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2. Revenue Sufficiency Analysis In FY 2024, all O&M expenses and minor capital outlays were based upon the FY 2024 Budget provided by IRCDUS. Beginning in FY 2025, O&M expenses were based upon IRCDUS' preliminary FY 2025 Budgets, adjusted each year by assumed cost escalation factors to reflect future inflation. Capital Improvement Plan One of the most important elements of a utility's financial plan is to ensure that there is continuous reinvestment in existing infrastructure to provide quality utility services and investment in new infrastructure to support new growth in the system. IRCDUS10 provided the CIP in project level detail from FY 2024 through FY 2028. Stantec and IRCDUS staff discussed the expected annual capital spending, timing of the projects, and reviewed potential funding methods for each project. The RSA includes annual capital project spending beginning in FY 2029 related to future projects that have not yet been defined by IRCDUS in its CIP including dollars for future water and sewer capacity expansions beginning in FY 2032 as provided by IRCDUS may be modified and further delineated as appropriate in the future. It is important to note that IRCDUS is initiating a master plan that may identify capital needs in addition to those presented herein. As these projects and associated costs are defined, they should be considered in future rate studies. A detailed list of projects and costs by year can be seen on Schedule 6 of Appendix A while a summary of IRCDUS' CIP from FY 2024 through FY 2028 in current day dollars relied on for this Study is provided in Table 6. Table 6 — Capital Improvement Plan (2024 dollars) Description FY 24 FY 25 FY 26 FY 27 FY 28 Total Capital Improvement Plan $37.61VI $33.91VI $37.4M $19.01VI $30.01VI $157.9M 2.3 ASSUMPTIONS The following section presents the assumptions, policies, and parameters of the RSA: 2.3.1 Customer Growth & Demand Projections The RSA reflects annual retail customer growth projections of 1,250 water ERUs and 1,350 sewer ERUs. Based upon these new connections, the average annual growth rate in ERUs is 1.6% for the water system and 2.3% for the sewer system. This assumption recognizes that IRCDUS has completed various septic to sewer projects and will experience additional conversions. The RSA reflects growth in billed volume that is equal in each year to the projected growth in water and sewer customers. s As of March 7, 2024. 10 Provided to Stantec on November 28, 2023. a 10 • �J