Water Pollution Control Utility Financial Planning Study

Transcription

1 City of Pocatello 911 North 7th Avenue P.O. Box 4169 Pocatello, ID Water Pollution Control Utility Financial Planning Study June 16, 2014 Report Prepared By: E Arapahoe Rd. Tower II, Suite 600 Centennial, CO (720)

2 Table of Contents Contents 1. Executive Summary Introduction Definitions Assumptions Study Findings and Recommendations Financial Forecast Cost of Service Analysis Rate Design System Capacity Fees Financial Plan Introduction Capital Improvement Fund Reserves Sources of Funds Uses of Funds Operating Fund Reserves Revenue Revenue Requirements Cash Flow Analysis Cost of Service Analysis Introduction Test Year Test Year Cost of Service Functional Cost Components Allocation to Cost Components Allocation of Costs to Customer Classes Units of Service Unit Costs of Service Customer Class Cost of Service Rate Design Introduction Existing Rates Proposed Rates Typical Monthly WPC Bills System Capacity Fees Introduction City of Pocatello WPC Utility Financial Planning Study i

3 Table of Contents 5.2. System Buy-in Method System Equity Capacity Units Fee Calculation Appendices A. Financial Forecast Tables B. Cost of Service Analysis Tables C. Rate Design Tables D. System Capacity Fee Tables E. Presentation City Council Study Session June 5, 2014 City of Pocatello WPC Utility Financial Planning Study ii

4 City of Pocatello Section 1: Executive Summary

5 1 1. Executive Summary 1.1. Introduction The City of Pocatello, Idaho (City), through its water pollution control (WPC) utility, provides wastewater collection and treatment services to approximately 16,900 customers, including the City of Chubbuck customers south of I-86 and wholesale wastewater treatment service to the City of Chubbuck customers north of I-86. The City s WPC utility is financially self-sufficient with funding for capital and operating requirements derived primarily from rates. The utility is responsible for planning, constructing, operating, and maintaining wastewater facilities. The City authorized Raftelis Financial Consultants (RFC) to complete this study to review the WPC utility s financial standing and assure its continuing financial viability. The study includes: Update of financial forecasts for the study period. Analysis of customer class cost of service. Design of rates. Update of system capacity fees Definitions There are terms used repetitively throughout the report that are defined as follows: References made to fiscal year (FY) mean year ending September 30. Existing WPC rates are rates in effect beginning December 19, Study period means the five-year period, FY 2015 through FY Assumptions This study is based on numerous assumptions. Changes in these assumptions could have a material effect on study findings. RFC incorporated the following key assumptions into the study: The number of accounts will increase about 0.5% annually. Billable usage per account will be constant. Costs will change as follows: Capital costs will increase 2.5% annually. City of Pocatello WPC Utility Financial Planning Study 1-1

6 Section 1 Executive Summary Most operation and maintenance (O&M) expenses will increase 2.5% annually. The exceptions are noted below. Gas/Oil costs will increase 5.0% annually. Electricity costs will increase 8.0% annually. Minimum reserve levels are as follows: Operating fund 90 days annual O&M. Capital improvement fund 2.0% of fixed asset value. Two new employees (not presently budgeted) will be hired during the study period: One Billing Department employee in 2015 (33% cost allocation to WPC). One Dig-Line Location Service employee in 2016 (33% cost allocation to WPC) Study Findings and Recommendations Financial Forecast Projected WPC service revenue under existing rates is inadequate to meet revenue requirements and sustain minimum reserves throughout the study period. RFC projects that rates may need to be adjusted at the beginning of each fiscal year to produce the WPC service revenue shown in the tabulation below to maintain the financial viability of the WPC utility. RFC recommends annually updating the WPC utility s five-year financial plan to recognize changes in growth, operating expenses, capital improvement needs, and capital financing requirements. Section 2 describes the development of the WPC financial plan. Fiscal Year Ending September 30 Revenue from Existing Rates WPC Utility Revenue from Proposed Rate Adjustments Total 2015 $7,758,800 $2,250,000 $10,008, ,788,700 2,560,200 10,348, ,818,800 2,881,700 10,700, ,849,100 3,215,100 11,064, ,879,500 3,560,800 11,440,300 City of Pocatello WPC Utility Financial Planning Study 1-2

7 Section 1 Executive Summary Cost of Service Analysis RFC completed a comprehensive cost of service analysis in accordance with standard methods supported by the Water Environment Federation (WEF) in its Systems Manual of Practice, No. 27, Financing and Charges for Wastewater. This analysis determines the cost of providing WPC service to each customer class and provides guidance for design of the proposed rates Rate Design Existing WPC rates have been in effect since December 19, 2013 and have the following structure: The single family rate is a flat monthly charge. Non-single family rates consist of a monthly service charge and a volume rate. Circuit breaker rates are 70% of existing rates for single family customers. Outside City rates, except for Chubbuck, are 20% greater than inside City rates. Chubbuck rates for customers located south of I-86 are the same as inside City non-single family rates. Chubbuck rates for customers located north of I-86 are applied to metered wastewater flows received at the treatment plant. Industrial rates are applied to monitored flows and strengths of each customer. Septage rates are applied to the volume delivered to the treatment plant. RFC developed proposed rates to increase WPC service revenue by the amounts developed in the financial forecast and to transition to class cost of service rates over the study period. Proposed rates retain the existing rate structure. Table 1-1 compares existing and proposed WPC rates over the study period. Monthly single family bills will increase $6.37 per month under proposed 2015 rates. Table 1-2 compares typical monthly WPC bills under existing and proposed rates over the study period System Capacity Fees The WPC capacity fee includes separate fees for the treatment plant and the collection system. Table 1-3 compares existing and proposed WPC treatment plant capacity fees. The proposed 2015 fee for the 1-inch and smaller water meters increases $130. Table 1-4 compares existing and proposed WPC collection system capacity fees. The proposed 2015 fee for the 1-inch and smaller water meters increases by $50. City of Pocatello WPC Utility Financial Planning Study 1-3

8 City of Pocatello, ID Table 1-1 WPC Utility 6/16/2014 Comparison of Existing and Proposed Monthly Rates Line Existing Proposed No. Customer Class $ $ $ $ $ $ Inside City 1 Residential Single Family Circuit Breaker All Other Customers 3 Service Charge, $ per bill Volume Charge, $ per 1,000 gallons Outside City (a) 5 Residential Single Family JR Simplot (b) 6 Service Charge, $ per bill Volume Charge, $ per 1,000 gallons All Other Customers 8 Service Charge, $ per bill Volume Charge, $ per 1,000 gallons Chubbuck 10 Service Charge, $ per bill Volume Charge, $ per 1,000 gallons 11 North of I South of I Industrial Service Charges (b) 13 Service Charge, $ per bill Volume Charge, $ per 1,000 gallons Biochemical Oxygen Demand (BOD), $ per pound (c) Total Suspended Solids (TSS), $ per pound (c) Total Kjeldahl Nitrogen (TKN), $ per pound (d) Phosphorus (P), $ per pound (e) Fats, Oils, Grease (FOG), $ per pound (> than 100 mg/l) Septage, $ per gallon (a) Outside City rates are 20 percent greater than Inside City. (b) JR Simplot pays for its own collection system so cost of service volume charge differs from other outside City customers. (c) Rate applies to all strength. (d) Rate applied to all strength > 35 mg/l. (e) Rate applied to all strength > 7 mg/l. Prepared by Raftelis Financial Consultants

9 City of Pocatello, ID Table 1-2 WPC Utility 6/16/2014 Comparison of Monthly Bills Under Existing and Proposed Rates for Inside City Customers Monthly Existing Proposed Usage ,000 gal $ $ $ $ $ $ Single Family Nonresidential Prepared by Raftelis Financial Consultants

10 City of Pocatello, Idaho Table 1-3 WPC Utility 6/16/2014 Proposed Treatment Plant Capacity Fee Schedule Current Proposed Fees Description Fee $ $ $ $ $ $ Water Meter (a) Size Capacity Ratios 3/ ,410 1,540 1,570 1,680 1,800 1, ,410 1,540 1,570 1,680 1,800 1, / ,820 3,080 3,140 3,360 3,600 3, ,510 4,930 5,020 5,380 5,760 6, ,870 10,780 10,990 11,760 12,600 13,580 (a) Water meter sizes greater than 3 inches assessed on an individual basis. Prepared by Raftelis Financial Consultants

11 City of Pocatello, Idaho Table 1-4 WPC Utility 6/16/2014 Proposed Collection System Capacity Fee Schedule Current Proposed Fees Description Fee $ $ $ $ $ $ Water Meter (a) Size Capacity Ratios 3/ ,400 1,450 1,480 1,510 1,540 1, ,400 1,450 1,480 1,510 1,540 1, / ,800 2,900 2,960 3,020 3,080 3, ,480 4,640 4,740 4,830 4,930 5, ,800 10,150 10,360 10,570 10,780 10,990 (a) Water meter sizes greater than 3 inches assessed on an individual basis. Prepared by Raftelis Financial Consultants

12 City of Pocatello Section 2: Financial Plan

13 2. Financial Plan 2.1. Introduction RFC developed a financial plan for the five-year study period, 2015 through 2019, that separated capital improvement and operating activities into separate funds for analysis. Appendix A includes tables that show the development of the WPC utility financial plan Capital Improvement Fund The WPC capital improvement fund forecasts the sources and uses of the WPC capital funds during the study period Reserves Capital reserves include Fund 038 (WPC Capacity Fees) and Fund 074 (WPC Bond Construction). Staff projects capital reserves will be about $600,000 at the beginning of FY RFC recommends the utility maintain a minimum capital reserve of at least 2.0% of fixed asset value, or approximately $680,000 in Sources of Funds Major sources of revenues include transfers from the operating fund to cash finance capital improvements, capacity fee revenue, and interest income Uses of Funds The City s five-year capital improvement program (CIP) totals $32.2 million. This includes the UV/Phosphorus project costs of $20.2 million, renewal and replacement projects of $9.6 million, and vehicles and equipment of $2.4 million. These costs include an allowance for inflation Operating Fund The operating fund forecasts the revenues and revenue requirements of the WPC operating fund during the study period Reserves Operating reserves include Fund 032 (WPC Operating Fund). Staff projects operating reserves available at the beginning of the study period will be about $1.4 million. RFC recommends the utility maintain a minimum operating reserve of at least 90 days of O&M, or approximately $1.3 million in City of Pocatello WPC Utility Financial Planning Study 2-1

