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MEDIA ADVISORY: City of Flint Transition to Flint River Water Ceremony WHERE; Flint Water Treatment Plant, 4500 N, Dort Hwy, by Stewart Ave. WHEN: Friday, April 25, 2014 at 2:00pm Description: The City of Flint is holding a ceremony tomorrow to officially begin the transition to use of the Flint River by shutting the valve to the ititake pipé from Detroit, The DEQ has given Flint final authorization to begin water distribution from the Flint Water Treatment Plant, City, Genesee County, and Michigan Department of Environmental Quality officials will be on hand to witness this historic event and answer media questions, xxxEND_PAGE:treasury02_b4_231_338_009 000240 -dason Lorene Public Information Officar Cily of Flint (810) 237-2039 | p.co xxxEND_PAGE:treasury02_b4_231_338_010 000241 Darnell Earle Payne Walling ICMA-CM, MP. Moyor Emergency Manager Jason Lorenz Public Information Gfficer (810) 237-2039 jlorenz@cityofflintcom For ltimediate Release City of Flint Officially Begins Using Flint River as Temporary Primary Water Source Flint, Michigan — April 25, 2074 — For the firsi lime in fifty years, ive Gity of Flint is usina the Flint River—part of the Saginaw River watershed—as a primary water source for clty residents. Today the valve to the pipeline from Detroit was closed and the Flint River officially became Flint's Water supply. The temporary switchaver is scheduled to suppart the sily’s primary water needs forthe next two years While construction of the forthcoming pipeline from Lake Huron is completed by Karegnondi Water Authority. Officials from the City of Flint, the Genesee County Drain Carmmission and the Michigan Department of Environmental Quality were all on hand to witness the historic event. The Flint River was once the primary source of water for city residenis up to the 1960s, Over the past 40 years, it has provided water to city residents as a back-up to water provided to us by Detroit. During our partnership wilh Detroit, Flint has had to transition to the use of the Flint River for residential water on a few different occasions, With the most recant temporary switchover happening in 2009. Each temporary stint on local water proved iliree things to city employees and residents alike: That a transitiori to local river water could be done seamlassly, and that it was both sensible and safe for us to Use our own Water as a primary water source in Flint. -CONTINUE— City Hal) (701 S. Saginaw Street - Flint, Michigan 48562 §10-766-7346 FAX? S1-746-7258 WAVY CIES OFT Lette xxxEND_PAGE:treasury02_b4_231_338_011 000242 Darnell Earta Daye Walling loma-cm, pied Mayor Emergency Manager Even with a proven track fecord of providing pariectly good water for Flint, there still remains lingering Uncertainty about the quality of the water. In an effori todispel myths and promote the truth aboutthe Flint River and its Viability as a residential water resource, there have been numerous studies and tests conducted on its water by several different independent organizations. In addition to What has been found in independent studies, it isalso the responsibility of the City of Flint Water Service Center to continually test the water provided to city residents. Michael Prysby of the Michigan DEQ Office of Drinking Water verified that “the quatity of the water being pul cul meets all of our drinking water standards and Flint water is safe to drink,” Far nearly 10 years Mike Glasgow has. Worked in the laboratory at the City of Flint Water Service Center. He has run countless tesis on our drinking water ta ensure its safety for public Use Mike has not only conducted tests on water provided to us by Detreit, but also on local water from nearby rivers, lakes and streams including the Flint River. When asked if over the lasi decade if he has seen any abnormalities of major concer in the water, his response was an emphatic, “No.” In his words, “there has been nothing seen that was of major concem," during his angging tenure working in the