CHARLOTTE-MECKLENBURGUTILITIES

Financial Planning for

Capital Improvements

Doug Bean

January 22, 2008

Overview

Needs

Priorities

Process

Financial Planning

Needs

10 Year Needs

5 Year CIP

1 Year Budget

Identifying Projects

Engineering

Master Plans– Capacity

– Growth

Regulatory

Identifying Projects

Land Use

Comprehensive Plans

Area Plans

Identifying Projects

Policy

Council Priorities

Advisory Input

Special Needs

City of Charlotte

Capital Improvements

Thoroughfare Plan

Complete

Fully Funded

Funded

Planned

PY

UC

Unfunded

"/ ENG Environmental Projects

$1 ENG Buildings Projects

ENG Transportation Active

ENG Transportation Complete

CATS Sidewalk Project

CATS Streetscape Project

") CATS Intersection Project

Legend

ENG Stormwater 2003

ENG Neighborhood Dev

CATS Road Projects

CATS Bikeway Projects

CATS Infrastructure Project

CATS Park Land Acquisition

CMU Water Projects

CMU Sewer Projects

Streets

Identifying Projects

Public

Neighborhoods

Developers

Criteria & Prioritization

City

Internal

Qualifying Criteria

Maintain and improve current service levels

– Rehabilitation

– Replacement and upgrades

Support community objectives

– Short term programs

– Long range programs

Environmental protection/regulatory

– Federal

– State

– Local

Process Oct. 25th Distribute Form

Nov. 12-15th Division Needs Interviews

Nov. 30th Engineering Staff Review

Dec.7th-Jan. 9th Utility Management Review

Jan. 17th Proposed FY 09-13 CIP to Utility Advisory Committee

Jan. 25th Summary to Budget and Evaluation

March City Collaborative Team Review

April Draft Citywide CIP to City Council at Retreat

June City Council Action

Program Category: Sewer

Project Title: Street and Minor Sewer Main Extension

Project provides for sewer service extensions to

residential customers 1,000 feet or less from an existing

sewer line per Council approved policy.

Project also provides for extensions when health

hazards are created in association with septic tank

deterioration, sewage demand beyond capacity, or when

on-site disposal systems are constructed in unsuitable soil

conditions.

Need is based on customer requests and on the presence

of sewer health hazards.

Notes

Account Number: 633.79

Appropriations to Date: $112,800,000

Estimated Balance June 30, 2008: $1,261,080

$8,500,000 $38,650,000$8,100,000$7,700,000$7,350,000$7,000,000Total

$19,850,000$0$0$7,700,000$7,000,000$5,150,000Sewer Revenue

Bonds

$38,650,000$8,500,000$8,100,000$7,700,000$7,350,000$7,000,000Total

$0$0$0$0$0$0Equipment

$31,930,000$7,225,000$6,850,000$6,475,000$6,230,000$5,150,000Construction

$400,000$0$100,000$100,000$100,000$100,000Acquisition

$6,320,000$1,275,000$1,150,000$1,125,000$1,020,000$1,750,000Planning/ Design

Total 2011-122010-112009-102008-092007-08Costs

Total 2011-122010-112009-102008-092007-08

$18,800,000$8,500,000$8,100,000$350,000$1,850,000Water/Sewer

Operating Fund

Operating Budget Impact: Additional costs ar anticipated for labor, service call response and routine maintenance.

$0

FY 08-12 Capital Investment Projects/Water

Project Title

Prior

Appro

Esitmated

Bal FY08 FY09 FY10 FY11 FY12

5 Year

Totals

Water Dist. System Study $2,250,000 $50,000 $150,000 $0 $0 $0 $0 $150,000

Water Line

Rehabilitation/Replacement $64,994,887 $2,000 $5,000,000 $5,500,000 $6,1000,000 $6,000,000 $6,000,000 $28,600,000

Water Lines for Street Improv. $40,519,871 $0 $5,000,000 $3,000,000 $3,000,000 $2,000,000 $1,000,000 $14,000,000

West Transit Corridor

Improvements - Wilkinson $0 $0 $0 $0 $0 $0 $1,000,000 $1,000,000

West Water Main $22,500,000 $5,000 $19,500,000 $0 $0 $0 $0 $19,500,000

WM Beatties Ford Road – Phase

II $1,510,000 $454,950 $150,000 $0 $0 $0 $0 $150,000

WM NC 115 Bailey Rd. to Washam

Potts $1,920,950 $5,000 $300,000 $0 $0 $0 $0 $300,000

WM Nevada & Wilmar Boulevards $1,500,000 $1,300,000 $650,000 $0 $0 $0 $0 $650,000