14 Revenue Section 2 Operating Fund Revenue for the WPC utility is derived from WPC service rates, interest income, and other miscellaneous sources. Revenue of the WPC utility is derived primarily from WPC service rates. Annual revenue from existing WPC service rates is projected to increase during the study period based on a projected growth rate in the number of accounts of about 0.5 percent per year. Projected annual revenue from existing WPC service rates $7.8 million during the study period. WPC service rate revenue is received from utility billing and special billing accounts. Utility billing accounts are billed by the utility billing personnel. Special billing accounts are billed by personnel at the wastewater treatment plant. A summary of projected revenue under existing rates for 2014 is shown below. Special Billing Customer Class Projected 2014 Revenue Unmonitored $ 78,000 Monitored 703,300 Chubbuck (North of I-86) 850,000 Septic Haulers 49,800 Total Special Billing 1,681,100 All Other Customers 6,047,800 Total Utility Billing $7,728,900 Miscellaneous operating revenue includes biosolids/land lease revenue, cogeneration power sales, interest income, and other miscellaneous revenue. Projected miscellaneous revenue averages $289,400 annually during the study period Revenue Requirements Revenue requirements of the WPC utility include O&M, debt service, and transfers to the capital improvement fund. O&M consists of the cost of personnel and materials to collect, treat, and dispose of wastewater on a routine basis. Since these costs are an annual obligation of the WPC utility, they must be met from WPC service rate revenue. O&M is projected to increase from $5.3 million in 2015 to $6.1 million in The WPC utility currently makes debt service payments on two WPC revenue bonds. Proposed debt issues will occur in 2015 and 2019 as a result of phosphorus constructs and a new lab/administration building, respectively. Debt service payments on existing and proposed debt average $3.4 million annually. City of Pocatello WPC Utility Financial Planning Study 2-2

15 Section 2 Operating Fund Transfers to the WPC capital improvement fund cash-financed WPC capital improvement projects. These transfers average $1.7 million annually Cash Flow Analysis Projected WPC service revenue under existing rates is inadequate to meet revenue requirements and sustain minimum reserves throughout the study period. RFC projects that rates may need to be adjusted at the beginning of each fiscal year to produce the WPC service revenue shown in the tabulation below to maintain the financial viability of the WPC utility. RFC recommends annually updating the WPC utility s five-year financial plan to recognize changes in growth, operating expenses, capital improvement needs, and capital financing requirements. Fiscal Year Ending September 30 Revenue from Existing Rates WPC Utility Revenue from Proposed Rate Adjustments Total 2015 $7,758,800 $2,250,000 $10,008, ,788,700 2,560,200 10,348, ,818,800 2,881,700 10,700, ,849,100 3,215,100 11,064, ,879,500 3,560,800 11,440,300 City of Pocatello WPC Utility Financial Planning Study 2-3

16 City of Pocatello Section 3: Cost of Service Analysis

17 3 3. Cost of Service Analysis 3.1. Introduction In developing an equitable WPC service rate structure, costs of service are allocated to various customer classes according to the service requirements of each class. Allocation of the costs of service should take into account the quantity of wastewater contributed, strength of wastewater, number of customers, City policies, and other relevant factors. Cost of service allocations presented in this report are considered to be in compliance with Environmental Protection Agency rules and regulations Test Year Cost of service allocations are made for a test year, or period, considered representative of the period when resultant rates are expected to be in effect. FY 2019 was selected as the test year for this study. Appendix B includes tables that show the WPC cost of service analysis Test Year Cost of Service Test year cost of service (revenue requirements) totals $12,463,352 and includes O&M, debt service, and cash funded capital costs. These costs are met from WPC service revenue generated from WPC rates of $11,440,287, miscellaneous revenue sources of $290,258 and cash reserves of $732, Functional Cost Components The total cost of WPC service is analyzed by system functions in order to equitably distribute costs to the various classes of customers. Costs of WPC service may be classified and assigned to three basic functional cost components including volume related costs, strength related costs, and customer related costs. Volume costs are those which vary directly with the quantity of wastewater contributed and include capital costs related to investment in system facilities which are sized on the basis of wastewater volume, operation and maintenance expense related to those facilities, and the expense of volume related treatment including chemicals and electric power. The City provides only wastewater treatment services to the portion of the City of Chubbuck located north of I-86. To recognize this type of service, volume costs are divided into two categories: common-to-all-customers and common-to-customers-served- City of Pocatello WPC Utility Financial Planning Study 3-1

18 Section 3 Cost of Service Analysis by-the-collection system. Volume costs associated with the common-to-all-customers category are those that result from the operation of the treatment plant. Volume costs associated with common-to-customers-served-by-the-collection system category are those that result from the operation of the interceptors and lift stations. Wastewater strength costs consist of O&M and capital costs related to system facilities which are designed primarily on the basis of the quantity of pollutants in the wastewater. Strength costs are further separated into biochemical oxygen demand (BOD), total suspended solids (TSS), total Kjeldahl nitrogen (TKN), and phosphorus (P). These strengths include soluble and insoluble materials that reach the wastewater system through customer flows or infiltration and inflow (I/I). These materials need to be neutralized and removed from the final effluent as required by state and federal regulations. For purposes of this study, the City has identified four strength parameters, BOD, TSS, TKN, and P, as the basis for assigning strength-related costs. Customer related costs are those which tend to vary in proportion to the number of customers served, including customer related billing, collection, and administration expense Allocation to Cost Components The separation of costs into functional components provides a means for distributing such costs to various classes of customers based on their respective responsibilities for each particular type of service. The allocation of system assets to functional cost components provides the basis for allocating annual capital costs. Cost of service is generally allocated to cost components that reflect the design and functional parameters of the associated facility. For example, assets such as the collection system which includes trunk mains (diameter greater than or equal to 12-inches), collection mains (diameter less than 12-inches), and lift stations, reflect assets used to serve customers served by the collection system and are allocated directly to that cost component. Treatment plant assets are allocated to their relative volume, BOD, TSS, TKN, or P cost component depending on their primary function in the system. General plant assets not specifically assigned are allocated in proportion to all other plant assets. O&M related to the treatment plant are allocated to their respective volume, BOD, TSS, TKN, or P cost component. Treatment expenses such as information and utility billing administration are allocated directly to the customer cost component. Other treatment related expenses not specifically assigned are allocated in proportion to all other treatment expenses. Collection system expenses are related to serving customers who use the system and are allocated directly to that cost component. Biosolids reuse expenses is City of Pocatello WPC Utility Financial Planning Study 3-2

19 Section 3 Cost of Service Analysis related to BOD, TSS, TKN, and P treatment and is allocated equally to each cost component. Land application expenses are allocated to the volume cost component Allocation of Costs to Customer Classes The total cost responsibility of each class of customer may be estimated by the distribution of the cost of service for each cost component among the classes based on the respective service requirements of each class. WPC customers have been separated into single family, multifamily, nonresidential, special billing, septic, and Chubbuck customer classes. The classes group together customers with similar service requirement characteristics and provide a means for allocating costs to customers. Chubbuck is treated as a separate customer class because the volume of sewage treated from Chubbuck is significant enough to justify a separate customer class Units of Service Historical data and information provided from utility billing records were used to estimate projected units of service. Wastewater collected and treated consists of two elements: (1) contributed domestic and industrial wastewater flow, and (2) I/I of groundwater into the sewers. Contributed wastewater flow is that portion of annual water use or other discharge of each customer class that enters the wastewater system. Estimates of contributed volume of each class are generally based upon water billing records that exclude estimated water use not reaching the wastewater system, such as that used for lawn irrigation and car washing or water use included in manufactured products. The estimated total contributed wastewater volume for the test year is about 1,955,200 thousand gallons. It is estimated that the amount of flow entering the sewers through I/I will average approximately 12.3 percent of total wastewater flow reaching the treatment plant, or slightly more than 275,000 thousand gallons. Each customer class should bear its proportionate share of the costs associated with I/I as the wastewater system must be adequate to convey and process the total wastewater flow. I/I is allocated to customer classes on the premise that two-thirds of the total is distributable on the basis of the number of customers with the remaining one-third allocated on the basis of contributed volume. Total strength units are based on the City s estimate of projected strengths of wastewater contributed to their system during the 2019 test year. Based upon an analysis of wastewater treatment plant data, the average wastewater concentration for BOD is estimated at 300 milligrams per liter (mg/l), 315 mg/l for TSS, 35 mg/l for TKN, and 7 mg/l for P. City of Pocatello WPC Utility Financial Planning Study 3-3

20 Section 3 Cost of Service Analysis The BOD, TSS, TKN, and P responsibility of each customer class is based on the estimated strength concentrations shown below. Strengths shown for special billing customers are based on monitoring performed by the City. Strength of Contributed Wastewater (mg/l) Customer Class BOD TSS TKN P Special Billing Septic Haulers 7,000 15, Gateway West Golden K Recycling 2, Idaho Rail Shop 2,717 3, ON Semiconductor UPRR Great Western 1, All Other Customers The estimated average wastewater strength is based upon consideration of the recorded total quantity of pollutants in the flow reaching the treatment plant. The WPC utility share of customer related billing costs is allocated on the basis of the number of bills Unit Costs of Service The development of test year unit costs of service for each functional cost component is calculated by dividing functionalized cost of service by applicable units of service Customer Class Cost of Service Class cost of service is the product of unit costs of service times the class service requirements. Unit costs are the quotient of functionalized cost of service divided by the applicable units of service and provide the foundation for rate design. Comparison of class cost of service with class revenue under existing rates shows the adjustment needed in class revenue to meet cost of service. City of Pocatello WPC Utility Financial Planning Study 3-4

21 City of Pocatello Section 4: Rate Design

22 4 4. Rate Design 4.1. Introduction In the development of schedules of rates for WPC service, a basic consideration is to establish equitable charges to customers commensurate with the cost of providing service. The only method of assessing entirely equitable rates for WPC service would be the determination of each customer s bill based upon their particular service requirements. Since this is impractical, schedules of rates are normally designed to meet average conditions for groups (classes) of customers having similar service requirements. Rates should be reasonably simple in application and subject to as few misinterpretations as possible. Appendix C includes tables that show the development of the proposed WPC rates Existing Rates Existing rates have been in effect since December 19, Residential customers are charged a flat rate for all usage. All other non-industrial customers are charged a monthly service charge and a volume charge based on their average monthly water use during the months of November through April of the previous year. Special monitored industrial users are charged separate volume and strength charges for discharges. Circuit breaker rates are 70% of existing rates for single family customers. Outside City rates are 20 percent greater than inside City rates Proposed Rates Revenue requirements and cost of service allocations described in previous sections of this report provide the basis for designing WPC rates. Revenue requirements show the need for adjustments and the level of revenue required. Cost of service allocations lead to unit costs of service, which are used in the rate design process as a basis for determining whether proposed rates will reasonably recover cost of service from customer classes as well as provide the total level of revenue required. Cost of service rates have been developed for the test period that proportionately recover class cost of service and increase annual WPC service revenue. Proposed rates for 2015 through 2019 transition from existing rates to 2019 cost of service rates and are shown in Table 5-1. Proposed rates retain the existing rate structure and are designed to generate the additional revenue needed in 2015 through Proposed rates include a flat monthly charge for residential customers and a monthly service charge and volume rate for all other customers. Special monitored industrial City of Pocatello WPC Utility Financial Planning Study 4-1

