FY 2017 Budget Highlights

EXHIBIT G WATER/SEWER RATES ORDINANCE/RESERVES Recent Action Regarding Water and Sewer User Rates and Fees In May 20, 2008, the County was anticipating an increase in revenue from the sale of water to the City of Frederick under Potomac River Water Supply Agreement (PRWSA), which was executed in 2006. Therefore BOCC in adopting Resolution 08-14, only established an annual escalation factor for the water and sewer capacity fees and changed the equivalent meter size basis for calculating Ready-to-Serve (RTS) charges for non- residential customers. No changes were made to the RTS charge or water and sewer user commodity rates. In May 2010, the BOCC adopted Resolution 10-12, which amended the water and sewer regulations, which among other things, increased or established miscellaneous fees for certain special services the water and sewer enterprise provided such as special meter readings, tank truck filling, septic waste disposal, and fire flow testing. No changes were made to the RTS charge or water and sewer user commodity rates at this time as the County was anticipating increased revenues from a new water supply agreement with the Army Garrison at Fort Detrick and increased revenue from the City of Frederick when the 8 MGD water capacity would be made available to the City later that year. In September 2010, the County, City of Frederick and the Army Garrison at Fort Detrick entered into a water supply agreement, which, unlike the PRWSA between the County and City, included the requirement to purchase a minimum of I MGD of water. This resulted in annual revenue from the Fort Detrick water supply agreement of $207,900. In December 2010, the County completed the Potomac River water system improvements, which made 8 MGD of capacity available to the City of Frederick. This increased the City's water availability charges from $365,000 to $1,500,000 per year. Although the enterprise's revenues increased by adding these two large water customers, the lack of actual usage by the City resulted in lower than anticipated revenue from Commodity fees. As a result the Water and Sewer enterprise continued to rely upon its operating reserves to supplement annual expenditures. Recognizing that the use of reserves could not continue indefinitely, in 2011, the current BOCC directed the DUSWM to complete a comprehensive update of the existing water and sewer rate model and recommend rate increases to address the problem. After considering the recommended rate increase options, the BOCC adopted Ordinance 12-29-624, which established specific rate increases over a five year period of time (FY 2014 - FY 2018). The new rates, which took effect July 1, 2013, are designed to eliminate the use of the enterprise reserves and to restore reserves used between 2014 and 2018, during the rate increase implementation period. Under the adopted ordinance, water commodity rates increase approximately 14.5% each year from FY 2014 to FY 2018. Sewer usage rates increased approximately 1% in 2014 and remain level thereafter. The adopted rates also included a 69% increase in the water and sewer RTS (Availability) charges, which was also spread out over the five year rate increase implementation period. Based on MFSG financial model the projected cumulative effect of the rate increase over the five year period of implementation will completely eliminate the use of reserves for sewer system expenditures by FY 2016, and water system expenditures by FY 2017. By FY 2018 reserves used during the five year rate increase implementation period are projected to be restored.

View entire presentation