WM Bailey Road $0 $0 $0 $0 $0 $0 $1,100,000 $1,100,000

WM New Dixie River Road $0 $0 $0 $0 $0 $0 $450,000 $450,000

WTP’s and BP Stations Upgrades

and Rehab $900,000 $350,000 $150,000 $250,000 $200,000 $150,000 $150,000 $900,000

Water CIP Total $104,675,000 $42,795,000 $55,820,000 $62,700,000 $87,335,000 $353,325,000

Financing

Standard & Poor’s – AAA, P1

Fitch – AAA, F1

Moody’s – Aa1, P1

Transition From:

General Obligation Bonds

Revenue Bonds

Commercial Paper

(Construction Period Financing)

Finance/Cash Flow Planning

Sources of Capital FundsG.O. Revenue Commercial

Paper

Credit Tax Rates Rates

Vote Yes No No

Term Long (20+yrs) Long (20+yrs) Short (8+-mths)

Issue 100% Cash Flow Year Cash Flow Year

Risk Low Low/Moderate Moderate

Rates 3.92% 4.16% 2.90%

Example $3M

/36 month

construction

$1M/year

/36 month

construction

$83,000/month

/36 month

construction

Water and Sewer Projection Summary 8 Year Financial Plan

$ 1,739,213$ 1,806,785$ 1,419,245$ 1,483,201 $ 1,233,752Total outstanding debt(2)

40%42%41%41%40%As % of op. exp. and DS

$ 110,313 $ 105,581$ 102,346$ 95,503$ 90,626Debt service/operating fund bal.

1.27 1.32 1.191.22 1.16 DS coverage - total

1.72 1.92 1.852.13 2.11 DS coverage - revenue bonds

51%48%52%50%53%DS as % of total revenue

$ 162,209 $ 142,575$ 146,109$ 131,560 $ 129,047 Total DS

42,45744,544 52,186 56,325 57,941 Total G.O. and other DS

$ 119,752$ 98,031$ 93,922 $ 75,235$ 71,106Total revenue bond DS(1)

$ 205,891$ 188,260 $ 173,903$ 160,486$ 149,851Net income available for DS

113,976109,141 104,516 100,09195,858 Total operating expenditures

$ 319,867$ 297,401$ 278,419$ 260,577$ 245,708Total revenue

1.00%1.00%1.00%1.00%1.00%% incr. in water sales volume

6.50%6.50%6.74%6.05%6.25%% incr. in avg. residential bill

268,195 260,383 252,799 245,436 238,287 Number of water customers

$ 448,700Revenue bond issues

$ 379,300$ 190,400$ 448,700 $ 215,800 $ 309,440Commercial paper balance (6/30)

$309,440

17%18%8%10%16%PAYGO as % of total

$ 229,700$ 234,700 $ 255,700 $ 242,100$ 181,360 Total

38,950 42,450 20,950 24,050 28,850 PAYGO

1,850 1,850 1,850 2,2505,050 Debt - equipment L/P

$ 188,900$ 190,400 $ 232,900 $ 215,800$ 147,460Debt - CP/revenue bonds

Capital program 2012 20112010 2009 2008

2008 2009 2010 2011 2012

Rate Covenant Test #1

Revenues $245,708,431 $260,576,835 $278,418,881 $297,401,130 $319,866,735

Less Current Expenses (95,857,884) (100,090,736) (104,516,328) (109,141,089) (113,976,049)

Less 120% of revenue bond debt service (85,327,428) (90,281,992) (112,.706,746) (117,636,989) (143,702,103)

Less 100% of G.O. debt service, etc. (57,940,687) (56,324,825) (52,186,368) (44,544,176) (42,457,357)

Remainder $6,582,431 $13,879,283 $9,009438 $26,078,879 $19,731,225

Required prior year Surplus Fund balance $0 $0 $0 $0 $0

Rate Covenant Test #2

Revenues $245,708,431 $260,576,835 $278,418,881 $297,401,130 $319,866,735

Less Current Expenses (95,857,884) (100,090,736) (104,516,328) (109,141,089) (113,976,049)

Less 110% of revenue bond debt service (78,216,809) (82,758,493) (103,314,518) (107,833,907) (131,726,928)

Less 100% of G.O. debt service, etc. (57,940,687) (56,324,825) (52,186,368) (44,544,173) (42,457,357)

Must not be less than zero $13,693,050 $21,402,782 $18,401,667 $35,881,962 $31,706,401