23 customers are charged separately for all volume and sewage strength components including BOD, TSS, TKN, and P. Section 4 Rate Design The single family residential flat rate is based on the assumption that on average about 5,500 gallons is discharged into the wastewater system per month per account. It is assumed that water usage in excess of 5,500 gallons per month is used for lawn watering and car washing and is not discharged into the sewer system. The flat rate includes the service and volume rate combined into one bill and takes into account the peaking characteristics of residential customers in particular. The service charge for all other customers is designed to recover customer-related costs of utility billing. Volume rates apply to average monthly metered water usage during the months of November through April and are designed to recover volume-related costs. Charges to outside City customers retain the same structure with the exception of JR Simplot and are 20% greater than charges to inside City customers. This differential recognizes differences in the cost to provide service to outside City customers. JR Simplot, an outside City industrial customer, delivers their flow directly to the wastewater treatment plant through their interceptor. Thus, the cost of service volume rate for JR Simplot differs from other outside City customers. The City of Chubbuck is provided two different levels of WPC service. The portion of Chubbuck located north of I-86 is provided wastewater treatment service only. The portion of Chubbuck located south of I-86 is provided collection and treatment services. These unique service requirements are recognized in the separate rates. Industrial and septic charges use the same structure as existing charges Typical Monthly WPC Bills Monthly single family bills will increase $6.37 per month under proposed 2015 rates. City of Pocatello WPC Utility Financial Planning Study 4-2

24 City of Pocatello Section 5: System Capacity Fees

25 5 5. System Capacity Fees 5.1. Introduction The City charges WPC capacity fees to all new connectors. This fee is intended to recover a new connector s proportionate share of the City s wastewater system backbone facility costs. The current WPC fees have been in effect since October Appendix D includes tables that show the development of the proposed water capacity fees System Buy-in Method The capacity fee calculations performed in this study are based on the system buy-in method. This method is based on the concept that existing customers, through rates and other assessments, have developed a valuable wastewater system. A new customer must buy-in to this system by making a contribution equal to the amount of equity a similar existing customer has in the system. Note this is not the cost to provide new service to the new customer, and when new capacity is needed, all customers will bear the cost. To compute the system capacity fees using the system buy-in method, the following general procedure is used: Determine existing wastewater system equity. Estimate system capacity. Calculate unit equity cost. Calculate treatment plant capacity fee. Calculate collection system capacity fee Implementation of fees designed using the system buy-in method results in new customers paying their proportionate share of facility costs incurred to serve them. The fees are dependent on the capacity required to serve a customer and the unit equity cost of existing facilities expressed as dollars per unit of capacity. Fees using the system buy-in method can readily be calculated using utility fixed asset records. Because fees can be traced to such records, they are generally understood by customers and supported on an engineering economic basis System Equity Determination of system value is the first important consideration in using the system buy-in methodology to compute capacity. System value is calculated by adding replacement cost of existing backbone system investments to the cost of planned capital City of Pocatello WPC Utility Financial Planning Study 5-1

26 Section 5 System Capacity Fees improvements. The backbone system includes all major wastewater collection and treatment facilities. Backbone collection mains are defined as the system of major wastewater collection interceptor sewer mains, typically including those greater than 12- inches in diameter. Assets have been grouped into two categories, treatment-related facilities and collection-system facilities. This separation recognizes that certain customers will not receive benefit from the collection system infrastructure, such as Chubbuck customers located north of I-86. Replacement cost represents the cost of duplicating existing facilities at current prices. The cost to replace the City s wastewater system was developed using historical cost information from fixed asset records and restating these costs in current dollars using the Construction Cost Index (CCI) published by Engineering News-Record (ENR). Table 6-1 shows the allocation of system assets to functional cost components to arrive at 2014 replacement costs. To determine net equity in the system, replacement cost of the existing backbone system is reduced by the outstanding debt on related facilities. Equity is not reduced by accumulated depreciation. Once a new customer connects to the wastewater system, that customer begins paying charges for service like all existing customers. These charges typically include payment for retirement of outstanding debt. For this reason, it is necessary to deduct outstanding debt from system value before developing these fees. Treatment plant net equity is projected to increase from $50.0 million in 2015 to $64.1 million in Collection system net equity is projected to increase from $40.0 million in 2015 to $44.2 million in These increases are due to the addition of scheduled major capital improvements, reduction in outstanding debt, and an annual inflation allowance of 2.5 percent Capacity Units In order to apply an equitable fee to new customers, all customer classes need to be expressed in common capacity units. For purposes of this calculation, the standard capacity unit is based on the system average day flow in gallons per day (gpd). The standard capacity unit is a single family equivalent with a 1-inch water meter contributing 185 gpd of wastewater flow. Fees for other water meter sizes are based on meter capacity ratios of maximum safe continuous capacity as published in the AWWA Manual M6. The number of capacity units is projected to increase from 6,022,200 gpd in 2015 to 6,111,800 gpd in City of Pocatello WPC Utility Financial Planning Study 5-2

27 Section 5 System Capacity Fees 5.5. Fee Calculation The treatment plant capacity fee per unit is the quotient of net equity of treatment plant assets divided by total capacity units. The treatment plant capacity fee is the product of the unit fee multiplied by 185 gpd and the relative meter capacity ratio for the meter size calculated. The proposed 2015 treatment plant capacity fee is $1,540 for a customer with a 1-inch water meter, an increase of $130. The collection system capacity fee per unit is the quotient of net equity of collection system assets divided by total capacity units. Total capacity units are reduced by the annual flows from Chubbuck customers north of I-86 since these customers do not benefit from the collection system infrastructure. The collection system capacity fee is the product of the unit fee multiplied by 185 gpd and the relative meter capacity ratio for each meter size. The proposed 2015 collection system capacity fee is $1,450 for a customer with a 1-inch water meter, an increase of $50. The capacity fee for a large industrial user is based on the individual flow and strength characteristics for each customer. The fee is split by the functional components of the system. City of Pocatello WPC Utility Financial Planning Study 5-3

28 City of Pocatello Appendix A: Financial Forecast Tables

29 City of Pocatello, ID Table 2-1 WPC Utility 6/16/2014 Capital Improvement Fund Cash Flow Analysis Line Fiscal Year Ending September 30 No. Description $ $ $ $ $ 1 Beginning Balance 600,000 9,798, , ,600 1,106,100 Sources of Funds 2 Treatment Capacity Fees 125, , , , ,000 3 Collection Capacity Fees 70,000 70,000 70,000 70,000 70,000 4 Transfer From Operating Fund 0 2,550,000 2,250,000 1,400,000 2,370,000 Bond Proceeds 5 Revenue Bond-20 Year 21,500, G.O Bond-20 Year Municipal Bank Loan ,000,000 8 Interest Income 52,000 52,800 8,800 10,500 11,100 9 Total Sources of Funds 21,747,000 2,797,800 2,453,800 1,605,500 4,576,100 Uses of Funds 10 CIP - Renewal & Relacement 1,067,000 1,644,000 1,597,000 1,181,000 4,175, CIP - New Facilities & Major Capital Improvements 10,506,000 9,692, CIP - Vehicles & Equipment 546, , , , , Transfer To Operating Fund Debt Service Reserve 15 Revenue Bonds G.O. Bonds Municipal Bank Loan Debt Issuance Expense 430, Total Uses of Funds 12,549,000 11,836,000 2,221,000 1,492,000 4,571, Annual Surplus (Deficiency) 9,198,000 (9,038,200) 232, ,500 5, Ending Balance 9,798, , ,600 1,106,100 1,111, Minimum Reserve (2% of Fixed Assets) 680, , ,000 1,100,000 1,100,000 Prepared by Raftelis Financial Consultant s

30 City of Pocatello, ID Table 2-2 WPC Utility 6/16/2014 Capital Improvement Program Line Total No. Description Budget $ $ $ $ $ $ $ Renewal & Replacement Costs (2014 Costs) Pipeline Repair 1 Sewer & Pipe Manhole Problems 75,000 75,000 75,000 75,000 75,000 75, ,000 2 CIPP Project: 2-miles of 8" pipe 500, , , , ,000 2,500,000 3 Lift Station Upgrade Contingency 500, ,000 4 M1-4 (M1140-M1013) 42" Pipeline Repair 181, ,000 5 M1-3 (M1013-M1014) 42" Pipeline Repair 141, ,000 6 P1 Project: Realinment of 24" Mainline across N Main Ext. 344, ,000 7 M1-2 (M1014-M6058) 42" Pipeline Repair 54,000 54,000 8 M1-1 (M6058-M1094) 42" Pipeline Repair 71,000 71,000 9 Yellowstone Ave Sewer Rehab 125, Highland Blvd. Sewer Replacement Project 250, , Flandro LS: Force Main Rerouting 150, , Raymond LS: 2nd Pump Installed & Guide Rail System 34,000 34, IH2 Upsizing of Force Main from Indian Hills 76,000 76, Whitman LS: Upgrade Station 620, ,000 1,240, Total Pipeline Repair 200, ,000 1,526,000 1,446,000 1,044,000 1,075,000 5,916,000 Treatment Plant Projects 16 WPCF Digester Improvements 350, Generator Rebuild 100, , , Blower Variable frequency drives 90,000 90, Dredge replacement 400, , Add on to Lab/New Admin building 2,000,000 2,000, Total Treatment Plant Projects 350, , ,525,000 2,715, Total Renewal & Replacement (2014 Costs) 550,000 1,015,000 1,526,000 1,446,000 1,044,000 3,600,000 8,631,000 New Facilities & Major Capital Improvements (2014 Costs) 23 Contingency For Early Start of Phosphorus Project 844, Phosphorus Removal Design 250, Phosphorus/UV Project 10,000,000 9,000,000 19,000, Facilities Plan Update 150, Total Major Capital Projects (2014 Costs) 1,244,185 10,000,000 9,000, ,000,000 Vehicles and Equipment Replacement (2014 Costs) 28 Combination Jet/Vacuum Truck 400, , " Trash Pump 60,000 60, Plant Service truck with crane 120, , Collections service Truck 45,000 45, Jet Truck 281, , , Biosolids truck/tanker 225, , Biosolids tractor 275, , Camera Van 300, , Vehicles 60,000 60,000 60, , Total Vehicles & Equipment 0 520, , , , ,000 2,167, Total Capital Improvement Program (2014 Costs) 1,794,185 11,535,000 10,991,000 2,012,000 1,319,000 3,941,000 29,798,000 Total Capital Improvement Program (Inflated Costs) 39 Renewal & Replacement 550,000 1,067,000 1,644,000 1,597,000 1,181,000 4,175,000 9,664, New Facilities & Major Capital Projects 1,244,185 10,506,000 9,692, ,198, Vehicles & Equipment 0 546, , , , ,000 2,377, Total 1,794,185 12,119,000 11,836,000 2,221,000 1,492,000 4,571,000 32,239,000 Prepared by Raftelis Financial Consultants

