2025-02-11; City Council; 08; 2025 Cost of Service Studies for Water and Wastewater, Setting a Public Hearing to Approve Rate Changes, Issuing a Written Notice of the Public Hearing and Establishing P — Carlsbad City Council, February 11, 2025 (part 1 of 2)

CA Review GH
Meeting Date: Feb. 11, 2025
To: Mayor/President and City Council/Board Members
From: Geoff Patnoe, City Manager/Executive Manager
Staff Contact: Shoshana Aguilar, Senior Management Analyst [email protected], 760-814-0241
Amanda L. Flesse, Utilities Director/General Manager
[email protected], 760-438-2722
Subject: 2025 Cost of Service Studies for Water and Wastewater, Setting a Public Hearing to Approve Rate Changes, Issuing a Written Notice of the Public Hearing and Establishing Procedures for Objections to Proposed Fees Districts: All
Rec
ommended Actions

1. Adopt a City Council resolution approving and filing the 2025 Wastewater Cost of Service Study, setting a public hearing for April 22, 2025, at 5 p.m., to approve increases to rates for wastewater services effective July 1, 2025, and directing the City Manager or designee to issue a written notice of the public hearing.

2. Adopt a City Council resolution establishing a procedure for customer and property owner objections to proposed property-related fees and charges for wastewater services.

3. Adopt a Carlsbad Municipal Water District Board of Directors resolution approving and filing the 2025 Potable and Recycled Water Cost of Service Study, Setting a public hearing for April 22, 2025, at 5 p.m., to approve increases to rates for potable and recycled water services effective July 1, 2025, and directing the Executive Manager or designee to issue written notice of the public hearing.

4. Adopt a Carlsbad Municipal Water District Board of Directors resolution establishing a procedure for customer and property owner objections to proposed water-related fees and charges for water services.

Executive Summary
Rate increases are needed to pay for increased costs to run Carlsbad’s water, recycled water and wastewater. The City of Carlsbad and the Carlsbad Municipal Water District, or the CMWD, recently completed studies on the cost of providing potable water, recycled water and wastewater services within their respective services areas.

Cost-of-service studies with rate analyses are performed periodically so that revenues from rates adequately fund utility operations, maintenance and capital investments. These cost-of- service studies assess how much revenue needs to be collected to cover the costs of delivering Feb. 11, 2025
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these services. By law, rates may only be high enough to cover the actual cost to provide the service.

Based on these studies, staff recommend increases to the rates for potable water, recycled water and wastewater services for the next three years, as detailed below. The rates being proposed are below the county average for potable water, recycled and wastewater services, and the proposed rate for potable water will be less than the 2025 average even into the third year of increases. The main driver of the proposed water rate increases is the increased costs of purchased water from the San Diego County Water Authority, which are passed on to the CMWD’s customers.

Other drivers for the proposed rate increases include:

• Increased costs for wastewater treatment from the Encina Wastewater Authority • The need to make capital investments in maintaining more than $2.1 billion1 worth of city and CMWD utility infrastructure assets, as well as regional wastewater treatment infrastructure that has reached the end of its useful life • Increased costs of materials and supplies needed to operate the potable water, recycled water and wastewater systems
• Maintaining sufficient reserves for fiscal stability, as required by the Utilities Reserve Policy, City Council Policy No. 96
The cost-of-service studies recommend increasing the rates for each of the utility services to provide adequate funding to operate, maintain and rehabilitate the utility infrastructure systems that are critical to the public health of our community, the prosperity of the city and the healthy natural environment that Carlsbad enjoys. Additionally, maintaining the fiscal health of the potable water, recycled water and wastewater services is part of the goals of the city’s Strategic Plan. Ultimately, reliable water and wastewater services maintain the quality of life and safety of our residents, businesses and visitors.

The cost-of-service studies describe the services that are provided by these utilities, how the rate analysis was performed and the results. Information on rates that includes comparisons to similar utilities in the region is included in this staff report. Financial data, including historical results and future budget projections, is incorporated into the cost-of-service studies.

The city, CMWD, and Carollo Engineers, a consultant with extensive expertise in utility rate setting, used this data to prepare the cost-of-service studies. Staff recommend that the City Council and the CMWD Board of Directors set a public hearing to consider the proposed rate increases2 detailed below.

Additionally, staff recommend that the City Council and the CMWD Board of Directors adopt resolutions to establish procedures for ratepayer and property owner to submit written objections to the proposed rate increases

1 The City of Carlsbad and CMWD operate, maintain and rehabilitate sewer, potable water and recycled water infrastructure. The 2019 Asset Management Master Plan estimated the replacement cost of this infrastructure to be more than $2.1 billion.
2 The City Council and the CMWD Board last voted on utilities rates in January 2022, approving rate increases for March 2022, January 2023, and January 2024.

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Explanation & Analysis
Overview of utilities
The CMWD provides reliable drinking and recycled water to homes and businesses within a

32.3-square mile service area, as shown in Exhibit 6, while meeting all federal and state water quality regulations. The CMWD buys treated water from the Water Authority, including desalinated water, and serves it through the CMWD’s potable water system to approximately 28,317 accounts, not including fire service. Water is available 24 hours per day and is properly metered and monitored for pressure, availability and quality.

The city operates a wastewater collection system in an approximately 30-square mile service area, as shown in Exhibit 7. This system must meet stringent regulations because it conveys wastewater from homes and businesses to the Encina Water Pollution Control Facility for treatment. There are about 24,000 wastewater connections within the service area.

A portion of the wastewater treated at the Encina facility is then further treated at the Carlsbad Water Recycling Facility and then delivered to customers through the CMWD’s recycled water system for landscape irrigation. The CMWD has one of the most comprehensive recycled water systems in San Diego County. This recycled water provides a drought-resilient water supply through about 1,000 customer connections.

