- Water/Wastewater Rate Study & Models - Fort Smith
We prepared a comprehensive water and sewer rate study for the City of Fort Smith, Arkansas, Water and Sewer Utilities. This study included a determination of system revenue requirements, a cost-of-service analysis and rate design services. The study included determination of costs for inside-city retail customers and outside-city wholesale costs and design of appropriate rates for each.
A five-year financial forecast estimated the annual revenue requirement and included projections of annual revenues, expenses and the resulting net margins, as well as projections of cash flows, over the forecast period. The forecast included consideration of annual levels of internally generated funds from operations and projected capital expenditure requirements. These estimates were used to forecast the need for additional funds through retail rate adjustments, external capital financing, and/or transfers from reserves.
The annual revenue requirement developed from the forecast was used as the basis for the cost-of-service analysis. Each component of the annual revenue requirement including operating expense, net income, net non-operating margins, and other revenue was assigned to the functional services provided. The annual revenue requirement was further allocated to rate classifications. These allocations were developed to reflect the relative impact each rate class has had on the level of each component of the annual revenue requirement.
Proposed rates were developed consistent with Fort Smith’s rate objectives. The proposed rate design for each class generally follows the existing rate structure and is designed to achieve a balance between the objectives to provide full recovery of the costs of providing service, to base the retail rates on the allocated cost-of-service, and to minimize the impacts of rate changes on individual groups of customers. Comparison of monthly bills calculated for varying levels of consumption based on the existing rates and the proposed rates were developed. As part of the rate design process, consideration was given to comparisons of monthly bills based on the proposed rates with the current rates of neighboring utilities.
Our team completed a consulting engineer's report in connection with the issuance of water and sewer utility revenue bonds for the Water and Sewer Utilities on several occasions. In completing the studies, we conducted an analysis of historical operations and made projection of operating revenues and operation and maintenance expenses for the water and sewer systems for a five-year period. The results of our analysis showed the systems' ability to provide for necessary debt service coverage. During the course of completing the work on the engineer's report, we also completed a review of the proposed water rate adjustments for the system.
- Financial forecast
- Revenue requirement
- Cost of service
- Rate design
- City council presentation