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MEETING NOTICE

METROPOLITAN SEWERAGE DISTRICT OF BUNCOMBE COUNTY, NORTH CAROLINA 2028 Riverside Drive W. H. Mull Building Asheville, North Carolina 28804 Phone: (828) 254-9646 Fax: (828) 232-5530 Website: www.msdbc.org

Finance Committee Members: E. Glenn Kelly, Chairman

Jackie W. Bryson

Ellen Frost

Jim Holland

Esther Manheimer

Gwen Wisler

The Finance Committee of the Metropolitan Sewerage District of Buncombe County will meet in the Boardroom of the W. H. Mull Building located at 2028 Riverside Drive, Asheville, NC on the following date:

Thursday, May 3, 2018 at 9:00 AM

MEETING NOTICE

Third Quarter Budget to Actual Review - FY2018

Pay Adjustment & Self-InsuredHealth Plan for FY 2018-2019

Capital Improvement Program for FY2019-2028

MSD Business Plan/Financial Forecast

MSD Rates & Survey Data Comparisons

FY19 Budget & ProposedSewer Rates

Schedule of Sewer Rates & FeesFY 2019

Review of Investment Policy

METROPOLITAN SEWERAGE DISTRICT OF BUNCOMBE COUNTY

Meeting Date: May 3, 2018

Submitted By: Thomas E. Hartye, PE., General Manager

Prepared By: W. Scott Powell, CLGFO, Director of Finance

Subject: Third Quarter Budget to Actual Review – FY 2018

Background

Attached for the Board’s information is a budget to actual comparison of the revenues and expenditures for the third quarter of the fiscal year ending June 30, 2018. This information is based on cash revenues and invoices received prior to April 1, 2018 and may not include some accruals of revenue and expenditures as explained below.

Discussion

The attached sheet summarizes revenues and expenditures per the budget summary, comparing actual plus encumbered expenditures to budgeted amounts. The notes are added to anticipate any questions or comments concerning amounts reported. Additional notes to aid in the analysis of the District’s financial performance for the fiscal year are as follows: Domestic revenue is at budgeted expectations. Industrial revenue is trending better than budgeted expectations

due to a temporary increase in revenue from one industrial user. Staff monitors consumption trends as they have a direct effect on the District’s current and future revenue projections.

Facility and Tap Fees are budgeted conservatively and can be significantly higher than budget. Facility and Tap fees are above budgeted expectation due to receiving unanticipated revenue of $3.5 million from seven (7) commercial/residential developers as well as a general residential development exceeding budgeted expectations.

Interest and miscellaneous income are below budgeted expectations. This is a direct result of short-term interest rates still be impacted by Federal Reserve monetary policy.

Rental income reflects expected earnings.

O&M expenditures are below 75% of budget. The expenditures include encumbered amounts, which will be spent in the fourth quarter.

Bond principal and interest expenditures are reflected at 75%. This will aid the user to properly assess the District’s overall debt service commitments. Actual amount spent is 25.7%, due to the timing of the District’s debt service payments. The District is required to make a semi-annual interest payment on January 1, 2018 and a principal and semi-annual interest payment on July 1, 2018.

Amounts budgeted for capital equipment and projects are rarely expended proportionately throughout the year and are expected to be fully spent prior to the end of the year.

Finance Committee Informational Item

Action Taken Motion by: to Approve Disapprove Second by: Table Send to Committee Other: Follow-up required: Person responsible: Deadline:

Meeting Date: May 3, 2018 Subject: Third Quarter Budget to Actual Review – FY2018 Page 2

Staff Recommendation

None – Informational only.

Budget to Actual Revenue and Expenditure Report For the Nine Months ended March 31, 2018 UNAUDITED—NON-GAAP

Notes: 1. Revenues are accounted for on the cash basis method 2. Increase due to unanticipated revenue from three developments at $1,117,500 3. Increase in number of Taps requiring Pavement Disturbance 4. Pay-as-go funds to be used for CIP 5. Budget-to-Actual Ratio does not include use of available funds 6. Includes encumbered amounts as well as actual insurance expenditures 7. Bond principal and interest expenditures are reflected a 75%. Actual spend amount is 23.57%.

Domestic User Fees 1 31,169,273$ 24,160,061$ 77.51%Industrial User Fees 3,347,294 2,999,626 89.61%Facility Fees2 2,000,000 3,080,203 154.01%Tap Fees3 175,000 460,137 262.94%Billing and Collection 800,255 596,038 74.48%Interest and Misc. Income 856,652 810,266 94.59%Employee Contribution to Health Ins. 382,700 317,682 83.01%City of Asheville (Enka Bonds) 37,000 - 0.00%Proceeds from Revenue Bonds 28,000,000 28,003,632 100.01%Rental Income 71,641 58,474 81.62%Use of (Contributions to) Available Funds4 (11,520,447) (14,055,595) 122.01% Total Revenues

555,319,368$ 46,430,526$ 83.93%

Operations and Maintenance 6 16,337,136$ 12,509,752$ 76.57%Bond Principal and Interest7 9,790,466 7,342,850 75.00%Capital Equipment (Other than O&M)6 884,050 738,003 83.48%Capital Projects6 27,307,716 25,839,921 94.62%Contingency 1,000,000 - 0.00%

Total Expenditures 55,319,368$ 46,430,526$ 83.93%

Budget Actual to Date

% Budget to Actual

REVENUES

EXPENDITURES

METROPOLITAN SEWERAGE DISTRICT OF BUNCOMBE COUNTY Meeting Date: April 24, 2018

Submitted By: Thomas E. Hartye, P.E., General Manager James A. Hemphill, SPHR, Human Resources Director W. Scott Powell, CLGFO, Director of Finance

Subject: Pay Adjustment and Self-Insured Health Plan for FY 2018-2019

Staff Recommendation: That the MSD Board fund and approve: 3.0% wage adjustment for all employees Increased Medical insurance contributions from the Board by an additional 6.5% Increased Medical insurance contributions from Employees by an average of 6.5%

The Division Directors and Employee Advisory Committee concur with these recommendations.

Background

As the Board has requested, the recommendations reflect a composite view of both salary and benefit programs costs. Each year during the budgetary process, the Personnel Committee considers the cost of living and merit pay salary adjustments with the goal of keeping MSD’s compensation program competitive with other area employers and to meet the objective of retaining skilled and high performing employees. Inadequate wages lead to high turnover levels and increased costs from training new employees as well as loss of efficiencies until they are fully proficient. The Personnel Committee also considers benefits as an integral part of budgeting for a comprehensive compensation package. The Employee Advisory Committee (EAC) has reviewed the staff’s recommendations and endorses them. In April 2005, the Personnel Committee reaffirmed the policy of annually adjusting the labor grade ranges, based on recommendations of several consultants. To confirm that MSD is providing a competitive compensation program, we conducted a wage survey in 2015 and minimal changes were required.

Staffing Levels

MSD management has endeavored to effectively maintain the reduced staffing levels. As a vacancy occurs, it is evaluated to determine the impact on efficient and effective operations. Frequently MSD reengineers, reorganize, and reassigns duties or implements technology applications to help control personnel costs. At other times, a position may be added to support work needs or safe work practices. MSD’s workforce continues to average 47 years of age and has 13 years of service with the District. MSD’s staff is considered extremely skilled and responsive.

Personnel Committee Action Item Personnel Committee

Meeting Date: April 24, 2018 Subject: Pay Adjustment and Self-Insured Health Plan for FY 2018-2019 Page 2

Health Insurance

The District’s insurance consultant provided a projected initial increase of an 8.5% over FY 2018-19 projected expenditures. As a comparison, U.S. medical cost “trend” is reported to be 6.5%. Drug “trend” is projected to be 10-17%. Attachment #1 provides actual and projected medical costs for MSD. Significant cost drivers are generally increasing medical costs, lack of competition, and increasing drug costs (both specialty and generic). Locally, Mission’s purchase of physician’s practices has decreased the network discounts available from the providers. This fiscal year, MSD has had several significant medical events that adversely affected group medical cost renewal rates. However, after negotiations with the reinsurer, we have come to a more feasible quote. Several years ago, we rebuilt the medical insurance plan. Based on the changes we made, savings were realized in brokerage fees, drug costs, claims experience, and reinsurance fees. Over the last 5 years, the medical plan has had significant expenditures that have reduced our insurance reserve. This insurance reserve allows for a smoothing of costs during adverse times, such as these. During recent years both the Board and Employees have increased their contributions with the goal of growing the reserves. In response to the increases in medical costs, MSD management has taken the following actions, with which the Employee Advisory & Wellness Committees concurred:

Partnering with Park Ridge Hospital and Associates to offer higher discounts that save the District and employee’s significant costs;

Researching a different Pharmacy Benefit Manager (PBM) that could save MSD over 20% of current drug costs;

Required working spouses to be covered as “primary” by their employer’s insurance, before they can be covered by MSD’s insurance;

We continue to offer several routine Health & Wellness programs, including: House Calls, an on-site nurse-practitioner available at zero cost to the employee; medical and nutritional training classes through Mission Hospital and AB Tech; Wellness activities that encourage healthier lifestyles; on-site “Asheville Project” services; required physicals for all adults covered by MSD’s medical insurance. Additional on-site programs include a monthly health newsletter, smoking cessation options, flu and tetanus shots, training on industry medical issues, Health Days and increased use of the workout & weight rooms.

Salary & Benefit Discussion

The District has attempted to provide employees with competitive wages and benefits as a means of retaining and rewarding high-performing employees. The benefit to MSD of keeping professional and motivated employees has been illustrated repeatedly over the past years. For instance, average “response time” to a customer call is 32 minutes.

Consumer Price Index (CPI) for South Urban Region

District Adopted Increases


Salary & Benefit Discussion (continued)

Over 50% of MSD employees have earned technical certifications above their job requirements. MSD employees have continued to earn national and state awards for ISO 14001, the AMSA Environmental Achievement Award, National and North Carolina GIS recognitions, NC “Operations Challenge” and the NACWA “Excellence in Management” award, among others. A summary of the last 10 years’ Consumer Price Index compared with actual and proposed FY 2018-19 cost of living and merit raises is summarized below:

2007 4.4% FY 2008-09 5.0% 2008 0.0% FY 2009-10 0.0% 2009 2.9% FY 2010-11 2.9% 2010 2.7%* FY 2011-12 3.0% 2011 3.9%* FY 2012-13 4.0% 2012 2.1%* FY 2013-14 2.1% 2013 1.5%* FY 2014-15 2.5% 2014 1.6%* FY 2015-16 3.0% 2015 0.5%* FY 2016-17 3.0% 2016 2.0%* FY 2017-18 3.0% 2017 1.89% FY 2018-19 3.0% PROPOSED

*CPI-W for “Urban Wage Earners and Clerical” for the South Urban region

Cost of Living The District obtains the cost of living data from the Bureau of Labor Statistics for the South Region. The Consumer Price Index increased by 1.89% for “all urban consumers and for wage earners and clerical workers” during the period of December 2017 to 2018.

Private Sector Each year several international consulting firms (Mercer, Towers Watson, Kiplinger, The Conference Board, Hay Group, World at Work, Aon Hewitt, Economic Research Institute, and Price Waterhouse Cooper) survey thousands of companies for projected pay increases for the next year. Most private sector firms granted raises averaging 2.7% - 3.3% in 2017 and are planning merit increases of 3.0% - 4.27% or more in 2018.

Locally, Western Carolina Industries reports surveyed firms in the Western Region projected raises averaging 2.9%. NC surveys project increases of 2.96% to 3.20% in 2018.


Agency Comparisons Attachment #2 provides a listing of our benchmark agencies showing the past years’ increases, as well as actual and projected increases.

Fiscal Impact

The proposed salary and benefit adjustment costs are approximately $419,000 higher than last years’ budget.


Therefore, to keep MSD competitive in the relevant Labor Market and within the utility/wastewater industry, the staff requests that the Personnel Committee approve the recommendations:

A 3.0% wage adjustment for all employees

6.5% increase in Board & Employee contributions to the medical insurance plan

Committee Recommendation

Mr. Root moved and Mr. Holland seconded the recommendation that the Board approve a 3.0% wage adjustment for all employees, an additional 6.5% increase in contributions from the Board for medical insurance cost, and a 6.5% increase in employee premiums for medical insurance. Mrs. Bryson called for the vote. It was unanimous in favor of the motion.

ATTACHMENT #1

ATTACHMENT #2

Local Governments and Utilities:

Town/Utility 2017-2018 2018-2019 PROPOSED

Montreat 2.5% COLA COLA & Merit 3.5%

Woodfin 3.0% COLA 3.0% - 3.5% COLA

Weaverville 2.0% COLA 3.0% Merit

2.0% COLA; 3.0% Merit = 5.0% Total

Black Mountain 3.0% COLA 3.0% COLA +

Maybe a 2.0% Merit

Biltmore Forest 3.0% COLA 3.0% COLA

Henderson County 3.0% across the board increase Been directed not to give out that

information

City of Asheville 2.5%+ 1.0% Pay Plan Adjustment;

Total of 3.5% 1.0% - 3.0% COLA

Buncombe County 2.0% COLA +

Longevity (5.0%)

April 1st – 2.2% increase and under $45,000 – 1.5% + $500

Avg. Longevity (5.0%)

CMUD 3.0% Merit 3.0% Merit

Beaufort - Jasper Water & Sewer 3.0% Merit 3.0% Merit

OWASA 3.0% Merit Unknown

Western Carolina Sewer & Water 3.0% COLA/Merit Combined 1.0% - 3.0% Merit Only going

forward

Consumer Price Index 2.0% 1.89%

NC 3.1% - 3.5% 3.0% - 3.2%

Private Sector 2.7% - 3.3% 3.4% - 4.3%

MSD 3.0% 3.0% Proposed


Meeting Date: April 24, 2018 Board Meeting Date: May 16, 2018

Submitted By: Thomas E. Hartye, P.E., General Manager

Prepared By: Ed Bradford, P.E., Director of Engineering

Subject: Capital Improvement Program Priorities & Review of Ten-Year CIP Document

Background

Enclosed are the Fiscal Year 2019 budget recommendations for the District’s Capital Improvement Program (CIP), as well as projections for the following nine fiscal years. A budget summary showing the entire program is included in the committee package. The full budget document, with detailed information for each project, is posted on the main page of the District’s website (www.msdbc.org). It is also available to the public for viewing and comment.

Capital Improvement Program

The District’s Capital Improvement Program is divided into the following six areas, generally based upon the type of project or expense category: Interceptor & Wet Weather Rehabilitation General Sewer Rehabilitation Private Sewer Rehabilitation Treatment Plant, Pump Stations, and General Capital Improvements Design, ROW, and Construction Management Expenses Reimbursement Projects

In accordance with the State Collection System Permit, the District maintains a CIP, which details necessary system improvements. The state permit requires a minimum of three years in the CIP; however, the District utilizes a ten-year window for more accurate prioritization and planning. The District rehabilitates approximately 50,000 LF of the collection system each year. Major plant projects are guided by the Facility Plan and include the Plant Headworks, High Rate Primary Treatment, and RBC Replacement projects. Construction of the Plant Headworks began in April 2017 and is expected to be complete by Spring 2019. The High Rate Primary Treatment project is in the final design stage, with construction expected to begin in Spring 2019. These projects, totaling $28.9 million, will significantly improve plant performance when complete. Replacement of the RBC’s is the final major plant project and may be regulatory-driven. Reimbursement projects include one Annexation Project from Consolidation, Developer Reimbursements, and NCDOT Reimbursements.

Capital Improvement Program Committee

Meeting Date: April 24, 2018 Subject: Capital Improvement Program Priorities & Review of Ten-Year CIP Document Page 2

Highlights

Collection System

The District rehabilitates 40,000 to 50,000 LF of sewer line each year. This is accomplished by using both in-house forces and outside contractors. Seventeen new collection system projects have been added to the CIP for FY18-19 and beyond. Within the entire program, there are 130 collection system projects which range in length from 90 LF to over 36,000 LF.

