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28 <br /> Orange County, NC <br /> Financial Plan & Rate Study for Solid Waste Enterprise Fund SCS ENGINEERS <br /> 2. 1 .4 Reserves <br /> The unaudited ending balance for the Solid Waste Enterprise Fund is forecasted at$8,867,042 on <br /> June 30, 2016. This balance includes long-term commitments and$3,492,631 of Equipment <br /> Reserves balance. This amount represents the ending Fund balance without loan proceeds <br /> including those from building construction,rural expansion cart procurement, a rural truck <br /> purchase, Eubanks Road W&R Center loan, balance from closure of the Orange County Landfill, <br /> and another prior loan. The total estimated Fund balance is $12,751,990 when these additional <br /> loan proceeds are accounted for. Use of Fund balance has been required in order to balance the <br /> Department budget over the past several fiscal years including the current FY 2016-17. The goal <br /> of the Department is to enable the Fund to be structurally viable and sustainable without <br /> contributions from the General Fund or allocations from the Fund balance. <br /> 2. 1 .5 Rate Model <br /> At the outset of the work effort, SCS developed a Microsoft ExcelTM spreadsheet-based, pro- <br /> forma model (Rate Model)to assist in the completion of the financial analysis. This model <br /> includes the following facets: <br /> • An analysis of operational expenditures (facility operation, staffing, recycling <br /> tonnages, tipping fees, etc.); refer to Appendix E for 5-year estimated Department <br /> expense projections. <br /> • Analysis of capital outlays (equipment replacement and capital projects). <br /> • Revenue analysis (annual revenue projections, net expenditures, and rate plan to <br /> provide sufficient revenues); refer to Appendix D for 5-year estimated Department <br /> revenue projections. <br /> • Rate Benchmarking Analysis. <br /> 2. 1 .6 Methodology Overview <br /> The following methods were utilized by SCS to conduct the cost of service analysis: <br /> • Collect Historical Actual Expenses and Revenues for the County System—This task <br /> involved gathering available historical actual revenue and expense data for the Fund, <br /> compiling these into a financial database, and incorporating the data into the Rate <br /> Model. <br /> • Develop the "Test Year"—The second task was the development of an annual <br /> revenue requirement for a"Test Year". The revenue requirement represents the total <br /> revenue for the System needed to recover all System costs. SCS worked with County <br /> staff to select a period that reflected a typical year for the System. Budgetary <br /> expenses for FY 2016-17 were used as the basis of the Test Year for the Study. SCS <br /> then worked with County staff to make these costs more representative of anticipated <br /> conditions during the upcoming 5-year financial planning horizon. The resulting Test <br /> 18 <br />