lab, “The tests results have shawn that ourwater is not only safe, buf of the high quality that Flint customers have come to expect," announced DPW Director Howard Croft, “we are proud of the end result.” Apart from the water plant's devotion to ensuring that our water fs good, Flint is doubly blessed in having the Flint River Watershed Coalition as a separate organization —CONTINUE— City Hall ) 101 §, Saginaw Strent - Flint, Michigan 48502 3) 0-766-7346 FAX: 810-766-7218 © wyweeilyofflini com xxxEND_PAGE:treasury02_b4_231_338_012 000243 Dernalt Earle: Hayne Walling 1CMA-CN, MNP. Mayor Emerygoncy Monoger dedicated ta monitoring the overall welfare of local bodies of water, overseeing more than 30 different nearby locations. Rebecca Fedewa has been direclor of the walershed caalillan since 2008, By virtue of her passion for her work and her posilion on the board, she |s very conversant with the condition of the Flint River, In her words, ‘The Flint River is Increasingly healthy, sand completely sulfable as a drinking waier source." Fedewa and FRWC are working closely with the city “to mianitor flaws and habitats beiween the intake and the Waste Water treatment plant to ensure there are minimal to no impacts to the overall heatti of the river.“ FRWE alsa invites city residents to be a part of their monitoring exercises during this spring in order “fo gain firsthand knowledge in the health and vitality of our Flint River.” Mayor Dayne Walling invited everyone at today’s event to toast to Flint's water. "Ws regular, good, pure drinking water, and it's righi in our backyard,” said Mayor Walling, “this is the first step in the right direction for Flint, as we take this monumental step forward in controlling the future of our community's most precious resource.” —END— ; City Hall L101 S, Sagmmaw Street - Flint, Michigan 48902 310-766-7346 FAR, B10-766°7218 — wory-cityo Minicom xxxEND_PAGE:treasury02_b4_231_338_013 RAFTELIS * Hie 4 TOM awe y Rate Stud ye Wa nad:Wa Fi 201 Jun eport| “Water.a A a 2:79, nal R xxxEND_PAGE:treasury02_b4_231_338_014 000245 TABLE OF CONTENTS 1. EXECUTIVE SUMMARY .....ccccccccccsceseeee Jetiseie EES ae OT ny | 7.1 BACKGROUND OF THE STUDY he! 1.2 ADEQUACY OF EXISTING WATER AND WASTEWATER REVENUES .........ccu0 x 1.3 WATER AND WASTEWATER FINANCIAL PLANS wad 1.4 COST OF SERVICE STUDY AND WATER AND WASTEWATER RATES......-0-rere0s 4 1.5 TRANSITION FROM DWSD TO KWA 6 4.6 WATER AND WASTEWATER UTILITY OPERATIONS 4ND BEST MANAGEMENT PTR A eo FR Eada xe veceasbyecessv eb ties sndthanpemnerssGnupsasoe dndsvajesesussvuvin dgracbadaniy ua duis rnbapstiSWaTaNPr pied {eves TO 2. INTRODUCTION AND STUDY OBJECTIVES........., abesdatarivee 4 2 2.1 INTRODUCTION ...,.csseesee Fa smmesttissdis " SFB TS BUOY OB eis IVES cise iccssssspenmrvees ensvonnibges 12 3. WATER AND WASTEWATER UTILITY FINANCIAL PLANS. ........012 3.1 THE FINANCIAL PLANNING PROCESS.) ..ciuses WaAcaasbia Hitbna RINAAWTIGeuDATCNEeA bom ONES 12 3.2 WATER UTILITY FINANCIAL PLAN. 13 2.2.1 Forecast Water Units of Service and Revenue at Existing Rates... 3.2,2Forecast of Water Operation and Maintenance Expenditures , 3.2.3Water Utility CIP and GIP Financing... 3.2,4Water Gasti Flow Forecast ......ceenes WAdOt a Waxenemnegpoennn teens ‘ 3.3 WASTEWATER UTILITY FINANCIAL PLAN, itso’ 3.3.1 Forecast Wastewater Units of Service and Revenwes at Existing Rates... 6 54 3.3.2Forecast Wastewater Utility Operation anti Maintenance Expendltures ......cssesse 40 B,S.SWastewater Utility CIP atid CIP Fimancdng ee, sesiyy AZ 3,3.4Wastewater Cash Flaw Forecasts... den nanaacr tt cikeavabclresansus sone SS 4. WATER UTILITY COST OF SERVICE STUDY dT 4.1 WATER REVENUE REQUIREMENT FROM RATES 4? 4.2 WATER REVENUE REQUIREMENTS BY CUSTOMER CLASS 4g 4.2.1048M Allocation to Function Categories OO 4.2,.208M Allacation to Cost COMPOMEMES iecorcerseeeerseeee 4,2,3Capital Cost Allocation to Funtétional Companents........ ioveababviad 4.2 4Capital Cost Allocation to Cost Component «63 4.2.5Non-Rate Reveniie Allocation to Cost Component... ~§3 4.2.8Determination of Maximum Day and Hour Peaking Factors... SA City of Flint xxxEND_PAGE:treasury02_b4_231_338_015 000246 4.2.7 Calculation of Units of Service Sie G2, BU ei Cost of Service i.e citi hla tinct Sa 4.2.9Revenae Requirements by Customer Class .........., 7 MS’ MYA TER FATE DESIGN a cesescarsescusesetce te ID 4.3.1 Volumetric Rate Calculations OO 4,3.2Fixed Charge Caloulatlois........ 44.3Summary of Existing and Forecast Water Rates 43, AProjected Residential Water BUNS .. sera seer OB WASTEWATER UTILITY COST OF SERVICE STUDY. * 6.1 WASTEWATER REVENUE REQUIREMENT FROM RATES .............. ane 5.2 WASTEWATER REVENLIE REQUIREMENTS BY CUSTGMER CLASS ....... cece 69 5.2,108M Allocation to Function Catagories pesipimeoiapehig Oe 5,2. 208M Allocation to Cost Camm PonBits ....-crncaeeernnercen — ipaieeenieianisibtcecet 5.2.3Capital Cost Allocation to Functional Components .....—ncernreernrnene sarah etetnatioectonsanieed D 6.2.4 Capital Cost Allocation to Cost COMmpOme|ntts EM 5.2,5Non-Rate Revenue Allocation to Cast COMpPONeNts —..ccarecwenenrr epcguaatatinnt L B.2.SPlant Satan ce Araalysis TE §.2.7 Calculation of Units of Service sun 5. Z.BUnit Cost Of Service... ebb ins seeoniowareuiiiniba kD 5.2.9 Revenue Requirements by Customer Chab, Gi reduvn stan vised neebccacessytithcewedisy areotadien ttle 74 5.3. WASTEVVAT ENC RATE DESIGN i sessta sors yersevesiniecd sure 75 5.3.1 Volumetric Rate Cain ulations nies pachshinchviapianeiiin te 5.3,2Fixed Charge Calculations... rssrresetesnes See eet are er een eet eee aasvoneeseieabaanss TO 5.3.3Summary of Existing and Forecast Wastewater Rates... asc BO 5.3,4Projected Residential Wastewater Bills cc BO DISCUSSION OF BEST MANAGEMENT PRACTICES (BMP).,.,,,,....83 6.1 FINANCIAL PROFILE.......... 6.2 DEBT PROFILE RELATED... 6:3: OPERATING PROFILE RELATED 5. reer eterer etter eoriiit iii reer serene Water and Wastewater Rale Study xxxEND_PAGE:treasury02_b4_231_338_016 000247 This page intentionally left blank to facilitate two-sided printing, City of Flint xxxEND_PAGE:treasury02_b4_231_338_017 000248 4 EXECUTIVE SUMMARY ti BACKGROUND OF THE STUDY On November of 2015, the City of Flint ("City") engaged Raftelis Financial Consultants ("REC") to perform water and wastewater utility rate studies: Tha scape of services Included the following: 3.2 Evaluate the adequacy of existing water and wastewater revenues ta meet each Utility's projected revenue requirements Develop comprehensive water and wastewater financial plans based on sound financial Mahagement practices fora | 0 year forecast period Determine water and Wastewater rates which adequately recover the cost of operating the water and Wastewater utilities under the existing rate structures and provide alternatives based on.a comprehensive cost of service study Analyze the impact of transitioning from the ase of purchased potable water from the Detroit Water and Sewerage District {“BWSD") to the treatment of raw water from the Karegnondi Water Authority (“KWA"}. Review the City's water and wastewater operations in comparison to Best Management Practices criteria, ADEQUAGY OF EXISTING WATER AND WASTEWATER REVENUES Charts ES-1 and 2 below summarize our ‘conclusions with respect to the adequacy of water aid Wastewater reyenu# at existing rates; As the charts indicate, beginning in FY 2015, water and wastewarer utility revenues are insufficient te recover tach utility's revenue requirement Key drivers uf this disparity are: Amarked decrease in tilled usage, the cause of which is currently being evaluated ly RFC ulider a separate contract. A sormal pattern of declining per customer usage for both utilities overall due to conservation, efficient appliances, etc. Increases in utility revenue requirements associaced with the financial plans lactuding operating cost inflation, capital improvements and policies. which support the sound financial management of each utility in accordance with best manapeniant practices. Consequently, the preposed increases in rate revenue are pecessary to ensure aach utilicy