HomeMy WebLinkAboutMinutes - September 26, 2023 SS2023 Water/Wastewater Rate
Study
Shirtsleeve Presentation
September 26, 2023
2
Agenda
1. Water Enterprise Financial Plan
2. Water Cost of Service / Rate Design
3. Water Rate Survey
4. Wastewater Enterprise Financial Plan
5. Wastewater Cost of Service / Rate Design
6. Wastewater Rate Survey
7. Project Schedule
8. Questions
The Rate Setting Process
Compares the revenues of the utility to its
expenses to determine the overall level of rate
adjustment
Equitably allocates the revenue requirements
between the various customer classes of service
Design rates for each class of service to meet
the revenue needs of the utility, along with any
other rate design goals and objectives
Revenue Requirements
Cost-of-Service
Rate Design
3
4
Legal Requirements
for Setting Water Rates In California
Proposition 218 (Article XIIID, Section 6 of California Constitution)
•Revenues shall not exceed funds required to provide service; nor used for
another purpose
•Amount shall not exceed the proportional cost of the service attributable to
the parcel
•Service must be actually used or immediately available
•Approval process includes 45-day notice, public hearing, and written
majority protest. Does not require a voting process (unlike taxes).
5
Schematic of Water Utility Fund/Reserve Structure
Operations & MaintenanceUser Rate Revenue
Other Operating Revenue
Interest Earnings
ImpactFees
Water Operating Fund (560)
Water Capital Project Fund (561)
Debt Service
Replacement, Rehabilitation, and
Upgrade Projects
Impact Mitigation FundImpact Mitigation Fund (562)Expansion Capital Projects
6
Water Enterprise Cash Balances
Fiscal Year beginning July 1, 2022
Unrestricted Reserves
Fund 560 - Water Operating Fund $9,614,000
Fund 561 - Water Capital Fund $1,650,000
Total Unrestricted $11,264,000
Restricted Reserves
Restricted Fund 562 - Water Impact Migation Fund $5,432,000
7
Reserve Policies
Reserve policies both (1) protect the City against unforeseen circumstances and
(2) contribute towards the City’s credit rating.
Operating Reserve: In light of estimated future financial needs of
the water (and wastewater) utility, it is
recommended that the City maintain
Operating Reserve target of at least 50
percent of annual operating and
maintenance costs, including debt service.
This policy has been practiced by this City
since the last study in 2019.
Water Revenue
FY2022/23 Budget
8
Rate Revenue $13,823,000
Non-Rate Revenue
Interest Earnings $72,000
Operating Revenue $310,000
IMF Revenue $1,016,960
Total: $15,221,960
Water Operating Expenses
FY2022/23 Budget
9
Salaries and Benefits $3,437,000
Supplies & Services $2,003,000
Minor Capital $105,000
Utilities $1,420,000
Water Purchases $1,570,000
Cost Allocation Plan $1,179,000
Debt Service $1,930,000
Total Budget: $11,644,000
(WID Surface Water)
Projected Water Capital Spending
10
Recent average capital:
$3.5M
Forecasted average capital:
$6.1M
SWTF Expansion
SWTF Membrane
Replacement
$1M Water Tank
Water Financial Forecast & Proposed Rate Revenue
Increases
11
FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033
Rate Revenue Increase: 3.0% 3.0% 3.0% 3.0% 3.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Debt Coverage Ratio:2.80 2.85 2.96 3.14 3.32 3.47 3.59 3.66 1.93 2.08
Proposed Forecasted
$0
$5
$10
$15
$20
$25
$30
$35
FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033Total Revenue / Expenses ($M)Non-Rate Revenue Existing Rate Revenue Additional Rate Revenue
Operating Expenses Debt Service Cash Capital
ExpensesRevenues$0
$10
$20
$30 MILLIONSCombined Ending Fund Balance
Target Reserve Level
12
Historical Water Rate Increases
CY Prop 218 Approved ENR Implemented
2019 2.9% 2.9% 2.5%
2020 3.0% 1.3% 0%
2021 3.0% 8.0%-5.3%
2022 3.0% 8.4% 2.0%
2023 3.0% 3.0% 3.0%
Total 15.8% 25.7% 7.1%
Over the past 8 years, water utility rates have increased by less than 1 percent per year despite reductions in
water demands due to the meter retrofit program and the drought.
13
Water Rate Design
Residential Meter Conversion Program
Update
Phase 7 & 8 conversions have been completed
All single-family accounts are now on metered rates
Staff will return to Council with recommendations for
multifamily billing policies.
