Metropolitan CouncilEnvironmental Services

SAC Revenue Update

December 9, 2008

A Clean Water Agency

Jason WillettMCES Finance Director

Presented to the Environment Committee

SAC RevenueUpdate

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Historical SAC RatesYear

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

SAC Rate Increase % Change$1,050

$1,100

$1,150

$1,200

$1,275

$1,350

$1,450

$1,550

$1,675

$1,825

$2,000

$50

$50

$50

$50

$75

$75

$100

$100

$125

$150

$175

5.0

4.8

4.5

4.3

6.2

5.9

7.4

6.9

8.1

9.0

9.6

SAC RevenueUpdate

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Service Availability Charge

SAC units in 2008 (through Sept.) are at a record low.

September year-to-date SAC units: 2008: 7,385 2007: 10,522 2006: 12,149 2005: 13,807 2004: 14,999

SAC RevenueUpdate

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Service Availability Charge

Total 2008 SAC units are projected to be 11,500.

SAC units: 2008: 11,500 (projected) 2007: 15,194 2006: 17,052 2005: 19,334 2004: 20,542

2008 will likely be the lowest since program’s inception in 1973. Previous lows: 1982: 13,400 1975: 13,300

SAC RevenueUpdate

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Service Availability Charge

History of SAC units (11,500 projected for 2008):

SAC Units Paid

10,000

15,000

20,000

25,000

30,000

73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

SAC RevenueUpdate

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SAC Units by Category

SAC units paid by category (net of credits):

Residential*

16,553

15,611

13,856

8,050

5,808

4,550

2003

2004

2005

2006

2007

2008**

Commercial

4,061

4,571

4,629

7,659

8,371

6,660

Industry

536

360

849

1,343

1,015

290

TOTAL

21,150

20,542

19,334

17,052

15,194

11,500

*Includes houses, town homes, duplexes, condos and apartments.**Estimated

SAC RevenueUpdate

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Service Availability Charge

The economic decline will likely cause the SAC reserve to drop below the established minimum balance in the next couple of years. Council Policy 3-2-5: The calculated minimum balance is 20% of

the sum of the following five years SAC transfers.

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Service Availability Charge

To keep the SAC fund above the minimum balance, the minimum SAC units needed are*: *Assuming annual $175 SAC rate increases *Based on 11,500 SAC units in 2008

– 2009: 16,000– 2010: 18,000– 2011: 19,000– 2012: 20,000 (and each following year)

SAC RevenueUpdate

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Service Availability Charge

A more realistic—albeit slightly optimistic—recovery might look like this: 2009: 13,000 2010: 16,000 2011: 18,000 2012: 20,000 (and each following year)

These numbers of SAC units will cause the reserve to drop below the minimum balance.

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Use of Reserve Fund

Council Policy 3-2-5: Use of the minimum reserve shall be allowed only in an economic downturn or natural disaster and as approved by the Council.

Reserve balance on 12/31/07 was $72.2 million

Minimum balance on 12/31/07 was $35.2 million

Projected balance for 12/31/08 was $62 million;now $54 million

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Recovery Impact on Fund

Reserve balance over or (under) the minimum in $ millions. Both cases are based on $175 annual SAC rate increase.

Quick Recovery

11,500 $12.0

16,000 $3.6

18,000 $0.7

19,000 $1.0

20,000 $3.1

2008

2009

2010

2011

2012

Realistic Recovery

11,500

13,000 ($1.0)

16,000 ($9.3)

18,000 ($12.4)

20,000 ($10.9)

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Questions, Concerns