can adequately furd its operation and maintenance expenditures, make payments on existing debt seryice, provide funding for needed capital improvements end ensure adequate operating reserves: Water and Wastewater Rate Study | | xxxEND_PAGE:treasury02_b4_231_338_018 000249 ES-1; Water Utility Revenues at Existing Rates $50,000,000 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 515,000,000 $10,000,000 $5,000,000 S55 Total Gross Revenue Requirements ——— Grand Tote! Water Revenue at Existing Rater ——— Proposed Rate Revenue ES-2: Wastewater Utility Revenues at Existing Rates 340,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,060 S$ FY 7014 Fe 291s FY 2016 FY 2017 FY 2018 FY 2019 tsa) Total Gross Revenues Requirements ——— Grand Total Wastewater Revenue et Existing Rates —- Proposed Rate Revenue = | City of Flint xxxEND_PAGE:treasury02_b4_231_338_019 000250 1.4 WATER AND WASTEWATER FINANCIAL PLANS Tables BS-3 and ES-4 below summarize the proposed water and wastewater financial plans and rate revenue increases for the first'5 years of the forecast periad, The financial plans and proposed increased in rate revenues are driven by the following factors: * Inflationary increases in O&M expenditures (or both utilities * For the water titility: o Decreases in revenues associated with the cessation of service to Genesee County © Decreases in O&M expenditures associated with an elimination of DWSD water purchases o Tnereases in C&M expenditures associated with transitioning from backeuw to primary operation of the Flint WTP oO Increases in capital expenditures associated with improvements to the Flint WTP in Preparation for the treatmeny of raw water from KWA o Increases in debt service associated with Flint’s share of projected KWA debt service + Necessary cash funded recapitalization of wastewater utility assets * A build-up, for each utility, of operating reserves equivalent to 90 days of projected O&M expenditures acd debi-service payments, the minimum, according to Anancial management practices ("BMP"), ES3: SUMMARY OF WATER AND WASTEWATER FINANCIAL PLANS Fon Mate vu a a Se Fn red Nave wv thar ae erating (ee sities | Rast t2feisrs = wmins & (Haim + Aw SNe ee ese i ‘ AUgI nd) Me eeive Hm Hele liisreeer eo ' ul LS ws F sorte Ss eran ¢ ' ’ | ee st | oe a | a eee er | {earn serben TEN PHP waa = JGR = Tee F varinn = Tee ara (bara aan es + aoc q2MOn F Dawe 4 ne, 8 TT ek orzo § Wrest ihren = ‘ofan & Woon wWheag (36 fecal ‘ Cer 797 EF Expekt ES FOIE snsen 4 324,002 £ i WaT a os [Craw Vite Wnstewstar avenue at Bo cieg Mates ‘ JAMad banat The veny Ream ively liverreet ! CNM (toa Anrwmruies i he rst on in tor dense Ftc Lia are bial (Goi AEVEwUE TEOUINEMENTE © wis & nm < f 2,033,208 gasore 3 som cs sme eer = mea rn ame 3 oar = los 8 0e3.090 some Amo £ eam F 2024. > 1. Thin = sarta & saasiyans Tas) & 50000 & vO & ntsarsth & aoe kab) THF NT © Water and Wasiewaler Rate Siudy | 3 xxxEND_PAGE:treasury02_b4_231_338_020 000251 ES-4: Annual % Rate Revenue Increases F¥ 2015 PY 2g16 FY2037 FY 2018 FY 2029 Water Ublity Wastewater Utility As indicated in the previous section, water and wastewater uillty revermas at existing rates are not adequate to recover the projected costs: gach utility will incur over the forecast period. Consequently additional rate revenue will bs needed to ensure adequate récovery of each ucility’s revenue requirements. {4 COST OF SERVICE STUDY AND WATER ANG WASTEWATER RATES Table ES-5 below summarizes the results of the water and wastewater cost of service studies, The customer classes included are those which are recognized in the City's existing customer information system ("CIS"). While the City does not currently have etther a water or wastewater rate structure which recognizes these customer classes, rates by customer class have been calevlated and are included as appendices A and B to this report. The totals for each customer class represent the contribution of that class to the overall costs of each utility. This is based on rhe allocation processes described in