31 Pocatello, ID Table 2-3 WPC Utility 6/16/2014 Operating Fund Cash Flow Analysis Line Fiscal Year Ending September 30 No. Description $ $ $ $ $ 1 Beginning Balance 1,400,000 3,067,797 2,346,095 2,101,184 2,892,191 Revenue Wastewater Sales 2 From Existing Rates 7,758,757 7,788,724 7,818,843 7,849,112 7,879,494 3 Additional From Increased Rates 2,250,040 2,560,154 2,881,720 3,215,136 3,560,792 4 Total Sales Revenue 10,008,797 10,348,878 10,700,563 11,064,248 11,440,286 5 Miscellaneous Revenue 6 Biosolids/Land Lease 100, , , , ,000 7 Cogeneration 100, , , , ,000 8 Other Miscellaneous 65,000 65,000 65,000 65,000 65,000 9 Total Miscellaneous Revenue 265, , , , , Trsfr from Cap Improvement Fund (Capacity Fees) Interest Income 22,339 27,069 22,236 24,967 25, Total Revenue 10,296,136 10,640,947 10,987,799 11,354,215 11,730,544 Revenue Requirements 13 Operation and Maintenance Expense 5,349,633 5,534,543 5,706,604 5,885,702 6,072,238 Debt Service 14 Existing 1,479,600 1,479,000 1,477,000 1,478,400 1,480, Proposed 1,799,106 1,799,106 1,799,106 1,799,106 2,540, Total Debt Service 3,278,706 3,278,106 3,276,106 3,277,506 4,021, Transfer to Capital Improvement Fund 0 2,550,000 2,250,000 1,400,000 2,370, Total Revenue Requirements 8,628,339 11,362,649 11,232,710 10,563,208 12,463, Annual Surplus (Deficiency) 1,667,797 (721,702) (244,911) 791,007 (732,808) 20 Ending Balance 3,067,797 2,346,095 2,101,184 2,892,191 2,159, Minimum Reserve (90 days of O&M) 1,337,000 1,384,000 1,427,000 1,471,000 1,518, Ending Balance Excess (Deficiency) 1,730, , ,184 1,421, , Debt Service Coverage - Enhanced (a) 157% 162% 167% 173% 146% 24 Debt Service Coverage - Simple (b) 151% 156% 161% 167% 141% Revenue Adjustments 25 Months Increase Effective Annual Increase 29.0% 3.0% 3.0% 3.0% 3.0% 27 Cumulative Increase 29.0% 32.9% 36.9% 41.0% 45.2% (a) Includes capacity fee revenue. (b) Does not include capacity fee revenue. Prepared by Raftelis Financial Consultant s

32 City of Pocatello, ID Table 2-4 WPC Utility 6/16/2014 Projected Operation and Maintenance Expense Budget Projected Line Sub Description $ $ $ $ $ $ OPERATION/MAINTENANCE Regular Wages/Salaries 622, , , , , , Extra Wages and Salaries 58,154 59,608 61,098 62,625 64,191 65, Group Insurance 114, , , , , , Workers Compensation Insurance 12,702 13,020 13,346 13,680 14,022 14, State Unemployment Insurance 2,500 2,563 2,627 2,693 2,760 2, Benefits-Retirement 100, , , , , , Social Security 50,561 51,825 53,121 54,449 55,810 57, Other Benefits 1,730 1,773 1,817 1,862 1,909 1, Supplies 9,070 9,297 9,529 9,767 10,011 10, Operating Supplies 261, , , , , , Repair/Maintenance Supplies 158, , , , , , Purchased Professional Services 62,408 63,968 65,567 67,206 68,886 70, Rentals and Leases 13,000 13,325 13,658 13,999 14,349 14, Repairs and Maintenance 142, , , , , , Utility Services 392, , , , , , Professional Services Insurance Communications 20,682 21,199 21,729 22,272 22,829 23, Transportation 3,360 3,444 3,530 3,618 3,708 3, Misc. Contractual Services 3,500 3,588 3,678 3,770 3,864 3, Noncash Charges Misc. Costs Debt Service Transfers Nonreciprocal 510,226 20,000 20,000 20,000 20,000 20, Retirement Severance 3,326 3,409 3,494 3,581 3,671 3, Interfund Charges Information Service Center 22,043 22,594 23,159 23,738 24,331 24, Insurance Charges 52,308 53,616 54,956 56,330 57,738 59, Labor Costs Administrative Support 49,153 50,382 51,642 52,933 54,256 55, Street Repair Employee Wellness Program 2,239 2,295 2,352 2,411 2,471 2, Custodial Labor Engineering Support 337, , , , , , Utility Billing Information 336, , , , , , Public Works Support 46,547 47,711 48,904 50,127 51,380 52, PILOT 114, ROW Maintenance Fee 276, , , , , Other Interfund Charges 52,000 53,300 54,633 55,999 57,399 58, Total Operation/Maintenance 3,556,207 3,342,564 3,468,920 3,580,297 3,696,470 3,817,723 CAPITAL OUTLAY Repair/Maintenance Supplies Purchased Professional Services 400, Repairs and Maintenance Transportation Total Capital Outlay O&M 400, Prepared by Raftelis Financial Consultants

33 City of Pocatello, ID Table 2-4 (continued) WPC Utility 6/16/2014 Projected Operation and Maintenance Expense Budget Projected Line Sub Description $ $ $ $ $ $ LIFT STATIONS Regular Wages/Salaries 355, , , , , , Extra Wages and Salaries 30,331 31,089 31,866 32,663 33,480 34, Group Insurance 71,983 73,783 75,628 77,519 79,457 81, Workers Compensation Insurance 9,826 10,072 10,324 10,582 10,847 11, State Unemployment Insurance Benefits-Retirement 58,257 59,713 61,206 62,736 64,304 65, Social Security 29,470 30,207 30,962 31,736 32,529 33, Other Benefits 1,100 1,128 1,156 1,185 1,215 1, Supplies 1,500 1,538 1,576 1,615 1,655 1, Operating Supplies 32,753 33,572 34,411 35,271 36,153 37, Repair/Maintenance Supplies 33,867 34,714 35,582 36,472 37,384 38, Purchased Professional Services 18,640 19,106 19,584 20,074 20,576 21, Rentals and Leases Repairs and Maintenance 81,054 83,080 85,157 87,286 89,468 91, Utility Services 45,000 48,600 52,488 56,687 61,222 66, Professional Services Insurance Communications 4,053 4,154 4,258 4,364 4,473 4, Transportation Misc. Contractual Service Noncash Charges Miscellaneous Costs Transfers Retirement Severance 1,907 1,955 2,004 2,054 2,105 2, Interfund Charges Shop Charge - Gas/Oil Insurance Charges 13,561 13,900 14,248 14,604 14,969 15, Employee Wellness Program 1,371 1,405 1,440 1,476 1,513 1, Total Lift Stations O&M 791, , , , , ,542 SLUDGE REUSE Regular Wages/Salaries 174, , , , , , Extra Wages and Salaries 13,879 14,226 14,582 14,947 15,321 15, Group Insurance 27,939 28,637 29,353 30,087 30,839 31, Workers Compensation Insurance 4,125 4,228 4,334 4,442 4,553 4, State Unemployment Insurance Benefits-Retirement 29,586 30,326 31,084 31,861 32,658 33, Social Security 14,418 14,778 15,147 15,526 15,914 16, Other Benefits , Supplies Operating Supplies 56,510 57,923 59,371 60,855 62,376 63, Repair/Maintenance Supplies 26,900 27,573 28,262 28,969 29,693 30, Purchased Professional Services 100, , , , , , Rentals and Leases 110, , , , , , Repairs and Maintenance 44,400 45,510 46,648 47,814 49,009 50, Utility Services 96, , , , , , Transportation Transfers Nonreciprocal Retirement Severance ,002 1,027 1, Interfund Charges Insurance Charges 5,812 5,957 6,106 6,259 6,415 6, Employee Wellness Program Total Sludge Reuse O&M 708, , , , , ,754 LABORATORY & PRETREATMENT Regular Wages/Salaries 175, , , , , , Extra Wages and Salaries 2,898 2,970 3,044 3,120 3,198 3, Group Insurance 40,520 41,533 42,571 43,635 44,726 45, Workers Compensation Insurance 3,903 4,001 4,101 4,204 4,309 4, State Unemployment Insurance Benefits-Retirement 28,427 29,138 29,866 30,613 31,378 32, Social Security 13,327 13,660 14,002 14,352 14,711 15, Other Benefits Supplies 9,000 9,225 9,456 9,692 9,934 10, Operating Supplies 56,425 57,836 59,282 60,764 62,283 63, Repair/Maintenance Supplies 1,000 1,025 1,051 1,077 1,104 1, Purchased Professional Services 92,900 95,223 97, , , , Rentals and Leases Repairs and Maintenance 16,540 16,954 17,378 17,812 18,257 18, Insurance Communications Transportation 1,500 1,538 1,576 1,615 1,655 1, Misc. Contractual Service Noncash Charges Transfers Retirement Severance ,023 1, Interfund Charges Insurance Charges 4,843 4,964 5,088 5,215 5,345 5, Employee Wellness Program Total Laboratory & Pretreatment O&M 450, , , , , , Total Operation & Maintenance Expense 5,906,753 5,349,633 5,534,543 5,706,604 5,885,702 6,072,238 Prepared by Raftelis Financial Consultants

34 City of Pocatello Appendix B: Cost of Service Analysis Tables

35 City of Pocatello, ID Table 3-1 WPC Utility 6/16/2014 Total Cost of Service Test Year 2019 Line Operating Capital No. Description Expenses Costs Total $ $ $ Revenue Requirements 1 Operation and Maintenance Expenses 6,072,238 6,072,238 2 Debt Service 4,021,114 4,021,114 3 Transfer To Capital Improvement Fund 2,370,000 2,370,000 4 Total Revenue Requirements 6,072,238 6,391,114 12,463,352 Revenue Requirement Adjustments 5 Biosolids/Land Lease (100,000) 6 Cogeneration (100,000) 7 Other Miscellaneous Revenue (65,000) 8 Interest Income (25,258) 9 Transfer from Capital Fund 0 10 Operating Reserve Increase / (Decrease) (732,807) 11 Total Adjustments (1,023,065) 12 Subtotal 11,440, Total Cost of Service 11,440,287 Prepared by Raftelis Financial Consultants