Significant collection system projects underway or completed over the past year are the South French Broad Interceptor Lining Project (second phase), Elkwood Avenue, Sutton Avenue, Hendersonville Rd. @ Rosscraggon Ph. 2, and Jonestown Road projects. These total over 22,600 LF.

The French Broad/Carrier Bridge study is well underway. This important study, along with its hydraulic model of the interceptors and the Carrier Bridge Pump Station, will help define and recommend major improvements within the collection system. Completion of the study is expected in Summer 2018.

The District’s Pipe Rating Program is used to objectively prioritize collection system projects within the CIP for each fiscal year. This rating considers overflow history, structural issues, customer service requests, and impacts to surface waters for each project location.

Water Reclamation Facility

The three main influent pumps (each with a capacity of 35 mgd) have now been replaced. The old pumps had been in service since the 1980’s and were rebuilt multiple times. This phased replacement occurred over a period of five years and was completed in June 2017. Smaller projects underway include replacement of the Sodium Hypochlorite Tanks and the MCC’s for the five large 450 Hp blowers used to turn the Rotating Biological Contactors (RBC’s).

The Plant Facility Plan continues to serve as guidance for implementing significant capital projects at the plant. Construction is well underway on the first project - Plant Headworks - which includes new bar screens, fine screens, grit removal, and a storm surge system for peak flows using existing decommissioned digesters. Completion is expected by Spring 2019.

The design phase for the next project - High Rate Primary Treatment - is near complete, with construction expected to begin in Spring 2019. These two projects total $28.9 million, and will significantly improve the plant’s treatment process.

The final recommendation of the Facility Plan and the most significant is the replacement of the plant’s biological treatment process - the RBC’s. These were installed in the 1980’s, and have functioned well over the years. They are approaching the end of their functional lifespan and are limited in the kind of

Meeting Date: April 24, 2018 Subject: Capital Improvement Program Priorities & Review of Ten-Year CIP Document Page 3

treatment that they can provide. Replacement of the RBC’s will be a major project - the exact timing of which may be regulatory-driven. It is important to note that this project is now fully incorporated into the District’s ten-year planning window.

Proposed Ten-Year Capital Improvement Program Document

Listed within this document are the specific areas where proposed projects are to occur. Total expenditures for the current Fiscal Year 2018 are estimated at $23.8 million. The proposed capital budget for FY18-19 is $23,492,718.00 which includes a contingency of $1,000,000.00. The $1,000,000 contingency line item is used for the entire program, rather than having a separate contingency for each project. This is more efficient and continues to provide sufficient reserves for the District’s capital program. A budget for Reimbursement Projects totaling $266,000.00 is proposed for a Master Plan project located in Woodfin. For these types of projects, the District will reimburse a developer for constructing a system which will serve larger areas upstream of their development. Total project costs over the ten-year window are estimated at $310.4 million. Costs are updated each year during budget preparation to accurately reflect current bid pricing and market conditions. Included in future years is an inflation factor of 3.03%, which is an average over the previous ten-year ENR Construction Cost Index. This factor is also updated each year. Staff will present information on a selection of significant projects within the District’s ongoing Capital Improvement Program, as well as the proposed CIP Budget for FY18-19 and beyond. Special thanks go to the Engineers, Angel Banks, Cheryl Rice, and the GIS Section for the many hours of preparation necessary to complete the District’s annual CIP budget document.


Endorsement of the Capital Improvement Program budget for Fiscal Year 2018-2019.

Committee Recommendation

Mr. Watts called for a motion recommending endorsement of the CIP Budget for FY18-19 in the total amount of $23,492,718. Mr. Martin moved. Mr. Pelly seconded the motion. Voice vote was unanimous in favor of the motion.

METROPOLITAN SEWERAGE DISTRICT OF BUNCOMBE COUNTY, NORTH CAROLINATEN YEAR CAPITAL IMPROVEMENT PROGRAM

FY 2018-2019 through 2027-2028

FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28

BUDGET FOOTAGE BUDGET FOOTAGE BUDGET FOOTAGE BUDGET FOOTAGE BUDGET FOOTAGE BUDGET FOOTAGE BUDGET FOOTAGE BUDGET FOOTAGE BUDGET FOOTAGE BUDGET FOOTAGE

INTERCEPTOR AND WET WEATHER REHABILITATION

Christian Creek Interceptor Buncombe County HC 2011110 24 12,379 $4,489,209 $73,431 $253,293 $2,073,500 6,189 $2,089,500 6,190 $0 $0 $0 $0 $0 $0 $0

Lower Swannanoa Interceptor Asheville EB 2004040 9 6,475 $5,478,400 $14,879 $0 $0 $0 $0 $33,021 $12,500 $5,418,000 6,475 $0 $0 $0

Middle Beaverdam Crk. @ I-26 Woodfin OH 2010002 24 2,930 $1,293,650 $7,430 $0 $0 $0 $0 $7,070 $34,000 $3,250 $0 $0 $1,241,900 2,930

NW French Broad Interceptor Asheville EB/HC 2018084 N/A 10,650 $16,100,000 $0 $0 $0 $0 $0 $0 $0 $0 $1,050,000 $1,050,000 $4,666,667 3,550

South French Broad Relief Int. Buncombe County HC 2017070 N/A 36,330 $35,135,250 $95,000 $40,000 $5,250 $510,000 $0 $0 $8,610,000 9,082 $8,610,000 9,082 $8,610,000 9,082 $8,655,000 9,084 $0

South French Broad Int. - Lining Biltmore Estate HC 2011033 8 21,913 $4,855,416 $2,986,416 $1,073,000 5,111 $796,000 3,976 $0 $0 $0 $0 $0 $0 $0 $0

Beaverdam Creek WW (CDM #10) Buncombe County EB 2001191 27 5,500 $1,506,000 $0 $0 $0 $0 $0 $0 $0 $0 $1,506,000 5,500 $0 $0

South Swannanoa WW (CDM #4) Asheville EB 2001195 23 8,040 $3,020,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,020,000 8,040 $0

SUBTOTAL 104,217 71,877,925 $3,177,156 $1,366,293 5,111 $2,874,750 10,165 $2,599,500 6,190 $0 0 $40,091 0 $8,656,500 9,082 $14,031,250 15,557 $11,166,000 14,582 $12,725,000 17,124 $5,908,567 6,480

Inflation per ENR Const. Cost Index 3.03% 1.0000 1.0000 1.0000 1.0303 1.0615 1.0937 1.1268 1.1610 1.1961 1.2324 1.2697 1.3082

SUBTOTAL with inflation 104,217 $71,877,925 $3,177,156 $1,366,293 5,111 $2,961,855 10,165 $2,759,416 6,190 $0 0 $45,175 0 $10,049,879 9,082 $16,783,347 15,557 $13,760,795 14,582 $16,157,248 17,124 $7,729,572 6,480



GENERAL SEWER REHABILITATION

Atkins Street Arden HC 2014012 39 1,833 $519,330 $5,480 $0 $0 $0 $30,250 $0 $483,600 1,833 $0 $0 $0 $0

Aurora Drive Asheville DP 2017145 53 2,500 $708,500 $0 $10,000 $5,500 $47,000 $646,000 2,500 $0 $0 $0 $0 $0 $0

Beale Road at Copney Lane Asheville DP 2009129 47 4,027 $1,445,925 $15,725 $0 $16,200 $151,000 $0 $1,263,000 4,027 $0 $0 $0 $0 $0

Beaucatcher Rd. @ Kenilworth Rd. E. Asheville SA 2015219 35 1,370 $521,900 $19,500 $37,600 $0 $464,800 1,370 $0 $0 $0 $0 $0 $0 $0

Bellevue Road S. Asheville DP 2015175 49 1,100 $445,600 $9,600 $0 $5,000 $56,000 $375,000 1,100 $0 $0 $0 $0 $0 $0

Bent Tree Road Asheville DP 2016102 60 925 $391,250 $4,500 $3,750 $54,000 $329,000 925 $0 $0 $0 $0 $0 $0 $0

Buchanan Ave. Asheville SA 2014023 51 2,535 $973,800 $0 $28,000 $6,400 $59,000 $880,400 2,535 $0 $0 $0 $0 $0 $0

Caledonia Road Asheville HC 2014153 31 2,993 $1,008,400 $10,000 $355,600 1,066 $0 $154,000 $0 $488,800 1,927 $0 $0 $0 $0 $0

Chatham Road Asheville SA 2015019 43 1,450 $439,400 $13,000 $0 $1,000 $43,000 $0 $382,400 1,450 $0 $0 $0 $0 $0

Cherokee Road Asheville DP 2009132 48 1,960 $701,680 $24,680 $0 $0 $101,000 $576,000 1,960 $0 $0 $0 $0 $0 $0

Chestnut Lodge Rd. Black Mountain SA 2014017 61 4,150 $1,300,000 $22,500 $16,500 $134,000 $1,127,000 4,150 $0 $0 $0 $0 $0 $0 $0

Cub Road Asheville OH 2018027 40 1,204 $425,600 $0 $0 $0 $0 $14,000 $76,000 $335,600 1,204 $0 $0 $0 $0

East Chestnut Ave @ Five Points N. Asheville SA 2015192 36 5,225 $1,733,800 $268,000 $0 $1,000 $80,800 $79,000 $0 $1,305,000 5,225 $0 $0 $0 $0

Elk Mountain Place Woodfin HC 2010094 48 4,101 $1,055,250 $18,000 $0 $164,000 $41,000 $832,250 4,101 $0 $0 $0 $0 $0 $0

TOTAL EST. EXPENDS

THRU FY 18

TOTAL EST. EXPENDS

THRU FY 18

PROJECT NUMBER

PIPE RATING

PIPE RATING

PROJECT NUMBER

PROJECT NAME

PROJECT NAME

PROJ. MGR.

PROJ. MGR.

LOCATION OF PROJECT

LOCATION OF PROJECT

TOTAL ESTIMATED COST

PROJECT FOOTAGE


PROJECT FOOTAGE

Page 1 of 4


FY 2018-2019 through 2027-2028



GENERAL SEWER REHABILITATION continued…

Fairmont Road N. Asheville DP 2015017 31 3,900 $1,196,000 $0 $0 $0 $0 $0 $15,000 $8,500 $59,500 $0 $1,113,000 3,900 $0

Forestdale Drive S. Asheville DP 2014002 33 2,600 $843,000 $0 $0 $0 $0 $12,000 $17,500 $104,000 $0 $709,500 2,600 $0 $0

Four Inch Main - Dry Ridge Rd. Asheville DP 2012009 58 908 $362,600 $39,100 $323,500 908 $0 $0 $0 $0 $0 $0 $0 $0 $0

Harmony Lane Asheville DP 2016103 35 670 $125,000 $0 $0 $0 $0 $0 $2,500 $0 $122,500 670 $0 $0 $0

Hazel Mill Rd @ Richland St. Asheville SA 2014016 26 3,300 $934,700 $0 $0 $0 $0 $0 $17,000 $9,400 $94,000 $0 $814,300 3,300 $0

Hendersonville @ Rosscraggon 2 Arden OH 2009150 68 4,163 $1,549,013 $1,205,010 $343,503 1,040 $0 $0 $0 $0 $0 $0 $0 $0 $0

Highland Farms Road Black Mountain HC 2018018 65 1,131 $271,250 $0 $5,700 $750 $6,000 $258,800 1,131 $0 $0 $0 $0 $0 $0

Hill Street Asheville SA 2015018 54 2,088 $697,200 $10,000 $687,200 2,088 $0 $0 $0 $0 $0 $0 $0 $0 $0

Horizon Hill Rd. (Hy-Vu Drive) Asheville SA 2008084 51 713 $228,444 $10,444 $0 $0 $0 $0 $218,000 713 $0 $0 $0 $0 $0

Howland Rd. @ Sunset Trail Asheville DP 2012134 43 1,033 $391,600 $7,500 $0 $0 $4,500 $66,000 $313,600 1,033 $0 $0 $0 $0 $0

Jarnaul Avenue N. Asheville HC 2016104 75 5,330 $1,526,100 $18,500 $154,250 $165,000 $1,188,350 5,330 $0 $0 $0 $0 $0 $0 $0

Johnston Blvd. @ Providence Rd. W. Asheville DP 2014013 37 2,000 $544,150 $8,150 $0 $0 $0 $9,000 $53,000 $474,000 2,000 $0 $0 $0 $0

Kenilworth @ Springdale Rd. Asheville HC 2014010 42 2,524 $747,350 $6,800 $299,700 1,061 $69,250 $0 $0 $371,600 1,463 $0 $0 $0 $0 $0

Kimberly Ave. @ Sedley Avenue Asheville OH 2018029 35 3,005 $984,000 $0 $0 $0 $0 $0 $31,000 $116,000 $837,000 3,005 $0 $0 $0

Lakeshore Dr. @ Merrimon Ave. N. Asheville HC 2014177 25 362 $211,600 $8,866 $0 $0 $0 $0 $1,800 $0 $3,000 $96,134 $101,800 362 $0

Lincoln Avenue Asheville HC 2013103 26 1,415 $398,370 $2,870 $0 $0 $0 $0 $0 $0 $0 $0 $395,500 1,415 $0

Lining Contract No. 9 Various DP 2017031 NA 11,000 $1,102,000 $200,000 $0 $902,000 11,000 $0 $0 $0 $0 $0 $0 $0 $0

Logan Avenue W. Asheville SA 2017256 48 1,884 $562,500 $0 $17,700 $52,500 $0 $492,300 1,884 $0 $0 $0 $0 $0 $0

Long Shoals Rd. @ Allen Ave. Arden HC 2010013 59 621 $286,472 $98,872 $187,600 621 $0 $0 $0 $0 $0 $0 $0 $0 $0

Lynn Cove Road Beaverdam DP 2015010 35 5,589 $1,547,000 $0 $0 $25,000 $0 $15,000 $91,000 $0 $1,416,000 5,589 $0 $0 $0

Manetta Rd. @ Johnson Dr. N. Asheville SA 2014022 20 6,500 $1,895,700 $0 $0 $0 $0 $0 $33,000 $7,000 $110,000 $0 $0 $1,745,700 6,500

Meadow Road @ Train Yard Asheville HC 2015207 37 2,001 $727,000 $9,000 $0 $0 $0 $45,000 $4,000 $669,000 2,001 $0 $0 $0 $0

Memory Lane Asheville OH 2016099 56 1,900 $787,885 $27,231 $760,750 1,900 $0 $0 $0 $0 $0 $0 $0 $0 $0

Mitchell Avenue W. Asheville SA 2014185 23 3,360 $991,300 $0 $0 $0 $0 $0 $17,000 $1,000 $4,800 $65,000 $0 $903,500 3,360

Montford Ave. @ Montford Park Asheville HC 2017144 50 1,258 $367,150 $0 $0 $0 $6,300 $6,750 $60,000 $294,100 1,258 $0 $0 $0 $0

Mountainbrook Rd. @ Chunns Cove Asheville DP 2010112 55 2,800 $983,515 $21,015 $0 $156,000 $806,500 2,800 $0 $0 $0 $0 $0 $0 $0

New Haw Creek Rd. @ Dogwood Grove E. Asheville SA 2014021 31 1,900 $632,500 $9,500 $7,600 $61,000 $554,400 1,900 $0 $0 $0 $0 $0 $0 $0

New Haw Creek @ Water Booster Station Asheville OH 2016250 80 90 $32,100 $1,000 $5,100 $26,000 90 $0 $0 $0 $0 $0 $0 $0 $0

New Stock Road Woodfin DP 2015011 45 9,020 $2,402,500 $36,000 $0 $0 $6,500 $76,000 $2,284,000 9,020 $0 $0 $0 $0 $0

New Walnut St. @ Riverside Dr. Asheville DP 2017007 63 1,180 $357,000 $5,000 $47,000 $305,000 1,180 $0 $0 $0 $0 $0 $0 $0 $0

North Lexington @ I-240 Asheville SA 2014182 47 210 $93,970 $2,570 $0 $0 $2,000 $0 $89,400 210 $0 $0 $0 $0 $0

North Market Street Asheville SA 2014019 26 1,064 $284,400 $5,300 $0 $0 $0 $0 $0 $0 $0 $1,500 $0 $277,600 1,064

Northwest Ave. @ No. 215 Swannanoa HC 2018017 84 251 $63,350 $0 $1,250 $1,500 $0 $60,600 251 $0 $0 $0 $0 $0 $0

TOTAL EST. EXPENDS

THRU FY 18PROJECT NAME

LOCATION OF PROJECT

PROJ. MGR.

