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Recommendations <br /> The City of Orono has managed its utility funds well. The need to upgrade, maintain and expand <br /> the water, sanitary sewer and storm sewer utility systems over the next several years will <br /> introduce new financial pressures along with the need to maintain adequate cash balances. <br /> The rate study indicates that water rate increases are necessary in 2010 to maintain cash balances <br /> and pay for capital improvements and debt. Steady rate increases will be needed for all three <br /> funds beginning in 2010, to keep pace with operating costs and capital improvements. <br /> While this analysis proposes the use of debt to allow for steady and predictable rate increases, it <br /> is not a debt plan. The City should review whether it has sufficient cash to pay for capital <br /> improvements prior to issuing debt. As with all other bonding decisions, the City's decision to <br /> issue debt for any given improvement will be based on many factors, including the City's cash <br /> balances, rating, and other financing needs. <br /> Summary of Recommendations <br /> • Adopt rates and user tiers as recommended <br /> • Update the Utility Rate Study periodically <br /> • Establish target Operating and Capital Reserves <br /> o Operating Reserve: six months,plus annual debt service and capital <br /> o Capital Reserve: 10%-15%of accumulated depreciation <br /> Gtrlitv Rute Stuclv Page 25 <br /> Citr q/'Orono. Ali�r�recv�a Decemher Z009 <br />