14
Single Family Tiered Rate Design*
15
* The uniform usage rates paid by multifamily and non-residential customers is equal to the
weighted average of these tiered water rates
Tier 1
Groundwater Supply
Conservation
Program
Surcharge (Tier 3)
Tier 2
Treated Surface Water
Consistent with historical practice, the proposed rate reflect the difference in the cost of groundwater versus
treated surface water
$1.00 / ccf $1.40 / ccf
$0.32 / ccf
Single Family Tiered Rates Allocation
16
Tier 1 Tier 3Tier 2
10 HCF 30 HCF
Current Allocations Proposed Allocations
(unlimited
Tier 1
Groundwater
Supply
(56%)
Tier 3
Conservation
Program
Surcharge*
Tier 2
Treated
Surface
Water
11 HCF 20 HCF (unlimited
(44%)
* Charged to top 7% of water users
17
Current & Proposed Metered Rates (Year 1)
Current Proposed
Monthly Service Charges (Metered)
Up to 3/4" meter $22.30 $22.99 $0.69 3.1%
1" meter $35.03 $36.45 $1.42 4.1%
1 1/2" meter $66.56 $67.22 $0.66 1.0%
2" meter $104.57 $105.68 $1.11 1.1%
3" meter $193.29 $209.52 $16.23 8.4%
4" meter $320.00 $324.90 $4.90 1.5%
6" meter $636.51 $644.12 $7.61 1.2%
8" meter $1,016.48 $1,028.72 $12.24 1.2%
10" meter $1,459.88 $1,542.16 $82.28 5.6%
Water Usage Rates (Metered) -- $/CCF
Single Family Residential
Tier 1 $0.99 $1.00 $0.01 1.0%
Tier 2 $1.32 $1.40 $0.08 6.1%
Tier 3 $1.63 $1.72 $0.09 5.5%
Multifamily & Non-Residential
All water usage $1.17 $1.20 $0.03 2.6%
Change
18
Current & Proposed Non-Metered Rates (Year 1)
Current Proposed
Monthly Flat Water Rates (Unmetered)
Single Family Residential
1 bedroom $33.50 $34.51 $1.01 3.0%
2 bedroom $40.23 $41.44 $1.21 3.0%
3 bedroom $48.21 $49.66 $1.45 3.0%
4 bedroom $57.93 $59.67 $1.74 3.0%
5 bedroom $69.47 $71.55 $2.08 3.0%
6 bedroom $83.39 $85.89 $2.50 3.0%
7 bedroom $99.98 $102.98 $3.00 3.0%
Multi-Family Units
1 bedroom $28.76 $29.62 $0.86 3.0%
2 bedroom $34.49 $35.52 $1.03 3.0%
3 bedroom $41.40 $42.64 $1.24 3.0%
Mobile Home
Per Unit $28.76 $29.62 $0.86 3.0%
Non-Residential
Per ESFU $40.23 $41.44 $1.21 3.0%
Change
19
Water Bill Impact Analysis (in Year 1)
Meter Monthly Water
Use
Size (CCF) Fixed Usage Fixed Usage $ %
SINGLE FAMILY
Low Use 3/4"5.5 $22.30 $5.45 $22.99 $5.50 $0.74 2.7%
Median Use 3/4"11 $22.30 $11.22 $22.99 $11.00 $0.47 1.4%
Average Use 3/4"17 $22.30 $19.14 $22.99 $19.40 $0.95 2.3%
High Use 3/4"34 $22.30 $41.58 $22.99 $43.20 $2.31 3.6%
Very High Use 1"68 $35.03 $92.04 $36.45 $99.44 $8.82 6.9%
MULTIFAMILY
Duplex, average use 3/4"15 $22.30 $17.55 $22.99 $18.00 $1.14 2.9%
Medium Apartment, average use 1.5"43 $66.56 $50.31 $67.22 $51.60 $1.95 1.7%
Medium Apartment, average use 2"85 $104.57 $99.45 $105.68 $102.00 $3.66 1.8%
Large Apartment, average use 3"294 $28.76 $343.98 $29.62 $352.80 $9.68 2.6%
3 Bedroom na $41.40 na $42.64 na $1.24 3.0%
COMMERCIAL / INDUSTRIAL / INSTITUTIONAL
Small Non-Residential, Average Use 3/4"15 $22.30 $17.55 $22.99 $18.00 $1.14 2.9%
Small Non-Residential, High Use 3/4"30 $22.30 $35.10 $22.99 $36.00 $1.59 2.8%
Medium Non-Residential Average Use 1.5"43 $66.56 $50.31 $67.22 $51.60 $1.95 1.7%
Medium Non-Residential, High Use 1.5"86 $66.56 $100.62 $67.22 $103.20 $3.24 1.9%
Large Non-Residential, Average Use 3"294 $193.29 $343.98 $209.52 $352.80 $25.05 4.7%
Large Non-Residential, High Use 3"588 $193.29 $687.96 $209.52 $705.60 $33.87 3.8%
Change (total)Current Proposed
20
Proposed 5-Year Water Rate Schedule
Consistent with the City’s historical practices, it the proposed resolution will authorize
the City to raise rates by as high as 5% per year in the event that inflation (or other
costs) exceed the assumptions in the current financial plan.
