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2. Revenue Sufficiency Analysis 2, REVENUE SUFFICIENCY ANALYSIS This section of the report presents the financial management plan developed in the Revenue Sufficiency Analysis (RSA) that was conducted as part of the Study which determined the level of annual rate revenue (and corresponding rate adjustments) necessary to satisfy IRCDUS' financial requirements over a projection period of FY 2025 through FY 2034. The following sub -sections herein present a description of the approach, source data, assumptions, and results of each RSA, while Appendix A includes detailed supporting schedules for the financial management plan identified herein. 2.1 APPROACH During the Study, Stantec reviewed alternative multi-year financial management plans and corresponding rate revenue adjustment plans through interactive work sessions with IRCDUS staff. During these work sessions, Stantec examined the impact of various inputs or assumptions upon key financial indicators by use of tabular and graphical output and extensive review of inputs, assumptions, and relationships between key variables. In this way, Stantec developed the recommended financial management plan and corresponding plan of annual water, sewer, and reclaimed water rate revenue adjustments presented in this report that will allow IRCDUS to fund its' cost requirements throughout the planning period and meet its financial performance goals and objectives. • Stantec obtained the Utility's historical and budgeted financial information regarding the operation of its • water, sewer, and reclaimed water systems, as well as historical customer counts and volume data by class of customer. Stantec was also provided the Utility's multi-year CIP and current debt service covenants relative to net income coverage requirements and reserves. Stantec discussed with IRCDUS staff other assumptions and policies that would affect the financial performance of the Utility, such as trends in demands, planned developments/customer growth, debt coverage levels, levels of reserves, capital funding sources, earnings on invested funds, escalation rates for operating costs, and others. This information was entered into a financial planning model which produced a ten-year projection of the adequacy of revenues provided by the existing rates of the Utility to meet its current and projected financial requirements. Thereafter, the level of rate revenue increases necessary in each year of the projection period to satisfy the system's annual financial requirements was determined. The financial planning model utilizes all projected available unrestricted funds in each year of the projection period to pay for capital expenditures. The model is set up to reflect the rules of cash -funded expenditures (Pay -As -You -Go or PAYGO) and it produces a detailed summary of the funding sources to be used for each project in the CIP. To the extent that current revenues and unrestricted reserves are not adequate to fund all capital projects in any year of the projection period, the model identifies a borrowing requirement to fund those projects, or portions thereof that are determined to be eligible for borrowing. The financial plan is used to develop a borrowing program (if necessary) that includes the required borrowing amount by year and the estimated annual debt service requirements for each year in the projection period. Of