The city and the CMWD’s three utilities own more than $2.1 billion worth of infrastructure assets that are critical to the community’s health and the environment, including:
• Over 800 miles of underground pipelines
• Over 14,000 water valves
• Over 4,000 fire hydrants
• 12 reservoirs
• 11 wastewater lift stations3
• Approximately 6,200 access holes
• A water recycling treatment facility and other assets This list does not include the city’s share of the Encina Wastewater Authority’s assets or those owned by the Water Authority.

Each utility – potable water, recycled water and wastewater – has its own separate budget, which is called an enterprise fund. Enterprise funds exist to provide a specific service, and they are funded by ratepayers – the customers. The enterprise fund establishes a separate accounting and financial reporting mechanism for municipal services for which a fee is charged in exchange for those services. The funds collected for providing the specific services cannot be used for any other expense.

Proposition 218 Overview
Proposition 218, or the “Right to Vote on Taxes Act,” was approved by the California voters in 1996 and amended the California Constitution by adding Articles XIII D, which established requirements for levying new or increased “property-related fees” and limits how revenues derived from these fees may be used.

3 A lift station uses pumps to move wastewater to the wastewater treatment plant.

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The requirements set forth under Article XIII D can be divided into two categories: substantive requirements and procedural requirements.

Substantive requirements
New or increased rates for property-related fees must comply with the following substantive requirements:
• Revenues derived from the fee must not exceed the funds required to provide the property-related service.
• Revenues derived from the fee shall not be used for any purpose other than that for which the fee or charge was imposed.
• The amount of a fee imposed upon any parcel or person as an incident of property ownership must not exceed the proportional cost of the service attributable to the parcel.
• The fee may not be imposed for a service, unless the service is used by, or immediately available to, the owner of the property subject to the fee. A fee based on potential or future use of a service is not permitted, and standby charges must be classified as assessments subject to ballot protest and proportionality requirements for assessments. • No fee may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services, when the service is available to the public at large in substantially the same manner as it is to property owners.

Procedural requirements
The procedures for adopting new or increased property-related fees are:
• Mail notification of the proposed fee or charge to every affected property owner or customer of record. The information needs to provide directions for submitting written protests and written objections, as well as information about the proposed fees or charges. This notice may be mailed with a customer's bill or separately. • Hold what is known as a majority-protest hearing at least 45 days after the mailing. The purpose of the hearing is to determine whether a majority of those affected object to the proposed fee or charge.
• Adopt the proposed fee or charge or reject it if there is a majority protest.

Majority-pr
otest public hearing
Before adopting any rate increase the City Council and Board must hold what is known as a majority-protest public hearing and notify property owners and customers at least 45 days in advance of public hearings related to proposed water, recycled water and wastewater rates.

The City Council and the CMWD Board’s approvals are needed to establish the date of the public hearing. Staff request that the City Council and the CMWD Board set the public hearing date for April 22, 2025.

State law establishes the following
• Any affected customers and property owners may protest the proposed rates by submitting their concerns in writing to the City Clerk's Office any time before the close of the public hearing.
• The written protest must contain the address of service, the rate change being protested and be received prior to the close of the public hearing.

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• While protesters may appear at the hearing and be heard on the matter, only written protests are to be considered as part of the majority protest. • Only one protest per parcel will be counted.
• If fewer than 50% of customers protest the proposed rates, the City Council and the CMWD Board may consider adopting the proposed changes at the public hearing. • If it is determined at the public hearing that a majority of affected customers and property owners, including customers of record, have submitted formal protests, the proposed fee changes must be rejected.

Rates can be adopted for a period not to exceed five years. In the past, the city and the CMWD have adopted rates for two- or three-year periods. This allows adjustments to be made to changing conditions, such as a change in the Water Authority’s rates or inflation on maintenance and capital costs.

Notice of pu
blic hearing
The legally required elements in the notice are as follows:
• Amount of the fees or charges proposed to be imposed
• Basis upon which the fees or charges were calculated
• Statement regarding the reason for the imposition of the new, or increases to the existing, fees or charges
• Description of pass-through increases and the maximum amount by which specific rates will increase as a result of any pass-through increase • Date, time and location of the public hearing at which the legislative body will consider new fees or charges, or proposed increases to existing fees or charges • Statement that the city and CMWD adopted what is known as the “opt-in” exhaustion of administrative remedies process, which requires written objections by property owners or ratepayers to preserve a right to legally challenge the proceedings and to provide notice of a 120-day statute of limitations for challenging any new, increased, or extended fees or charges.

The draft Proposition 218 notice to customers and property owners is included as Exhibit 5.

Exhaustion of administrative remedies
One of the most fundamental rules governing the relationship between public agencies and the courts is the "exhaustion of remedies" principle, which requires people to raise concerns about proposed agency actions by pursuing the agency’s available procedures for addressing concerns before suing the agency over those concerns.

The exhaustion requirement serves several important purposes:

1. Permitting the agency to resolve factual issues, apply its expertise, and exercise statutorily delegated remedies

2. Bolstering administrative autonomy

3. Promoting judicial economy

4. Mitigating damages
Assembly Bill 2257 added Government Code Sections 53759.1 and 53759.2 and became effective January 1, 2025, allowing local agencies to adopt administrative exhaustion procedures for ratemaking procedures under Proposition 218. Staff recommend that the City Feb. 11, 2025
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and CMWD adopt the recently established exhaustion of administrative remedies procedures for proposed water, recycled water, and wastewater rates by allowing the public to submit timely written objections to the proposed rate increases to exhaust their administrative remedies as a prerequisite to later litigating the particular issue raised.

Staff recommend that the City Council and the CMWD Board adopt the resolutions provided as Exhibits 2 and 4, respectively, to establish objection procedures.

Rate-setting process
The 2025 cost-of-service studies, provided as Exhibits 8 and 9, present a comprehensive analysis that conforms with Proposition 218 and with industry best practices, as outlined by the American Water Works Association’s Principles of Water Rates, Fees, and Charges M1 Manual.

The manual is the most widely used rate-setting manual among public water purveyors, and rates developed in accordance with the manual represent industry standards. The studies also follow the policies and practices of the city and the CMWD.