PROJECT NUMBER

PIPE RATING

PROJECT FOOTAGE


Page 2 of 4


FY 2018-2019 through 2027-2028



GENERAL SEWER REHABILITATION continued…

Oakland Drive @ Church Street Black Mountain DP 2015177 27 575 $171,000 $0 $0 $0 $0 $0 $0 $2,500 $2,500 $29,000 $137,000 575 $0

Old Haw Creek Rd. @ Greenbriar Rd. E. Asheville HC 2012109 56 3,755 $1,172,600 $129,700 $1,043,900 3,755 $0 $0 $0 $0 $0 $0 $0 $0 $0

Old West Chapel Road Asheville DP 2014004 53 5,200 $1,560,000 $112,000 $1,448,000 5,200 $0 $0 $0 $0 $0 $0 $0 $0 $0

Owenby Lane @ US Hwy 70 Black Mountain OH 2018033 85 1,426 $492,345 $0 $15,500 $0 $76,845 $400,000 1,426 $0 $0 $0 $0 $0 $0

Riverside Dr. @ Riverside Baptist Asheville OH 2016251 40 510 $168,450 $0 $0 $0 $0 $5,500 $19,200 $143,750 510 $0 $0 $0 $0

Riverview Drive Asheville HC 2013104 24 2,302 $650,680 $7,880 $0 $0 $0 $0 $0 $0 $0 $0 $0 $642,800 2,302

Royal Pines Drive - PRP 47009 Arden SA 2007020 35 2,888 $818,100 $10,100 $0 $0 $0 $6,500 $17,000 $0 $0 $784,500 2,888 $0 $0

Sand Hill Road @ Baker Place W. Asheville SA 2015223 22 550 $155,000 $0 $0 $0 $0 $0 $3,000 $1,000 $0 $0 $0 $151,500 550

Smokey Park Hwy @ Sand Hill Rd. Enka OH 2018035 TBD 590 $237,750 $0 $0 $0 $0 $0 $6,500 $63,750 $167,500 590 $0 $0 $0

S. Main St. @ Reems Creek Rd. Weaverville HC 2017012 51 565 $187,450 $0 $0 $46,050 $11,000 $130,400 565 $0 $0 $0 $0 $0 $0

Springside Rd. @ Overlook Rd. S. Asheville SA 2012127 52 4,056 $1,370,700 $31,300 $108,000 $0 $0 $1,231,400 4,056 $0 $0 $0 $0 $0 $0

Starnes Avenue Asheville HC 2014154 22 2,871 $896,500 $0 $0 $0 $0 $0 $14,300 $0 $0 $82,000 $0 $800,200 2,871

Sulphur Springs Rd. @ Covington St. W. Asheville DP 2014006 44 1,350 $463,000 $5,500 $0 $0 $10,000 $103,000 $344,500 1,350 $0 $0 $0 $0 $0

Sweeten Creek Rd. @ Buck Shoals Rd. S. Asheville HC 2014015 51 918 $326,920 $6,920 $7,000 $44,500 $6,500 $262,000 918 $0 $0 $0 $0 $0 $0

Sweeten Creek Rd. @ Mills Gap Rd. Asheville SA 2014189 46 2,325 $679,000 $24,000 $4,000 $105,000 $546,000 2,325 $0 $0 $0 $0 $0 $0 $0

US 70 @ Jordan Road Swannanoa DP 2015014 21 4,550 $1,443,000 $0 $0 $0 $0 $20,000 $0 $20,000 $100,500 $39,000 $0 $1,263,500 4,550

Walnut St. @ N. Lexington Ave. Asheville DP 2017008 42 1,550 $463,500 $0 $0 $0 $0 $7,000 $0 $456,500 1,550 $0 $0 $0 $0

Walnut Street @ Rankin Ave. Asheville SA 2014018 54 2,350 $1,141,100 $11,500 $0 $1,129,600 2,350 $0 $0 $0 $0 $0 $0 $0 $0

Waynesville Ave. @ Brownwood Ave. W. Asheville SA 2014183 33 4,100 $1,348,200 $0 $0 $0 $21,000 $500 $28,200 $160,000 $184,000 $954,500 4,100 $0 $0

West Crabapple Lane W. Asheville DP 2014005 67 N/A $124,800 $3,800 $9,000 $112,000 $0 $0 $0 $0 $0 $0 $0 $0

Wildwood Park Weaverville HC 2015194 27 582 $168,780 $2,380 $0 $0 $0 $0 $0 $0 $0 $0 $166,400 582 $0

SSD Rehab. & Replacement Various MS 2002101 N/A 200,000 $43,100,000 $4,164,404 $4,400,000 20,000 $4,300,000 20,000 $4,300,000 20,000 $4,300,000 20,000 $4,300,000 20,000 $4,300,000 20,000 $4,300,000 20,000 $4,300,000 20,000 $4,300,000 20,000 $4,300,000 20,000

Surveys for Design Various EB 2002060 N/A N/A $500,000 $0 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000

Future Projects - Non Critical Various EB Varies Varies Varies Varies $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

SUBTOTAL 364,156 $93,436,029 $6,653,197 $10,377,703 37,639 $7,938,250 34,620 $10,249,495 38,800 $10,990,650 42,427 $10,612,300 41,193 $9,004,700 35,581 $7,451,300 29,854 $7,111,134 29,588 $7,078,000 30,134 $10,134,800 41,197


SUBTOTAL with inflation 364,156 $93,436,029 $6,653,197 $10,377,703 37,639 $8,178,779 34,620 $10,880,024 38,800 $12,020,277 42,427 $11,958,159 41,193 $10,454,126 35,581 $8,912,802 29,854 $8,763,645 29,588 $8,987,112 30,134 $13,258,320 41,197



PRIVATE SEWER REHABILITATION

Dogwood Rd. @ White Pine Circle Arden OH 2014132 56 580 $208,750 $5,800 $0 $0 $14,000 $188,950 580 $0 $0 $0 $0 $0 $0

Homeland Park Asheville OH 2016248 48 930 $286,750 $0 $0 $10,000 $0 $17,500 $259,250 930 $0 $0 $0 $0 $0

Old County Home Rd PSR W. Asheville SA 2015221 48 2,650 $743,900 $20,000 $0 $15,400 $14,000 $0 $694,500 2,650 $0 $0 $0 $0 $0

SUBTOTAL 4,160 $1,239,400 $25,800 $0 0 $25,400 0 $28,000 0 $206,450 580 $953,750 3,580 $0 0 $0 0 $0 0 $0 0 $0 0


SUBTOTAL with inflation 4,160 $1,239,400 $25,800 $0 0 $26,170 0 $29,723 0 $225,791 580 $1,074,705 3,580 $0 0 $0 0 $0 0 $0 0 $0 0

TOTAL EST. EXPENDS

THRU FY 18

TOTAL EST. EXPENDS

THRU FY 18


PROJECT FOOTAGE

PROJECT NUMBER

PIPE RATING

PROJECT NAMELOCATION OF

PROJECTPROJ. MGR.

PROJECT NUMBER

PIPE RATING


PROJECTPROJ. MGR.

PROJECT FOOTAGE


Page 3 of 4


FY 2018-2019 through 2027-2028



TREATMENT PLANT, PUMP STATIONS & GENERAL CAPITAL IMPROVEMENTS

Avery Creek PS Improvements Arden DP 2018008 N/A 0 $500,000 $0 $500,000 $0 $0 $0 $0 $0 $0 $0 $0 $0

Biological Treatment MSD-Treatment Plant HC 2016063 N/A 0 $45,500,000 $0 $0 $0 $0 $0 $500,000 $2,500,000 $2,500,000 $10,000,000 $18,000,000 $12,000,000

Building and Facility Rehabilitation MSD-Treatment Plant HC 2002068 N/A 0 $786,000 $20,950 $139,000 $80,000 $91,000 $68,000 $68,000 $68,000 $68,000 $68,000 $68,000 $68,000

Carrier Bridge Capacity Improvements Asheville EB/HC 2018089 N/A 0 $17,800,000 $0 $0 $0 $1,150,000 $1,150,000 $5,166,667 $5,166,667 $5,166,666 $0 $0 $0

Flow Monitoring MSD-Treatment Plant SA 2008013 N/A 0 $442,535 $312,535 $50,000 $40,000 $40,000 $0 $0 $0 $0 $0 $0 $0

Intermediate Clarifier Slide Gates MSD-Treatment Plant HC 2017022 N/A 0 $243,000 $0 $243,000 $0 $0 $0 $0 $0 $0 $0 $0 $0

Plant Headworks Improvements MSD-Treatment Plant HC 2015004 N/A 0 $11,995,950 $8,809,950 $3,186,000 $0 $0 $0 $0 $0 $0 $0 $0 $0

Plant High Rate Primary Treatment MSD-Treatment Plant HC 2015054 N/A 0 $16,950,595 $1,185,595 $3,509,500 $10,527,000 $1,728,500 $0 $0 $0 $0 $0 $0 $0

General Capital Equipment Varies EB 2016072 N/A 0 $1,500,000 $133,242 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000

SUBTOTAL 0 $95,718,080 $10,462,272 $7,777,500 0 $10,797,000 0 $3,159,500 0 $1,368,000 0 $5,884,667 0 $7,884,667 0 $7,884,666 0 $10,218,000 0 $18,218,000 0 $12,218,000 0


SUBTOTAL with inflation 0 $95,718,080 $10,462,272 $7,777,500 0 $11,124,149 0 $3,353,866 0 $1,496,157 0 $6,630,964 0 $9,153,809 0 $9,431,168 0 $12,592,495 0 $23,131,846 0 $15,983,556 0



DESIGN, ROW, & CONSTRUCTION MANAGEMENT EXPENSES

Design, ROW, & Const. Mgmt. Exp. MSD/ENG EB N/A N/A 0 $30,722,347 $2,476,474 $2,705,222 $2,779,330 $2,851,153 $2,925,039 $3,001,101 $3,143,616 $3,215,794 $3,290,041 $3,366,324 $3,444,727

SUBTOTAL 0 $30,722,347 $2,476,474 $2,705,222 0 $2,779,330 0 $2,851,153 0 $2,925,039 0 $3,001,101 0 $3,143,616 0 $3,215,794 0 $3,290,041 0 $3,366,324 0 $3,444,727 0

BUDGET SUMMARY



SUBTOTAL with Inflation 472,533 $292,993,781 $22,794,899 $22,226,718 42,750 $25,070,283 44,785 $19,874,182 44,990 $16,667,264 43,007 $22,710,105 44,773 $32,801,431 44,663 $38,343,111 45,411 $38,406,976 44,170 $51,642,530 47,258 $40,416,175 47,677

CONTINGENCY $1,000,000

REIMBURSEMENT PROJECTS Various Various Various 0 $1,216,000 $22,930 $266,000 0 $150,000 0 $100,000 0 $100,000 0 $100,000 0 $100,000 0 $100,000 0 $100,000 0 $100,000 0 $100,000 0

TOTAL 472,533 $294,209,781 $22,817,829 $23,492,718 42,750 $25,220,283 44,785 $19,974,182 44,990 $16,767,264 43,007 $22,810,105 44,773 $32,901,431 44,663 $38,443,111 45,411 $38,506,976 44,170 $51,742,530 47,258 $40,516,175 47,677

TOTAL EST. EXPENDS

THRU FY 18

TOTAL EST. EXPENDS

THRU FY 18

TOTAL EST. EXPENDS

THRU FY 18

PIPE RATING

PIPE RATING

PIPE RATING

PROJECT FOOTAGE


LOCATION OF PROJECT

PROJ. MGR.


PROJECTPROJECT NUMBER



PROJECTTOTAL

ESTIMATED COST

PROJ. MGR.

PROJECT FOOTAGE

PROJ. MGR.

PROJECT FOOTAGE

PROJECT NUMBER

PROJECT NUMBER

PROJECT NAME

Page 4 of 4

Action Taken Motion by: to Approve Disapprove Second by: Table Send to Committee Other: Follow-up required:



Submitted By: Thomas E. Hartye, PE., General Manager W. Scott Powell, CLGFO, Director of Finance

Subject: MSD Business Plan/Financial Forecast

Background

The MSD Business Plan is a financial policy established by the Board to forecast long-term planning needs for its operations and capital improvement. The Plan covers a 10-year period and aids staff’s ability to evaluate Bond Order compliance and infrastructure reinvestment in accordance with state and federal regulations.

Discussion

The MSD Business Plan/Financial Forecast is designed to assess the funding mixture, revenue versus debt, while addressing current and long-term operational needs and state and federal required infrastructure improvements. Additionally, the forecast illustrates these effects on sewer rates as well as the impact on the Board accepted target debt coverage ratio of 1.5. All general operation, infrastructure, and debt assumptions are listed on the right side of the forecast, which addresses the following:

Maintain or improve operation and service delivery

Implement a Capital Improvement Program to meet all current and future regulatory requirements for the Wastewater Reclamation Facility and Collection system

Support of the pay-as-you-go element of the CIP in addition to bonds

Continue with goal of periodic smaller consistent rate increases in lieu of large increase in future years Also included are the FY19 Personnel Committee recommendations for employee compensation and self-insurance funding as well as FY19 CIP Committee recommendations for infrastructure improvements. (See Tabs 2 & 3) Lastly, the purpose of this item is to review both budget and rates as a part of the Districts’ overall business plan prior to taking action on them individually.


For information prior to upcoming budget and rate setting process.