36 City of Pocatello, ID Table 3-2 WPC Utility 6/16/2014 Percent Allocation of Wastewater System Assets Test Year 2019 Common to Customers Common to All Served by the Line Strength Collection No. Description Total Volume BOD TSS TKN Phosphorus Customer System 1 Collection System 100.0% 100.0% Treatment Plant 2 Aeration Basins 100.0% 55.0% 35.0% 10.0% 3 Airport Farm 100.0% 25.0% 25.0% 25.0% 25.0% 4 Aeration Lift Station 100.0% 100.0% 5 Blower Building 100.0% 55.0% 35.0% 10.0% 6 Biosolids Land Development 100.0% 25.0% 25.0% 25.0% 25.0% 7 Chlorine Contact basins 100.0% 100.0% 8 Co-Generation Building 100.0% 50.0% 50.0% 9 Chlorine Room 100.0% 100.0% 10 DAF #1 and #2 -WAS Thickener 100.0% 100.0% 11 Digester Control Building 100.0% 25.0% 25.0% 25.0% 25.0% 12 Headworks 100.0% 100.0% 13 Outfall 100.0% 100.0% 14 Phosphorus Removal Project 100.0% 75.0% 25.0% 15 Primary Clarifiers 100.0% 100.0% 16 Primary Digesters 100.0% 25.0% 25.0% 25.0% 25.0% 17 Primary Pump House 100.0% 100.0% 18 RAS Pump House 100.0% 100.0% 19 Raw Sludge Pump House 100.0% 100.0% 20 Secondary Clarifiers 100.0% 25.0% 25.0% 25.0% 25.0% 21 Sludge Lagoon 100.0% 25.0% 25.0% 25.0% 25.0% 22 Sludge Storage Tank 100.0% 25.0% 25.0% 25.0% 25.0% 23 General Plant 100.0% 26.1% 7.9% 9.6% 5.5% 9.5% 0.0% 41.3% 24 General Plant - Treatment 100.0% 44.5% 13.5% 16.3% 9.5% 16.2% 0.0% 0.0% Prepared by Raftelis Financial Consultants

37 City of Pocatello, ID Table 3-3 WPC Utility 6/16/2014 Allocation of Wastewater System Assets Test Year 2019 Common to Customers Common to All Served by the Line Strength Collection No. Description Total Volume BOD TSS TKN Phosphorus Customer System $ $ $ $ $ $ $ $ 1 Collection System 34,770,786 34,770,786 Treatment Plant 2 Aeration Basins 6,625, ,644,213 2,319, ,584 3 Airport Farm 17, ,422 4,422 4,422 4,422 4 Aeration Lift Station 10,294 10,294 5 Blower Building 1,437, , , ,759 6 Biosolids Land Development 1,627, , , , ,996 7 Chlorine Contact basins 216, ,113 8 Co-Generation Building 806, , ,384 9 Chlorine Room 893, , DAF #1 and #2 -WAS Thickener 2,155, ,155, Digester Control Building 445, , , , , Headworks 2,588,462 2,588, Outfall 532, , Phosphorus Removal Project 21,292,185 15,969,139 5,323, Primary Clarifiers 2,685, ,685, Primary Digesters 3,361, , , , , Primary Pump House 168, , RAS Pump House 44,188 44, Raw Sludge Pump House 970, , Secondary Clarifiers 294, ,738 73,738 73,738 73, Sludge Lagoon 1,356, , , , , Sludge Storage Tank 283, ,892 70,892 70,892 70, Land 1,546,217 1,546, Total Treatment Plant 49,359,347 21,968,743 6,684,999 8,060,560 4,668,929 7,976, General Plant 1,334, , , ,849 74, , , General Plant - Treatment 9,452,442 4,207,071 1,280,194 1,543, ,112 1,527, Total System Assets 94,916,966 26,524,261 8,071,224 9,732,027 5,637,095 9,630, ,322, Percent of Total 100.0% 27.9% 8.5% 10.3% 5.9% 10.1% 0.0% 37.2% 29 Annual Capital Costs 6,391,114 1,785, , , , , ,378,382 Prepared by Raftelis Financial Consultants

38 City of Pocatello, ID Table 3-4 WPC Utility 6/16/2014 Allocation of Operation and Maintenance Expenses Test Year 2019 Common to Customers Common to All Served by the Line Strength Collection No. Description Total Volume BOD TSS TKN Phosphorus Customer System $ $ $ $ $ $ $ $ Operation and Maintenance 1 Personal Services and Benefits 1,089, , , , , ,851 2 Supplies 485,649 97,130 97,130 97,130 97,130 97,130 3 Contractual Services 74,569 14,914 14,914 14,914 14,914 14,914 4 Power 576, , ,825 28,807 5 All Other 203,512 40,702 40,702 40,702 40,702 40,702 6 Transfers 23,763 3,416 2,953 2,953 3,375 3,074 4,185 3,807 Interfund Charges 7 Labor Costs 2,533 2,533 8 Information Service Center 24,939 24,939 9 Insurance Charges 59,181 59, Administrative Support 55,612 55, Engineering Support 403, , Utility Billing Information 402, , Public Works Support 52,665 52, Other Interfund Charges 363,896 52,313 45,227 45,227 51,682 47,071 64,082 58, Total Operation and Maintenance 3,817, , , , , ,548 1,069,205 62,102 WPC Capital Outlay 16 Repair and Replacement Items Contractual Services Total WPC Capital Outlay Collection System and Lift Stations 19 Personal Services and Benefits 630, , Supplies 77,072 77, Contractual Services 21,205 21, Power 66,120 66, Transfers 2,158 2, Interfund Charges 16,894 16, All Other 96,971 96, Total Collection System and Lift Stations 910, ,542 Sludge Reuse 27 Personal Services and Benefits 299,950 74,988 74,988 74,988 74, Supplies 94,370 23,593 23,593 23,593 23, Contractual Services 114,128 28,532 28,532 28,532 28, Power 141,056 35,264 35,264 35,264 35, Transfers 1, Interfund Charges 7,256 1,814 1,814 1,814 1, All Other 175,941 43,985 43,985 43,985 43, Total Sludge Reuse 833, , , , , Laboratory and Pretreatment 35 Personal Services and Benefits 300,529 75,132 75,132 75,132 75, Supplies 75,154 18,789 18,789 18,789 18, Contractual Services 105,109 26,277 26,277 26,277 26, Power Transfers 1, Interfund Charges 6,373 1,593 1,593 1,593 1, All Other 21,326 5,332 5,332 5,332 5, Total Laboratory and Pretreatment 509, , , , , TOTAL O&M EXPENSES 6,072, , , , , ,460 1,069, , Percent of Total 100.0% 14.4% 12.4% 12.4% 14.2% 12.9% 17.6% 16.0% 45 Annual Operating Costs 6,072, , , , , ,460 1,069, ,752 Prepared by Raftelis Financial Consultants

39 City of Pocatello, ID Table 3-5 WPC Utility 6/16/2014 Estimated Units of Service Test Year 2019 Contributed Wastewater Strength Wastewater Volume TSS Phosphorus Line Infiltration/ BOD TKN No. Customer Class Billed Contributed Inflow Total Strength Contribution Strength Contribution Strength Contribution Strength Contribution Bills 1,000 gal 1,000 gal 1,000 gal 1,000 gal mg/l lbs mg/l lbs mg/l lbs mg/l lbs Inside City 1 Single Family 878, , , , ,801, ,319, , , ,747 2 Multifamily 359, ,893 35, , , , , ,452 21,107 3 Nonresidential 362, ,963 30, , , , , ,588 15,568 4 Circuit Breaker 47,831 39,221 9,991 49, , , , ,587 8,751 5 Industrial Domestic - Heinz Industrial Domestic - Idaho Rail Shop Industrial Domestic - ON Semiconductor Domestic Meter (AMI) 25,228 20,687 1,182 21, , , , , Gateway West Industrial Center - Special Monitored 4,213 4, , , , Golden K Recycling Industrial - Special Monitored ,505 3, , Idaho Rail Shop - Special Monitored ,717 4,742 3,748 6, ON Semiconductor Industrial - Special Monitored 73,894 73,894 4,196 78, , , UPRR - Special Monitored 11,382 11, , , , Great Western Malting - Special Monitored 117, ,948 6, ,640 1,171 1,151, , , Heinz-Special Monitored N/A Septic Haulers ,000 41,567 15,000 89, , , HOKU N/A Total Inside City 1,882,138 1,580, ,644 1,853,532 4,644,668 4,654, , , ,293 Outside City 18 Single Family , , Multifamily 7,102 5, , , , , Nonresidential 12,637 10, , , , , Industrial (JR Simplot) 2,064 1, , , , Chubbuck S. of I-86 26,013 21,331 1,219 22, , , , , Total Outside City 48,418 39,703 2,610 42,313 99, ,822 14,716 2, Subtotal City Contributors 1,930,556 1,620, ,253 1,895, ,743, ,782, , , , Chubbock N. of I , , , , ,077, , , TOTAL SYSTEM 2,265,177 1,955, ,253 2,230, ,580, ,859, , , ,712 Prepared by Raftelis Financial Consultants