Lathrop
City of Stockton
Tracy
Lodi (Proposed)
Lodi (Existing)
Manteca
Galt
$- $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00
21
Water Bill Survey
(single family homes with ¾” meter and average monthly water usage (16 HCF)
22
Drought Surcharge Policy
The City has an existing Drought Surcharge policy that increases
water rates on a percentage basis during drought events (as
declared by City Council). This policy was developed as part of
the 2019 rate study and does not need to be updated at this
time.
23
Schematic of Wastewater Utility Fund/Reserve
Structure
Operations& MaintenanceUser Rate Revenue
Other Operating Revenue
Interest Earnings
ImpactFees
Wastewater Operating Fund (530)
Wastewater Capital ProjectFund
(531)
Debt Service
Replacement, Rehabilitation, and
Upgrade Projects
Impact Mitigation FundWastewaterImpact Mitigation Fee
Fund (533)
Rate Stabilization Fund (534)
Expansion Capital Projects
24
Wastewater Enterprise Cash Balances
Fiscal Year beginning July 1, 2022
Unrestricted Reserves
Fund 530 - Wastewater Operating Fund $17,522,000
Fund 531 - Wastewater Capital Fund $4,985,000
Fund 534 - Wastewater Rate Stabilization Fund $500,000
Total Unrestricted $23,007,000
Restricted Reserves
Fund 533 - Wastewater IMF $4,923,000
Wastewater Revenue
FY2022/23 Budget
25
Rate Revenue $17,284,100
Non-Rate Revenue
Operating Revenue $100,000
Interest Earnings $226,300
IMF Revenue $1,535,700
Total: $19,146,100
Wastewater Operating Expenses
FY2022/23 Budget
26
Salaries and Benefits $4,545,000
Supplies & Services $3,429,000
Transfer Out $175,000
Minor Capital $290,000
Utilities $1,050,000
Cost Allocation Plan $1,227,000
Debt Service $3,326,000
Total Budget: $14,042,000
Projected Wastewater Capital Spending
27
Recent average capital:
$2.2M
Forecasted average capital:
$7.6M
28
Electrical Upgrades/SCADA Construction* $15 million
UV Design / Replacement $4.5 million
Fan Press Replacement (solids handling)* $3.3 million
Aeration Diffuser Replacement* $3.0 million
Lodi Lake Storm Pump Station and Trash Handling $2.0 million
Irrigation Improvements $1.74 million
On-going Sewer Main Replacements* $1.0 million+ per year
Highlighted Large Capital Projects
(in next 5 years)
* In progress
Wastewater Financial Forecast & Proposed Rate Revenue
Increases
29
FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033
Rate Revenue Increase: 4.0% 4.0% 4.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Debt Coverage Ratio:2.33 4.88 2.62 2.81 4.44 3.59 3.67 4.48 4.60 4.72
Proposed Forecasted
$0
$5
$10
$15 MILLIONSCombined Ending Fund Balance
Target Reserve Level
$0
$5
$10
$15
$20
$25
$30
FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033Total Revenue / Expenses ($M)Non-Rate Revenue Existing Rate Revenue Additional Rate Revenue
Operating Expenses Debt Service Cash Capital
ExpensesRevenues
30
Historical Wastewater Rate Increases
FY Prop 218 Approved ENR Implemented
2018 3.0% 2.7% 0%
2019 2.9% 2.9% 2.9%
2020 3.0% 1.5% 0%
2021 3.0% 3.1% 0%
2022 3.0% 8.9% 3.0%
Total 15.8% 20.4% 6.0%
Over the past 5 years, wastewater utility rates have increased by just over 1 percent per year.