2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.50% 2.75% 2.75% 2.75% 2.75%$28.49 $29.15 $29.88 $30.62 $31.36 $32.14 $32.95 $33.77 $34.62 $35.48 $36.46 $37.46 $38.49 $39.55

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Assumptions

REVENUE:Domestic Users 28,154,062 29,581,170 30,842,462 31,419,273 32,431,584 33,519,844 34,625,974 35,750,290 36,893,117 38,115,855 39,435,929 41,090,437 42,518,752 44,034,247Industrial Users (No growth) 3,725,584 3,344,074 3,909,925 3,572,294 3,422,373 3,476,353 3,557,012 3,639,687 3,724,429 3,811,290 3,909,225 3,759,854 3,863,250 3,969,489Billing and Collections (User Fee) 738,239 754,317 768,833 800,255 816,660 841,160 866,394 892,386 919,158 946,733 975,135 1,004,389 1,034,520 1,065,556Tap Fees 389,090 526,415 571,126 450,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000Facility Fees 3,922,165 5,798,181 6,405,971 3,500,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000Interest & Non-operating Revenues 180,162 207,246 306,110 730,197 903,227 739,158 599,891 706,129 604,226 761,785 748,913 867,171 1,244,863 665,229City of Asheville (annex.-Enka) 37,167 37,146 35,834 35,000 35,000 35,000 35,000 35,000 35,000 35,000 0 0 0 0Rental Income 71,226 78,925 71,399 71,063 71,641 71,641 71,641 71,641 71,641 71,641 71,641 71,641 71,641 71,641Transfer from Reserves (to / from) (116,059) 430,058 (527,554) 0 0 0 0 0 0 0 0 0 0 0Miscellaneous 177,248 170,897 138,469 140,000 140,000 140,000 140,000 140,000 140,000 140,000 140,000 140,000 140,000 140,000

Total Revenues 37,278,884 40,928,429 42,522,575 40,718,082 39,995,485 40,998,156 42,070,912 43,410,133 44,562,572 46,057,304 47,455,843 49,108,492 51,048,026 52,121,162State and Federal (EPA) GrantsRevenue Bonds/Stimulus 28,000,000 40,000,000 60,000,000 30,000,000

Total Funds Available 85,765,412 85,513,528 84,341,722 114,860,760 105,179,809 96,244,070 85,379,417 80,087,115 78,498,531 112,543,990 97,147,704 134,307,907 112,565,669 103,594,392

EXPENSES:Operations & Maintenance 13,901,595 14,804,769 14,874,149 15,775,013 16,263,063 17,120,915 18,060,872 18,729,949 19,442,380 20,251,864 20,996,152 21,775,109 22,590,626 23,444,840Replacement Funds (WRF & Fleet) 500,000 625,000 625,000 660,000 730,000 760,000 830,000 830,000 860,000 865,000 865,000 865,000 865,000 865,000Debt Service 10,184,160 9,003,519 7,918,557 9,444,707 9,448,115 9,834,367 9,837,382 9,823,943 8,899,361 8,833,835 11,644,026 11,643,179 15,894,283 15,893,024CIP (including Bond Projects) 16,594,558 19,261,094 14,781,337 23,796,716 23,492,718 25,220,283 19,974,182 16,767,264 22,810,104 32,901,430 38,443,111 38,506,976 51,742,530 40,516,175

Total Expenses 41,180,313 43,694,382 38,199,043 49,676,436 49,933,896 52,935,565 48,702,436 46,151,156 52,011,845 62,852,129 71,948,289 72,790,264 91,092,439 80,719,039Ju e 30 Ca y O e o Co st uct o ,585,099 ,8 9, 6 6, ,6 9 65, 8 ,3 5 55 59 3 8 3,308,505 36,6 6,98 33,935,960 6, 86,686 9,69 ,86 5, 99, 5 6 ,5 ,6 3 , 3, 30 ,8 5,353Pay-as-you-go (Current Revenue only) 13,193,129 17,120,141 19,729,869 15,498,362 14,284,307 14,042,875 14,172,659 14,856,242 16,220,830 16,971,605 14,815,665 15,690,204 12,563,117 12,783,298

Debt Coverage (User Fees only) 1.8 2.1 2.5 2.1 2.2 2.1 2.1 2.2 2.5 2.6 2.0 2.1 1.6 1.6Debt Coverage with Total Revenue 2.3 2.9 3.5 2.6 2.5 2.4 2.4 2.5 2.8 2.9 2.3 2.3 1.8 1.8

April 14, 2018Active Plan CIP FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028

Interceptor/Wet Weather Rehabilitation 5,480 618,050 760,970 1,726,500 1,366,293 2,961,855 2,759,416 0 45,175 10,049,879 16,783,347 13,760,795 16,157,248 7,729,572 General Sewer Rehabilitation 11,317,853 9,104,792 8,859,631 13,213,448 10,377,703 8,178,779 10,880,024 12,020,277 11,958,159 10,454,126 8,912,802 8,763,645 8,987,112 13,258,320Private Sewer Rehabilitation 34,000 2,000 646,000 51,200 0 26,170 29,723 225,791 1,074,705 0 0 0 0 0

Treatment Plant / Pump Stations 3,028,300 7,181,959 1,868,250 6,324,000 7,777,500 11,124,149 3,353,866 1,496,157 6,630,964 9,153,809 9,431,168 12,592,495 23,131,846 15,983,556Engineering Force Account 2,208,925 2,254,293 2,546,486 2,481,568 2,705,222 2,779,330 2,851,153 2,925,039 3,001,101 3,143,616 3,215,794 3,290,041 3,366,324 3,444,727

Reimbursements 0 100,000 100,000 0 266,000 150,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000Contingency 0 0 0 0 1,000,000

Capital Improvement Program Totals 16,594,558 19,261,094 14,781,337 23,796,716 23,492,718 25,220,283 19,974,182 16,767,264 22,810,104 32,901,430 38,443,111 38,506,976 51,742,530 40,516,175

Sewer Rate Increase

3% inflation in O & M, Replacement Funds and

Engineering Force Account

No growth in Industries - Rate Parity for Flow in 2020

General Sewer Rehab to cover approx. 50,000 lineal ft / year

Target Debt Coverage 1.5

ENR 10-year Construction Index @ 3.03%

Minimum of 365 Days Cash on Hands

0.75% Increase

District 10yr CIP $310.4 Million

District total 10yr Budget $998.3Million

Average Monthly Bill

46,142,679 65,184,325 55,245,914 61,517,643 21,473,23036,676,982 33,935,960 26,486,68643,308,505

Consumption and Account Growth

Bond Issues figured at: 5.0% yield FY23 5.0% yield FY26 5.5% yield FY28

49,691,861 25,199,415

10-Year Capital Improvement Program

Business Plan FY19

48,486,528 44,585,099 41,819,146July 1- Available for Construction

Bond Money UsedPay-as-you-go

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

15 16 17 18 19 20 21 22 23 24 25 26 27 28

TOTAL CONSTRUCTION COSTS

$0$10,000,000$20,000,000$30,000,000$40,000,000$50,000,000$60,000,000$70,000,000

15 16 17 18 19 20 21 22 23 24 25 26 27 28

CASH BALANCE & REVENUEPay-as-you-go

Revenue w/o Bonds

Bond Issues

Cash Balance

Meeting Date:

May 3, 2018

Subject: M

SD Business Plan/Financial Forecast Page 2

Action Taken Motion by: to Approve Disapprove Second by: Table Send to Committee Other: Follow-up required:



Submitted By: Thomas E. Hartye, PE., General Manager W. Scott Powell, CLGFO, Director of Finance

Subject: MSD Rates and Survey Data Comparisons

Background

Every three years the National Association of Clean Water Agencies (NACWA) publishes a comprehensive survey for our industry. The report covers financial trends, utility operations, business practices, and future rate and service charge increases. It also provides a complete picture of how utility managers continue to find a balance in providing an essential service and responsibly managing their communities’ resources. A total of 167 clean water agencies representing over 103 million people served by centralized sewer service participated.

Discussion

One of the significant data comparisons in the survey is the EPA Region IV average residential sewer charge comparison (Exhibit 1). For 2014 NACWA survey, MSD’s monthly residential charges are very competitive as compared to agencies within our EPA Region IV. Additionally, MSD’s average residential sewer bill compares well with the rest of the EPA regions across the country (Exhibit 2). As reported in NACWA 2016 Cost of Clean Water Index (Exhibit 5), sewer service rate increases nationally have averaged 3.7% per year for the period of 2012 through 2016. The District’s annual rate increases have averaged 2.5% for the same time period. Sewer service rates are anticipated to increase nationally at an average of 4.2% per year for the next five fiscal years. The District’s currently proposed rate increase of 2.5% is well below the projected national average. Finally, the state and national average residential sewer bills are typically 20% greater than water bills. Based upon current projection, MSD’s average sewer bill will only be 11.7% greater than local area water bills (Exhibit 3). Staff has also included a 2019 rate comparison for all AA & AAA sewer providers in North Carolina (Exhibit 4).


None – Informational only.


Meeting Date: May 3, 2018 Subject: MSD Rates and Survey Data Comparisons Page 2

Exhibit 1

Ran

king

Agency NameRate Design Gallons Per

Year

Rate Design CCF's per

month

Volume Rate per

CCF

Average Annual Sewer Charge

Average Monthly Sewer Charge

Residential Connection

Fee

Residential Facility /

Hookup Fee

% Billed of Metered

Water

Industrial Volume Rate per

CCF

BOD Rate per

lb

BOD Limit

TSS Rate

per lb

TSS Limit

15 Orange County Utilities, FL 127,750 14.2 2.60$ 599$ 49.95$ * 3,346$ 100% 2.60$ 0.513 300 0.546 300

14 Knoxville Utilities Board, EO, TN 44,880 5.0 8.70$ 570$ 47.50$ 20$ 1,500$ 100% 8.70$ 0.104 240 0.098 300

13 Beaufort Jasper WSA, SC 78,000 8.7 4.52$ 540$ 45.00$ 500$ 2,760$ 100% 4.53$ 0.350 250 0.600 250

12 Broward County Water and Wastewater, FL 60,000 6.7 2.57$ 497$ 41.45$ 25$ * 100% 2.57$ 0.122 400 0.146 400

11 Charlestion Water System, SC 62,832 7.0 6.89$ 493$ 41.06$ 200$ 2,940$ 100% * 0.003 290 0.003 290

10 Western Carolina RSA, SC 120,000 13.4 4.03$ 491$ 40.89$ * 2,500$ 100% 3.87$ 0.275 250 0.275 250

9 Sanitation District #1, KY 53,856 6.0 6.69$ 482$ 40.14$ 3,159$ * 100% 6.69$ 0.435 * 0.242 *

8 Orange WSA, NC * * 4.85$ 455$ 37.92$ 325$ 4,123$ 100% 4.85$ * * 0.520 235

7 Louisville/Jefferson MSD, KY 72,000 8.0 2.37$ 455$ 37.91$ 1,600$ 820$ 85% 2.85$ 0.362 * 0.149 *

6 Greenwood Metro District, SC 55,651 6.2 3.84$ 448$ 37.31$ 700$ 900$ 100% 4.03$ 0.500 300 0.400 300

5 Charlotte Mecklenburg Util, NC 59,400 6.6 4.46$ 383$ 31.90$ 2,323$ 1,695$ 100% 0.24$ 0.120 * 0.160 *

4 Miami-Dade County WSD, FL 81,000 5.6 * 335$ 27.92$ 487$ * * * 0.190 * 0.140 *

3 MSD of Buncombe County, NC 44,880 5.0 4.08$ 334$ 27.81$ 650$ 2,500$ 100% 3.20$ 0.341 210 0.267 210

2 Macon Water Authority, GA 62,832 7.0 2.06$ 259$ 21.62$ * * 100% 2.06$ 0.100 250 0.100 250

1 Toho Water Authority, FL 57,750 6.4 1.10$ 213$ 17.73$ 300$ * 100% 3.78$ * * * *

Minimum 44,880 5 1.10$ 213$ 17.73$ 20$ 820$ 0.24$ 0.003 210 0.003 210

Maximum 127,750 14 8.70$ 599$ 49.95$ 3,159$ 4,123$ 8.70$ 0.513 400 0.600 400

Average 70,059 8 4.20$ 437$ 36.41$ 857$ 2,308$ 3.84$ 0.263 277 0.260 279

Median 61,416 7 4.06$ 455$ 37.92$ 493$ 2,500$ 3.78$ 0.275 250 0.201 270

* Not Reported

2014 NACWA Financial Survey

EPA Region IV - Southeast Residential - Single Family Homes Industry


Exhibit 2

Monthly Bills for Residential Customers (5 CCF or 3,750 gallons)

Asheville (bi-monthly bills) FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Increase Water Service 23.17 24.59 25.67 25.67 25.67 25.90 26.27 26.82 26.98 27.39 1.5%MSD Sewer Service 23.99 24.84 25.72 26.45 27.14 27.81 28.49 29.15 29.88 30.62 2.5%

$47.15 $49.43 $51.39 $52.12 $52.81 $53.70 $54.76 $55.97 $56.86 $58.013.0% 4.8% 4.0% 1.4% 1.3% 1.7% 2.0% 2.2% 1.6% 2.0%

Biltmore Forest (bi-monthly bills)Water Service 28.24 28.24 28.24 29.37 30.83 32.07 33.50 35.19 36.96 38.81 5.0%MSD Sewer Service 23.99 24.84 25.72 26.45 27.14 27.81 28.49 29.15 29.88 30.62 2.5%

$52.22 $53.07 $53.95 $55.82 $57.97 $59.87 $61.99 $64.34 $66.84 $69.431.4% 1.6% 1.7% 3.5% 3.9% 3.3% 3.5% 3.8% 3.9% 3.9%

Black Mountain (monthly bills)Water Service 23.36 25.55 25.55 25.55 26.90 27.58 27.95 28.51 29.11 29.46 1.2%MSD Sewer Service 25.01 25.86 26.77 27.52 28.24 28.93 29.63 30.30 31.03 31.80 2.5%

$48.37 $51.41 $52.32 $53.07 $55.14 $56.51 $57.58 $58.81 $60.14 $61.263.0% 6.3% 1.8% 1.4% 3.9% 2.5% 1.9% 2.1% 2.3% 1.9%

Montreat (monthly bills) * All single family homes have larger 3/4" metersWater Service 29.50 29.77 29.77 29.77 31.41 32.10 32.11 32.11 32.92 32.92 0.0%MSD Sewer Service * 27.47 28.42 29.42 30.25 31.04 31.80 32.57 33.31 34.11 34.96 2.5%

$56.97 $58.19 $59.19 $60.02 $62.45 $63.90 $64.68 $65.42 $67.03 $67.881.5% 2.1% 1.7% 1.4% 4.1% 2.3% 1.2% 1.1% 2.5% 1.3%

Weaverville (monthly bills)Water Service 23.01 24.14 25.35 25.35 25.88 25.88 25.88 25.88 29.85 30.45 2.0%MSD Sewer Service 25.01 25.86 26.77 27.52 28.24 28.93 29.63 30.30 31.03 31.80 2.5%

$48.02 $50.00 $52.12 $52.87 $54.12 $54.81 $55.51 $56.18 $60.88 $62.253.6% 4.1% 4.2% 1.4% 2.4% 1.3% 1.3% 1.2% 8.4% 2.3%

Woodfin (bi-monthly bills)Water Service 19.98 19.98 19.98 19.98 19.98 19.98 20.38 20.63 20.70 21.70 4.8%MSD Sewer Service 23.99 24.84 25.72 26.45 27.14 27.81 28.49 29.15 29.88 30.62 2.5%

$43.96 $44.81 $45.69 $46.43 $47.11 $47.78 $48.87 $49.78 $50.58 $52.321.9% 1.9% 2.0% 1.6% 1.5% 1.4% 2.3% 1.9% 1.6% 3.5%

$27.55 Average Sewer Bill (weighted) $30.78

*Average sewer bill is currently 11.7% greater than local area water bills. The National average residential sewer bills are typically 20% greater than water according to NCLM and AWWA surveys.

Meeting Date: May 3, 2018 Subject: MSD Rates and Survey Data Comparisons Page 4 Exhibit 3


Exhibit 4

1

2016 COST OF CLEAN WATER INDEX

Average Charge for WastewaterServices Increases 2.6% in 2016

NACWA’s 2016 Cost of Clean Water Index indicates that the average cost of wastewater services rose 2.6 percent in 2016, double the rate of inflation as measured by the Consumer Price Index (CPI) (see Cost of Clean Water Indexvs. Inflation chart below). The national average amount thata single-family residence pays for wastewater collection and treatment(i.e., the sewer service charge) is now $479 per year. This is the 15th consecutiveyear that sewer service charges have increased faster than inflation, doubling theaverage sewer service charge since 2002.

The national average of $479 provides only part of the picture. Sewer service charges vary widely among EPA regions and states, and are affected by demographics, geography, aging infra-structure, local water quality issues (e.g., total maximum daily loads), wet weather infrastructure needs, and drought-related water conservation. As an example of these variations, the Regional Average Annual Charge map (above) shows a breakdown of average charges by EPA region. The average service charge by region varies from a low of $258 in EPA Region 8 to a high of $860 in EPA Region 1.

The Cost of Clean Water Index vs. Inflation chart (below) presents a national snapshot of the increase in service charges, as compared to inflation, since 2002. Table A-1 (see Cost of Clean Water Data Annex, page 3) provides a breakdown of NACWA Index values and service charges back to 1985, the base year for the Index. The values for 2016 are based on the responses from 167 NACWA members serving nearly 103 million people.

In 2016, a majority of clean water utilities implemented rate structures that resulted in increases in the average annual household service charge. However, in some communities (6% of respon-dents), volume-based rates increased, but average service charges dropped due to reductions in residential water use. Additional national and regional data are included in Tables A-1 and A-3 (see Cost of Clean Water Data Annex, pages 3-4).