40 City of Pocatello, ID Table 3-6 WPC Utility 6/16/2014 Development of Unit Costs of Service Test Year 2019 Common to Customers Common to All Served by the Line Strength Collection No. Description Total Volume BOD TSS TKN Phosphorus Customer System $ $ $ $ $ $ $ $ Revenue Requirements 1 Operation and Maintenance Expenses 6,072, , , , , ,460 1,069, ,752 2 Capital Costs 6,391,114 1,785, , , , , ,378,382 3 Total Revenue Requirements 12,463,352 2,658,912 1,298,150 1,409,978 1,241,965 1,433,889 1,069,325 3,351,134 11,394,027 2,658,912 1,298,150 1,409,978 1,241,965 1,433,889 3,351, % 11.4% 12.4% 10.9% 12.6% 0.0% 29.4% Adjustments to Revenue Requirements 4 Biosolids/Land Lease (100,000) - (25,000) (25,000) (25,000) (25,000) Cogeneration (100,000) - (50,000) (50,000) Other Miscellaneous Revenue (65,000) (15,168) (7,406) (8,044) (7,085) (8,180) - (19,117) 7 Interest Income (25,258) (5,894) (2,878) (3,126) (2,753) (3,179) - (7,429) 8 Transfer from Capital Fund Operating Reserve Increase / (Decrease) (732,807) (171,008) (83,490) (90,683) (79,877) (92,220) - (215,528) 10 Total Adjustments (1,023,065) (192,070) (168,774) (176,852) (114,715) (128,579) - (242,074) 11 Cost of Service 11,440,287 2,466,841 1,129,376 1,233,126 1,127,250 1,305,310 1,069,325 3,109,060 Units of Service Units 1,000 gal lbs lbs lbs lbs Bills 1,000 gal Values 12 Inside City 1,826,156 4,558,368 4,507, , , ,530 1,650, Inside City - Circuit Breaker 49,213 98, ,271 14,537 2,587 8,751 41, Inside City - Septic Haulers ,567 89,072 3,563 1, Inside City - Chubbock N of I , ,684 1,077, ,027 22, Outside City 17,964 41,707 53,700 6,182 1, , Outside City - JR Simplot 1,799 4,231 5, Total Units of Service 2,230,466 5,580,625 5,859, , , ,712 1,709,842 Inside City 18 Inside City Inside City - Circuit Breaker Outside City (a) 20 Outside City (a) Outside City unit costs are 20 percent greater than Inside City. (b) Circuit breaker unit costs are 70 percent of Inside City. Prepared by Raftelis Financial Consultants

41 City of Pocatello, ID Table 3-7 WPC Utility 6/16/2014 Distribution of Costs to Customer Classes Test Year 2019 Common to Customers Common to All Served by the Line Strength Collection No. Description Total Volume BOD TSS TKN Phosphorus Customer System $ $ $ $ $ $ $ $ Unit Costs of Service - $/unit 1 Inside City Inside City - Circuit Breaker Outside City Inside City Single Family 4 Units 903,987 1,801,421 2,319, ,037 47, , ,264 5 Cost of Service - $ 5,037,063 1,004, , , , , ,920 1,391,479 Multifamily 6 Units 330, , , ,302 19,452 21, ,596 7 Cost of Service - $ 1,783, , , , , , , ,552 Nonresidential 8 Units 327, , , ,069 19,588 15, ,783 9 Cost of Service - $ 1,760, , , , , ,166 81, ,550 Circuit Breaker 10 Units 49,213 98, ,271 14,537 2,587 8,751 41, Cost of Service - $ 191,951 38,285 13,943 18,684 17,700 18,228 32,084 53,026 Industrial Domestic - Heinz 12 Units Cost of Service - $ Industrial Domestic - Idaho Rail Shop 14 Units Cost of Service - $ Industrial Domestic - ON Semiconductor Domestic Meter (AMI) 16 Units 21,870 51,726 66,601 7,668 1, , Cost of Service - $ 115,980 24,305 10,506 14,078 13,337 13, ,955 Gateway West Industrial Center - Special Monitored 18 Units 4,462 3,615 3, , Cost of Service - $ 14,741 4, ,136 Golden K Recycling Industrial - Special Monitored 20 Units 191 3,564 1, Cost of Service - $ 1, Idaho Rail Shop - Special Monitored 22 Units 232 4,742 6, Cost of Service - $ 3, , ON Semiconductor Industrial - Special Monitored 24 Units 78, , , , Cost of Service - $ 259,395 86, , , ,718 UPRR - Special Monitored 26 Units 12,037 8,194 3, , Cost of Service - $ 37,873 13,377 1, ,982 Great Western Malting - Special Monitored 28 Units 124,640 1,151,555 98, , , Cost of Service - $ 736, , ,893 20, , ,804 Heinz-Special Monitored 30 Units Cost of Service - $ Septic Haulers 32 Units ,567 89,072 3,563 1, Cost of Service - $ 46, ,443 18,828 6,197 12, HOKU 34 Units Cost of Service - $ Prepared by Raftelis Financial Consultants

42 City of Pocatello, ID Table 3-7 (continued) WPC Utility 6/16/2014 Distribution of Costs to Customer Classes Test Year 2019 Common to Customers Common to All Served by the Line Strength Collection No. Description Total Volume BOD TSS TKN Phosphorus Customer System $ $ $ $ $ $ $ $ Outside City Single Family 36 Units 620 1,236 1, Cost of Service - $ 4, ,145 Multifamily 38 Units 6,209 14,562 18,750 2, , Cost of Service - $ 39,618 8,280 3,549 4,756 4,506 4, ,498 Nonresidential 40 Units 11,135 25,909 33,360 3, , Cost of Service - $ 71,236 14,851 6,315 8,462 8,016 8,256 1,321 24,015 Industrial (JR Simplot) 42 Units 1,799 4,231 5, Cost of Service - $ 7,545 2,399 1,031 1,382 1,309 1, City of Chubbock Chubbock N. of I Units 334, ,684 1,077, ,027 22, Cost of Service - $ 1,207, , , , , , Chubbuck S. of I Units 22,549 53,335 68,673 7,906 1, , Cost of Service - $ 119,585 25,061 10,833 14,516 13,752 14, , TOTAL SYSTEM 11,440,287 2,466,841 1,129,376 1,233,126 1,127,250 1,305,310 1,069,325 3,109,060 Prepared by Raftelis Financial Consultants

43 City of Pocatello, ID Table 3-8 WPC Utility 6/16/2014 Comparison of Cost of Service to Test Year 2019 Revenue Under Existing Rates Adjusted Revenue Line Cost of Under Indicated No. Customer Class Service Existing Rates Adjustment $ $ % Inside City 1 Single Family 5,037,063 3,509, % 2 Multifamily 1,783,586 1,205, % 3 Nonresidential 1,760,704 1,186, % 4 Circuit Breaker 191, , % 5 Industrial Domestic - Heinz % 6 Industrial Domestic - Idaho Rail Shop % 7 Industrial Domestic - ON Semiconductor Domestic Met 115,980 77, % 8 Gateway West Industrial Center - Special Monitored 14,741 8, % 9 Golden K Recycling Industrial - Special Monitored 1,600 1, % 10 Idaho Rail Shop - Special Monitored 3,071 3, % 11 ON Semiconductor Industrial - Special Monitored 259, , % 12 UPRR - Special Monitored 37,873 21, % 13 Great Western Malting - Special Monitored 736, , % 14 Heinz-Special Monitored % 15 Septic Haulers 46,937 49, % 16 HOKU % 17 Total Inside City 9,990,647 6,865, % Outside City 18 Single Family 4,146 3, % 19 Multifamily 39,618 26, % 20 Nonresidential 71,236 46, % 21 Industrial (JR Simplot) 7,545 7, % 22 Chubbock N. of I-86 1,207, , % 23 Chubbuck S. of I ,585 79, % 24 Total Outside City 1,449,641 1,013, % 25 TOTAL SYSTEM 11,440,287 7,879, % Prepared by Raftelis Financial Consultants

44 City of Pocatello Appendix C: Rate Design Tables

45 City of Pocatello, ID Table 4-1 WPC Utility 6/16/2014 Comparison of Existing and Proposed Monthly Rates Line Existing Proposed No. Customer Class $ $ $ $ $ $ Inside City 1 Residential Single Family Circuit Breaker All Other Customers 3 Service Charge, $ per bill Volume Charge, $ per 1,000 gallons Outside City (a) 5 Residential Single Family JR Simplot (b) 6 Service Charge, $ per bill Volume Charge, $ per 1,000 gallons All Other Customers 8 Service Charge, $ per bill Volume Charge, $ per 1,000 gallons Chubbuck 10 Service Charge, $ per bill Volume Charge, $ per 1,000 gallons 11 North of I South of I Industrial Service Charges (b) 13 Service Charge, $ per bill Volume Charge, $ per 1,000 gallons Biochemical Oxygen Demand (BOD), $ per pound (c) Total Suspended Solids (TSS), $ per pound (c) Total Kjeldahl Nitrogen (TKN), $ per pound (d) Phosphorus (P), $ per pound (e) Fats, Oils, Grease (FOG), $ per pound (> than 100 mg/l) Septage, $ per gallon (a) Outside City rates are 20 percent greater than Inside City. (b) JR Simplot pays for its own collection system so cost of service volume charge differs from other outside City customers. (c) Rate applies to all strength. (d) Rate applied to all strength > 35 mg/l. (e) Rate applied to all strength > 7 mg/l. Prepared by Raftelis Financial Consultants

46 City of Pocatello, ID Table 4-2 WPC Utility 6/16/2014 Comparison of Monthly Bills Under Existing and Proposed Rates for Inside City Customers Monthly Existing Proposed Usage ,000 gal $ $ $ $ $ $ Single Family Nonresidential Prepared by Raftelis Financial Consultants

47 City of Pocatello, ID Table 4-3 WPC Utility 6/16/2014 Development of COS Service Charge Test Year 2019 Inside City # Units Unit Cost COS Total # Bills COS Rate/Bill Customer Related I/I 175, $194, ,566 $ Customer 197, $1,034, ,566 $ $1,229,676 $ Inside City - Circuit Breaker # Units Unit Cost COS Total # Bills COS Rate/Bill Customer Related I/I 7, $6,045 8,751 $ Customer 8, $32,084 8,751 $ $38,128 $ Outside City # Units Unit Cost COS Total # Bills COS Rate/Bill Customer Related I/I $ $ Customer $2, $ $2,945 $ $1,270,749 Prepared by Raftelis Financial Consultants

