2006 Water Comprehensive Plan - City of Bellevue

CHAPTER 12Financial InformationThis chapter summarizes the current and forecasted financial strength of Bellevue’s WaterUtility and it’s funding strategy for recommended investments through the 20-year planningperiod.CURRENT FINANCIAL STATUSTable 12-1 summarizes actual cash-basis revenues, expenses, and fund balances for the WaterUtility for the most recent 8-year period. Over this period, the Utility fund balance, whichrepresents total unexpended resources carried forward to future years, increased from$1.7 million at the beginning of 1998 to a current balance of $12.0 million at the end of 2005.This is consistent with reserve polices in place since 1992 and adjustments made to thosepolicies in 2004 to account for the change in the Utility’s wholesale suppliers. Theseadjustments increased reserve requirements due to differences in lags between wholesaleexpenses and revenue collections as well as the “take or pay” nature of the contract with theUtility’s new wholesale water supplier.During 1998 through 2005, a total of $27.2 million was transferred to the Utility CapitalImprovement Fund to finance budgeted capital project expenses. These transfers representapproximately 15 percent of total water utility expenses for the 8-year period.FINANCIAL OUTLOOK — Upcoming 8-Year PeriodTable 12-2 presents a projection of annual utility revenues, expenses, and fund balances for thenext 8 years, based on the 2006 adopted budget amounts and changes expected to occur invarious categories over the subsequent 7-year period as a result of new customers, generalinflation, and other related factors. This type of forecast is routinely used by utility staff todevelop rate adjustment proposals and to assess the impact of changing budget assumptions onfuture rate requirements.Some key assumptions used to forecast future annual revenues and expenses that appear inTable 12-2 are outlined below:1. Growth in total water utility customers/water consumption levels will equal 0.5 percentper year in 2006 through 2013, based on historical averages.2. Interest and other revenue sources will grow by 4.9 percent per year, based on historicaltrends and projected fund balances.12-1