Regional AverageAnnual Charges (2016)

2016 NACWA Cost of Clean WaterIndex Summary

Population Served

167Avg. National AnnualSewer Service Charge

Increase in SewerCharges from 2015-2016$

Increase in ConsumerPrice Index 2015-2016

103 MILLION

$479

2.6%

1.3%

Utility Respondants

Annual Change in Cost of Clean Water Index vs. Inflation

$436 $502

$597

$258

$402

$860

$510REGION 1

REGION 2

REGION 3

REGION 4

REGION 5

REGION 6

REGION 7

REGION 8

REGION 9

REGION 10$558

$368

$547

NACWA IndexConsumer Price Index

2017 to 2021 Projected ServiceCharge Changes Based on Approved

and Anticipated Rate Increases

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

10%

8%

6%

4%

2%

0%

-2%

3.6%3.1%

6.5%7.3%

6.0% 6.0%

8.2%

4.4%

6.1%5.5%

4.1%

3.1%

4.1% 4.1% 4.1%4.7%

3.9%

2.6%3.4%

5.4%

Exhibit 5

2

Projected Charges Expected to Increase 3.9 to 4.7% per Year

Customers pay for sewer services in a variety of ways. Charges may be based on property values, gallons of water used, on a flat rate, or include some combination of these values. Because of this variability, the NACWA Index uses what the average single-family residence pays annually because it is a more consistent measure to track the cost of service over time.

This year NACWA’s Index indicates that clean water utilities are expecting average charges to continue to increase from 3.9 to 4.7% per year for the next five years. Consent decree requirements and associated new capital construction and debt service were the top reasons cited by respondents for projected rate increases greater than 25 percent (over 5 years). Other drivers for large rate increases include infrastructure rehabilitation and replacement, higher operation and maintenance costs, cominbed sewer overflow (CSO) long-term control plan compliance, and sewer system improvements to reduce sanitary sewer overflows (SSOs).

The Projected Increases in Charges, 2017-2021 chart (right) shows the projected percentage increase in charges distributed among agency respondents. Of those utilities responding, nearly one-half of agencies project cumulative five-year rate increases above 25 percent

Average Annual Service Charge Has Doubled in Last 14 Years

The Average Annual Service Charge chart (below) presents a national snapshot of sewer service charges since 2000, and provides a projection of average charges through 2021. From 2002 to 2016, the average annual service charge has doubled from $239 to $479. Meanwhile, the Consumer Price Index (CPI) has increased only 33 percent in this same time period.

The average annual sewer charge of $479 represents 1.97 percent of the 2016 Federal poverty income threshold ($24,300) for a family of four. This proportion has risen from 1.3 percent in 2000. Projected increases in rates show the average charge reaching nearly $600 by 2021.______________________________________

Disclaimer: The NACWA Index strives to use the best available data each year when determining current and historical household charges and trends. These data are intended for comparison purposes only, and are subject to change from one year to the next. While this document presents the most up-to-date data available, if better data become available in the future, the data presented here may be modified.

Projected Increases in Charges2017-2021

Average Annual Service Charge, 2000-2016 & Projected

Aver

age

Annu

al C

harg

e ($

)

NACWA IndexConsumer Price Index (as $ amount)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 202120012000

$700

$600

$500

$400

$300

$200

$100

$0

$222 $230 $239 $250 $262$284 $295 $308

$324$357

$381 $399 $412$435 $448 $452 $479

$498$520

$542$566

$598

Projected Increase

Num

ber o

f Age

ncie

s

20174.1% Average

20184.1% Average

20193.9% Average

20204.1% Average

20214.7% Average

40

0

40

0

40

0

40

0

40

0

<0 - 0% >0 - 3% >3 - 5% >5 - 7% >7 - 10% >10 - 15% >15%


METROPOLITAN SEWERAGE DISTRICT OF BUNCOMBE COUNTY Meeting Date: May 3, 2018



Subject: Proposed FY 2019 Budget

Background

The District Budget process must comply with North Carolina General Statues and the MSD Revenue Bond Order. The Bond order requires that the District adopt its final budget on or before June 15 of each year. The North Carolina General Statutes require an annual balanced budget ordinance, based upon expected revenues, along with a budget message be presented to the governing board no later than June 1 of each year.


Staff recommends to the Finance Committee that the attached Proposed FY 2019 Budget along with the Resolution be endorsed today and presented to the Board at the May 16, 2018 Board Meeting.

Finance Committee Action Item

1 FY19 Budget & Proposed Sewer Rates

May 3, 2018

Members of the Finance Committee Metropolitan Sewerage District of Buncombe County, North Carolina W. H. Mull Building 2028 Riverside Drive Asheville, North Carolina 28804 Subject: FY19 Budget and Proposed Sewer Rates

Dear Members of the Finance Committee,

We respectfully present the FY19 Budget for the Metropolitan Sewerage District of Buncombe County, North Carolina. The budget incorporates staff recommendations presented to and accepted by the Capital Improvement Program Committee, which met on April 24, 2018 and the Personnel Committee, which met on April 24, 2018. We have developed the FY19 Budget to advance the organization’s mission “to provide wastewater collection and treatment to its users which promotes the health and safety of affected citizens in the most effective and efficient manner possible today and in the future”. The following Operational and Capital budget is designed to provide services meeting or exceeding all state regulations and Bond Order covenants with which the District must comply, with any rate changes to be at the lowest responsible level.

Current Year Highlights

In FY18, the District’s domestic and industrial revenue are expected to meet budgeted projections. The District continues to achieve growth in the number of residential customers. By effectively controlling the increase in operating expenditures and strategically planning the timing of CIP projects, the District has been able to limit the proposed rate increase to 2.5% for the upcoming year. Additionally, the District’s long-range business plan incorporates these changes and projects that future rate increases will be between approximately 2.5% to 2.75% for the remaining nine (9) years. This budget continues several recent initiatives to maintain the District’s overall strategy of keeping collection lines and the plant functioning effectively while rehabilitating significant portions of aging infrastructure. The most important goal remains meeting all regulatory permit requirements.


The SS Construction Department continues to expand its participation in sewerline rehabilitation and replacement efforts to minimize SSOs. Goals for FY19 include utilizing Infrastructure Rehabilitation System (IRS) lining, pipe bursting, and dig-and-replacement construction to rehabilitate and replace at least 20,000 linear feet, while providing preventative maintenance for approximately 500,000 linear feet of the system by employing in-house jet wash cleaning and both chemical and mechanical root control. In addition, the SS Maintenance Department will manage the District’s Right-of-Way maintenance program whereby easements will be periodically cleared or mowed. The Wastewater Treatment Plant is continuing systematic improvements as part of the District’s detailed Facilities Plan. In FY17, the District began the construction phase of the $9.6 million Headworks project. This project included installing new bar screens and grit removal systems along with fine screens and a surge system for peak flows.

Operating Budget

The proposed $16.99 million Operating Budget represents routine expenditures and capital equipment acquisitions needed for the day-to-day operations of the District. Highlights of significant components and changes include:

Compensation and Benefits—The staff and employees considered salary and health insurance increases together as part of a comprehensive compensation package.

• A 3.0% salary adjustment—CPI increased 1.8% for the last twelve-month period; Division Directors in conjunction with Employee Advisory Committee have requested a cost of living increase to keep pace with industry salary increases as well as to encourage retention of valued employees. The Personnel Committee has recommended a wage increase, which has an approximate $329,000 net impact on current year expenditures.

• A 3.3% increase in funding for North Carolina retirement cost—In 2016, the Local Governmental Employees’ Retirement Systems (LGERS) adopted a rate stabilization policy to allow for predictability and stability in the contribution rates, while continuing keeping the local retirement system one of the best-funded systems in the country. Subsequently, LGERS raised the District’s contribution rate from 7.5% to 7.75% of total salary and wages. Over the next five years, contribution rates are projected to increase to an amount slightly over 8.75%. This has an approximate $34,000 impact on current year expenditures.

• A 6.5% increase in funding for Self-Insured Medical Plan—During FY16, staff worked with its consultant and initiated a top to bottom review of our medical insurance plan. The effort was to insure the District had a medical plan in line with our sister agencies as well as to limit certain benefits and increase cost sharing by employees in the amount of $175,000. The Employee Advisory Committee endorsed these changes. The two groups continue to work on a long-term strategic plan to address controllable medical issues. The 6.5% increase in the employer contribution is in line with medical and prescription trend and has an approximate $133,000 impact on current year expenditures.

• Funding for Post-Employment Health Benefit—Starting in FY09, GASB 45/75 required recognition of cost for Post-Employment Health Benefits. An actuarial study was done in the current year, which stated that FY19 funding should be approximately $308,000. Current funding has been implemented into the proposed FY19 budget, in addition to the current business plan, and represents 1.8% of total operations.


Materials, Supplies, and Service expenditures increased 1.8% over prior year—The District has made a concerted effort to hold materials, supplies, and services cost close to the prior year’s level, taking into account inflationary cost increases. The District has increased specific line items to address regulatory and operational needs. Discretionary expenditures have been limited where practicable. This has an approximate $116,000 impact on current year expenditures.

Capital Improvement Program

The District prepares a ten-year Capital Improvement Program as required by its State Collection System Permit and the Consolidation Agreements. The estimated construction expenditure for FY19 is $23.5 million, which is comprised of an estimated $22.23 million in construction, $266,000 of reimbursement, and $1 million in contingency. The total 10-year CIP budget is $310.4 million. A detailed list of individual projects and planned expenditures by year was presented at the April 24, 2018 CIP meeting. This signifies a large increase in the 10-year CIP due largely to major improvements at the Plant along with upgrades to the interceptor network. MSD will be positioned to meet future regulations and to provide capacity to serve the estimated growth for the next 50 years. The Board has consistently financed its Capital Improvement Program through revenue bonds and pay-as-you-go moneys. As of June 30, 2018, the District will have $110.02 million in outstanding revenue bond debt, with total debt service of $9.45 million due before the end of the fiscal year. Unlike counties and cities, the District does not have a legally mandated debt limit. However, the District does have a rate covenant. The covenant requires the District to set rates and charges so that income available for debt service will not be less than 120% of fiscal year debt service requirement.

Collection System Capital Improvements: MSD initiated and maintains an aggressive program to rehabilitate its Wastewater Collection System. This program will conform to the North Carolina Department of Environmental and Natural Resources (NCDENR) Collection System Permit requirements, will improve the operational performance, and extend the life of the collection system. The estimated cost over a 10-year period is approximately $208.7 million. In the previous decade, efforts had been directed to expediting completion of certain projects identified by the member agencies and assumed by the District during the consolidation process. For example, construction of the 23.8-mile North Swannanoa Interceptor begun in 1993 was completed during FY2004 at a cost in excess of $44 million. Now that most of these “consolidation” projects have been completed, our focus has been redirected to rehabilitation 250,000 feet of sewerline every five (5) years and other projects identified in the Master Plan. This rehabilitation has been made more cost-effective by the development of the Pipe Rating Program. Pipe Rating is a proactive planning tool, which utilizes Closed Circuit Television (CCTV) information, a GIS database, actual maintenance history to view, rate, and computer-score pipe segments based on a number of factors. These factors, for any given manhole-to-manhole segment, include maintenance work order history, number, severity of defects, record of overflows on that segment, and are combined to yield a rating useful for prioritizing rehabilitation efforts.


Pipe Rating minimizes costs by helping the District focus rehabilitation dollars where they are needed most, rather than the previous replacement of collector lines throughout an entire basin. In recognition of this innovative program, the Association of Metropolitan Sewerage Agencies (AMSA) awarded the District one of only two 2003 National Environmental Achievement Awards. Major projects for FY19 include the Old West Chapel Road with 5,200 linear feet $1,448,000, South French Broad Lining Project with 5,111 linear feet $1,073,000, Old Haw Creek Road at Greenbriar Road with 3,755 linear feet $1,043,900, Memory Lane with 1,900 linear feet $760,750, and Hill Street with 2,088 linear feet $687,200. In FY19, Plant Headworks improvements are scheduled to cost $3.2 million and Plant High Rate Primary Treatment are scheduled to cost $3.5 million. These are in addition to numerous smaller projects completed throughout the collection system. Further details are available in the CIP section of the budget document. The District’s Collection System Master Plan addresses the orderly extension of the District’s collection system into future service areas. The plan has been prepared in close cooperation with the District’s member agencies and regional stakeholders. The land use policies and zoning regulations of each agency were used for land usage, growth projections/densities, and line locations. For areas outside of corporate or jurisdictional limits, Buncombe County’s Zoning Ordinance has played an integral role in defining future service areas. The plan will serve as a basis to ensure that the sewer system will be extended in an orderly fashion, and is done so in accordance with the planning policies of the various local governments within the District’s service area.

Wastewater Treatment Plant Capital Improvements: During FY15, the Treatment Facilities Plan was updated for the Water Reclamation Facility. This plan provides short, medium, and long-term recommendations for each specific process and facility. This update primarily expanded on several of the original plan’s longer-term recommendations. It focused specifically on improvements to the WRF Headwork’s (i.e. bar screens, influent pumping station, and the problematic grit & grease removal system), including surge control for short-term peak flows. It also investigated in detail the installation of a primary clarification process and has evaluated alternatives for the biological treatment process. Another key aspect of the Facility Plan Update was to gain a solid understanding of regulatory issues that may influence (impact) future treatment requirements and identify long-term biological treatment alternatives to comply with anticipated future regulation changes. Near-term and mid-term project recommendations from the plan include:

Plant Headworks Project—This $9.6 million project spans 2 years and consists of a new grit removal system to replace the existing problematic system, a fine screening facility which will supplement the WRF’s existing bar screens, and storage at the plant using existing decommissioned tanks to provide more effective treatment during peak flow events. In addition, by removing more grit than the current process, it will help to better protect downstream processes within the plant. Construction of the Plant Headworks Project began in


early April 2017 and will be completed in 18 months.

High Rate Primary Treatment Project—This $14.4 million project will provide primary clarification by removing solids before the biological treatment stage. This will provide a more effective treatment and will help the Rotating Biological Contactors (RBC’s) to better perform. During high flow (storm) events, this treatment can be ramped-up in order to match the higher flows. Design began in FY17 and construction is planned to begin in FY19.

Long-term alternatives focused on the biological treatment aspect (currently RBC’s). Specific alternatives will be evaluated if and when future regulatory requirements change over time. The two projects noted above allow for flexibility among the viable options for biological treatment.

Impact of CIP on Operations

For most municipal and county governments, capital improvements often result in higher operating costs. For example, larger buildings increase utility expenses, and new facilities such as libraries or swimming pools involve hiring additional staff. The opposite holds true for the District. Through major rehabilitation projects to the sewer collection system, the District is expected to realize a modest cost reduction in wastewater treatment operations by reducing infiltration of groundwater and inflow of surface water into the sewer system. Mud and grit, which accompany infiltration/inflow, will also be reduced, thereby increasing the life of pumps and other treatment equipment adversely effected by abrasion. Other savings are realized from capital expenditures as new or rehabilitated sewer lines also require less maintenance and are not as susceptible to frequent blockages and overflows as older and smaller lines. The District’s major environmental responsibility is reduction of Sewer System Overflows (SSOs). Staff has estimated the average cost of responding to an SSO to be approximately $2,175. During FY 2000, the District experienced more than 289 SSOs, which have reduced to less than 30 in recent years. Thus, the District has been able to focus approximately $500,000 additional dollars annually on preventative maintenance as opposed to responding to spill events. Moreover, the North Carolina Department of Environment and Natural Resources has the discretion to levy fines up to $25,000 per day per SSO if the District does not follow through on renovations and rehabilitations planned for areas identified as requiring capital improvements. Therefore, the CIP has a positive impact on operations by reducing repair and replacement while avoiding environmental penalties.

Sewer Rate Increase

Staff recommends a 2.5% increase in domestic sewer rates and meter fees for FY19, including a previously approved plan to achieve flow rate parity between industrial and domestic users. This amount is in line with past increases.


