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7. Conclusions and Recommendations 7. CONCLUSIONS AND RECOMMENDATIONS • Based upon the analyses presented in this report, Stantec has reached the following conclusions and recommendations: ■ Based upon the assumptions and base data as outlined in Appendix A and summarized herein, IRCDUS' current water, sewer, and reclaimed water rates are not projected to generate sufficient revenues to satisfy the overall cost requirements including annual operating expenses, capital improvement requirements, debt service, and operating reserve targets through FY 2034. Stantec identified a plan of annual rate indexing adjustments effective October 1 of each fiscal year to meet IRCDUS' projected financial requirements including the capital financing plan described herein. Specifically, that plan includes annual water rate adjustments of 12.0% in both FY 2025 and FY 2026 and sewer rate adjustments of 24.0% in FY 2025 and 12.0% in FY 2026. Thereafter, the analysis identified the need for annual 5.0% water and sewer rate indexing through FY 2031, and 10.0% water and sewer rate indexing beginning in FY 2032. • IRCDUS is in the process of initiating a master plan that is anticipated to identify the future capital needs of the water, sewer, and reclaimed water systems including the potential for future capacity expansions for these services. Additionally, IRCDUS intends on performing annual revenue sufficiency reviews and proactive financial management. As such, Stantec recommends that • IRCDUS adopted the proposed rate indexing plan for FY 202531 and FY 2026 to address the near- term cash flow imbalance to stabilize the financial sustainability of the Utility and evaluate future rate indexing plans at which time the master plan is complete and as part of future annual reviews of rates. ■ The resulting rates and typical residential customer bills are expected to remain favorable to those of neighboring utility systems. • The capital financing plan developed for IRCDUS' includes funding of $590 million in capital projects through FY 2034 from a combination of grants, impact fees, PAYGO (cash funding from reserves and annual revenues), and the issuance of approximately $198 million in new borrowing for future capacity expansions. IRCDUS does not carry outstanding debt and the anticipated borrowing needs are not projected until FY 2032. The intent of this plan is to cash fund all of IRCDUS' recurring CIP therefore preserving IRCDUS' borrowing capacity to address large scale projects from the master plan or accelerated timing of expansion projects. As such, the timing and level of actual borrowing should be regularly evaluated based on IRCDUS' capital and system reinvestment needs. 31 The Study assumes an implementation date of 10/1/24 for FY 2025 rates. However, actual implementation may be 1/1/25 due to the County's planned stakeholder communication and engagement activities. 38 L_J