14 ATTACHMENTS - Laserfiche WebLink

depreciated facility. Therefore, consideration should be given to funding within rates some amount greater than annual depreciation expense for renewals and replacements. Whenever possible, the City should be funding from their rates an amount that is greater than annual depreciation expense. As a point of reference, the current depreciation expense for the local sewer utility is approximately $2.5 million. The City begins moving toward funding its depreciation by funding $1.2 million in FY 2010 and ramping up to $2.6 by FY 2017 in anticipation of increased replacements in the future. Once the City has completed it asset management study it should provide City staff with an annual level of replacement funding necessary to prudently maintain its local sewer system. This level of funding should be reviewed and a determination made as to the level of acceptable borrowing and rate financed capital to minimize rates, yet maximize the level of funding available. 1.6 Projection of Debt Service Payments The final component of the City's revenue requirement is debt service. Debt service relates to the City's annual debt service obligations (principle and interest) when capital projects are financed via long -term debt. The City's current debt obligations have an annual principal and interest payment ranging from $303,000 in FY 2010 and drop to $179,000 for FY 2011 through 2014. It should also be noted that this level of debt service represents the net debt service after funding from the replacement and expansion funds for the portions related to each. After 2014 there are no assumed new debt obligations. As mentioned above, once the City has determined the annual level of replacement funding necessary to fund the local sewer system, the City may incur additional debt service payments to fund those major replacement projects. 1.7 Summary of the Revenue Requirement The components discussed above are summed together to develop the overall revenue requirement for the City's local sewer system. In developing the final revenue requirement, consideration was given to the financial planning considerations of the City. In particular, emphasis was placed on attempting to minimize rates, yet still have adequate funds to support the operational activities and capital projects throughout the projected time period. A summary of the revenue requirement is shown below in Table 1 -2. Z Development of the Revenue Requirement 1.5 City of Pleasanton Local Sewer Rate Study