We believe this rate increase is prudent under the current economic situation and is necessary to provide for the following District responsibilities and objectives:

Meet current and future regulations at the Water Reclamation Facility and for the Collection System Replace and rehabilitate approximately 44,000 linear feet of sewer mains a year

Debt coverage ratio attractive to investors and rating agencies

Support of the pay-as-you-go element of the CIP in addition to bonds

Continue with goal of periodic smaller rate increases in lieu of large increase in future years

Adequate current funding and maintenance of prudent reserves for Self-Insured Medical and Dental Plan In the past, the MSD Board has endeavored to keep rate increases to a minimum. The District’s Bond Order requires sewer rates be set to ensure that the excess of revenues over current expenditures is at least 120% of debt service. Additionally, the Board balances the bond order requirements while maintaining all regulatory and fiduciary responsibilities. Domestic sewer rates for the past five years as well as FY19 are shown below:

FY14 FY15 FY16 FY17 FY18 FY19

Rate Increase % 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Meter, Maintenance & Billing Fees $8.53 $8.73 $8.90 $9.08 $9.30 9.51 Flow Rate (per ccf) $4.08 $4.18 $4.28 $4.39 $4.50 4.61 Avg. Monthly Bill (5ccf) $27.81 $28.49 $29.15 $29.88 $30.62 31.36

Distinguished Budget Award

The Government Finance Officers Association of the United States and Canada (GFOA) presented a Distinguished Budget Presentation Award to the Metropolitan Sewerage District of Buncombe County, North Carolina for its annual budget for the fiscal year beginning July 1, 2017. This is the twenty-first (21) consecutive year that the MSD has received this award. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communication device. This award is valid for a period of one year only. We believe our FY19 budget continues to conform to program requirements and we are submitting it to GFOA to determine its eligibility for another award.


In Closing

The Budget represents the combined efforts and guidance of the Board, its Committees, and staff. A special thanks to Teresa Gilbert for assembling the budget documents, Jim Hemphill/HR Director, Ed Bradford/CIP Director, and Cheryl Rice for assembling the CIP Section of the Budget. We look forward to working with you, staff, and our ratepayers as we implement this financial plan and policy document.

Respectfully submitted,

Thomas E. Hartye, PE W. Scott Powell, CLGFO General Manager Director of Finance


Trend Analysis


Revenue Summary for FY19

Expenditures Summary FY19


FY 2019Proposed

Budget

REVENUES & FINANCING SOURCESDomestic User Fees 30,974,599$ 31,169,273$ 32,431,584$ 1,262,311$ 4.05%Industrial User Fees 3,909,925 3,347,294 3,422,373 75,079 2.24%Billing and Collection 768,833 800,255 816,660 16,405 2.05%Facility and Tap Fees 6,977,097 2,175,000 2,175,000 - 0.00%Interest and Misc. Income 918,334 836,652 1,164,716 328,064 39.21%Rental Income 71,063 71,641 71,641 - 0.00%City of Asheville (Enka Bonds) 35,834 37,000 35,000 (2,000) -5.41%Employee Contributions to Health Fund - 402,700 421,467 18,767 4.66%Proceeds from Revenue Bonds - 28,000,000 - (28,000,000) N/AUse of (Contributions to) Available Funds (4,972,468) (11,520,447) 10,243,546 21,763,993 -188.92%

Total Revenues & Financing Sources 38,683,218$ 55,319,368$ 50,781,987$ (4,537,381)$ -8.20%

EXPENDITURESOperations and Maintenance 15,499,149$ 16,234,866$ 16,747,044$ 512,178$ 3.15%Construction 14,615,309 28,307,716 23,492,718 (4,814,998) -17.01%Capital Equipment 650,202 986,320 1,094,110 107,790 10.93%Bond Principal and Interest 7,918,558 9,790,466 9,448,115 (342,351) -3.50%

Total Expenditures 38,683,218$ 55,319,368$ 50,781,987$ (4,537,381)$ -8.20%

FY 2017 Actual Total

FY 2018 Budget

Increase (Decrease)

% Change

ACTUAL APPROVED ESTIMATED PROPOSED INC(DEC)2016-2017 2017-2018 2017-2018 2018-2019 OVER

BUDGET ACTUAL BUDGET PRIOR YRBUDGET

SALARIES & WAGES 8,513,191$ 8,826,272$ 8,826,272$ 9,118,199$ 3.31%

BENEFITS 4,142,954$ 4,377,033$ 4,377,033$ 4,648,231$ 6.20%

MATERIALS, SUPPLIES & SERVICES 5,862,593$ 6,492,384$ 6,344,850$ 6,609,008$ 1.80%

REPLACEMENT FUNDS & TRANSFERS 803,881$ 846,350$ 846,350$ 900,610$ 6.41%CAPITAL EQUIPMENT 134,022$ 118,623$ 117,004$ 128,110$ 8.00%

SUB-TOTAL O&M FUND 19,456,641$ 20,660,662$ 20,511,509$ 21,404,158$ 3.60%

LESS:Capitalized Construction Expenses (3,854,837)$ (4,095,844)$ (4,076,496)$ (4,411,095)$ 7.70%

NET OPERATION & MAINTENANCE FUND 15,601,804$ 16,564,818$ 16,435,013$ 16,993,063$ 2.59%

Consolidated Budget Summary FY19

NOTE: Both Operation and Maintenance and Capital Equipment expenditures represent actual amounts to be spent in the respective reserve funds. These amounts do not include current year reserve funds funding request.

O & M Overview


FY19 All Department Budget Summary

No. Name Actual Actual Actual Approved Estimated Percent Proposed Inc (Dec)2014-2015 2015-2016 2016-2017 2017-2018 Actual Expended 2018-2019 Over

Budget 6/30/2018 To Total Budget Prior YearBudget

Salaries & Wages51100 Salaries & Wages 7,822,788.68$ 8,114,221.40$ 8,256,868.46$ 8,523,272.00$ 8,523,272.00$ 100.00% 8,804,199.00$ 3.30%51150 Overtime 249,885.92$ 281,072.44$ 256,322.95$ 303,000.00$ 303,000.00$ 100.00% 314,000.00$ 3.63%

8,072,674.60$ 8,395,293.84$ 8,513,191.41$ 8,826,272.00$ 8,826,272.00$ 100.00% 9,118,199.00$ 3.31%

51200 North Carolina Retirement 569,223.92$ 564,384.10$ 630,362.92$ 669,032.00$ 669,032.00$ 100.00% 713,954.00$ 6.71%51250 Payroll Taxes 584,714.82$ 607,735.77$ 690,654.00$ 675,210.00$ 675,210.00$ 100.00% 697,544.00$ 3.31%51300 Medical, Dental & Life 2,045,496.63$ 1,805,519.85$ 1,908,628.00$ 2,051,775.00$ 2,051,775.00$ 100.00% 2,185,141.00$ 6.50%51325 Post Retirement Insurance 77,100.00$ 191,096.15$ 270,000.00$ 249,500.00$ 249,500.00$ 100.00% 307,560.00$ 23.27%51350 Worker's Compensation 201,145.36$ 215,312.00$ 273,000.00$ 273,000.00$ 273,000.00$ 100.00% 273,000.00$ 0.00%51360 State Unemployment Benefits 23,962.99$ 6,220.43$ 1,065.51$ 32,340.00$ 32,340.00$ 100.00% 32,560.00$ 0.68%51500 401-K/457 Plan 339,055.67$ 359,097.20$ 369,243.99$ 426,176.00$ 426,176.00$ 100.00% 438,472.00$ 2.89%

3,840,699.39$ 3,749,365.50$ 4,142,954.42$ 4,377,033.00$ 4,377,033.00$ 100.00% 4,648,231.00$ 6.20%3,840,699.39$ 3,749,365.50$ 4,142,954.42$ 4,377,033.00$ 4,377,033.00$ 4,648,231.00$

Total Salaries, Wages & Benefits 11,913,373.99$ 12,144,659.34$ 12,656,145.83$ 13,203,305.00$ 13,203,305.00$ 100.00% 13,766,430.00$ 4.27%

Materials, Supplies & Services52010 Advertising 25,523.03$ 23,047.57$ 29,872.28$ 32,050.00$ 30,650.00$ 95.63% 35,500.00$ 10.76%52050 Dues & Subscriptions 46,092.18$ 44,742.89$ 47,248.57$ 55,430.00$ 53,255.00$ 96.08% 58,130.00$ 4.87%52100 Postage 9,452.22$ 8,348.72$ 9,730.55$ 12,200.00$ 12,000.00$ 98.36% 12,000.00$ -1.64%52150 Travel, Mtgs & Training 119,837.27$ 132,443.65$ 135,708.68$ 161,557.00$ 152,383.00$ 94.32% 171,542.00$ 6.18%52160 Tuition Assistance 4,229.42$ 3,407.16$ 1,499.70$ 7,000.00$ 4,200.00$ 60.00% 7,000.00$ 0.00%52170 Directors Fees & Expenses 22,791.28$ 21,412.12$ 22,040.26$ 19,083.90$ 19,083.00$ 100.00% 20,000.00$ 4.80%52180 Liability Insurance 497,820.01$ 605,434.00$ 547,746.00$ 547,746.00$ 547,746.00$ 100.00% 547,746.00$ 0.00%52200 Telephone/Telefax 30,645.80$ 29,427.21$ 31,559.30$ 34,000.00$ 34,000.00$ 100.00% 38,000.00$ 11.76%52210 Communications 93,518.10$ 89,900.00$ 93,540.25$ 123,310.00$ 121,735.00$ 98.72% 132,060.00$ 7.10%52240 Uniforms 62,640.92$ 58,905.42$ 75,502.00$ 90,476.70$ 87,346.00$ 96.54% 93,250.00$ 3.07%52250 Office Supplies 18,892.49$ 20,633.94$ 17,757.73$ 28,350.00$ 25,825.00$ 91.09% 27,400.00$ -3.35%52260 Special Dept Supplies 407,240.20$ 402,558.34$ 403,848.08$ 453,921.30$ 444,060.00$ 97.83% 465,400.00$ 2.53%52270 Safety Equip/Supplies 60,727.31$ 66,747.80$ 71,485.85$ 76,789.56$ 75,362.85$ 98.14% 82,300.00$ 7.18%52280 Maint Supp/Small Tools 109,319.52$ 103,879.67$ 113,327.73$ 143,608.29$ 141,708.29$ 98.68% 143,500.00$ -0.08%52290 Chemical Supplies 388,293.43$ 429,656.28$ 421,562.83$ 519,600.00$ 514,625.00$ 99.04% 521,000.00$ 0.27%52300 Line Cleaning Supplies 53,527.63$ 56,533.42$ 64,384.72$ 53,750.00$ 53,750.00$ 100.00% 53,750.00$ 0.00%52330 Legal Fees 35,412.41$ 46,971.49$ 39,364.31$ 44,500.00$ 37,700.00$ 84.72% 47,000.00$ 5.62%52350 Prof/Contractual Svcs 420,368.31$ 404,790.52$ 583,379.74$ 630,868.47$ 597,200.00$ 94.66% 622,550.00$ -1.32%52410 Maint-Buildings & Grounds 125,999.81$ 121,118.94$ 142,201.39$ 147,900.00$ 143,900.00$ 97.30% 154,000.00$ 4.12%52420 Maintenance-Equipment 466,425.42$ 548,283.83$ 523,452.14$ 464,100.00$ 458,100.00$ 98.71% 464,050.00$ -0.01%52430 Landscape Restoration 9,180.32$ 13,513.62$ 9,189.87$ 17,000.00$ 17,000.00$ 100.00% 17,000.00$ 0.00%52440 Pump Maintenance 33,951.84$ 63,764.14$ 80,410.24$ 122,500.00$ 115,000.00$ 93.88% 102,500.00$ -16.33%52450 Equipment Rental 5,922.50$ 7,451.30$ 9,647.84$ 23,017.80$ 22,500.00$ 97.75% 26,500.00$ 15.13%52460 Motor Fuel & Lubricants 176,658.06$ 128,263.06$ 128,800.36$ 210,000.00$ 200,000.00$ 95.24% 210,000.00$ 0.00%52470 Outside Vehicle Maint 9,368.84$ 12,483.16$ 11,375.26$ 18,000.00$ 14,000.00$ 77.78% 14,000.00$ -22.22%52500 Rents/Leases 37,393.63$ 38,994.18$ 41,020.59$ 48,350.00$ 47,500.00$ 98.24% 49,500.00$ 2.38%52510 Permits/Fees/Software Licenses 189,637.60$ 232,009.87$ 231,756.42$ 247,370.00$ 245,479.00$ 99.24% 264,170.00$ 6.79%52650 Utilities 1,026,485.57$ 943,331.54$ 1,113,988.48$ 1,237,000.00$ 1,210,000.00$ 97.82% 1,290,000.00$ 4.28%52690 Freight 6,737.82$ 4,861.58$ 4,390.63$ 5,000.00$ 4,800.00$ 96.00% 5,000.00$ 0.00%52715 Safety Incentive Program 1,845.91$ 1,846.44$ 841.60$ 2,500.00$ 1,600.00$ 64.00% 2,500.00$ 0.00%52725 Wellness Program 4,592.67$ 6,730.67$ 6,222.83$ 8,000.00$ 7,200.00$ 90.00% 8,000.00$ 0.00%52730 Employee Asst Program 4,255.00$ 4,355.00$ 4,355.00$ 4,500.00$ 4,355.00$ 96.78% 4,500.00$ 0.00%52900 Other Operating Expenses 467.94$ 1,222.53$ 1,893.08$ 3,850.00$ 3,800.00$ 98.70% 4,000.00$ 3.90%52910 Non-Capital Equipment 140,310.15$ 62,258.25$ 74,655.70$ 94,126.20$ 92,132.20$ 97.88% 94,500.00$ 0.40%52915 Copiers Printers & Faxes 60.41$ -$ -$ 4,673.30$ 4,600.00$ 98.43% 4,000.00$ -14.41%52920 Billing & Collections 738,238.51$ 754,316.76$ 768,832.93$ 800,255.00$ 800,255.00$ 100.00% 816,660.00$ 2.05%

Total Materials, Supplies & Services 5,383,863.53$ 5,493,645.07$ 5,862,592.94$ 6,492,383.52$ 6,344,850.34$ 97.73% 6,609,008.00$ 1.80%5,383,863.53$ 5,493,645.07$ 5,862,592.94$ 6,492,383.52$ 6,344,850.34$ 6,609,008.00$

Interfund Transfers52340 Debt Administration Expenses 191,223.71$ 188,362.16$ 178,880.66$ 186,350.00$ 186,350.00$ 100.00% 170,610.00$ -8.45%53040 Fleet Replacement Charges 400,000.00$ 425,000.00$ 425,000.00$ 460,000.00$ 460,000.00$ 100.00% 500,000.00$ 8.70%53050 Wwtp Replacement Charges 100,000.00$ 200,000.00$ 200,000.00$ 200,000.00$ 200,000.00$ 100.00% 180,000.00$ -10.00%53070 Pump Maintenance Replacement -$ -$ -$ -$ -$ - 50,000.00$ -

Total Interfund Transfers 691,223.71$ 813,362.16$ 803,880.66$ 846,350.00$ 846,350.00$ 100.00% 900,610.00$ 6.41%691,223.71$ 813,362.16$ 803,880.66$ 846,350.00$ 846,350.00$ 900,610.00$

Capital Outlay54010 Capital Equipment - New 57,871.48$ 79,321.14$ 49,288.10$ 47,622.60$ 46,903.71$ 98.49% 66,650.00$ 39.95%54020 Capital Equip-Software 11,250.00$ 18,353.88$ 354.22$ 17,500.00$ 17,500.00$ 100.00% 3,200.00$ -81.71%54030 Capital Equip - Replacement 77,559.66$ 74,888.05$ 84,379.26$ 53,500.88$ 52,600.00$ 98.32% 58,260.00$ 8.90%

Total Capital Outlay 146,681.14$ 172,563.07$ 134,021.58$ 118,623.48$ 117,003.71$ 98.63% 128,110.00$ 8.00%146,681.14$ 172,563.07$ 134,021.58$ 118,623.48$ 117,003.71$ 128,110.00$

18,135,142.37$ 18,624,229.64$ 19,456,641.01$ 20,660,662.00$ 20,511,509.05$ 99.28% 21,404,158.00$ 3.60%

59200 LESS:Chargebacks to General Fund for CIP (2,293,656.56)$ (2,295,944.89)$ (2,288,880.75)$ (2,475,836.00)$ (2,456,488.00)$ 99.22% (2,705,222.00)$ 9.26%Chargebacks to General Fund for SSD (1,309,983.00)$ (1,388,104.00)$ (1,565,955.82)$ (1,620,008.00)$ (1,620,008.00)$ 100.00% (1,705,873.00)$ 5.30%

(3,603,639.56)$ (3,684,048.89)$ (3,854,836.57)$ (4,095,844.00)$ (4,076,496.00)$ (4,411,095.00)$

Net Operation & Maintenance Fund 14,531,502.81$ 14,940,180.75$ 15,601,804.44$ 16,564,818.00$ 16,435,013.05$ 99.22% 16,993,063.00$ 2.59%

Total Salaries & Wages

Benefits

Total Benefits

Sub-Total O&M Fund


Pump Stations Maintenance

Trustee Funds

Income Sources

Expenditures

Flow of Funding Flow of Funding if required for emergency repairs or maintenance

Priority of expenditures per Bond Order1. Current Expenditures2. Debt Service3. Capital Reserve4. Any Lawful Purpose

User Charges, Rental Income & Misc.