48 City of Pocatello, ID Table 4-4 WPC Utility 6/16/2014 Development of COS Volume Charge Test Year 2019 Inside City - Normal Strength # Units Unit Cost COS Total Billable Volume COS Rate/1000 Gal Contributed Volume 1,333, $1,481,600 1,625,778 $ Volume Related I/I 75, $83,919 1,625,778 $ BOD 3,333, $677,042 1,625,778 $ TSS 4,291, $907,249 1,625,778 $ TKN 494, $859,477 1,625,778 $ P 87, $885,126 1,625,778 $ Collection System 1,408, $2,574,803 1,625,778 $ $7,469,216 $ Inside City - Circuit Breaker # Units Unit Cost COS Total Billable Volume COS Rate/1000 Gal Contributed Volume 39, $30,512 47,831 $ Volume Related I/I 2, $1,728 47,831 $ BOD 98, $13,943 47,831 $ TSS 126, $18,684 47,831 $ TKN 14, $17,700 47,831 $ P 2, $18,228 47,831 $ Collection System 41, $53,026 47,831 $ $153,823 $ Inside City - Special Monitored # Units Unit Cost COS Total Billable Volume COS Rate/1000 Gal Contributed Volume 207, $230, ,817 $ Volume Related I/I 11, $13, ,817 $ Collection System 219, $401, ,817 $ $645,416 $ BOD 1,171, $237,979 TSS 147, $31,122 TKN $179 P 13, $138,434 Total $1,053,130 Inside City - Septic Haulers # Units Unit Cost COS Total Billable Volume COS Rate/1000 Gal Contributed Volume $ $ Volume Related I/I $0 712 $ BOD 41, $8, $ TSS 89, $18, $ TKN 3, $6, $ P 1, $12, $ Collection System $0 712 $ $46,811 $ Chubbuck N # Units Unit Cost COS Total Billable Volume COS Rate/1000 Gal Contributed Volume 334, $371, ,622 $ Volume Related I/I $0 334,622 $ BOD 836, $169, ,622 $ TSS 1,077, $227, ,622 $ TKN 124, $215, ,622 $ P 22, $222, ,622 $ Collection System $0 334,622 $ $1,207,448 $ Chubbuck S # Units Unit Cost COS Total Billable Volume COS Rate/1000 Gal Contributed Volume 21, $23,706 26,013 $ Volume Related I/I 1, $1,343 26,013 $ BOD 53, $10,833 26,013 $ TSS 68, $14,516 26,013 $ TKN 7, $13,752 26,013 $ P 1, $14,162 26,013 $ Collection System 22, $41,198 26,013 $ $119,510 $ Outside City # Units Unit Cost COS Total Billable Volume COS Rate/1000 Gal Contributed Volume 16, $22,245 20,342 $ Volume Related I/I $1,260 20,342 $ BOD 41, $10,165 20,342 $ TSS 53, $13,622 20,342 $ TKN 6, $12,904 20,342 $ P 1, $13,289 20,342 $ Collection System 17, $38,659 20,342 $ $112,145 $ JR Simplot # Units Unit Cost COS Total Billable Volume COS Rate/1000 Gal Contributed Volume 1, $2,257 2,064 $ Volume Related I/I $128 2,064 $ BOD 4, $1,031 2,064 $ TSS 5, $1,382 2,064 $ TKN $1,309 2,064 $ P $1,348 2,064 $ Collection System $0 2,064 $ $7,456 $ Prepared by Raftelis Financial Consultants

49 City of Pocatello Appendix D: System Capacity Fee Tables

50 City of Pocatello, Idaho Table 5-1 WPC Utility 6/16/2014 Total System Assets Replacement Cost New Backbone Facilities Line Original (RCN) Collection Treatment No Description Cost 2013-CCI Index System Plant Total $ $ $ $ $ 1 Aeration Basins 6,625,842 10,638,444 10,638,444 10,638,444 2 Airport Farm 17,686 38,322 38,322 38,322 3 Aeration Lift Station 10,294 21,003 21,003 21,003 4 Blower Building 1,342,590 2,162,362 2,162,362 2,162,362 5 Biosolids Land Development 1,068,983 1,522,058 1,522,058 1,522,058 6 Chlorine Contact basins 216, , , ,711 7 Co-Generation Building 806,767 2,142,633 2,142,633 2,142,633 8 Chlorine Room 893,334 1,628,781 1,628,781 1,628,781 9 Collection System 26,607,786 95,295,070 38,118, ,118, DAF #1 and #2 -WAS Thickener 2,155,043 3,242,715 3,242,715 3,242, Digester Control Building 95, , , , General Plant 922,392 2,323, Headworks 2,588,462 3,764,581 3,764,581 3,764, General Plant - Treatment 6,754,442 10,635,080 10,635,080 10,635, Outfall 532, , , , Primary Clarifiers 2,685,022 4,826,078 4,826,078 4,826, Primary Digesters 3,361,208 5,981,843 5,981,843 5,981, Primary Pump House 168, , , , RAS Pump House 44,188 61,950 61,950 61, Raw Sludge Pump House 970,384 1,398,548 1,398,548 1,398, Secondary Clarifiers 294,952 1,394,012 1,394,012 1,394, Sludge Lagoon 892,365 1,805,094 1,805,094 1,805, Sludge Storage Tank 283,570 1,340,218 1,340,218 1,340, Land 1,546,217 1,546,217 1,546,217 1,546, Total System Assets 60,883, ,056,658 38,118,028 56,438,542 94,556, Inflation Allowance of 2.5 Percent 953,000 1,411,000 2,363, Total System Assets at 2014 RCN 39,071,028 57,849,542 96,920,470 Prepared by Raftelis Financial Consultants

51 City of Pocatello, Idaho Table 5-2 WPC Utility 6/16/2014 Percent Allocation of Backbone Assets Common to Customers Common to All Served by the Line Strength Collection No. Description Total Volume BOD TSS TKN Phosphorus System 1 Aeration Basins 100% 55% 35% 10% 2 Airport Farm 100% 25% 25% 25% 25% 3 Aeration Lift Station 100% 100% 4 Blower Building 100% 55% 35% 10% 5 Biosolids Land Development 100% 25% 25% 25% 25% 6 Chlorine Contact basins 100% 100% 7 Co-Generation Building 100% 50% 50% 8 Chlorine Room 100% 100% 9 Collection System 100% 100% 10 DAF #1 and #2 -WAS Thickener 100% 100% 11 Digester Control Building 100% 25% 25% 25% 25% 12 Headworks 100% 100% 13 General Plant - Treatment 100% 16.5% 25.3% 30.6% 17.3% 10.3% 14 Outfall 100% 100% 15 Primary Clarifiers 100% 100% 16 Primary Digesters 100% 25% 25% 25% 25% 17 Primary Pump House 100% 100% 18 RAS Pump House 100% 100% 19 Raw Sludge Pump House 100% 100% 20 Secondary Clarifiers 100% 25% 25% 25% 25% 21 Sludge Lagoon 100% 25% 25% 25% 25% 22 Sludge Storage Tank 100% 25% 25% 25% 25% 23 Land 100% 20% 20% 20% 20% 20% Prepared by Raftelis Financial Consultants

52 City of Pocatello, Idaho Table 5-3 WPC Utility 6/16/2014 Development of Treatment Plant System Capacity Fees Line Fiscal Year Ending September 30 No. Description $ $ $ $ $ $ Backbone System Investment 1 Treatment Plant Facilities 56,438,542 59,443,727 60,929,827 82,851,027 84,922,327 87,045,427 2 Annual Inflation of 2.5% 1,411,000 1,486,100 1,523,200 2,071,300 2,123,100 2,176,100 3 Total WWTP System Investment 57,849,542 60,929,827 62,453,027 84,922,327 87,045,427 89,221,527 4 Scheduled Backbone Improvements 1,594, ,398, ,928,000 Less: Outstanding Principal 5 Existing 11,965,000 10,935,000 9,885,000 8,795,000 7,660,000 6,500,000 6 Proposed ,500,000 20,888,349 20,242,594 21,560,835 7 Total Outstanding Principal 11,965,000 10,935,000 31,385,000 29,683,349 27,902,594 28,060,835 8 Net Backbone WWTP Equity 47,478,727 49,994,827 51,466,027 55,238,979 59,142,833 64,088,693 9 System Average Day Flow, gpd 6,000,000 6,022,200 6,044,500 6,066,900 6,089,300 6,111, Capacity Fee, $ per gpd Prepared by Raftelis Financial Consultants

53 City of Pocatello, Idaho Table 5-4 WPC Utility 6/16/2014 Development of Collection System Capacity Fees Line Fiscal Year Ending September 30 No. Description $ $ $ $ $ $ Backbone System Investment 11 Collection System Facilities 38,118,028 39,070,979 40,047,753 41,048,947 42,075,171 43,127, Annual Inflation of 2.5% 952, ,774 1,001,194 1,026,224 1,051,879 1,078, Total Collection System Investment 39,070,979 40,047,753 41,048,947 42,075,171 43,127,050 44,205, Scheduled Backbone Improvements Less: Outstanding Principal 15 Existing Proposed Total Outstanding Principal Net Backbone Collection System Equity 39,070,979 40,047,753 41,048,947 42,075,171 43,127,050 44,205, System Average Day Flow, gpd 6,000,000 6,022,200 6,044,500 6,066,900 6,089,300 6,111, Less: Chubbuck N of I-86, gpd 916, , , , , , Net Collection System Average Month Flow 5,083,200 5,105,400 5,127,700 5,150,100 5,172,500 5,195, Capacity Fee, $ per gpd Prepared by Raftelis Financial Consultants

54 City of Pocatello, Idaho Table 5-5 WPC Utility 6/16/2014 Proposed Treatment Plant Capacity Fee Schedule Current Proposed Fees Description Fee $ $ $ $ $ $ Water Meter (a) Size Capacity Ratios 3/ ,410 1,540 1,570 1,680 1,800 1, ,410 1,540 1,570 1,680 1,800 1, / ,820 3,080 3,140 3,360 3,600 3, ,510 4,930 5,020 5,380 5,760 6, ,870 10,780 10,990 11,760 12,600 13,580 (a) Water meter sizes greater than 3 inches assessed on an individual basis. Prepared by Raftelis Financial Consultants

55 City of Pocatello, Idaho Table 5-6 WPC Utility 6/16/2014 Proposed Collection System Capacity Fee Schedule Current Proposed Fees Description Fee $ $ $ $ $ $ Water Meter (a) Size Capacity Ratios 3/ ,400 1,450 1,480 1,510 1,540 1, ,400 1,450 1,480 1,510 1,540 1, / ,800 2,900 2,960 3,020 3,080 3, ,480 4,640 4,740 4,830 4,930 5, ,800 10,150 10,360 10,570 10,780 10,990 (a) Water meter sizes greater than 3 inches assessed on an individual basis. Prepared by Raftelis Financial Consultants

