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c. In January 2010, the City passed a resolution establishing a Water & Sewer Rate <br />Maintenance Policy ("Rate Maintenance Policy") in order to safeguard the <br />financial integrity of the City's Water and Wastewater Utility. The Rate <br />Maintenance Policy requires the setting of rates to achieve and maintain: <br />i. Net utility revenues equal to 1.1 times the principal and interest <br />payinents on all outstanding deUt of the Water and Wastewater <br />Utility; <br />ii. Interest and Sinking Fund to pay the next maturing principal and <br />interest payment; <br />iii. Reseive Fund equal to the average annual principal and interest <br />payments for all outstanding debt issues; and, <br />iv. Contingency Fund of $500,000. <br />d. At the time of this study, the City has sufficient funds in the Reseive Fund and <br />Contingency Fund to meet the requirements of the Rale Mainlenance Policy. <br />e. Based on thc study's test year revenue requirements, the City's current retail <br />water and wastewater rates and contract customer revenues are sufficient to meet <br />the Rate Maintenance Policy's Interest and Sinking Fund requirement and net <br />revenues of 1.1 tiines the test year principal and interest payments. <br />f. Per contractual terms, the City's treated water conh•act customers' rates are based <br />on actual, and not budgeted, expendihues, For this study, the treated water <br />contract customers' rates are based on Fiscal Year ("FY") 2009 achial <br />expenditLires. Because the rates for the City's treated water contract customers <br />are based on actual, and not budgeted, expenditures, tliere is a timing difference in <br />cost recovei•y between the City's retail customers, whose rates are based on <br />budgeted expenditures, and treated water contract customers. This timing <br />diffet•ence is especially evident in tliis year's study. <br />For FY 2009, ach►al chemical costs for water treatment increased by <br />approximately $650,000 from FY 2008 achlal chemical costs, and FY 2009 actual <br />electricity costs for water supply and treatment increased by approximately <br />$200,000 froin FY 2008 achial electricity costs. However, because of changing <br />2 Ciq, ojPm•is, Teras <br />Wrrrer aard K'astewnrer Cost of Sen~ice Srndi, <br />Juiie 2010 <br />- - 227 <br />