Neither the city nor the CMWD profit on utility rates; they only recover the costs of service consistent with the requirements of Proposition 218. The City Council and the CMWD Board last voted to approve rate increases on Jan. 11, 2022. They approved three years of increases, taking effect on March 1, 2022, Jan. 1, 2023, and Jan. 1, 2024.

Recommended increases
Carollo Engineers, consultant experts in utility rate setting, recently updated the 2021 studies and created the new 2025 cost-of-service studies provided as Exhibits 8 and 9. The studies recommend increasing the revenue for each of the utilities to provide adequate funding to operate, maintain and rehabilitate aging utility infrastructure systems.

These systems are:
• The CMWD’s potable water distribution system, including treated water purchased from the Water Authority
• The CMWD’s recycled water production and delivery system, including the Carlsbad Water Recycling Facility
• The City of Carlsbad’s wastewater collection system, including sewage treatment at the Encina facility
Staff recommend rate increases beginning July 1, 2025, Jan. 1, 2026, and Jan. 1, 2027, to meet the revenue requirements recommended in the cost of service studies.

After the development of the rates proposed in the cost-of-service studies, the Utilities Department opted to delay the first rate increases from January 1, 2025, until July 1, 2025. This delay allows time to update the customer billing system to show the pass-through charges from the Water Authority. The implementation of the rates developed based on January 1, 2025, increases will be delayed by six months. Consequently, this schedule delay will also delay revenue increases by six months, a gap that may be temporarily covered by reserves.

Rate structures
Potable and recycled water

The CMWD maintains separate rate structures for its potable and recycled water customers.

Potable and recycled water customers have two components to their bill:

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• The water delivery fee is a fixed monthly charge. It is assessed based on meter size. It is set at the amount needed to capture the costs associated with providing customer service for each account, as well as a portion of the costs of providing and maintaining the system capacity to serve each account. This component of the charge is equal for all customers in a particular class, e.g., single-family residential, commercial or industrial. • The water usage fee is a charge based on the amount of water consumed each month, as measured by each customer’s water meter. It is set at the amount needed to capture the costs of the water utility, which vary with the amount of water provided.

Wastewater
The city also maintains a separate rate structure for wastewater customers. The city does not individually meter customers’ wastewater usage, because metering wastewater is an expensive and generally inefficient process.
• All customers are appropriately assigned to one of 16 classes, e.g., single-family, multi- family, small medium and large commercial, industrial, etc. Each class is then charged based upon a unit cost per hundred cubic feet of water sold. The unit cost for each of the classes is based on such factors as water use, the quality of the water discharged into the city’s collection system.
• Single-family residential customers, including those who live in duplexes, incur a flat monthly charge for wastewater service based upon an estimated monthly flow of 6.69 hundred cubic feet.
• A home with an accessory dwelling unit is charged 1.5 times that amount. • All other customers are charged based upon the factors that apply specifically to their class.

The cost-of-service studies determined that, in general, the current wastewater and recycled water rate structures do not need to be changed; they adequately cover the cost of providing these services.

Proposed billing changes
Staff are proposing the CMWD change how potable water rates are structured in three ways:
• Two tiers are proposed instead of the three tiers currently used for single family residential customers. This change would align with how residential customers are now using water and simplify how rates are calculated, increasing efficiency. • Water bills would show the charges from the wholesaler, the Water Authority, that are passed onto them. Almost all water agencies in San Diego County already bill this way, including the City of Oceanside, Vista Irrigation District and Olivenhain Municipal Water District. This change would provide greater transparency, allowing customers to readily see how much of their payments go toward buying water from the Water Authority. (More than half the water bill consists of these pass-through charges.) • A unique rate for the accounts at the San Diego County McClellan-Palomar Airport is proposed to provide for costs that are unique to water service there. The CMWD owns and operates a system of water distribution mains on the airport property.

Prudent management
The CMWD’s residential water rates and the city’s wastewater rates are below the county average, while operational and capital improvement costs continue to increase. Like most Feb. 11, 2025
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agencies in the San Diego County region and statewide, the Water Authority and Encina Wastewater Authority share the challenges of managing aged infrastructure and rising construction, energy and treatment costs. Rate increases are needed to continue to maintain these systems and protect the health of the community and the environment that the public enjoys. The city and the CMWD have little control over the cost of purchasing treated drinking water from the Water Authority or the cost of wastewater treatment at the Encina facility.

To keep the rates as low as possible, the city and the CMWD have prioritized maintaining the utility systems in a way that extends the useful life of the utility infrastructure. The city and the CMWD work to avoid expensive replacement whenever possible and perform rehabilitation and replacement when it is most cost-effective. Investing in capital projects increases the reliability of our infrastructure and decreases the likelihood of water main breaks and sewer spills. Staff have also implemented an asset management system that uses high-level technology to prioritize capital projects with the highest risk of failure, with less crucial projects being postponed.

Potable water rates
Under state law, rates are allocated to customer classes, e.g., single-family, commercial or industrial, based on each class's proportionate share of the system, which is why there is some variation in rate increases across customer classes.
• Overall, more than half of a customer’s water bill is to purchase water from the Water Authority. The CMWD relies exclusively on the Water Authority for potable water supply, so it does not have a choice in accepting rate adjustments from the wholesale water provider.
• The remainder of the water bill goes towards maintaining and operating the potable water delivery system, including replacing aged infrastructure to maintain service reliability and minimize main breaks and service interruptions.

Cost of water from Water Authority per acre-foot

(One acre-foot of water is enough to supply three average Carlsbad households for a year.) Projected
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The Water Authority’s rates make up approximately 65% of customer water bills. Its rates for water are increasing and are expected to continue to increase significantly. A factor in these future increases is the certain reduction in the demand for Water Authority water that results from water conservation efforts. While conservation is extremely important in creating a more sustainable water supply, decreased demand from customers results in a per unit cost increase in the water the Water Authority delivers.

The Water Authority must also pay to maintain its infrastructure and for all requirements to treat and convey water to wholesale customers, including the CMWD. In addition to the efforts that the CMWD’s customers have made to conserve water, more local water reuse supplies are coming online, so the Water Authority will be selling even less water. This will result in much higher Water Authority rate increases in the future.