Revenue FundO&M paid from Revenue Fund

Capital Reserve Fund

Tap FeesFacility Fees

Grants

General Fund

ConstructionFund

Wastewater Treatment

Plant

Fleet & Heavy Equip

Replacement Funds

Revenue Bond FundSinking Fund Account

Capitalized Interest AccountInterest AccountPrincipal Account

Redemption AccountParity Reserve Account

Employee Contributions

Sale of Surplus Property

Medical & Dental

Worker’s Comp

General Liability

Insurance Funds

Post Retirement

Flow of Funds Chart


Resolution Adopting Preliminary and Sewer Use Charges For The

Metropolitan Sewerage District of Buncombe County, North Carolina

For the Fiscal Year July 1, 2018 Thru June 30, 2019

WHEREAS, the Board of Directors has reviewed the Operations and Maintenance, Bond, Reserves, Construction Expenditures of the District, and the sources of revenue and allocations (uses) of expenditures for the 2018-2019 fiscal year; and

NOW, THEREFORE, BE IT RESOLVED:

1. The following amounts are hereby appropriated in the Revenue Fund for the Operations and Maintenance of the District and for transfers to the Debt Service, General Fund, and Insurance Funds for the fiscal year beginning July 1, 2018 and ending June 30, 2019:

Operating and Maintenance Expenses $ 12,949,616

Transfer to Insurance Accounts $ 3,313,447

Transfer to Fleet & Heavy Equipment Fund $ 500,000

Transfer to Wastewater Treatment Plant Fund $ 180,000

Transfer to Pump Stations Reserve $ 50,000 Transfer to General Fund $ 5,000,000

Subtotal O&M $ 21,993,063

Transfer to Debt Service Fund $ 9,448,115

$ 31,441,178

It is estimated that the following revenues will be available in the Revenue Fund for the fiscal year beginning July 1, 2018 and ending June 30, 2019:

Domestic User Fees $ 32,431,584

Industrial User Fees $ 3,422,373

Billing and Collection Fees $ 816,660

Investment Interest $ 764,965

Reimbursement for Debt Service from COA $ 35,000

Rental Income $ 71,641

Contribution to Net Position $ (6,101,045)

$ 31,441,178

2. The following amounts are hereby appropriated in the General Fund for the transfers to the Construction Fund for the fiscal year beginning July 1, 2018 and ending June 30, 2019:

Transfer into Construction $ 16,000,000


It is estimated that the following revenues will be available in the General Fund for the fiscal year beginning July 1, 2018 and ending June 30, 2019:

Facility and Tap Fees $ 2,175,000 Transfer from the Revenue Fund $ 5,000,000

Investment Income $ 142,311

Appropriated Net Position $ 8,682,689

$ 16,000,000

3. The following amounts are hereby appropriated in the Construction Fund for Capital Improvement Plan expenditures for the fiscal year beginning July 1, 2018 and ending June 30, 2019.

Capital Improvements Projects $ 23,492,718

It is estimated that the following revenues will be available to the Construction Fund for the fiscal year beginning July 1, 2018 and ending June 30, 2019.


Transfer from General Fund $ 16,000,000

Appropriated Net Position $ 7,356,797

$ 23,492,718

4. The following amounts are presented as the financial plan of the Insurance Funds that are used to provide insurance services. Estimated operating expenditures for the fiscal year beginning July 1, 2018 and ending June 30, 2019 are:

Operating Expenditures $ 3,925,538

It is estimated that the following revenues will be available in the Insurance Funds for the fiscal year beginning July 1, 2018 and ending June 30, 2019:

Transfer from the Revenue Fund $ 3,313,447


Employee/Retirees Medical Contributions $ 421,467

Appropriated Net Position $ 162,624

$ 3,925,538

5. The following amounts are presented as the financial plan of the Fleet & Heavy Equipment Fund designated for capital equipment expenditures for the fiscal year beginning July 1, 2018 and ending June 30, 2019 estimated as follows:

Capital Equipment $ 721,000


It is estimated that the following revenues will be available in the Fleet & Heavy Equipment Fund for the fiscal year beginning July 1, 2018 and ending June 30, 2019:

Transfer from the Revenue Fund $ 500,000

Sale of Surplus Property $ 72,100



$ 721,000

6. The following amounts are presented as the financial plan of the Wastewater Treatment Plant Replacement Fund designated for wastewater treatment plant capital expenditures for the fiscal year beginning July 1, 2018 and ending June 30, 2019 estimated as follows:


It is estimated that the following revenues will be available in the Wastewater Treatment Plant Replacement Fund for the fiscal year beginning July 1, 2018 and ending June 30, 2019:



Transfer Out to Pump Station Replacement Fund $ (50,000)


$ 160,000

7. The following amounts are presented as the financial plan in the Pump Station Replacement Fund designated for pump capital expenditures for the fiscal year beginning July 1, 2018 and ending June 30, 2019 estimated as follows:


It is estimated that the following revenues will be available in the Pump Station Replacement Fund for the fiscal year beginning July 1, 2018 and ending June 30, 2019:


Transfer from the Wastewater Replacement Fund $ 50,000


Contribution to Net Position $ (16,480)

$ 85,000


8. The following amounts are hereby appropriated in the Debt Service Fund for principal and interest payments for the fiscal year beginning July 1, 2018 and ending June 30, 2019:

Debt Service $ 9,448,115

It is estimated that the following revenues will be available in the Debt Service Fund for the fiscal year beginning July 1, 2018 and ending June 30, 2019:

Transfer from the Revenue Fund $ 9,448,115


Contribution to Net Position $ (1,000)

$ 9,448,115

9. That the Board of the Metropolitan Sewerage District does hereby approve an increase in the Budgets to the amount necessary to reflect any contributions to the Debt Service Reserve Fund or Capital Reserve Fund as determined by the Bond Trustee to be necessary to comply with covenants in the Bond Order.

10. The General Manager is hereby authorized to transfer appropriations as contained herein under the following

conditions:

a. He may transfer amounts without limitation between departments in a fund. b. He may transfer any amounts within Debt Service and Reserve Funds designated as excess by the

Trustee into another fund. c. He may transfer up to 10% of Insurance Fund reserves to meet current year expenditures in excess of

budget. 11. That the attached Schedule of Fees and Charges be adopted as effective July 1, 2018.

12. That this resolution shall be entered in the minutes of the District and within five (5) days after its adoption,

copies thereof are ordered to be filed with the Finance and Budget Officer and Secretary of the Board as required by G.S. 159-13 (d).

Adopted this 16th day of May 2018

M. Jerry VeHaun, Chairman Metropolitan Sewerage District of

Buncombe County, North Carolina Attest: Jackie W. Bryson Secretary/Treasurer

METROPOLITAN SEWERAGE DISTRICT OF BUNCOMBE COUNTY Meeting Date: May 3, 2018



Teresa L. Gilbert, CBEO, Budget Analyst

Subject: Schedule of Sewer Rates and Fees FY 2019

Background

The following is a schedule of rates and fees based upon assumptions in the Preliminary Budget and recommendations based upon the Business Plan.

Discussion

Collection Treatment Charge/Base Meter Maintenance Charge: The collection treatment charge is a volumetric charge based on a customer’s monthly or bi-monthly water use. Staff is recommending a 2.5% increase for residential and commercial flow and continuation of the District’s industrial rate parity plan, which calls for an average increase of 3.8%. The Base meter charge is a fixed rate based on meter size. Staff is recommending a 2.5% increase in this charge. Average monthly residential bill will be $31.36 for five (5) CCF of consumption after the aforementioned increases. This is a $0.74 increase over prior year’s monthly bill.

Sewer System Development Fee: The District established this in 1990 to collect from the new customers a fee, which accounts for their allotted capacity for the capital cost of the sewage collection, transport, and treatment infrastructure. On July 20, 2017, the North Carolina General Assembly passed into law North Carolina General Statute 162A Article 8 (“Article 8”). Article 8 provides for the uniform authority to implement system development fees for public water and sewer systems. Raftelis Financial Consultants, Inc. was engaged to perform a study which conforms to the conditions and limitations of Article 8. All proposed recommendations have been implemented in the FY2019 Schedule Rates and Fees.

Sewer Connection Fee: The sewer connection fee is the charge for the investigation and actual physical connection to the sewer system. The District has traditionally done this work with its System Services forces while outsourcing certain parts of the tap installation. In FY2018, staff reviewed cost for connections for the last three fiscal periods. Staff has proposed increases in sewer connection fees in FY 2019.


Meeting Date: May 3, 2018 Subject: Schedule of Sewer Rates and Fees FY 2019 Page 2

Other Fees: These fees were computed in connection with the review process of Planning and Development Division. Staff is recommending no fee increase in FY 2019.

Bulk Charges: Septage hauler fees have been updated to reflect the current industrial rates in accordance with the industrial fee parity plan.

Returned Check Charge: Such charges do not fully reimburse the time spent by District staff processing and collecting bad checks, nor for charges assessed by our bank. However, these fees are comparable to charges assessed by retail merchants and other governments. Staff is recommending no fee increase in FY 2019.

Copy and Printing Fees: These fees were computed by Information Technology staff and reflect the cost of materials used to comply with NC public records regulations. They also are in line with copy fees assessed by certain other NC governmental units. Staff is recommending no fee increase in FY 2019.

Fiscal Impact

This fee schedule corresponds to the rates and fees presented in the updated business plan. The typical monthly bill for FY 2019 will be $31.36. This is a $0.74 increase over prior year’s monthly bill.


Staff requests that the Finance Committee recommend to the Board that the attached Schedule of Rates, Fees, and Charges be endorsed today and presented to the Board at the May 16, 2018 Board Meeting.



Rate increase 2.5% 2.5%

Collection Treatment Charge

Residential & Commercial Volume Charges (per CCF) Inside 4.50$ 4.61$

Industrial Volume Charges (per CCF) Inside 4.21$ 4.47$

Industrial Surcharge for BOD (per lb., BOD >250 mg/l) Inside 0.314$ 0.307$

Industrial Surcharge for TSS (per lb., TSS >250 mg/l) Inside 0.256$ 0.253$

Residential & Commercial Volume Charges (per CCF) Outside 4.51$ 4.62$

Industrial Volume Charges (per CCF) Outside 4.22$ 4.48$

Industrial Surcharge for BOD (per lb., BOD >250 mg/l) Outside 0.314$ 0.307$

Industrial Surcharge for TSS (per lb., TSS >250 mg/l) Outside 0.256$ 0.253$

Base Meter/Maintenance Charge & Billing Fee

5/8" 6.94$ 7.11$

3/4" 10.10$ 10.35$

1" 17.92$ 18.37$

1 1/2" 41.01$ 42.04$

2" 72.53$ 74.34$

3" 160.85$ 164.87$

4" 287.03$ 294.21$

6" 646.60$ 662.77$

8" 1,148.12$ 1,176.82$

10" 1,797.89$ 1,842.84$

Billing Fee (per bill) 2.36$ 2.40$

Sewer System Development Fees

This impact fee is for alloted capacity in the treatment and transmission system. A differential fee will be charged for increases to an existing meter size.

Residential

Per Unit (non-mobile home) 2,500.00$ 2,836.00$

Mobile Home 1,740.00$ 2,836.00$

Multifamily Unit 2,500.00$ 1,900.00$

Affordable Housing 670.00$ 670.00$

CURRENT FY18 RATE

PROPOSED FY19 RATE


Sewer System Development Fees (continued)

Nonresidential (modifiable per economic development waiver) (continued)

5/8" 2,500.00$ 2,836.00$

3/4" 2,830.00$ 4,254.00$

1" $ 5,560.00 $ 7,090.00

1 1/2" $ 11,350.00 $ 14,180.00

2" $ 20,000.00 $ 22,688.00

3" $ 45,000.00 $ 45,376.00

4" $ 87,500.00 $ 70,900.00

6" $ 225,400.00 $ 141,800.00

8" $ 237,500.00 $ 226,800.00

10" $ - $ 595,560.00

12" $ - $ 751,540.00

Additions < 1,400 GPD $ 870.00 $ 870.00 Additions over 1,400 GPD Based on flow rate &

meter sizeBased on flow rate &

meter size

Sewer Connection Fees**

This fee is to provide new or re-establish existing service connections to the MSD system.

Sewer Connection by MSD 650.00$ 1,300.00$

Pavement Disturbance and Boring Fee 2,200.00$ 2,300.00$

Inspection Fee for Developer (or Utility Contractor) Installed Sewer Connection 140.00$ 140.00$

**The Sewer Connection Fee will apply to all new construction, as well as

existing structures which have been demolished/rebuilt and sewer service

is reinstated under new property ownership. MSD reserves the right to

require that a licensed utility contractor install any sewer

connection/service line. Sewer service lines within public rights-of-way

between 75 and 300 feet shall be constructed by a licensed utility

contractor to MSD Standards. All work will be subject to MSD inspection.

Manhole Installation/Replacement

Cost per foot 250.00$ 250.00$

Pavement replacement (if required) 1,800.00$ 1,800.00$

CURRENT FY18 RATE

PROPOSED FY19 RATE


Other Fees

Allocation Fee 170.00$ 170.00$

Non-Discharge Permit 200.00$ 200.00$

Plan Review Fee 450.00$ 450.00$

Plan re-review Fee 350.00$ 350.00$

Final Inspection 350.00$ 350.00$

Pump Station Acceptance Fee Note 1 Note 1Note 1--See policy for details of computation of O&M and equipment replacement costs for upcoming 20 years; 50% discount for affordable housing

Bulk Charges

Volume Charge for Septic Haulers (per 1,000 Gal.) 45.00$ 45.00$

Biochemical Oxygen Demand >250 mg/l (per lb.) 0.314$ 0.307$

Total Suspended Solids >250 mg/l (per lb.) 0.256$ 0.253$

Returned Check Charge

Returned Check (per event) 25.00$ 25.00$

Dishonored Draft (per event) 25.00$ 25.00$

Copy/Printing Fees/Miscellaneous (each)

8x11 first print of standard GIS inquiry 1.00$ 1.00$






8x11 or 8x14 copies after first print 0.11$ 0.11$

11x17 copies after first print 0.20$ 0.20$




Foam Core mounting per sq. foot 3.00$ 3.00$

Data CD 30.00$ 30.00$

Shipping for CD 5.00$ 5.00$

Permit Decals for Septic Haulers 50.00$ 50.00$

CURRENT FY18 RATE

PROPOSED FY19 RATE





Reviewed By: Billy Clarke, District Counsel

Subject: Review of Investment Policy

Background

On February 18, 2004 the Board adopted a resolution establishing the District’s Investment Policy. The policy is in compliance with the North Carolina Budget and Fiscal Control Act, North Carolina General Statute 159, and incorporates best practices from Governmental Accounting Standards Board. The Board has amended the policy on September 15, 2006 as well as August 15, 2007 to improve the District’s ability to secure commercial paper with the best rates of return while continuing to manage non-systemic risk. The Board receives monthly reports summarizing the amount of investments and investment income received, along with charts showing diversification by investment type.