31
Wastewater Rate Design
32
Current & Proposed Wastewater Rates (Year 1)
Current Proposed
Monthly Flat Wastewater Rates (Unmetered)
Single Family and Multi-Family Residential Dwelling Units
1 bedroom $30.45 $31.67 $1.22 4.0%
2 bedroom $40.60 $42.22 $1.62 4.0%
3 bedroom $50.75 $52.78 $2.03 4.0%
4 bedroom $60.90 $63.34 $2.44 4.0%
5 bedroom $71.05 $73.89 $2.84 4.0%
Mobile Homes (per unit)$30.45 $31.67 $1.22 4.0%
Schools (per SSU (18 students)$30.45 $31.67 $1.22 4.0%
Non-Residential (per SSU)$40.60 $42.22 $1.62 4.0%
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fixed Monthly Service Charges (Metered)
Up to 3/4" meter $27.73 $29.74 $2.01 7.3%
1" meter $44.67 $49.00 $4.33 9.7%
1 1/2" meter $86.30 $93.01 $6.71 7.8%
2" meter $135.73 $148.03 $12.30 9.1%
3" meter $253.59 $296.58 $42.99 17.0%
4" meter $420.86 $461.64 $40.78 9.7%
6" meter $838.71 $918.29 $79.58 9.5%
8" meter $1,340.31 $1,468.47 $128.16 9.6%
Variable Wastewater Usage Rates (Metered)
Usage Rate ($/CCF of water use)*$3.15 $3.15 $0.00 0.0%
Change
* Residential customers are billed based on their WQA while non-residential customers are billed
based on actual monthly water usage.
33
Wastewater Bill Impact Analysis (in Year 1)
Meter
WQA/Water
Usage
Size (CCF) Fixed Usage Total Fixed Usage Total $ %
SINGLE FAMILY
Low Use 3/4" 4 $27.73 $12.60 $40.33 $29.74 $12.60 $42.34 $2.01 5.0%
Median Use 3/4" 8 $27.73 $25.20 $52.93 $29.74 $25.20 $54.94
$2.01 3.8%
Average Use 3/4" 9 $27.73 $28.35 $56.08 $29.74 $28.35 $58.09
$2.01 3.6%
High Use 3/4" 18 $27.73 $56.70 $84.43 $29.74 $56.70 $86.44
$2.01 2.4%
Very High Use 1" 36 $44.67 $113.40 $158.07 $49.00 $113.40 $162.40 $4.33 2.7%
Multifamily
Duplex, average use 3/4" 17 $27.73 $53.55 $81.28 $29.74 $53.55 $83.29
$2.01 2.5%
Medium Apartment, average use 1.5" 19 $86.30 $59.85 $146.15 $93.01 $59.85 $152.86
$6.71 4.6%
Medium Apartment, average use 2" 26 $135.73 $81.90 $217.63 $148.03 $81.90 $229.93
$12.30 5.7%
Large Apartment, average use 3" 188 $253.59 $592.20 $845.79 $296.58 $592.20 $888.78
$42.99 5.1%
3 Bedroom na na $50.75 na $50.75 $52.78 na $52.78
$2.03 4.0%
COMMERCIAL / INDUSTRIAL / INSTITUTIONAL
Small Non-Residential, Average Use 3/4" 15 $27.73 $47.25 $74.98 $29.74 $47.25 $76.99 $2.01 2.7%
Small Non-Residential, High Use 3/4" 30 $27.73 $94.50 $122.23 $29.74 $94.50 $124.24 $2.01 1.6%
Medium Non-Residential Average Use 1.5" 43 $86.30 $135.45 $221.75 $93.01 $135.45 $228.46 $6.71 3.0%
Medium Non-Residential, High Use 1.5" 86 $86.30 $270.90 $357.20 $93.01 $270.90 $363.91
$6.71 1.9%
Large Non-Residential, Average Use 3" 245 $253.59 $771.75 $1,025.34 $296.58 $771.75 $1,068.33
$42.99 4.2%
Large Non-Residential, High Use 3" 490 $253.59 $1,543.50 $1,797.09 $296.58 $1,543.50 $1,840.08 $42.99 2.4%
Current Proposed Change (total)
34
Proposed 5-Year Wastewater Rate Schedule
Consistent with the City’s historical practices, it the proposed resolution will authorize
the City to raise rates by as high as 5% per year in the event that inflation (or other
costs) exceed the assumptions in the current financial plan.
35
Wastewater Bill Survey
(single family homes with ¾” meter and average water usage)
36
Combined Utility Bill Survey
(single family homes with ¾” meter and average water usage)
37
•Receive feedback from today’s presentation
•Complete draft report
•Finalize and mail Prop 218 notifications by end of
November
•Set Public Hearing date during November 15th Council
Meeting
•Conduct Public Hearing – January 17
th
•Implement water rates - February 1
st, 2024
•Implement wastewater rates -July 1st, 2024
Next Steps
38
Questions and Discussion