Last summer, the Water Authority approved an overall rate increase of 14%, which took effect in January 2025. Rate increases are also needed for the ongoing CMWD operations. The utilities’ reserves cannot absorb the additional costs resulting from the increased Water Authority rates.

Staff are recommending setting a public hearing on April 22, 2025, to change the rate structure so that the Water Authority rates are passed on to customers. Staff are also recommending to m
ake these costs visible on utility bills separately from the CMWD costs for maintaining and operating the delivery system.

Residential water rates
The CMWD’s water rates have remained low compared to those in the rest of San Diego County. The chart below compares the CMWD’s current and proposed average water bill for single-family residential customers with those from neighboring agencies. The average monthly water bill for San Diego County is currently $114.49, in comparison to the CMWD’s proposed average monthly bill of $91.10. (The chart does not include increases that other water agencies are currently considering.)
Regional monthly single-family residential water bill

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The average monthly bill with the proposed rate increases for a single-family residential home are as follows and include the CMWD costs and the Water Authority’s pass-through costs:

Single family residential average bill
Current 2025 2026 2027
$73.91 $91.10 $103.38 $109.62
Commercial water rates
Commercial bills would also increase, though there is not one average commercial bill, since this category includes many types of businesses with different meter sizes and usage patterns.

Commercial customers include restaurants, industrial parks and water users that use water outdoors but are not connected to the recycled water system. The current and proposed potable water rates by customer class are shown in Exhibit 5.

Recycled water rates
The primary driver of modest recycled water rate increases are the inflationary costs for operations and maintenance, including rising costs for electricity to produce and deliver recycled water as well as chemicals, labor and materials.

The CMWD contracts with Encina Wastewater Authority for operation of the Carlsbad Water Recycling Facility. Recycled water is a relatively new commodity in the region not available in every water district, so meaningful cost comparisons are not easily available. Customer usage within the CMWD varies widely depending on irrigation needs. The rate increases proposed are under 5%.

The current and proposed recycled water rates by customer meter size are shown in Exhibit 5.

Most recycled water customers are homeowner associations or multifamily housing that irrigate shared spaces or businesses, rather than single-family homes. The proposed recycled water rate is lower than the proposed rate for potable irrigation. This promotes local water use and conservation of potable water for drinking, cooking, washing and other needs.

Wastewater rates
The wastewater rate increases proposed are 6% lower than the prior increases that City Council approved in 2022. Since the last increase, the City Council approved a successful low interest loan application to the state to fund a needed wastewater Capital Improvement Program project to update the system for remote flow monitoring. The loan allows for lower rate increases in the near future and spreads the cost of infrastructure projects with a lifespan of 20 years or more over time.

Major cost drivers for the proposed wastewater rates include:
• Increased costs to meet the city’s Sewer Master Plan Capital Improvement Program goals, which are needed to continue to operate the city’s wastewater system in future years. (The costs of materials and construction have increased significantly. Materials such as steel, PVC pipe and odor control chemicals have not only risen in cost significantly over the past few years but are now also difficult to obtain.) Feb. 11, 2025
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• The city’s portion of capital and operating costs for treatment at the Encina facility, which the Encina Wastewater Authority owns and operates, has increased 16% in the last three fiscal years.
• Aged infrastructure throughout the city and at the Encina facility that needs to be replaced
• Delayed project implementation by the Encina Wastewater Authority, resulting in higher construction costs
• Decreasing wastewater volumes associated with water conservation causing higher treatment costs. (More concentrated wastewater solids are harder to treat than more diluted wastewater.) The utilities also must maintain adequate reserves in keeping with the 2023 City Council-approved Utilities Reserve Policy to ensure fiscal stability.

Staff have made major adjustments to the schedule of capital improvement projects to minimize the size of the proposed rate increases for wastewater services. Without the proposed rate increases, additional adjustments would need to be made. Staff do not recommend making additional adjustments because this could increase the risk of infrastructure failures, which could result in sewage overflows, environmental damage and regulatory fines.

Wastewater treatment costs are determined by the Encina Wastewater Authority, charged directly to the Wastewater Enterprise Fund and then to the city’s wastewater customers. The Encina Wastewater Authority’s costs make up about 43% of customer’s wastewater bills.

The chart below compares the city’s current average wastewater bill for single-family residential customers with those of other agencies in San Diego County. The average monthly wastewater bill in San Diego County is currently $66.02, shown in the dashed horizontal line, in comparison to the City of Carlsbad’s proposed monthly bill of $59.85. (This chart does not include increases that other wastewater agencies may soon consider, which could raise the regional average significantly in the near future.)
Regional monthly single-family residential wastewater bill

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The wastewater monthly bill with the proposed rate increases for single-family residential customers are as follows:

Current 2025 2026 2027
$51.74 $59.85 $68.22 $77.78

As with water, there is not one average commercial wastewater bill, since this category includes many types of businesses with different sizes of wastewater connections and usage patterns.

Commercial customers could include locations such as a stand-alone post office, a small business, a 250-room hotel or Legoland California. Utilities Department staff will contact some of the largest commercial customers and trade and business organizations to go over their potential increases with them before the proposed public hearing on April 22, 2025.

Alternatives to raising rates
Options for proposing smaller rate increases were considered, such as issuing more long-term debt, by issuing bonds, applying for more state revolving fund loans or other borrowing mechanisms. Taking on debt may be prudent when spreading large, one-time costs over a generation of ratepayers and when it does not add significant debt-related costs.

For example, the CMWD holds long-term debt through a large state revolving fund loan at a 1% interest rate, with the funds being used to build out the city’s recycled water system. This allowed the CMWD to smooth rates and spread the costs over time. In wastewater, the city was awarded a state revolving fund loan for a portion of the project to replace the remote monitoring and control system used for wastewater. (The Supervisory Control and Data Acquisition, or SCADA, replacement project.) While the state revolving fund loans are the lowest cost option for debt, they are very competitive now and in the next few years.

