R97-17 AUTHORIZING AGREEMENT - ECONOMIC AND ENGINEERING SERVICES, INC.

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� � Attachement A typically established in relation to debt service, capital improvements and operations. In addition to these traditional financial planning considerations, the City has specified five financial "tests" for the revenue requirements developed. The financial tests to be included as a part of this study include the following: ❑ Cash Test ❑ Debt Service Coverage Test ❑ Earnings Test ❑ Debt Service plus Depreciation Test ❑ Debt Service plus Replacement Cost Test Under the approach used by EES to develop the revenue requirements for the City, the revenue requirements, in theory, should pass each of these financial tests. EES will obtain from the City, the exact definition to be used for each test. This is necessary, since certain tests, such as debt service coverage ratio, are often specific to the utility and are contained within the official statements associated with the issuance of the revenue bonds. 1.3.5 Summarization of the Water Revenue Requirements At the end of this process, a summary of the revenue requirements for the utility will be developed. This summary will show the potential annual rate impacts over the projected five year planning horizon. The revenue requirements will reflect proper levels of funding for operation and maintenance activities, as well as capital expenditure needs. The summary of the revenue requirements will show a comparison of present rate levels to projected expenditures for the test period, on an annual basis. At that point, a determination and recommendation can be provided of the required changes in water rate revenue levels for the utility. If necessary, a plan can be developed to phase-in rates over time should it appear that large adjustments may be required. 1.4 Water Cost of Service Study An average embedded water cost of service study is concerned with the equitable allocation of the revenue requirements to the various customer classes of service for the utility. A key goal or objective within the cost of service study is to determine if cost differences appear to exist between the various customer classes of service (e.g. residential, commercial, industrial, etc.). For example, if appropriate, a cost of service analysis will allow for residential, multi-family, commercial and industrial customers to be disaggregated and analyzed on an individual class-by-class basis. The main focus of this type of analysis is to determine if cost differences do exist Scope of Seruices 1-6