56 City of Pocatello, Idaho Table 5-7 WPC Utility 6/16/2014 Development of Capacity Fee for Large Industrial User Test Year: 2015 Backbone Treatment Plant (WWTP) Backbone Line Strength Collection No. Description Total Volume BOD TSS TKN Phosphorus System $ $ $ $ $ $ $ Treatment Plant (RCN) as of 9/30/13 1 Aeration Basins 10,638,444 5,851,144 3,723,456 1,063,844 2 Airport Farm 38,322 9,581 9,581 9,581 9,581 3 Aeration Lift Station 21,003 21,003 4 Blower Building 2,162,362 1,189, , ,236 5 Biosolids Land Development 1,522, , , , ,514 6 Chlorine Contact basins 474, ,711 7 Co-Generation Building 2,142,633 1,071,316 1,071,316 8 Chlorine Room 1,628,781 1,628,781 9 DAF #1 and #2 -WAS Thickener 3,242,715 3,242, Digester Control Building 512, , , , , Headworks 3,764,581 3,764, General Plant - Treatment 10,635,080 1,755,800 2,686,304 3,249,803 1,843,113 1,100, Outfall 759, , Primary Clarifiers 4,826,078 4,826, Primary Digesters 5,981,843 1,495,461 1,495,461 1,495,461 1,495, Primary Pump House 541, , RAS Pump House 61,950 61, Raw Sludge Pump House 1,398,548 1,398, Secondary Clarifiers 1,394, , , , , Sludge Lagoon 1,805, , , , , Sludge Storage Tank 1,340, , , , , Land 1,546, , , , , , Total Treatment Plant as of 9/30/13 56,438,542 9,317,730 14,255,752 17,246,149 9,781,083 5,837, % 25.3% 30.6% 17.3% 10.3% 24 Treatment Plant (Test Year) 60,929,827 10,059,219 15,390,201 18,618,569 10,559,446 6,302, Less: Outstanding Principal on Debt (Test Year) (10,935,000) (1,805,315) (2,762,060) (3,341,451) (1,895,091) (1,131,083) 26 Net Treatment Plant Equity (Test Year) 49,994,827 8,253,904 12,628,141 15,277,117 8,664,355 5,171, Concentration, mg/l Units gpd lbs/day lbs/day lbs/day lbs/day 28 Treatment Plant Capacity Units 6,022,200 15,068 15,821 1, Capacity Fee, $ per unit per day , , Capacity Fee, $ per unit per gpd Total Collection System (Backbone) as of 9/30/13 38,118,028 38,118, % 31 Test Year Backbone Collection System 40,047,753 40,047, Less: Outstanding Principal on Debt (Test Year) Net System Equity 40,047,753 40,047,753 Units gpd 34 Treatment Plant Capacity Units 5,105, Capacity Fee, $ per unit per day Capacity Fee, $ per unit per gpd (a) Includes inflation allowance of 2.5 percent for Prepared by Raftelis Financial Consultants

57 City of Pocatello Appendix E: Presentation City Council Study Session June 5, 2014

58 City of Pocatello Water, Water Pollution Control (WPC) and Sanitation Utilities Financial Planning Study Preliminary Findings City Council Study Session June 5, 2014 John Gallagher, Principal Consultant 1 Presentation Agenda Financial Sustainability Indicators Financial Plan Findings Water Utility WPC Utility Sanitation Utility Typical Residential Bill Capacity Fees 2 2 1

59 Financial Sustainability Indicators for Utilities Revenues meet annual revenue requirements Revenues provide sufficient reserves Operating Capital Revenues maintain required debt service coverage 3 3 Study Overview Data Budget CIP Monthly Bills Operation statistics Financial reports Financial Plan 10-year forecast Capital funding plan Revenue requirements Rate revenue needed to meet revenue requirements Cost of Service Customer classes Service characteristics Cost to serve each customer class Rate Design Structure Proposed rates Customer monthly bills 4 2

60 Water Utility 5 5 Water Level of Service Mission: Provide a safe, reliable, and adequate supply of drinking water for our customers at the lowest practical cost. Infrastructure 21 wells 12 booster stations 16 storage tanks (23.3 million gallons) 274 miles of mains 2,000 hydrants 6 6 3

61 Water Level of Service (cont d) Mission: Provide a safe, reliable, and adequate supply of drinking water for our customers at the lowest practical cost. Annual Operations 4.9 billion gallons average production 1.5 miles of main replacement 2,000 water quality samples 3,000 service requests 1,250 valves exercised 30 main line leaks repaired 500 meters upgraded to AMR (Automated Meter Reading) 7 7 Water Financial Plan for FY15 FY19 Revenue Produced by Existing Rates $15.0 Revenues Revenue Requirements Reserves Minimum Reserves $10.0 Millions $5.0 $ $5.0 -$

62 Water Financial Plan for FY15 FY19 Revenue Produced by Proposed Rates $15.0 Revenues Revenue Requirements Reserves Minimum Reserve $10.0 Millions $5.0 $ $5.0 -$ Water Cost of Service Recognizes industry standard rate making principals of AWWA M1 Manual Identifies annual cost to provide water service to customer classes Recognizes differing service characteristics Size of water meter Peak demands Fire protection

63 Proposed Water Rates Monthly Service Charge, per bill Meter Size Proposed Existing FY15 FY16 FY17 FY18 FY19 3/4 $7.94 $8.35 $8.75 $9.20 $9.60 $ / Proposed Water Rates Volume Rate, per 1,000 gallons Usage Proposed Block (Kgal) Existing FY15 FY16 FY17 FY18 FY19 Single Family 1 First 25 $2.22 $2.28 $2.35 $2.41 $2.48 $ Over Multifamily $2.05 $2.12 $2.19 $2.27 $2.35 $2.42 Nonresidential Summer Line Hydrant Water

64 Typical FY 2015 Single Family Monthly Water Bill Monthly Service Charge Varies by meter size Recovers utility billing, meter reading and replacement, and small main costs Volume Rate Varies by customer class Recovers average and peak demands and fire protection costs FY 2015 Median Single Family Bill of $22.03 (6,000 gallons) $8.35 $13.68 Service Charge Volume Charge Residential Monthly Water Bills Monthly Usage (gallons) Cumulative % of Bills Cumulative % of Usage Existing Rates Proposed FY 2015 Rates Change 0 2% 0% $ 7.94 $ 8.35 $ ,000 6% 8% ,000 14% 15% ,000 23% 22% ,000 35% 28% ,000 44% 33% ,000 51% 37% ,000 56% 41% ,000 60% 45% ,000 65% 51% ,000 69% 56%

65 WPC Utility WPC Level of Service Mission: Collect and treat wastewater at the lowest practical cost while meeting regulations and providing excellent customer service Infrastructure 250 miles of gravity sewer pipe 20 miles of pressurized sewer pipe 2013 CCTV 6.7 miles of sewer Wastewater treatment plant (12 million gallons per day capacity) 23 lift stations

66 WPC Level of Service (cont d) Mission: Collect and treat wastewater at the lowest practical cost while meeting regulations and providing excellent customer service Annual Operations 12 MGD design flow MGD actual flow in 2013 Reclaimed 2.2 Billion gallons to Portneuf River Conventional Activated Sludge with Biological Nutrient Removal 2.6 billion gallons treated (98% removal of pollutants) Lab services and pretreatment Jetting & Cleaning (9400 feet of over 15 sewer lines, 200 miles of under 15 sewer lines) WPC Level of Service (cont d) Mission: Collect and treat wastewater at the lowest practical cost while meeting regulations and providing excellent customer service Measures of Efficiency 1.5 Back-ups per 100 miles of sewer (2.2 in previous year) 3.9 FTEs per MGD treated influent Production of 1.4 million kwh of electricity generated $97,000 revenue Hauled 11.6 mg of biosolids to WPC Farm land

67 WPC Level of Service (cont d) Mission: Collect and treat wastewater at the lowest practical cost while meeting regulations and providing excellent customer service Challenges Phosphorus Removal Improvements ($16-20 million) Aging infrastructure and replacement WPC Financial Plan for FY15 FY19 Revenue Produced by Existing Rates $15.0 Revenues Revenue Requirements Reserves Minimum Reserves $10.0 Millions $5.0 $ $5.0 -$

68 WPC Financial Plan for FY15 FY19 Revenue Produced by Proposed Rates $15.0 Revenues Revenue Requirements Reserves Minimum Reserves $10.0 Millions $5.0 $ $5.0 -$ WPC Cost of Service Recognizes industry standard rate making principals of WEF Manual of Practice No. 27 Identifies annual cost to provide wastewater service to customer classes Recognizes differing service characteristics Flows Strengths

69 Proposed WPC Rates Proposed Customer Class Existing FY15 FY16 FY17 FY18 FY19 Single family, $/bill All Other City Customers Service Charge, $/bill Volume Charge, $/Kgal Chubbuck Service Charge, $/bill Volume Charge, $/Kgal North of I South of I FY 2015 Single Family Monthly WPC Bill Customer service costs Recovers utility billing costs Volume and strength costs Recovers volume and strength related costs Total monthly bill of $28.20 $6.25 $21.95 Customer Service Volume and Strength

70 Proposed WPC Rates Industrial Proposed Customer Class Existing FY15 FY16 FY17 FY18 FY19 Service Charge, $ per bill Volume Charge, $ per Kgal Strength Charges BOD, $ per lb TSS, $ per lb Nitrogen (TKN), $ per lb Phosphorus (P), $ per lb Fats, Oils, Grease (FOG), $ per lb Septage Users, $ per gallon Sanitation Utility

71 Sanitation Level of Service Mission: Provide efficient and cost effective collection, recycling, and disposal of municipal solid waste within the Pocatello city limits Operations Weekly curbside pickup for 17,000 customers 132 tons of refuse delivered daily to landfill Recycle 9 tons of co-mingled recyclables daily Current Fleet 27 Class 8 trucks; 2 Class 7 trucks 7 pickup trucks 1 service truck 2 forklifts 1 side by side with snow plow Sanitation Level of Service Carts, Containers, and Roll-off boxes Capital Program Vehicles replaced every 6 to 10 years Yard expansion project Residential Recycling Curbside service since 2009 Yard waste collection

72 Sanitation Financial Plan for FY15 FY19 Revenue Produced by Existing Rates Millions $10.0 $9.0 $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 -$1.0 -$2.0 Revenues Revenue Requirements Reserves Minimum Reserves Sanitation Financial Plan for FY15 FY19 Revenue Produced by Proposed Rates Millions $10.0 $9.0 $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 -$1.0 -$2.0 Revenues Revenue Requirements Reserves Minimum Reserves

73 Proposed Monthly 2015 Sanitation Rates Proposed Customer Description Existing FY15 FY16 FY17 FY18 FY19 96 GALLON CART SERVICE ONCE A WEEK Collection charge $14.31 $14.78 $15.27 $15.73 $16.21 $16.70 Billing charge Total charge $15.87 $16.40 $16.95 $17.47 $18.01 $ YARD CONTAINER SERVICE ONCE A WEEK Collection charge $71.20 $73.52 $75.91 $78.19 $80.54 $82.96 Container rental Billing charge Total charge $82.16 $84.85 $87.62 $90.27 $93.00 $ Comparison of Single Family Typical Monthly Bills Under Existing and Proposed Rates Water Wastewater Sanitation $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 $73.04 $75.20 $66.63 $68.80 $70.88 $58.96 $16.40 $16.95 $17.47 $18.01 $18.56 $15.87 $28.20 $29.00 $29.75 $30.55 $31.35 $21.83 $21.26 $22.03 $22.85 $23.66 $24.48 $25.29 Existing

74 Water and WPC Capacity Fees Recovers new connector's proportionate share of backbone facility costs Capacity Fee Considerations System Buy-In Method Non-Discriminatory Same charge for meter size regardless of customer type Standard industry practice in Intermountain Region