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c. In January 2010, the City passed a resolution establishing a Water & Sewer Rate <br />IVIaIIltel1a11Ce POlICy ('`Rate Maintenance Policy") in order to safeguard the <br />tinancial integrity of the City's Water and Wastewater Utility. 'I'he 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 />payments on all outstanding deUt of the VVater and Wastewater <br />Utility; <br />ii, Interest and Sinking Ftuid to pay the next maturing principal and <br />interest payment; <br />iii. Reserve Fund equal to the average annual principal and interest <br />paymcnts for all outstanding debt issues; and, <br />iv. Contingency Fund of $500,000. <br />d. At thc timc of this study, the City has sufficient funds in the Reseive Ftmd and <br />Contingency Fund to meet the requirements of the Rate Maintenance Policy. <br />C. Basecl on the study's test year cevenue requirements, the City's current retail <br />«ater and wastewater rates and contract customer revenues are sufficient to meet <br />the Rate Maiiitenance Policy's Interest and Sinking Fund requirement and net <br />revenues of 1. l times the test year principal and interest payments. <br />f. Per contractual terms, the City's treated water contract customers' rates ace 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 actual <br />expenditures. Bccause the rates for the City's treated water contract customers <br />are based on actual, and not Uudgeted, expenditures, there is a timing difference in <br />cost recovci•y between the City's retail customers, whose rates are Uased on <br />budgeted expeiiditures, and treated water contract customers. This timing <br />difference is especially evident in this year's study. <br />For FY 2009, achial chemical costs for water treatment increased Uy <br />approxiiiiately $650,000 from FY 2008 actual chemical costs, and FY 2009 ach►al <br />electricity costs for water supply and treatinent increased by approximately <br />$200,000 from FY 2008 actual electricity costs. However, Uecause of changing <br />2 crry ojParis. Texns <br />6Vnier aud !f'nsreivnrer Cost ojService Sfutly <br />Jiaie 2010 <br />