St. Lucie West Services District	
Water, Wastewater, and Irrigation System
2022 Revenue Sufficiency Update and Review
Presented on August 30, 2021

Purpose of Update
Determine revenue requirements
Monitor system trends and

Gross Revenues	Gross Revenue Requirements

financial position
Support budget process
Rate covenant compliance
Promote full cost recovery
Identify potential future rate

Rate Revenues

Other Revenue / Impact Fees

Investment Income / Contributions

Expenses

Capital / Debt

Reserves / Compliance

adjustments

$ Surplus	$ (Deficiency)

$ Balanced

2

Basis for Financial Forecast
Five-year financial forecast– fiscal years 2022-2026
Proposed 2022 budget
2021 year-to-date operating results
District's six-year capital improvement program
District’s financial policies
Debt service schedules and covenants
› 110% coverage requirement (minimum)
› Flow of funds

3

System Overview
Residential service majority of sales
Approx. 82% of retail customers have irrigation service
Bulk service – The Reserve CDD
System serves about 6,800 retail accounts
Minimal customer growth (less than 1% annually)

4

Major Assumptions

Conservative sales forecast based on historical trends
Forecast of operating expenses based on proposed FY 22 budget
› Increases in O&M outpacing revenue growth
› 3% average annual projected increase in operating expenses during forecast period
› Consumer Price Index (CBO)– Projected at approximately 2.4% per year

5

Major Assumptions (cont’d.)

Operating expense projections
› Adjusted for inflation and growth
› Includes contingency of 1.5%

Personnel costs 48% of operating expenses
Variable costs also significant at 19% of operating expenses

6

Major Assumptions (cont’d.)

Identified utility capital needs of $10.9 million
› Clearwell & Transfer Pump Expansion ($1.6 M)
› Sand Filter Upgrades ($1.1 M)
› Membrane Filter Replacement ($0.6 M)
› Water Main Extension ($0.6 M)
› Continued water and wastewater renewal and replacement programs

7

Capital Funding Sources

Capital Improvement Program Funding
$5,000,000		

$4,000,000		

$3,000,000		

$2,000,000		

$1,000,000		
$-	
2021	
2022	
2023	
2024	
2025	
2026	
-	R&R Fund	-	w ater & Sewer Fund	-	Rates	
-	General Fund Transfer	-	Total Connection Fees	Depreciation	
	 8

Debt Service Requirements
No additional debt assumed during forecast period
Average total annual debt service = $2.6 million
› Matures in 2035
Projected coverage remains strong at proposed rates
› Coverage provides rate flexibility
Capital reinvestment
Fund rate stabilization fund

9

Results of Analysis
Increased budgeted O&M expenses for FY 2022
› Primarily due to inflation (higher cost to provide service)
Continued inflationary pressure on O&M during forecast period
› Average increase from fiscal years 2022 – 2026 of 3% per year
› Reductions in operating margins

10

Fiscal Position

(/)   $12
C
0

Revenues Requirements and Existing vs Proposed Rates

$10

$8

$6

$4

$2

$0

2021	2022	2023
Operating Expenses

2024
Debt Service

2025	2026

R&R Transfers/Rate Funded Capital
-	-     ■ Revenues at Proposed Rates

Revenues at Existing Rates

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Fiscal Position (cont’d.)

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%

2021	2022

Operating Revenue Margin

2023	2024	2025

2026

-	o perating Margin

B enchmark: Fitch Small System Median 42%

12

Fiscal Position (cont’d.)

	Operating	Reserves	Ending	Cash Balance	
$7 ,000					
$ 6,000					
$ 5,000					
$4,000					
$3,000					
$2,000					
$1,000					

IJ)
"'O
C
ctl
IJ)
:::::l

0
..c:
I-

$-
2021	2022	2023	2024	2025	2026

-	OPERATING FUND	-	RATE STABILIZATION FUND	90 - Days of O&M
	 13

Fiscal Position (cont’d.)

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Debt to Equity Ratio

2021	2022	2023	2024	2025	2026
Debt Outstanding as a Percentage of Total Equity

14

Fiscal Position (cont’d.)

160%
140%
120%
100%
80%
60%
40%

2021

-	Ca

20%

0%

Test 1 -All-in Debt Service Coverage I Net Revenues without Connection Fees or AFPI

2022	2023	2024	2025	2026

lculated Coverage	-	Required Ratio at 110%	Target Ratio at 135%
	 15

Fiscal Position (cont’d.)

160%
140%
120%
100%
80%
60%
40%
20%
0%

Test 2 - Total Debt Service Plus Required R&R Deposit/Net
Revenues and AFPI

2021	2022	2023	2024	2025	2026

-	c alculatedCoverage

-	Required Ratio at 100%

Target Ratio at 115%

16

Results of Analysis (cont’d)
Financial position
› Projected operating revenue margin 37% in 2022 and minimal decline during forecast period
› Strong operating reserves
› Projected coverage ratio – 134% calculated / 110% required
Last rate increase effective fiscal year 2010
No rate increase proposed for fiscal year 2022

17

Results of Analysis (cont’d)

Proposed rate increases:
› Fiscal Years 2023 through 2026 – 2% annual increase
› Re-evaluate annually to determine need
› Consider using District's adopted indexing provision
Based on Consumer Price Index (CPI)
– 10-year average of 1.75%
Provision includes a minimum 0% and maximum of 5%

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Rate Comparison

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Rate Comparison with Irrigation

c::::::::J Water	c::::::::J Irrigation c::::::::J Wastewater	-other Florida Utilities' Average

St. Lucie West Services  District Combined Water and Wastewater Bill Comparison
Assuming 3,000 Gallons Potable Water Usage and 5,000 Gallons Irrigation Service

$140        +---------------------------------------,
$120  +--------------------------  -,------,-------,-----,--7--1
$100        -+-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-   _::-_::-_:::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-_::-....:::----,-----F;;;;;,...----1---1---+---+---+---+---+---+---+--+---+--+---+--+---+-

Other Utilities' Avera e: $104.51

$80 +---"<.!._C ,< ---------,7	I
$60
$40
$20
$0 -+---'-

$160    ----------------------------------­

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Recommendations

Fiscal year 2022 utility budget is reasonable

No rate increase for fiscal year 2022
› Consider indexing beginning in fiscal year 2023

Annual update and evaluation of revenue sufficiency

21

Contact: Ryan Smith or Trevor McCarthy 407 628 2600

22