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User Rate AdjustmentsJune 30, 2008

Financial Analysis -

Karen Spence

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Water & Sewer FundExpenditure Categories

28%

24%

9%

14%

12% 3%

3%1%

6%

UOSA DebtUOSA MaintenanceSewer SalariesSewer OperationsWater Purchase

Water OperationsWater SalariesAdmin FeeWater Debt

Note: UOSA Debt and UOSA Maintenance are mandatory expenditures (52%) regardless of water/sewage usage. These mandatory expenditures represent approximately $50 - $60 per month per Manassas Park utility account.Manassas Park is mandated by Federal Court to utilize UOSA, our only source of sewage treatment.

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Water & Sewer Enterprise Fund

The Water & Sewer fund is an Enterprise fund.

An enterprise fund is a self-sufficient fund. A self-sufficient fund is similar to a business in that revenues must at least equal expenditures. However, unlike a business an enterprise fund does not make a profit. Instead the enterprise fund’s goal is to have revenue equal expenditures.

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$3.8

$4.9 $3.8

$5.3

$3.5

$5.0 $4.9 $4.9

$0

$2

$4

$6

$8

$10

(Mill

ions)

FY'06 FY'07 FY'08 FY'09

Revenue Expenditures

Current Water / Sewer FundRevenue vs. Expenditures

ProjectedWith Tiered-

Rate AdjustmentActual Actual

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Customer Base– Average Total Number of Residential Accounts - 3,690– Average Total Number of Commercial Accounts - 295

Average Monthly Consumption:– Residential Accounts - 5,600 gallons/month– Commercial Accounts - 17,900 gallons/month

Average Monthly Bill– Residential Accounts - $57.40– Commercial Accounts - $194.11

Last assessment and adjustment to water and sewer rates– April 18, 1995

Current Status

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Analysis Highlights

“The term "tiered" typically refers to a "block" type of rate structure where the unit price of water changes with each of several preset consumption blocks for each billing period. “ *

A five-tiered conservation approach is used for residential and a four-tiered approach for commercial accounts

Recommend rates be re-evaluated every other year even though this analysis is a 10-year projection (revenue, operational & debt) keeping the fund self-sufficient

* American Waterworks Association – www.awwa.org

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Tiered Residential Rate Structure

Recommended

Option

Tiers in

gallons

Base

Fee

Cost/1000 gallons

UOSA Service Charge*

1 0-3,500 $0 $8.00 $26.00

2 3,501-7,000 $0 $8.25 $26.00

3 7,001- 10,000 $0 $9.50 $26.00

410,001- 14,000

$0 $10.25 $26.00

5 14,000+ $0 $12.25 $26.00

*UOSA Service Charge helps to defray the mandatory UOSA costs.

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Monthly Utility Bill Comparison Recommended Option

Average 5,600 gal usage

Current Residential Bill

Base Fee $35.00

Consumption 22.40

Total $57.40

New Residential Bill – tiered $0 base

Base Fee $0.00

Consump-Tier1 28.00

Consump-Tier2 17.33

UOSA Srv Chrg 26.00

Total $71.33

Increase – $13.93 or 24%

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Tiered Residential Rate Sample Bills

Gallons

Used

Current Bill

$35 base,

$4.00/1,000

Recommended Option

Utility BillIncrease / (Decrease)

1,000 $39 $34 (13%)

2,000 $43 $42 (2%)

3,000 $47 $50 6%

4,000 $51 $58.13 14%

5,000 $55 $66.38 21%

6,000 $59 $74.63 26%

7,000 $63 $82.88 32%

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Tiered Residential Rate Sample Bills

Gallons

Used

Current Bill

$35 base,

$4.00/1,000

Recommended Option

Utility BillIncrease / (Decrease)

8,000 $67 $92.38 38%

9,000 $71 $101.88 43%

10,000 $75 $111.38 49%

11,000 $79 $121.63 54%

12,000 $83 $131.88 59%

13,000 $87 $142.13 63%

14,000 $91 $152.38 67%

15,000 $95 $164.63 73%

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Surrounding Jurisdictions Comparison

Cost of W&S with use of 5,600 per month

Cost

1990

Increase/

Decrease

Cost

2000

Increase/

Decrease

Proj. 2009

Manassas Park 33.24 73% 57.40 24% 71.33

Manassas Na 32.15 64% 52.81

Fairfax Na 38.15 52% 58.13

PWCSA Na 39.85 45% 75.07 includes 17.42 peak

Average VA city 25.91 48% 38.23

Note: 1) All of the above jurisdictions except for Manassas Park have direct interlocal agreements with Fairfax County to purchase water.

PWCSA adds a peak charge of $3.11/1000 gallons over 7,000 gals OR 2,000 gals over winter aver OR 1.3 times winter consumption.

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Cost Increases Over Time

Item - Cost 1970 1980 1990 2000 2008 Proj. 2009

Gasoline/gallon 0.36 2.05 1.30 1.50 4.06 * 3.00-6.00

Min wage 1.45 3.10 3.80 5.15 6.55 7.25

Milk/gallon 1.15 1.69 2.78 2.88 3.87 4.16 **

W&S Base Fee 14 11.75 17 35 35 0

Water /1000gallons6500

gallons included

4000 gals

included, 4001 + $4.25/ga

l

$.90 $1 $1 $2.88 – 1st tier

Sewer /1000gallons $2.00 $3 $3$5.12 – 1st tier

$26 UOSA Srv Chrg

Avg W&S bill

For 5,600 gal$14 $18.55 $33.24 $57.40 $57.40 $71.33

* National Average – AAA’s Fuel Gage Report 6/12/08

** Over next 5 yrs, food prices expected to increase at a 7.5% annual rate. – Adv Econ Solutions research firm.