW Study, MRW Saving $400,000 Per Year Without Efficiency Measures, Power would be 14% MRW Currently Evaluating Whether Positions Vacated by Retirement over the Next Few Years Can be Eliminated to Reduce Future Rate Increases

4. 2018 Budget Overview
1.03 Retail Water Consumption Rebounded in 2016 and Development Related Collections Remain Strong 1.05 Major Wholesale Water Contracts 1.06 District Water Production 1.07 Operations Expense Contingency 1.08 No Rate or Fee Increases Needed Until Debt Coverage Ratio 1.11 District Cash & Reserves 1.12 Personnel & Compensation Revenue Expenses Debt Service Budget 4.0 Capital Budget Operating Budget Amendments Debt Service Budget

5. 1.03 Retail Water Consumption Rebounds
0.49 Acre Feet Per Culinary Customer
Increase Due to Hot, Dry Weather
Increased Water Sales
Fund Small Capital Projects & Equipment
Built Up Cash Reserves

6. 1.03 Retail Water Sales Vary Up to $1.04 M (15.2%) A Year
Assumes 2016 Rates and Number of Customers for All Years from 2011 to 2016 Calculated Based upon Actual Monthly Consumption Over Six-Year Period $1.04 M (15.2%) Variance between Hot Dry Weather and Cool Wet Weather

7. 1.03 Two Retail Water Sales Contingencies Reduce Risk
$150K to $200K Budget Contingency
Represents 2.0% of Retail Water Sales
Reduces Downside Risk to $300 K to $350 K
$1.0 M Stabilization Reserve
Represents 13.6% of Retail Water Sales
Provides Funding for Debt Payments for up to three years of significant revenue shortfalls

8. 1.04 Development Related Collections Remain Strong
Impact Fee Collections Strongly Correlate with New Water Connections 10 Year Average New Connections 74 Assumed in 2018 Budget Year Average Impact Fee $8,100 (Average Includes Prepaid Connections)
Risk Mitigated with Impact Fee Cash Reserves
If collections exceed $600,000 in any given year, the additional amount is put into reserves, as has happened the past 3 years
If collections fall below $600,000 in any given year, the shortfall is taken from the reserves, as happened in the last recession
Projected 2017 Year-end Unallocated Balance is $1.2 M

9. 1.05 Major Wholesale Water Contracts
Total Projected 2018 Revenue of $1.56 M
Take-or-Pay Helps Mitigate Variability in Retail Water Sales
Represents 17.2% of Total Water Sales
Park City Wheeling
Has Lost Canyon Rights Up to 2,900 Acre Feet
Average Wheeled Since ,504 Acre Feet
Take-or-Pay Contract (Pay for all 2,900 AF) Rate Methodology Outlined in Contract
2018 Projected Revenue $615, Increase in Higher Lost Canyon Production Costs
2017 Projected Revenue $615, Offset by 2017 Budget Savings Credit
Weber Basin Regionalization (Summit Water)
Take-or-Pay Contract (Pay All Contracted Water)
2018 Revenue $940,800 for 800 Acre Feet $51,200 Pass-thru Higher Production / Treatment Costs
2017 Revenue $889,600 for 800 Acre Feet

10. 1.06 District Water Production
Bulk Wholesale Water Sales 50% of Production
Park City Started Taking Water in 2012
Summit Water Started Taking Water in 2015
2017 Projected Production ,684 AF
2018 Projected Production ,900 AF
Based Upon Customer Growth
and Park City Take More Water

11. 1.07 Operations Expense Contingency
Operations Budget Includes $150,000 Contingency District Historically Has Not Spent Contingency Since 2011, Operating Expenses Average $205,037 Under Budget Revenue Shortfalls Led to Budget Cuts in 2009 and 2010

12. 1.08 No Rate or Fee Increases Needed Until 2019
Debt Payments Increase $773,800 between 2017 & 2019
Includes Debt Paid From Water Sales & Impact Fees
$450,000 Increase in Payments to Weber Basin between 2017 and 2020
Likely Need Rate Increases in 2019 and 2020
District Set Aside 30% of Regionalization Proceeds
Phase in Rate Increase Over 4 to 5 Years by Prepaying Debt
Project Monthly Rate Increases of $2.50 to $4.00 Annually for 4 to 5 Years
Otherwise, Combined Monthly Rate Increase of $12 to $18 in 2019 and 2020

13. 1.10 Debt Coverage Ratio
Parity Debt Coverage Must be 1.25 or Higher Pursuant to Bonding Requirements
For 2018, Projected Parity Coverage Ratio is 1.66
Benefits from One-time $630,503 Drop in Debt Service Requirements
The Ratio When All Debt is Included is 1.52
(Non-parity Debt Includes Weber Basin and Zions Lease Purchases)
It is Projected that $1,886,500 in Additional Cash Will Be Generated
Capital Facility Reserves Mandatory Deposit $ 322,700
Increase Operating Cash to Maintain Policy Level ,800
Regionalization Reserves ,200
Capital Projects 1,181,800