Discussion

During the past year, short-term investment rates have increased steadily and gradually as the FOMC has pushed up the Fed Funds rate. At the same time, the yield curve for intermediate and long-term rates has remained relatively flat. As a result, during this time the majority of the District’s investments have been short-term. Since the last review of the District’s investment policy, the commercial paper market has experienced substantial changes. In 2006, the average A-1/P-1 commercial paper issuer issued commercial paper in denominations ranging from $250,000 to $500,000. In 2018, the same issuers issue in denomination ranging from $500,000 to $5,000,000. This change has limited staff’s ability to access more competitive rates of returns. As noted above, in the current interest rate environment the District has focused on short-term investments. Within short-term investments, the highest yield is usually offered by commercial paper with durations ranging from 30 to 270 days. Commercial paper often yields 15-25 basis points higher than Treasuries or Agencies. The minimum amount of commercial paper brokers will sell is $500,000, while others will not consider any amounts less than $2,000,000 to $5,000,000. To limit the District’s risk associated with holding individual securities (non-systemic risk); the policy currently limits investment in any one non-governmental entity to a greater of $500,000 or 1% of the total portfolio.


Meeting Date: May 3, 2018 Subject: Review of Investment Policy Page 2

To improve the District’s ability to secure commercial paper with the best rates of return, while continuing to manage the non-systemic risk, staff suggests that the policy be revised to allow the limit to be the greater of 10% of the portfolio or up to $5,000,000. Staff believes that this change will be in the best interest of the District ratepayers by allowing access to more competitive rates of return without unduly compromising management of the risk of investing in any one company. The District only invests in commercial paper with the highest ratings and there has not been a failure of A1/P1 rated paper since the early 1970’s.


Staff recommends that the applicable portion of the investment policy be modified with the words highlighted below:

To limit the District’s risk associated with holding individual securities (e.g. non-systematic risk), no more than the greater of up to $5,000,000 or 10% of the portfolio may be invested in a single non-governmental issue.



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Investment Policy

Investment Philosophy: The purpose of this investment policy is to guide the Metropolitan Sewerage District of Buncombe County (the “District”) in managing cash on hand, to preserve principal, and generate income to provide cash for District daily operational and capital needs.

The District shall manage all investments in a manner consistent with the District Bond Order and in compliance with applicable law and regulation.

The District will strive to maximize income and manage risk using strategic asset allocation including diversification and prudent active management. Market timing shall be avoided. The overall program shall be designed and managed with a degree of professionalism worthy of the public trust.

Scope: This investment policy applies to all financial assets of the District and is specifically subject to all of the provisions of the District's Bond Order and applicable laws and regulations. These funds are accounted for in the District's annual financial report and include:

Operation and Maintenance

Self-Funded Insurance

Maintenance Reserve Fund

Fleet Replacement Fund

WWTP Replacement Fund

Revenue Fund (approved by Board October 16, 1996)

Construction

General

Trust and Agency Funds

Any new fund created by the District Board, unless specifically exempted by the District Board

Objectives: The investment portfolio of the District shall be designed to attain a rate of return (yield) consistent with investments allowed under the Bond Order and applicable laws and regulations while minimizing risk (safety) and retaining liquidity.

1. Preservation of Principal Preservation of principal shall be the foremost investment objective of the District. Investments of the District shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall


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portfolio. The objective will be to mitigate credit risk and interest rate risk. Credit risk (non-systematic risk) is the risk of loss due to the failure of the security issuer or backer. Credit risk may be mitigated by: a. Limiting investments to the safest types of securities;

b. Pre-qualifying the financial institutions, brokers/dealers, intermediaries, and advisors with which an entity will do business; and

c. Diversifying the investment portfolio so that potential losses on individual securities will be minimized.

Interest rate risk (systematic risk) is the risk that the market value of securities in the portfolio will fall due to changes in general interest rates. Interest rate risk may be mitigated by: a. Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing

operations, thereby avoiding the need to sell securities on the open market prior to maturity, and

b. By investing operating funds primarily in shorter-term securities.

2. Liquidity

The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This will be accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity).

3. Yield The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is less important than preservation of capital and liquidity. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall not be sold prior to maturity with the following exceptions: a. A declining credit security could be sold early to minimize loss of principal;

b. A security swap would improve the quality, yield, or target duration in the portfolio; or

c. Liquidity needs of the portfolio require that the security be sold.


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Delegation of Authority: The Director of Finance serves as the District's Finance Officer who is responsible for conducting investment transactions in accordance with North Carolina G.S. 159-25 (a) (6) and 159-30 (a). The Finance Officer shall establish and maintain written procedures for the operation of the investment program consistent with this investment policy. Such procedures shall include explicit delegation of authority by the Finance Officer to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Finance Officer and approved by the District Board. The Finance Officer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinates.

Standard of Care The standard of care to be used by investment officials shall be the “prudent person” standard and shall be applied in the context of managing an overall portfolio.

Conflicts of Interest: Officers and employees involved in the investment program, namely the General Manager, the Director of Finance, the Accounting Manager, and any members of the Finance Committee assisting in the selection of individual investments, shall refrain from personal investment activity that conflicts, or appears to conflict, with proper execution of the District’s investment program. Employees and officers involved in the investment program shall disclose to the District Board any material financial interests in financial institutions conducting business with the District. Employees and officials shall refrain from undertaking personal investment transactions with the same individual who provides such services to the District.

Investment Instruments: The District is authorized to invest idle funds in compliance with North Carolina General Statute 159-30 and the District Bond Order. A list of permitted investments is attached as Exhibit A. In accordance with North Carolina General Statute 159-31(b), full collateralization will be required on deposits at interest and savings certificates of deposit. The District shall utilize the pooling method of collateralization and shall use only banking institutions approved by the North Carolina Local Government Commission.

Maturities: The District's general intent is to make investments and hold until maturity. However, early liquidation may be necessary if cash flow demand warrants an earlier date of sale. To the extent possible, the District will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the District will not directly invest in securities maturing more than two (2) years from the date of purchase. The Finance Director shall determine what the appropriate average weighted maturity of the portfolio shall be.


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Reserve funds may be invested in securities exceeding two (2) years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of funds.

Asset Allocation and Diversification: The District, in consultation with an investment professional as deemed prudent by the Finance Officer, shall develop a strategic asset allocation plan. The goal of the asset allocation plan shall be to provide an optimal mix of investments designed to produce the desired returns and meet the current and future liabilities, with the least amount of fluctuation in the overall value of the investment portfolio. By diversifying funds among several types, there is an increased probability that if one investment type is decreasing in value, another is increasing.

Asset Allocation Maximum Maximum Percent

U.S. Government Treasuries, Agencies and Instrumentalities 100% Bankers’ Acceptances 20% Certificates of Deposit 100% Commercial Paper 20% North Carolina Capital Management Trust 100%

To limit the District’s risk associated with holding individual securities (e.g. non-systematic risk), no more than 1% of the portfolio may be invested in a single non-governmental issue. To allow the investment in any one issue of commercial paper to be the greater of 10% of the portfolio or up to $5,000,000, which would allow the District to access more competitive markets to achieve greater rates of return.

Safekeeping and Custody: All security transactions entered into by the District shall be conducted on a delivery-versus-payment (DVP) basis. This ensures that securities are deposited in the eligible financial institution prior to the release of funds. Securities will be held by a contracted third-party custodian designated by the Finance Officer and evidenced by safekeeping receipts. The custody agreement shall be in form approved by District Legal Counsel.

Investment Trading Relationship Agreement: Dealers providing services to the District must execute an investment trading relationship agreement with the Finance Officer in a form approved by District Legal Counsel. Any financial institution or broker/dealer providing services to the District shall provide evidence of credit worthiness and appropriate state and federal licensure to the Finance Officer. The Finance Officer reserves the right to decline to do business with any entity based upon less-than-optimal financial condition, licensure, or managerial integrity.


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Reporting: The purpose of monitoring and reporting on investment performance is for the Board to be able to ensure compliance with District policy and applicable law, manage portfolio risk, and assess the performance of District employees and other professional, if any, responsible for investment decisions. The Finance Officer is charged with the responsibility of a monthly investment inventory report, which includes investment type, cost, market value, maturity date, and yield. This report shall be submitted to the Board of Directors and General Manager.


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EXHIBIT A Investment Obligations Allowed By

The 1999 Amended Bond Order

“Investment Obligations” means, to the extent permitted by law,

a. Government Obligations;

b. Obligations of the Federal Financing Bank, the Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts), the Federal National Mortgage Association (excluded are stripped mortgage securities which are purchased at prices exceeding their principal amounts), the Government National Mortgage Association, the Federal Housing Administration and the Farmers Home Administration;

c. Direct general obligations of the State secured by the full faith and credit and taxing power of the State rated in one of the two highest rating categories by Moody’s and S&P;

d. Bonds and notes of any North Carolina local government or public authority (other than the District), subject to such restrictions as the Secretary of the Local Government Commission may impose, provided such bonds or notes are rated in one of the two highest rating categories by Moody’s and S&P;

e. Savings certificates or certificates of deposit issued by any commercial bank or savings and loan association organized under the laws of the State or by any federal bank or savings and loan association having its principal office in the State; provided, however, that any principal amount of such certificates in excess of the amount insured by the federal government or any agency thereof, or by a mutual deposit guaranty association authorized by the Administrator of the Savings Institutions Division of the Department of Commerce of the State, be fully collateralized by obligations described in (a) or (b) above;

f. Prime quality commercial paper (having original maturities of not more than 270 days) bearing the highest rating of Moody’s and S&P and not bearing a rating below the highest by any nationally recognized rating service which rates the particular obligation;

g. Participating shares in the cash portfolio of North Carolina Capital Management Trust, provided that the investments of such fund are limited to those qualifying for investment under this definition and that said fund is certified by the Local Government Commission;

h. A commingled investment pool established and administered by the State Treasurer pursuant to G.S. 147-69.3;

i. Repurchase agreements with respect to Government Obligations if entered into with a broker or dealer, as defined by the Securities Exchange Act of 1934, which is a dealer recognized as a primary dealer by a Federal Reserve Bank with a long-term rating of not less than “A2” from Moody’s and “A” from S&P, or any domestic commercial bank, domestic trust company or domestic national banking association (or a domestic branch of a foreign commercial bank, trust company or national banking association) with a


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long-term rating of not less than “A2” from Moody’s and “A” from S&P, the deposits of which are insured by the Federal Deposit Insurance Corporation or any successor thereof, if:

i. such obligations that are subject to such repurchase agreement are delivered (in physical or in book entry form) to the District, or any financial institution serving either as trustee for the District or as fiscal agent for the District or are supported by a safekeeping receipt issued by a depository satisfactory to the District, provided that such repurchase agreement must provide that the value of the underlying obligations shall be maintained at a current market value, calculated at least daily, of not less than one hundred percent (100%) of the repurchase price, and, provided further, that the financial institution serving either as trustee or as fiscal agent for the District holding the obligations subject to the repurchase agreement hereunder or the depository issuing the safekeeping receipt shall not be the provider of the repurchase agreement;

ii. a valid and perfected first security interest in the obligations which are the subject of such repurchase agreement has been granted to the District or its assignee or book entry procedures conforming, to the extent practicable, with federal regulations and satisfactory to the District have been established for the benefit of the District or its assignee;

iii. such securities are free and clear of any adverse third-party claims;

iv. such repurchase agreement is in a form satisfactory to the District; and

v. such repurchase agreement shall state and an opinion of counsel shall be rendered at the time the obligations which are the subject of such reimbursement agreement are delivered that the holder of the collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof; and

j. any other investment now or hereafter permitted for investment of funds by the District by the General Statutes of North Carolina, including, without limitation, Section 159-30 of the General Statutes of North Carolina.


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EXHIBIT B Excerpts from The 1999 Amended Bond Order pertaining to

Depositaries of Money, Security for Deposits, Investment of Funds and Covenant as to Arbitrage

Section 1.02. Security for Deposits. Any and all money received by the District under the provisions of this Order shall be deposited as received with the Trustee or one or more other Depositaries as provided in this Order and shall, in the case of deposits with the Trustee, be trust funds under the terms hereof, and, to the extent permitted by law in the case of the Construction Fund, shall not be subject to any lien or attachment by any creditor of the District.

All money deposited with the Trustee or any Depositary hereunder in excess of the amount guaranteed by the Federal Deposit Insurance Corporation or other federal agency shall be continuously secured, for the benefit of the District and the Owners, either (a) by lodging with a bank or trust company chosen by the Trustee or Depositary or, if then permitted by law, by setting aside under control of the trust department of the bank or trust company holding such deposit, as collateral security, Government Obligations or other marketable securities eligible as security for the deposit of trust funds under regulations of the Comptroller of the Currency of the United States or applicable State law or regulations, having a market value (exclusive of accrued interest) not less than the amount of such deposit, or (b) if the furnishing of security as provided in clause (a) above is not permitted by applicable law, then in such other manner as may then be required or permitted by applicable State or federal laws and regulations regarding the security for, or granting a preference in the case of, the deposit of trust funds; provided, however, that it shall not be necessary for the Trustee or any Depositary to give security for the deposit of any money with it for the payment of the principal of or the redemption premium or the interest on any Bonds, or for the Trustee or any Depositary to give security for any money that shall be represented by Investment Obligations purchased under the provisions of this Article as an investment of such money.

All money deposited with the Trustee or any Depositary shall be credited to the particular fund, account

or subaccount to which such money belongs. Section 1.03. Investment of Money. Money held for the credit of all funds, accounts and

subaccounts shall be continuously invested and reinvested by the Trustee or the Depositaries, whichever is applicable, in Investment Obligations to the extent practicable. Except as hereinafter provided in this Section with respect to the disposition of investment income, the particular investments to be made and other related matters in respect of investments shall, as to each Series of Bonds, be provided in the applicable Series Resolution.

Except as hereinafter provided in this Section with respect to the Parity Reserve Account, Investment Obligations shall mature or be redeemable at the option of the holder thereof not later than the respective dates when the money held for the credit of such funds, accounts and subaccounts will be required for the purposes intended.


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At the time that the Parity Reserve Account is first funded in connection with the issuance of a Series of Bonds or the incurrence of Parity Debt, the District shall determine in the Parity Resolution the maximum number of years of the average life of the Investment Obligations in the Parity Reserve Account, and thereafter such Investment Obligations in the Parity Reserve Account shall mature or be redeemable at the option of the Trustee so that all such Investment Obligations in the Parity Reserve Account shall have an average life from the date of such investment of not more than the amount of years so determined by the District.

Notwithstanding the foregoing, no Investment Obligations pertaining to any Series in any fund, account or

subaccount shall mature on a date beyond the latest maturity date of the respective Series of Bonds Outstanding at the time such Investment Obligations are deposited. For purposes of this Section, the maturity date of any repurchase agreement shall be deemed to be the stated maturity date of such agreement and not the maturity dates of the underlying Investment Obligations.

An Authorized Officer or his designee shall give to the Trustee or any Depositary directions respecting

the investment of any money required to be invested hereunder, subject, however, to the provisions of this Article, and the Trustee or such Depositary shall then invest such money as so directed. The Trustee or any Depositary may request additional direction or authorization from the Authorized Officer or his designee in writing with respect to the proposed investment of money under the provisions of this Order. Upon receipt of such directions, the Trustee or any Depositary shall invest, subject to the provisions of this Article, such money in accordance with such directions. The Trustee shall have no liability for investments made in accordance with this Section.

For purposes of making any investment hereunder, the Trustee or any Depositary may consolidate

money held by it in any fund, account or subaccount with money in any other fund, account or subaccount. Transfers from any fund, account or subaccount to the credit of any other fund, account or subaccount provided for in this Order may be effectuated on the books and records of the Trustee, the District, or any Depositary without any actual transfer of funds or liquidation of investments. Investment Obligations purchased with consolidated funds shall be allocated to each fund, account, or subaccount on a pro rata basis in accordance with the initial amount so invested from each such fund, account, or subaccount.

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