Given the cost of potential alternative loans, the limited funding available from state revolving fund and the recurring nature of the forecasted costs, staff recommend the proposed rate increases. Staff will continue to analyze debt options in the future as part of the city’s enterprise fund management.

Staff also actively monitor grant opportunities. The CMWD has been awarded two federal grants and one state grant to be used to pay for recycled water projects. These grants have totaled $4 million in the last four years. There are not any regular grant programs to fund the replacement of aged potable and wastewater infrastructure, particularly not for a city such as Carlsbad, which does not have many disadvantaged communities.

Community notification and outreach
The CMWD and the city will notify affected customers and property owners about the proposed rates and the proposed April 22, 2025, public hearing by mail at least 45 days before the hearing. The draft notice, which complies with the requirements of state law, is provided as Exhibit 5.

Staff will also post information about the proposed rates and the public hearing on the city's website and share it through other information channels. Public notifications of this item, such as mailings, public hearing notices posted in a newspaper and on the city’s website, will be available in the office of the City Clerk. The city’s Economic Development Department will help Feb. 11, 2025
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inform the business community with outreach campaigns targeted to different commercial customer types.

Staff also plan to hold informational workshops on the proposed rates and changes with commercial customers. Staff will be reaching out to large commercial customers by starting with direct communications to major business organizations. These may include Visit Carlsbad, Carlsbad Chamber of Commerce, Carlsbad Village Association, and the Building Owners and Managers Association. After listening to the needs of the city’s business community, staff will determine the scope and timing of the informational workshops.

Fiscal An alysis
The updated cost-of-service studies presented as Exhibits 8 and 9 assess the revenues needed to maintain service delivery for critical water, recycled water and wastewater services. The proposed rate increases project revenue that is incorporated into operating and capital budgets, which are presented for approval as part of the regular annual budgeting cycle.

The City Council approved City Council Policy No. 96 - Utilities Reserve Policy in March 2023 to establish guidelines to ensure the fiscal stability of the potable water, recycled water and wastewater funds and provide guidance to staff in the management of each utility’s finances.

Annual reporting on reserves is included in the city’s Annual Comprehensive Financial Report.

Reserve levels are treated as practical reserve minimums and may be allowed to increase or decrease as necessary within the minimum and target levels. Rate increases as identified in the cost-of-service studies include input from historical financial data, including actual costs and fund balances.

Options

1. Accept staff’s recommendation, approve and file the cost-of-service studies, set the hearing date, issue the notice, and establish objection procedures.

Approve, receive and file the 2025 cost-of-service studies; set a public hearing date on April 22, 2025, to approve increase to the water, recycled water and wastewater rates and charges to be effective July 1, 2025, and direct staff to issue the Proposition 218 notice. Adopt resolutions to establish a procedure for ratepayer and property owner objections to proposed rates, to create a procedure to exhaust administrative remedies as a prerequisite to later litigating the approved rates.

2. Defer approval
Defer approval of the 2025 cost-of-service studies and the July 1, 2025, changes to water, recycled water and wastewater rates and charges and provide direction to staff on revisions necessary before bringing the study and revised notice back to the City Council and the CMWD Board for consideration.

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Next Steps
Upon receiving direction from the City Council and the CMWD Board, staff will begin the required customer notification process within the following timeline:

Feb. 12, 2025 Final preparation of the required notification and address list; printing of mailer (approximately 35,000 copies)
Feb. 18, 2025 Required notifications are mailed informing customers of the April 22, 2025, public hearing for the CMWD Board and City Council to consider adoption of the rate changes proposed by the 2025 cost of service studies for potable and recycled water, and wastewater. Required 45- day public notification period begins.

April 22, 2025 Public hearing for the CMWD Board/City Council to consider adoption of the rate changes proposed by the 2025 cost of service studies for potable and recycled water, and wastewater
July 1, 2025 New rates from the 2025 cost of service studies for potable and recycled water and wastewater will go into effect if approved by the CMWD Board and City Council on April 22, 2025.

If they are approved, the proposed rates will go into effect July 1, 2025, Jan. 1, 2026, and Jan. 1, 2027.

Environmental E valuation
This informational item and the actions proposed do not constitute a project within the meaning of the California Environmental Quality Act under Public Resources Code Section 21065 because it has no potential to cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment.

Exhibits

1. City Council resolution setting public hearing

2. City Council resolution establishing objection procedures

3. CMWD Board resolution setting public hearing

4. CMWD Board resolution establishing objection procedures

5. Draft public hearing notice

6. Carlsbad Municipal Water District water service area map

7. City of Carlsbad wastewater service area map
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RESOLUTION NO. 2025-047

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING AND FILING THE 2025 WASTEWATER COST OF SERVICE STUDY, SETTING A PUBLIC HEARING FOR APRIL 22, 2025, AT 5 P.M.,

TO APPROVE INCREASES TO RATES FOR WASTEWATER SERVICES EFFECTIVE JULY 1, 2025, AND DIRECTING THE CITY MANAGER OR DESIGNEE TO ISSUE

WRITTEN NOTICE OF THE PUBLIC HEARING
WHEREAS, the City of Carlsbad provides wastewater collection services to approximately two thirds of the City's population and is responsible for the collection and conveyance of sewer discharges to the Encina Water Pollution Control Facility; and
WHREAS, the City and the Carlsbad Municipal Water District, or CMWD, solicited responses to its 2019 Utilities Cost of Service Study Request for Proposals and received four responses, and after an evaluation determined that Carollo Engineers, Inc., was the most qualified consultant; and WHEREAS, the City Council and CMWD Board authorized a professional services agreement with Carollo Engineers, Inc., to develop a comprehensive cost-of-service study, including the City's wastewater cost of services; and
WHEREAS, the City of Carlsbad's Final Wastewater Cost-of-Service Study dated January 2025 provides a revenue requirement analysis, cost of service analysis, and a rate design process, including recommended adjustments for wastewater rates; and
WHEREAS, the City is proposing wastewater service rate increases effective July 1, 2025, Jan. 1, 2026, and Jan. 1, 2027, consistent with the Final Wastewater Cost-of-Service Study dated January 2025; and
WHEREAS, the California Constitution , Article XIII D, section 6, or Proposition 218, requires the City to hold a majority-protest public hearing on any proposed new or increased rates and fees and mail a written notice at least 45 days prior to the public hearing to the record owners of each identified parcel upon which the fees or charge for imposition is proposed .