14. 1.11 Cash (Unrestricted) District’s Cash Position Currently Strong
Debt Restructuring in 2012
Strong Building Economy
Rate Increases
Hot Weather in 2016 and 2017
Unrestricted Cash Has Remained Above the Policy Minimum of 120 Days Consistently Since 2014
Unrestricted Cash Can be Used for Any Legitimate District Purpose
Other Cash is Restricted for Specific Purposes
Debt Payments
Customer Deposits
Facility Repairs, Replacement & Construction
Rate Stabilization Funds
Bond Proceeds for Construction
Impact Fee and Assessment Collections

15. 1.11 Cash (Debt Reserves Held by District)
Reserves Available to Make Debt Payments in Case Revenue Sources Fall Short of Budget Projections
$1.0 M Rate Stabilization Fund Created in 2011
Reduced Reserves Held by Trustee by $3.5M
Other Debt Reserves Held By the District Include:
Special Assessment Reserves
Impact Fee Reserves
Impact Fee Collections are Cyclical
Collections Beyond Projections Placed Into Reserve Each Year
When Collections Fall Under Budget, Money is Taken Out of Reserves to Make Debt Payments,
as Happened During the Last Recession

16. 1.11 Cash (Capital Facility Reserves)
Goal to Maintain Between $750,000 and $1.0 M
Use Restricted to:
Emergency Repairs
Acquire Capital Equipment (Typically Use Cash from Prior Years)
Small Capital Projects (Typically Use Cash from Prior Years)
Facility Repair & Replacement (Typically Use Bonds)
New Facility Construction (Typically Use Bonds)
Used During Last Recession to Fund Critical Small Capital Projects
2017 Capital Budget Includes $500,000 of these Reserves for the Meter Replacement
Projected Year-End 2017 Balance is $1.0 Million
2018 Capital Budget Includes $50,000 of these Reserves for the Meter Replacement

17. 1.12 Personnel & Compensation
No New Positions
Recommended Pay Increases
2.0% COLA
2.0% Average Merit
4.0% Total Average
Strong Job Market – At Full Employment
Retain Employees
Adopt Summit County’s Health Program
Increase Amount of Premium Paid by Some MRW Employees
Incentivize Shift to Select Med and HSAs

18. 2.02 2018 Revenue Total Increase $ 847,500 7.6%
2018 Revenue Projections Based Upon:
Retail Water Sales Increase $595,700 (8.8%)
160 New Customers Using Water
$300K Correction in Base Retail Water Sales
Summit Water Pass-Thru
To cover higher production and treatment costs
Ten-Year Average New Water Connections – 74
Interest Earnings Higher Due to Higher Interest Rates
Promontory Contract Assessment Increase $170,700
Assessment Related Debt Increasing Same Amount

19. 2.03 2018 Operating Expenses Total Increase $ 414,200 5.3%
Non-cash Depreciation $ 100,000
Total Cash Increase $ 314,200 (5.1%)
Weber Basin Cash Increase ,300
MRW Cash Increase ,900 (3.0%)
Compares to 4.2% Customer Growth and 2.0% Inflation
Energy & Resource Management $146,100
Transferred Employee from Distribution
Public Services ,700
Service Order Operator Transferred from Distribution
in early 2017 – now budgeted for a full year
Financial Management ,100
Potential Increase in Audit Costs

20. 2.03 2018 Non-operating Expenses
Total Decrease $ 58,800 (3.7%)
Interest Expense / Bank Fee drop due to 2017 principal payments

21. 3.0 2018 Debt Service Budget Parity Debt Coverage 1.66
Minimum Required 1.25
Total Debt Coverage 1.52
Total 2018 Debt Service Requirement Decreased $630,503

22. 4.0 2018 Capital Budget Total Request - $1.52 M Funding Sources
All From Cash Reserves
No New Debt
Summit Park $400,000
Willow Creek / Atkinson Interconnect ,000
Meter Program ,000
Capitalize Personnel Costs ,000
Small Projects & Equipment ,000
Replace Older Vehicles & Dump Truck
Minor Upgrades
Impact Fee Study ($5K to $10K)

23. 5.01 2017 Amended Operating Budget
No Increase
Transfer Funds
Increase Online Banking Fees $10,500
Increasing Transaction Volume
Bank Fee Increase
Funded with Other Cuts
Financial Management – Unused Professional Services Budget
Legal Services Savings – County Contract

24. $1.42 M Increase 5.01 2017 Revenue Projections Strong Customer Growth
Hot Dry Weather
Strong Customer Growth
Strong Building Economy
(Blackstone Flats – LV 4)
Fund Additional Capital Projects

25. 5.02 2017 Debt Service Budget Parity Debt Coverage Projected 1.61
Increase Due to Higher Revenue Collections