City of Belmont
Sewer Rate Study Summary
June 9, 2026
Overview of the Presentation
2 Rate Study Key Issues
Establishing Cost-Based Rates
Review Study Results and Recommendations
Concluding Comments
Sewer Rate Study Key Issues
3 Maintain sufficient sewer rate revenues to:
• Fund annual City 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
• 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
Rate Design
Design cost-based fixed and volumetric rates for each class of service based on the revenue requirement and cost of service results
Cost of Service
Establishes the total costs for each customer class of service by proportionally distributing the total revenue requirement between the customer classes
Revenue Requirement
Establishes the overall utility costs at the appropriate level of total operating and capital expenditures 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 (4.2% 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 4.8% 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 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Revenues
Retail Rate Revenues $16,983 $17,153 $17,325 $17,498 $17,673 $17,850 Other Revenues 309 1,231 1,134 961 969 984
Total Revenues $17,293 $18,384 $18,459 $18,459 $18,642 $18,834 Expenses
Collection O&M Expenses $4,556 $4,744 $4,936 $5,123 $5,302 $5,489 Treatment O&M Expenses 3,220 3,562 3,704 3,852 4,006 4,167 Repair and Replacement
Funding 6,500 6,575 6,625 6,675 6,725 6,775
I/I Capital Funding 350 450 450 450 450 450
Total Debt Service 2,498 2,501 2,501 2,497 2,496 2,499
Change in Working Capital +/- 169 552 239 377 728 1,098 Total Expenses $17,293 $18,384 $18,455 $18,974 $19,708 $20,478 Balance/(Deficiency) $0 $0 $3 ($514) ($1,066) ($1,644)
Cumulative as % of Rates 0.0% 0.0% 0.0% 2.9% 6.0% 9.2%
Proposed Rate Adjustment 0.0% 1.0% 1.0% 1.0% 3.0% 3.0%
Summary of Sewer Utility Revenue Requirements ($000s)
Summary of the Sewer Revenue Requirement
Focus of projections is
over the next five
fiscal years
(cumulative
adjustment needed is
9.2%)
Rate setting period for
the next three years
(FY 2026-27, FY
2027-28, and FY
2028-29)
7 Cost of Service
Analysis
8 Need for Cost of Service
9 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 Cost of service results are within a reasonable range of the total system revenue adjustment
• No interclass adjustments (“cost of service”) are recommended Rate Design
Analysis
10 Overview of the Proposed Sewer Rates
11 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 1.0% annually in FY 2026-27 through 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
Present
Rates FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31
COLLECTION
Low Strength
Base Charge $465.80 $470.46 $475.16 $479.91 $494.31 $509.14 Flow Charge ($/HCF) 6.63 7.36 7.43 7.50 7.73 7.96
High Strength
Base Charge $465.80 $470.46 $475.16 $479.91 $494.31 $509.14 Flow Charge ($/HCF) 12.88 14.30 14.44 14.58 15.02 15.47
TREATMENT
Low Strength
Base Charge $244.81 $247.26 $249.73 $252.23 $259.80 $267.59 Flow Charge ($/HCF) 3.28 3.64 3.68 3.72 3.83 3.94
High Strength
Base Charge $244.81 $247.26 $249.73 $252.23 $259.80 $267.59 Flow Charge ($/HCF) 6.38 7.08 7.15 7.22 7.44 7.66
COMBINED
Low Strength
Base Charge $710.61 $717.72 $724.89 $732.14 $754.11 $776.73 Flow Charge ($/HCF) 9.91 11.00 11.11 11.22 11.56 11.90
High Strength
Base Charge $710.61 $717.72 $724.89 $732.14 $754.11 $776.73 Flow Charge ($/HCF) 19.26 21.38 21.59 21.80 22.46 23.13 Present and Proposed Sewer Rates
Proposed Rates Forecasted Rates
Proposed Annual Sewer Rates – 5 Years
12 Proposed Monthly Bill Comparisons