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:

1. That the above recitations are true and correct.

2. The Final Wastewater Cost-of-Service Study dated January 2025 (Attachment A) is approved by the City Council.

3. That the City Council of the City of Carlsbad hereby sets a majority-protest public hearing for Tuesday, April 22, 2025, at 5 p.m.

4. That the City Manager of designee is directed to issue written notice of the public hearing.

5. That approving a cost study, setting of a majority-protest public hearing, and sending written notice of the public hearing do not constitute a project within the meaning of the California Environmental Quality Act under Public Resources Code Section 21065 because it has no potential to cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment.

PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Board of Directors of the Carlsbad Municipal Water District of the City of Carlsbad, California, and the City Council of the City of Carlsbad, California, on the 11th day of February 2025, by the following vote, to wit:

AYES:

NAYS:

ABSTAIN:

ABSENT:

Blackburn, Bhat-Patel, Acosta, Burkholder, Shin.

None.

KEITH BLACKBURN, MAYOR

CITY OF CARLSBAD
Wastewater Cost-of-Service Study
2025 Wastewater Cost-of-Service Study
FINAL / January 2025
Attachment A
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Contents
SECTION 1 INTRODUCTION 1

1.1 Study Purpose and Key Drivers 1

1.2 Overview of the Rate Setting Process 2

1.2.1 Revenue Requirement Analysis 2

1.2.2 Cost of Service Analysis 4

1.3 Project Findings and Recommendations 4
SECTION 2 INPUTS AND ASSUMPTIONS 7

2.1 Growth and Wastewater Usage 7

2.2 User Rate Categories 8
SECTION 3 REVENUE REQUIREMENT ANALYSIS 9

3.1 Fiscal Policies 9

3.2 Operating Revenues 10

3.3 Operations and Maintenance Expenditures 11

3.4 Capital Improvement Program Funding 11

3.5 Recommended Revenue Requirements 13
SECTION 4 COST-OF-SERVICE ANALYSIS 15

4.1 Revenue Needs 15

4.2 Functional Allocation 16

4.2.1 Functional Allocation Factors 17

4.2.2 Functional Allocation Results 18
SECTION 5 RATE DESIGN ANALYSIS 20

5.1 Customer Characteristics 20

5.1.1 Class Flow and Loading Assumptions 22

5.2 Unit Cost Calculation 27

5.3 Rate Design 27

5.3.1 Class Unit Costs per HCF Discharges 27

5.3.2 Customer Class Rate Calculations 30

5.3.3 Proposed Rates 31
SECTION 6 ALTERNATIVE OPTION 32

6.1 Bond Issuance 32

6.2 Recommended Revenue Requirements – Alternative Option 32

6.3 Proposed Rates – Alternative Option 34

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Appendices

APPENDIX A PROJECTED O&M

APPENDIX B CAPITAL IMPROVEMENT PLAN

APPENDIX C REVENUE REQUIREMENT ANALYSIS

APPENDIX D FUNCTIONAL ALLOCATION

APPENDIX E RATE CALCULATIONS

APPENDIX F PROJECTED FLOW AND LOADS

APPENDIX G PROJECTIONS FOR ALTERNATIVE OPTION
Tables
Table 1 Proposed Wastewater Rates by Customer Class 6
Table 2 Escalation Factors 7
Table 3 Current Rate Revenues (in millions) 10
Table 4 Offsetting Revenues (in millions) 10
Table 5 Operating Expenditures (in millions) 11
Table 6 Capital Improvement Plan Expenditures (in millions) 12 Table 7 Capital Improvement Plan Funding (in millions) 13 Table 8 Revenue Requirement Summary (in millions) 14
Table 9 Expenditures and Offsetting Revenues (in millions) 15 Table 10 Functional Allocation Factors 17
Table 11 CIP Functional Allocation (in millions, 2024 Dollars) 18 Table 12 O&M Functional Allocation (in millions) 18
Table 13 Revenue Requirements Functional Allocation (in millions) 19 Table 14 Wastewater Flow Mass Balance – FY 2021/22 Data 23 Table 15 Wastewater BOD Mass Balance – FY 2021/22 Data 24 Table 16 Wastewater TSS Mass Balance – FY 2021/22 Data 25 Table 17 Expected Billed Units by Customer Class for FY 2024/25 26 Table 18 Unit Cost per Billable Constituents 27
Table 19 Group I Unit Cost per HCF Calculation 28
Table 20 All Classes Unit Cost per HCF Calculation 29
Table 21 Group I Monthly Rate Calculation 30
Table 22 Rate per HCF of Water Consumption Calculation 30 Table 23 Schools Rates Calculation 30
Table 24 Proposed Wastewater Rates by Customer Class 31 Table 25 Alternative Option – Bond Summary 32
Table 26 Alternative Option with Bond Funding – Revenue Requirement Summary (in millions) 33
Table 27 Alternative Option with Bond Funding – Proposed Wastewater Rates by Customer Class 34
Table 28 Comparison of Rate Revenue Increases for Baseline Option to Alternative with Additional Bonds 35
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Figures
Figure 1 Cost of Service Rate Study Process 2
Figure 2 Single Family Bill Comparison 35
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Abbreviations
ACFR Annual Comprehensive Financial Report
ADU Accessory Dwelling Unit
BOD biological oxygen demand
Carlsbad City of Carlsbad
Carollo Carollo Engineers, Inc.

