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2. Revenue Sufficiency Analysis • New connections and ERUs, water sales, and billed sewer volume projections were based upon a review of historical data, observance of local environmental and economic conditions, and discussions with IRCDUS. The projection of ERUs, water sales, and billed sewer volumes by fiscal year is provided on Schedule 1 of Appendix A. 2.3.2 Impact Fees The RSA reflects impact fee revenues based on a four-year phasing in of a total 50.0% increase to the water impact fees beginning in FY 2025 at $1,463 per ERU up to $1,952 per ERU in FY 2028. Sewer impact fees are recommended to be reduced from $2,796 to $2,624 in FY 2025. Revenues from impact fees are directed to IRCDUS' Impact Fee Funds and are available for system expansion related capital projects or related debt service. 2.3.3 Interest Earnings on invested Funds The assumed annual interest earnings rate on IRCDUS' fund balances is 2.75% in FY 2024, 2.5% in FY 2025, 2.25% in FY 2026, and 2.0% each year thereafter. 2.3.4 Operating Expenses • O&M expenses for the Utility include personnel, contract services, repair and maintenance of the facilities, materials, supplies, electricity, chemicals, and others. This RSA utilized the FY 2024 Budget and the preliminary FY 2025 Budget for FY 2024 and FY 2025, respectively, and projects future expenses by applying various annual cost escalation factors based upon the type of expense. Through discussions with IRCDUS, various expenses were modified in future years where the preliminary FY 2025 Budget did not reflect longer-term expectations for future annual expenses. Cost Escalation Annual cost escalation factors for the various types of O&M expenses were developed based upon a review of historical trends, Stantec's industry experience, and detailed discussions with IRCDUS. The escalation factors range from an average of 3.0% for items such as repair and maintenance, to 8.0% for group health insurance costs. The specific escalation factors assumed for the various categories of expenses can be found in Schedule 5 of Appendix A. O&M Expense Execution Historically, IRCDUS has been able to realize savings by executing or spending less than its annual operations expense budget. Based upon a review of historical actuals to budget and discussions with IRCDUS regarding future expectations, this RSA assumes that personnel services actual expenses will be 90.0% of budgeted in FY 2024 increasing by 1.0% annually up to 95.0% by FY 2029 and remaining at that level for the remainder of the projection period. Variable O&M expenses are assumed to be executed at 92.0% throughout the projection period while other O&M expenses are assumed to be executed at 83.0% 13