Item 3: Ratification of FY11 MWMC Budget

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Metropolitan Wastewater Management Commission Budget and Program Summary OPERATING BUDGET AND RATE HISTORY The graphs on page 16 show a five-year Regional Operating Budget comparison, and Regional Residential Sanitary Sewer costs over a fifteen-year period. Because the Equipment Replacement and Major Infrastructure Rehabilitation programs are managed in the Eugene Operating Budget, these programs are incorporated into both the five-year Regional Operating Budget comparison graph and the Five-Year Capital Programs comparison graph on page 43. As shown on the following graph, regional sewer user charges remained highly stable from 1992 through 2004. During the late 1990s, considerable efforts were made by MWMC to absorb increased costs due to inflation and service level increases through improvements in organizational efficiency and effectiveness. However, as the Regional Wastewater Facilities approached the end of their original design lives, and increased regulatory requirements emerged, MWMC completed a comprehensive update to its Facilities Plan in 2004. This Plan demonstrated the need for a significant capital investment in new and expanded facilities to meet environmental performance requirements and capacity to serve the community through 2025. Although a portion of these capital improvements can be funded through system development charges (SDCs), much of the funding for approximately $196 million (in 2006 dollars) in capital improvements over the twenty-year period will come from user charges. Since 2004, this has become the major driver of MWMC’s need to increase sewer user rates on an annual basis. In FY 08-09, there was an 11% user rate increase over FY 07-08 rates applied uniformly across all user classes. This rate increase provided adequate revenue to meet current bond covenants and meet requirements to issue $50.7 million in bonds in FY 08-09. In October of 2008, the Commission adopted an interim user rate increase of 7% due to the closure of Hynix Semiconductor. This increase was necessary to issue new revenue bonds and maintain bond covenants for existing bonds. The typical residential monthly wastewater bill (based on 5,000 gallons of usage) increased an additional $1.10 per month and went into effect on December 1, 2008. The FY 09-10 RWP operating budget is based on an 18% user rate increase over FY 08-09 rates applied uniformly across all user classes. This rate provides for Operations, Administration, Capital programs, reserves and debt service to be funded at sufficient levels to meet FY 09-10 requirements.It is intended to meet capital and operating requirements, the Commission’s Financial Plan policies, and covenants associated with MWMC’s 2006 and 2008 revenue bonds as well as provide adequate debt service coverage ratios for an additional $20 million bond sale in FY 09-10. In FY 09-10, there was an 18% user rate increase over FY 08-09 rates and was applied uniformly across all user classes. The increase was driven by the need to finance the capital improvement program and establish rates to borrow an additional $20M in revenue bonds. In FY 10-11, the operating budget is based on a 5% user rate increase over the FY 09-10 rates. This rate provides for Operations, Administration, Capital programs, reserves and debt service to be funded at sufficient levels to meet FY 10-11 requirements.It is intended to meet capital and Page 14 DRAFT FY 10-11 BUDGET AND CIP