CIP capital improvement program
DSCR Debt Service Coverage Ratio
EDU Equivalent Dwelling Unit
EWA Encina Wastewater Authority
EWPCF Encina Water Pollution Control Facility
FYE Fiscal Year Ending
gpd gallons per day
HCF hundred cubic feet
MFR Multi-Family Residential
mgd or
MGD
million gallons per day
mg/L milligrams per liter
O&M Operation and maintenance
SFR Single Family Residential
SRF State Revolving Fund
Study Cost of Service Study
TSS total suspended solids
WEF Water Environment Federation
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SECTION 1 INTRODUCTION
The City of Carlsbad (Carlsbad) owns a wastewater system that provides wastewater service to roughly two thirds (2/3) of the City’s population and is responsible for the collection and conveyance of sewer discharges to the Encina Water Pollution Control Facility (EWPCF). The EWPCF is jointly owned by the cities of Carlsbad, Vista, Encinitas, the Buena Sanitation District, Vallecitos Water District, and Leucadia Wastewater District and provides full secondary treatment, sludge handling, and disposal through a deep ocean outfall that extends along the ocean floor to a point 1.5 miles offshore.

The City’s wastewater service customer base includes approximately 24,000 sewer accounts, consisting of single family residential, multi-family residential, commercial, other, breweries, industrial, and schools. The City maintains a separate wastewater enterprise fund with its own operating and capital reserves. The wastewater user rates are designed to distribute the cost of the operation and improvement of the City’s collection system and the City’s share of the EWPCF equitably among all users in accordance with California legal requirements as defined by Proposition 218.

1.1 Study Purpose and Key Drivers
Carlsbad retained Carollo Engineers, Inc. (Carollo) to perform a comprehensive Cost of Service Study (Study) of the City’s potable water, recycled water, and wastewater systems and to develop a rate plan for the upcoming 5-year period, Fiscal Year Ending (FYE) 2025 through FYE 2029. The City has historically set rates on a calendar year basis, and the rates calculated in this assume that schedule is retained. However, to align with the proposed increased for water and recycled water rates, implementation of the first increase will be delayed to July 1, 2025.

Carollo’s analysis was guided by the policies and practices of the City, industry best practices for cost-of- service analyses as outlined by the Water Environment Federation (WEF) updated Manual of Practice No. 27, Financing and Charges for Wastewater Systems, and requirements for establishing wastewater rates within the State of California. This report summarizes the findings and recommendations of the cost- of-service and rate analysis for the City’s wastewater system. The findings of the cost-of-service analysis for potable and recycled water are provided by Carollo in a separate report.

Several matters influence the need to conduct a comprehensive cost-of-service rate design study.

Identifying these matters upfront defines the strategic intent needed to complete this project successfully.

These issues include the following:
 The State of California requires that all utility rates meet the cost-of-service requirements imposed under Proposition 218. These principles underlie the approach to rate setting such that all customers are charged rates that are proportional to the cost of providing service attributable to a parcel based on the demands that each customer class places on the system.  Although there are others, the main factor driving the need for increased rate revenues for this Study is funding of the capital improvement program (CIP). Based on current projections, the City and the EWPCF have identified a total of $122.3 million (2024 dollars) in necessary capital improvements over the next 5 years. The City’s share of the EWPCF projects is expected to total approximately half of the City’s total CIP expenses over this time period.

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 In addition to anticipated CIP expenditures, the recent high inflation rates have affected operating costs of utilities dramatically in the last few years. Although the inflation rate is expected to return to a more historically “normal” rate during the Study period, FYE 2024 budget was carefully reviewed and updated to develop the appropriate 5-year financial plan.

1.2 Overview of the Rate Setting Process
Rate analyses should be performed periodically so that revenues from rates adequately fund utility operations and maintenance (O&M) and capital investments. Additionally, in California, water and wastewater rates must adhere to the cost-of-service requirements imposed by the State Constitution.

Proposition 218 requires that property related fees and charges, including wastewater rates, do not exceed the reasonable proportional cost of providing the service.

In addition to adhering to state requirements, Carollo’s rate-setting methodology is consistent with industry guidelines described in the WEF Manual of Practice 27: Financial and Charges for Wastewater Systems (MOP 27).

The cost-of-service analysis presented within this report consists of the following three interconnected processes:

Figure 1 Cost of Service Rate Study Process
While the process is described in a linear step by step approach, it is better understood as an iterative process where the ultimate objective is to balance revenues with costs in an equitable manner for customers. These three processes will form the basis for the rate analyses presented within this report.

1.2.1 Revenue Requirement Analysis
The revenue requirement analysis is a comprehensive test of a utility’s fiscal health, examining the adequacy of current revenues under existing rates and forecasted demands to its forecasted future O&M and capital funding needs. This analysis sets the basis for rate planning and reviews the viability of a utility’s revenues against expenses, debts, and reserve policies.

Revenue Requirement Analysis
Compares existing revenues of the utility to its operating, capital, and policy driven costs to establish the adequacy of the existing cost recovery levels.

Cost of Service Analysis
Identifies and apportions annual revenue requirements to functional rate components based on its application of the utility system.

Rate Design
Considers both the level and structure of the rate design to collect the distributed revenue requirements from each class of service.

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If revenue projections under existing rates do not meet forecasted requirements, rate revenue increases are recommended until the tests are passed. The study analyzed the revenue requirements to test the fiscal health of the City’s wastewater system, evaluated the adequacy of current rates and charges, and set the basis for the 5-year rate plan for the City. No bond issuance was assumed during the Study period.

1.2.1.1 Revenue Requirements Components
Revenue requirements are the summation of expenses or costs for providing wastewater services, including collecting and treating sewage, and handling treated effluent to the environment. They are determined on an annual basis, and they include:
 O&M: Salaries and benefits, chemicals, power, vehicles, equipment, supplies, etc. Some costs vary by the volume of treatment such as chemicals and power, but other costs are fixed and independent of volume such as salaries and vehicles.
 Capital Improvements and Financing: Design and construction of new and replacement infrastructure, including labor for City employees and fees for consultants and contractors that perform this work, along with debt service payments, bond issuance costs, commercial paper fees, etc. including debt coverage. Capital requirements include the City’s internal collection assets as well as the City’s share of costs for Encina.
 Encina Operating Costs: Wastewater treatment and effluent disposal costs incurred by Encina Wastewater Authority (EWA).
 Financial Policies: Maintenance of financial policies, such as minimum reserve balances, which are supported by user rates.

