The Harrisburg Authority 2014 Budget Presentation November 14, 2013

Chris Feese, Finance Director

The Harrisburg Authority

Provider of Essential Community Services
Water

Steward for Sustainable Utility Management

Administrative
Wastewater

Solid Waste

THA

Projected Operating Expenses The Authoritys operating expenses consist of the expense to produce, treat, and distribute water to residents of the City of Harrisburg and adjacent service areas. In preparing the budget for 2014, several adjustments were made from historical costs to account for the following items, among others: 1. Increase in salaries, wages, and benefits to account for the hiring of additional Water Division personnel to fill positions left vacant in recent years. 2. Accrued Leave Payouts due to past City personnel based upon their employment contracts with the City. 3. Increase in Operating Expenses and Major Maintenance to account for prior years maintenance deferments (i.e. water meters, meter batteries, pipeline repairs, minor equipment replacements.) 4. Elimination of the City Administrative Fee relative to the termination of the Management Agreement 5. Proforma adjustments to estimated annual expenses, such as sewage, where significant increases or decreases in cost are predicted for 2014 and beyond. 6. Full funding of expenses, necessary for effective operations, which were historically cut by the City as part of their budget approval process. Based upon industry standards and discussions with BOW staff, remaining expenses were then increased between three (3%) to five (5%) percent to account for anticipated inflation over the six-year period of our analysis.

Projected Revenues Historically, the Management Agreement authorized the City to perform customer billing and collection services for the Authority. Revenue collected by the City for water service, referenced as City Deposits, was transferred to the Authoritys Water Revenue Fund. City Deposits represented cash received. The projected opening balance for January 1, 2014 is $3,102,590. These funds are unrestricted and available for debt service coverage. It is assumed that the City will continue billing service into 2014 until the time in which THA is appropriately staffed and their billing software ready to commence direct customer billing and collection. This transition in billing is anticipated to take place the middle to end of 2014. Estimated receipts from water revenues for 2014 are derived based upon the review of 2010, 2011 and 2012 actual revenues, along with projected revenues for 2013. The cash basis rather than the accrual basis is used for projecting revenue. In addition to reviewing historic revenue totals, City billing information was evaluated including historic annual water consumption totals, total annual collectable amounts and total amount collected for the period of 2007 through 2013. Revenue projections for water service for the study period 2014 through 2019 were based on the existing rates that became effective during 2006. The revenue projection does not include growth in the water system customer base.

The Harrisburg Authority Water System Rate Analysis TABLE A - Comparison of Expanded Volumetric Rate Options
RATE Per 1,000 gallons EXISTING OPTION 1A (Rates Per Existing Rate Covenant) Current Consumption Rate Proposed 2016 Rate (w/ 5.0% inc.) Proposed 2017 Rate (w/ 12.0% inc.) Proposed 2018 Rate (w/ 3.5% inc.) Proposed 2019 Rate (w/ 3.5% inc.) Proposed 2014 Rate (w/ 5.0% inc.) OPTION 1B (Rates Per Existing Rate Covenant) Proposed 2016 Rate (w/ 5.0% inc.) Proposed 2018 Rate (w/ 5.0% inc.) Proposed 2019 Rate (w/ 7.0% inc.) Proposed 2015 Rate (w/ 5.0% inc.) OPTION 1C (Rates Per Existing Rate Covenant) Proposed 2016 Rate (w/ 5.0% inc.) Proposed 2018 Rate (w/ 8.0% inc.) Proposed 2019 Rate (w/ 5.5% inc.) Proposed 2014 Rate (w/ 14.5% inc.) OPTION 2 Proposed 2016 Rate (w/ 1.0% inc.) (Rates Per Financial Proposed 2017 Rate (w/ 3.0% inc.) Institutions's Proposed Rate Covenant, No Addl. Bonds Test) Proposed 2018 Rate (w/ 3.0% inc.) Proposed 2019 Rate (w/ 3.5% inc.) OPTION 3 Proposed 2014 Rate (w/ 14.5% inc.) (Rates Per Financial Institutions's Proposed Rate Proposed 2015 Rate (w/ 9.0% inc.) Covenant, Includes Addl. Bonds Proposed 2016 Rate (w/ 8.0% inc.) Test) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 5.75 6.18 7.27 7.63 7.99 6.18 6.64 7.11 7.81 6.18 6.63 7.38 7.94 6.99 7.09 7.39 7.69 8.06 6.99 7.87 8.73 Average Residential Bill $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 26.83 28.45 32.54 33.88 35.26 28.45 30.15 31.94 34.57 28.44 30.13 32.96 35.07 31.49 31.86 32.98 34.13 35.51 31.49 34.81 38.02

PENNVEST

Financial Institution's

Per. Existing Rate Covenant

The Harrisburg Authority

Triple Bottom Line Criteria:
Environmental Social Financial Affordability
Environmental

Social

Financial Affordability

THA