13 Present Proposed $ % Present Proposed $ % Present Proposed $ % Rates Rates Change Percent Rates Rates Change Percent Rates Rates Change Percent
1.10 1.00
Low Strength
0 0.00 0.00 $59.22 $59.81 $0.59 1.0% $59.81 $60.41 $0.60 1.00% $60.41 $61.01 $0.60 0.99% 8 8.80 8.00 146.43 147.81 1.38 0.9% 147.81 149.29 1.48 1.00% 149.29 150.77 1.48 0.99% 20 22.00 20.00 277.24 279.81 2.57 0.9% 279.81 282.61 2.80 1.00% 282.61 285.41 2.80 0.99% 40 44.00 40.00 495.26 499.81 4.55 0.9% 499.81 504.81 5.00 1.00% 504.81 509.81 5.00 0.99% High Strength
0 0.00 0.00 $59.22 $59.81 $0.59 1.0% $59.81 $60.41 $0.60 1.00% $60.41 $61.01 $0.60 0.99% 30 33.00 30.00 694.80 701.21 6.41 0.9% 389.81 393.71 3.90 1.00% 393.71 397.61 3.90 0.99% 60 66.00 60.00 1,330.38 1,342.61 12.23 0.9% 719.81 727.01 7.20 1.00% 727.01 734.21 7.20 0.99% 110 121.00 110.00 2,389.68 2,411.61 21.93 0.9% 1,269.81 1,282.51 12.70 1.00% 1,282.51 1,295.21 12.70 0.99% FY 2025-2026 FY 2026-2027 FY 2026-2027 FY 2027-2028 FY 2027-2028 FY 2028-2029 Base Charge Present Proposed Present Proposed Present Proposed Low Strength $59.22 $59.81 $59.81 $60.41 $60.41 $61.01
High Strength 59.22 59.81 59.81 60.41 60.41 61.01
Flow Charge (per HCF)
Low Strength $9.91 $11.00 $11.00 $11.11 $11.11 $11.22
High Strength 19.26 21.38 21.38 21.59 21.59 21.80
Adjustment Factor
FY 2028 - 2029 Comparison
Monthly Consumption (per HCF)
FY 2026-2027 Comparison FY 2027-2028 Comparison
Low Strength & High Strength Monthly Sewer Bill Comparison Rate Comparisons - Low Strength ($/Month)
14 Belmont - Present $1,757.14
Belmont - Proposed Jul 26 $1,773.72
Belmont - Proposed Jul 27 $1,791.48
Belmont - Proposed Jul 28 $1,809.24
Sewer Annual Bill at 8 HCF
Concluding Comments
15 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
• 1.0% in FY 2026-27 through FY 2028-29
• Winter water flow adjustment factor reset to 0.0%
© 2014 HDR Architecture, Inc., all rights reserved. © 2016 HDR, Inc., all rights reserved. © 2014 HDR, Inc., all rights reserved.
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
17 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Capital Projects $6,500 $12,132 $18,541 $10,575 $7,154 $6,775 Total Capital Projects $6,500 $12,132 $18,541 $10,575 $7,154 $6,775 Less: Funding Sources
Grants $0 $0 $0 $0 $0 $0
Capital Reserve 0 5,557 9,216 0 0 0
Connection Fee Reserve 0 0 2,700 3,900 429 0
Additional Long-Term Debt 0 0 0 0 0 0
Total Funding Sources $0 $5,557 $11,916 $3,900 $429 $0
Total CIP Funded Through Rates $6,500 $6,575 $6,625 $6,675 $6,725 $6,775 Annual I&I Funded Capital $350 $450 $450 $450 $450 $450 Summary of Sewer Capital Improvement Plan ($000s)
Debt service coverage ratio calculates the ability to repay debt • 𝐷𝐷𝐷𝐷𝐷𝐷 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 −𝐴𝐴 𝑂𝑂&𝑀𝑀 𝐸𝐸𝐸𝐸𝐸𝐸
𝐴𝐴 𝐷𝐷 𝐷𝐷 𝑆𝑆 𝑆𝑆 𝑆𝑆𝑆𝑆 𝑃𝑃 𝑃𝑃𝑃𝑃
City is legally required to meet minimum debt service coverage ratio of 1.25 Revenue requirement recommendations address 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
18 Recommend adopting the proposed revenue adjustments over the three-year period as developed in the revenue requirement Class of Service
Present Rate
Revenues
Distributed
Costs $ Difference % Difference
Low Strength $16,674 $16,691 ($16) 1.0%
High Strength 479 463 $16 1.0%
Total $17,153 $17,153 $0 0.0%
Summary of the FY 2026-27 Cost of Service Analysis ($000s) Summary of the FY 2026-27 Cost of Service
19 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 Review of Present Sewer Rates
20 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 from
10.0% to 0.0% as recent billing data
shows consumption has been increasing
to pre-drought levels