sections 4 and 5 of this report. Given the transition fram KWA to DWSD the City will not be making any rete structure changes at this time. Itis our opinion that che current water and wastewater rate structures are reasonable. The declining block water rates generally recognizing the fact that higher volume customers (Je. large commercial and industrial) contribute less to peak demand, and overall water utility costs. Additionally, the relatively high propertion of fixed charge revenue recovery provides a less cimarically variable revenue stream, which given that the majorlty of the urillty's ensts are fixed, is entirely appropriate. 9 | City of Flint xxxEND_PAGE:treasury02_b4_231_338_021 000252 ES-5: SUMMARY OF COST OF SERVICE STUDY RESULTS es rT CUSTOMER CLASS Allocated Cost of Service 18,345,672 16,412,799 15,283,704 13,378,697 370,646 Total Outside City Residential COS Total Outside City Cammereiallindusinal COS Total Outside City Lawn OGS Total Outside Clly COS Total Systam Gost of Senice Tables 5-6 and ES-7 summarize the projected fixed and volimetric rates for the first 5 years of the forecast period, given financial plans and rate revenue incraases proposed above. Far every dollar uf rate revenue generated by each utility appraxmately 2.66 is derived from Volutjetrit charges and $,34 js derjyed Tom fixed charges. Ibis typical For water and Wastewater utilities to design fixed charges Which recover, at a miniramm, the costs of métér reading, billing and collection and custamer service, Additonally, hxed charges may also relate to.fixed investment in utility assets associated Wath providing service which is available at all times regardless of usage levels by City customers, These costs, known as readiness (o serve costs, have also been incorporated into the water and wastewater fixed charges. Volumetric rates recover the variable costs associated with operacing the water and wastewater utilities, For the water uulity variable costs are asseciated with water treatment, transmission and distribution, pumping, and storage and are driven primarily by the design requirements associated with peak water usage. For the wastewater utility variable costs are associated with wastewater treatment, collection, and pumping, and are driven by the wastewater yolume and strength, Water and WastewaterRate Study | 6 xxxEND_PAGE:treasury02_b4_231_338_022 000253 Peni! S Increcew bn Rake Ravenuea Varn) inside City Al) Clenene fade Ciry Block § @35 CCF jscer) 5 7a nse City Breck 2 SMM COF OCF) § a Viti Clty Biel 3 abreROI OCF (OCF) 4 4.79 ou! Oued de City Ail Clanvon ‘Cuistte Cy Bleek | oascor (siccry | 3 ues Oviside iy Block ¥ MDM CCR SICK) oS “OTF ‘Mnside Chy Block 5 ow 200CCr OTFA § ae ANtusl % Increase [n Rate Neyonios Tomnt indie City Al Claes Tota) Guede City All Clagsoe 4 City of Fim xxxEND_PAGE:treasury02_b4_231_338_023 000254 ro meee omer es hoes eo p20 vue dese? yeure ge iee 00 it's was raters vonez pray ogee OC ote wee ocnet Of Po we aaa pana aa spews. Se Ce ee ore en or me oe ey Rteise svar rope 1 L00'» efavoe is os oe | um me aie sy FY dort ane 4o0 ole ua ua a8 ordt weet ip ee Great mice weet mith ice Hens 1NGLE am w't5 ter wn re'eay) Weis deere WheREL icone #2 5u6 al epee 6S Our Abba va ved’ TLTANT was! witee al tetetttatatntal nen he ne nee 4 | Ape ary oyemaise ad plterejenh ee a ak it ee or nr me re Ce ed eee eee eee aan io ye ade ese dae We ot0r ite Lise (oats sagt Sutsey 92009 Wwreee sere wee nw Some e400 Tran re ee re — EPSR yHtD GFL gS PART UWA SS9uVHO O3x14 HAL ree Ole ore oeee moe wo tee Ae snes ye seit Mi aba" daeace ® some Hevge's & PS aeht OF hee Leite ae Spb ve a wey a wy ae ed +e weet Pi bac's a's eb cahr St ons wey tee) ie Sr dee ate aa aoe od “Varn ewewe ene we aD * aft at 7 4 at 6 are -t wt ae Hae mara 3 42 toa ENE = the « ey ae wenepe ay 413 APS) Az tt atl oF a “ ” at wes enverpey Alc semi xxxEND_PAGE:treasury02_b4_231_338_024 000255 1.5 TRANSITION FROM OWSb'TO KWA A key aspect of this study involved analyzing the impact of the anticipated Apri) 1, 2014 transition