City of BelmontSewer Rate Study Summary
April 14, 2026
Overview of the Presentation
2 Sewer Rate Study Key Issues
3 Maintain sufficient sewer rate revenues to:
Fund annual O&M expenses
Fund Silicon Valley Clean Water (SVCW) treatment costs (pass-through 41.0% of O&M budget) Fund ongoing capital needs and existing annual debt service payments Capital is funded through existing rates and reserves
No new long-term debt for this rate setting period identified Propose resetting winter water flow adjustment factor to 0.0% starting in FY 2026-27 Currently set at 10.0%
Maintain key financial metrics
Fund renewal and replacement capital greater than annual depreciation expense Meet 2.0 target debt service coverage ratio
Maintain target minimum reserves for operations, emergency/litigation, and capital City has historically established rates for a two-year period This study has proposed rates for the three-year period of FY 2026-27, FY 2027-28, and FY 2028-29
Establishing Cost-Based Rates
4 Revenue Requirement Analysis
5 Rate Revenue Assumptions
Consumption levels based on water consumption data from Mid-Peninsula Water District Current 10.0% winter water flow adjustment proposed to be reset to 0.0% due to increased customer consumption to pre-drought levels Historical flow and current rates (FY 2025-26) to project FY 2025-26 rate revenue O&M Expense Assumptions
Starting point was the adopted FY 2025-26 budget
Projected based on historical inflationary factors (4.4% on average) Major O&M expense – Treatment (SVCW) - $3.6M in FY 2026-27 Treatment costs (rates) not controlled by the City
SVCW treatment rate inflation factor at average of 5.3% annually Treatment costs based on projected SVCW projections
Capital Projects and Funding
Starting point is the sewer capital improvement plan and identified projects from sewer master plan Maintaining past practice of rate funding at a level greater than annual depreciation Balance of capital funding needs provided through existing available reserves Revenue Requirement Key Assumptions
6 Summary of the Sewer Capital Improvement Plan
Funding of projects from rates and reserves
Minimum of CIP from rates > annual depreciation expense (increasing annually) Use of capital and connection fee reserves to fund remaining capital needs Additional rate funded I&I improvements
7 Summary of the Sewer Revenue Requirement
Focus of projections is over the next five fiscal years (cumulative adjustment needed is 9.3%) Rate setting period for the next three years (FY 2026-27, FY 2027-28, and FY 2028-29) 8 Debt service coverage ratio calculates the ability to repay debt City is legally required to meet minimum debt service coverage ratio of 1.25 Revenue requirement recommendations addresses key financial planning metrics Prudently funding system renewal and replacement
Debt service coverage ratio target of 2.0
Maintain target minimum reserve levels
Revenue Requirement Conclusions and Recommendations
9 Recommend adopting the proposed revenue adjustments over the three-year period as developed in the revenue requirement
Cost of Service Analysis
10 Need for Cost of Service
11 Reflects the proportionality requirements of Proposition 218 Need to develop the cost basis (justification) for the proposed rates Proportionally distributes the costs to the customer classes of service (e.g., low strength and high strength customers) Developed using generally accepted methodologies based on the City’s specific system and customer characteristics Water Environment Federation Manual of Practice No. 27
Summary of the FY 2026-27 Cost of Service
12 Cost of service results are within a reasonable range of the total system rate adjustment No interclass adjustments (“cost of service”) are recommended at this time
Rate Design Analysis
13 Review of Present Sewer Rates
14 Two rate schedules:
Low Strength
High Strength
Components of the current rate structure:
Base charge: flat annual charge
Flow (volume) charge per HCF(based on winter water average) Winter water flow adjustment factor
Flow adjustment factor reset from10.0% to 0.0% as recent billing data showing consumption has been increasing to pre-drought levels Winter water flow adjustment factor formula:
Actual Volume Usage x (1 + (Flow Adjustment Factor)) = Adjusted Volume Usage Example: 8 HCF x (1+.10) = 8.8 HCF adjusted volume usage
Overview of the Proposed Sewer Rates
15 Maintained current customer classes of service
Customer classes reflect usage and system characteristics Maintained base charge structure
Base charge adjusted by the proposed rate transition plan
0.0% annually in FY 2026-27 and FY 2027-28 and 3.0% in FY 2028-29 Flow adjustment factor reset to 0.0% for future rate projections Increased volume (flow) charge by present flow adjustment factor (10%) to account for change Sewer bills will continue to be collected through property tax bills
Proposed Annual Sewer Rates – 5 Years
16 Proposed Monthly Bill Comparisons
17 Rate Comparisons - Low Strength ($/Month)
18 Concluding Comments
19 Proposed rates are cost-based, proportional, and based on cost of service principles and the City’s unique sewer system and customer characteristics Proposed rates have balanced the financial requirements of the sewer utility with the impacts to customer bills Maintains financial stability
Continues plan to increase funding of repair and replacement through rates Improved debt service coverage ratios
Continues to maintain target reserve balances
Recommend approval of the proposed sewer rates
0.0% in FY 2026-27 and FY 2027-28 and 3.0% in FY 2028-29 Winter water flow adjustment factor reset to 0.0%