1. Mark Beauchamp Utility Financial Solutions, LLC
Groton Utilities: Wastewater Cost of Service, Financial Plan, and Rate Design
Mark Beauchamp
Utility Financial Solutions, LLC

2. Utility Financial Solutions, LLC
International consulting firm providing financial services to utilities across the United States, Guam, Canada and the Caribbean
Instructors for cost of service and financial planning for AWWA and APPA.
Hometown Connections preferred vendor
Previous Class A Wastewater License (Class Four)

3. Objectives Financial Projections and Targets Long term capital plan
Debt Coverage Ratios
Minimum Cash Reserves
Target Operating Income
Long term capital plan
Bonding requirements for preliminary capital replacement plan
Review long term rate adjustments to meet bonding and cash needs requirements of the Wastewater Department

4. Situation
Past funding was to cover operating expense that included limited capital improvements. Capital expenses were primarily for emergency work requirements
System is aged (69% (Ideal 50%) depreciated)
Accounting records indicate the system is $12.5 million behind in capital investment
System is 59% leveraged in debt and debt is expected to increase to fund future asset replacements
Cash reserves below minimum cash requirements needed to operate, maintain and fund capital improvements
Original plan to transition from tax funded to rate funded utility
Customers deduct meters resulted in original plan overstating revenues by approximately $1.0 million

5. Study Objectives
Establish a plan to fund future capital improvements and identify sources
Plan is to fund capital replacements through a combination of rates, bond issuances, grants and low interest federal loans
Identify cash needs to operate, maintain and fund capital replacements of the Wastewater Department
Cash reserves are maintained to fund emergencies, capital replacements and meet working capital needs of Wastewater Utility
Calculate debt coverage requirements to ensure the utilities ability to issue debt to fund future capital replacements
Develop a plan with a long term rate track to meet financial targets over a number of years

6. Plant Asset Review

7. JUPITER POINT PUMP STATION
PUMP STATIONS
JUPITER POINT PUMP STATION
WESTSIDE PUMP STATION

8. COLLECTION SYSTEM

9. POLLUTION ABATEMENT FACILITY

10. Development of Financial Plan and Key Financial Targets

11. Assumptions

12. Financial Projection (no rate change)

13. Financial Projections (Based on Current Capital Improvement Plan)

14. Cash Targets
Why does a utility need a “Cash Reserve” and what is it used for?
Pay expenses
Fund system improvements help ensure reliability
Pay Debt Service
Fund unanticipated cost contingencies (Risk)
Phase in large rate adjustment
Keep utility healthy for future management

15. Minimum Cash Reserve (No Rate Changes, with bonding)

16. Debt Coverage Ratio (No Rate Changes, with bonding)

17. Target Operating Income (No Rate Changes, with bonding)