Debt service

Revenue bonds incl. CP interest $71,106,190 $75,234,994 $93,922,289 $98,030,824 $119,751,753

G.O. bonds, etc. 57,940,687 56,324,825 52,186,368 44,544,173 42,457,357

Total debt service $129,046,878 $129,046,878 $146,108,657 $142,574,997 $162,209,110

Debt service coverage ratio - all debt service 1.16 1.22 1.19 1.32 1.27

Debt service coverage ratio - revenue bonds 2.11 2.13 1.85 1.92 1.72

Debt service as a % of total revenue 53% 50% 52% 48% 51%

8 Year Financial Plan

Cash FlowTime Period Total Bond Sale Bond Funds Available Projected

Balance Forward 2,992,245

May-07 $11,368,030 31,477,142 $19,852,786

June-07 $25,297,488 200,000,000 206,179,654 $23,125,690

July-07 $ 8,881,082 197,298,572 $22,178,205

August-07 $23,373,222 173,925,350 $25,378,038

September-07 $15,037,758 158,887,592 $22,427,867

October-07 $15,215,100 143,672,492 $24,860,380

November-07 $21,682,618 121,989,874 $21,682,618

December-07 $18,922,645 103,067,229 $18,922,645

January-08 $21,110,933 81,956,296 $21,110,933

February-08 $18,752,597 63,203,698 $18,752,597

March-08 $16,993,287 46,210,411 $16,993,287

April-08 $18,004,243 28,206,169 $18,004,243

May-08 $16,599,651 11,606,518 $16,599,651

June-08 $15,016,028 200,000,000 196,590,490 $15,016,028

July-08 $15,854,665 180,735,825 $15,854,665

August-08 $18,069,140 162,666,686 $18,069,140

September-08 $17,986,393 144,680,293 $17,986,393

October-08 $20,863,043 123,817,250 $20,863,043

November-08 $18,799,733 105,017,518 $18,799,733

December-08 $17,692,733 87,324,785 $17,692,733

January-09 $16,877,233 70,447,552 $16,877,233

February-09 $15,075,900 55,371,653 $15,075,900

March-09 $14,896,400 40,475,253 $14,896,400

April-09 $13,996,338 26,478,915 $13,996,338

May-09 $15,034,251 11,444,664 $15,034,251

Cash Flow ChangedTime Period Total Bond Sale Bond Funds Available Projected

Balance Forward 2,992,245

May-07 $11,368,030 31,477,142 $19,852,786

June-07 $25,297,488 200,000,000 206,179,654 $23,125,690

July-07 $ 8,881,082 197,298,572 $22,178,205

August-07 $23,373,222 173,925,350 $25,378,038

September-07 $15,037,758 158,887,592 $22,427,867

October-07 $15,215,100 143,672,492 $24,860,380

November-07 $21,682,618 121,989,874 $21,682,618

December-07 $18,922,645 103,067,229 $18,922,645

January-08 $32,310,933 70,756,296 $21,310,933

February-08 $18,952,597 51,803,698 $18,952,597

March-08 $17,193,287 34,610,411 $17,193,287

April-08 $18,204,243 16,406,169 $18,204,243

May-08 $16,799,651 (393,482) $16,799,651

June-08 $15,216,028 200,000,000 184,390,490 $15,216,028

July-08 $17,354,665 167,035,825 $17,354,665

August-08 $19,569,140 147,466,686 $19,569,140

September-08 $19,486,393 127,980,293 $19,486,393

October-08 $22,363,043 105,617,250 $22,363,043

November-08 $20,299,733 85,317,518 $20,299,733

December-08 $19,192,733 66,124,785 $19,192,733

January-09 $17,377,233 48,747,552 $17,377,233

February-09 $15,575,900 33,171,653 $15,575,900

March-09 $15,396,400 17,775,253 $15,396,400

April-09 $14,496,338 3,278,915 $14,496,338

May-09 $15,534,251 (11,255,336) $15,534,251

Allocating Capital Costs to

Customers

Today’s Customers (Rates/Pay-Go)

New Customers (Capacity Fees)

Today’s and Future Customers

(Rates/Debt Service)

Conservation Rates

Water

3.22Variable Charge (per Ccf)

1.80Fixed Charge (per account)

Sewer

1.73Non-Residential

4.31- Block 3

2.18- Block 2

1.33- Block 1

Residential

Variable Charge (per Ccf)

$1.80Fixed Charge (per account)

FY 2008Charge Type

Capacity Fees

$1,295Sewer

$408Water

FY 2008

¾”

Line

Capacity Fee Formula:

Net book value of asset

# of units of plant capacityX Average daily consumption