1.2.1.2 Revenue Requirement Tests
There are three sufficiency tests that can be used to define the annual revenue requirement: (1) operating income, (2) debt coverage, and (3) reserves. These sufficiency tests are commonly used to determine the amount of annual revenue that must be generated from an agency’s rates.  The cash flow sufficiency test examines whether a utility is generating enough revenues to meet O&M expenses, debt service payments, policy driven additions to working capital (and reserves), miscellaneous capital outlays, replacement funding, and rate- funded- capital expenditures. It requires a net positive cash flow at the end of each fiscal year. When there is a cash flow deficit, an increase in rate revenues is recommended. However, when ending reserve balance is sufficient, the rate increase can be reduced or omitted to mitigate rate payer impacts.  The debt service coverage test assesses a utility’s ability to meet their annual debt service obligations. Bond issuances regularly include a stipulation that the agency must maintain sufficient cash flows to meet annual debt service payments plus an additional amount by its covenant. Typical debt service coverage ratio (DSCR) target ranges from 1.10 to 1.40 times annual debt service payment, depending on an agency’s specific financial situation and the type of debt instrument issued. This means that for a utility’s every $100 in debt obligation, it needs to generate $110 to $140 in net operating income. When the calculated DSCR falls below the target, an increase in rate revenues is recommended. Based on the City’s State Revolving Fund loan agreement with the California State Water Resources Control Board, the DSCR target for the wastewater State Revolving Fund (SRF) loan is 1.20.

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 Reserves Test measures if a utility is maintaining its reserve target to ensure continuation of their operations and any financial obligations during unexpected revenue shortfalls. This test is not legally binding under Proposition 218 but provides an assurance for a utility’s financial stability. The reserve target is based on the polices adopted by the City Council. When the end of the year balance falls before the target, an increase in rate revenues is recommended. However, reserve targets could be reduced in some cases in order to mitigate rate payer impacts.

1.2.2 Cost-of-Service Analysis
This step builds a link between the City’s cost of wastewater service and the proposed rates for each customer. After determining the revenue requirement, this step outlines the cost to collect and treat each unit of sewage to serve each customer.

This process reviews each item in the system’s budget and allocates the items based on what function is served. For example, some cost items support the collection or treatment of wastewater while other costs are incurred to provide customer service or to fund infrastructure maintenance. Organizing the budget in terms of end function allows the creation of a nexus between the budget item and the rate. This process bridges the costs incurred by the City and the unique and varied benefits delivered to each customer.

With respect to wastewater, there are two methods outlined in Manual of Practice No. 27 for distributing these costs: Wastewater Flow and Wastewater Loading Strengths. Both are considered fair and equitable because both approaches distribute revenue requirements to each class in proportion to their respective contribution to the system cost components. This study’s cost of service analysis uses the Base-Extra Capacity method which uses a three-part allocation process:

1. Functionalization: Annual costs are allocated by utility functions, such as collections, treatment, and customer service.

2. Rate Components: Wastewater facilities are designed and operated to collect wastewater and treat it to remove pollutants prior to reuse or disposal. The costs can be tracked in rate components such as collection flow, treatment flow, biochemical oxygen demand (BOD), total suspended solids (TSS), and customer service. These services are the basis for allocating the functionalized costs to cost components.

3. Customer Class: Cost components are distributed to customer classes in proportion to their burden on the system based on their estimated wastewater flows and loading.

1.3 Project Findings and Recommendations
Based on the analysis projections, the City will need to increase wastewater rate revenues to implement identified capital improvement projects and, to a lesser extent, to keep pace with inflationary increases to O&M costs. While the use of reserves to fund a share of capital projects will help to mitigate the necessary level of rate increases, significant rate increases will still be required due to the magnitude of the capital improvements that are necessary. The main analysis discussed in this report assumes that the City will not be issuing bonds to support the CIP projects during the Study period, in line with the City’s typical capital funding practices. An alternative analysis, assuming the use of bonds, is included in the last section of the report. It is recommended that the City review its revenues and expenditures on an annual basis to verify that the implemented rates are adequately recovering costs.

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The key findings and recommendations are as follows:
 Proposed Rate Increases: Given the considerable capital improvement projects for the study period (FYE 2025 – FYE 2029), increases of 14 percent per year through FYE 2027 are proposed with projected increases at 7-percent per year for FYE 2028 and FYE 2029.  Retain the Current Rate Structure: The proposed user rates largely retain the City’s current rate structure and will include a cost-of-service adjustment on July 1, 2025 based on the updated cost-of- service allocations followed by across the board increases on January 1, 2026 and January 1, 2027.  Rate Implementation Timing: Subsequent to the development of the rates proposed in this report, the City opted to delay rate increased until July 1, 2025. This will allow time to update the customer billing system to include the pass-through charges that have been developed for water rates. Rather than recalculating rates, the implementation of the rates developed based on a January 1, 2025 increase will be delayed by six months. The City will resume its typical calendar year rate increases starting January 1, 2026. The delay in 2025 will result in decreased revenues of approximately $1.8 million which will be covered with reserves. Future increases, beyond FYE 2027 may need to be higher than those presented to replenish the reserves.
 Projected Reserves: The City’s utilities reserve policy sets a minimum reserve target based on components for 90-days of O&M costs, 1 year of annual debt service payments, 25-percent of the five year annual average CIP, a rate stabilization reserve set at minimum of 5-percent of annual rate revenues, and 1-percent of the system’s replacement value in an emergency reserve ($4.4 million for FYE 2025). The policy also includes general guidance to maintain total reserves equivalent to between 180 and 365 days of O&M expenditures. Due to the large anticipated CIP expenditures, the City will draw on its existing reserves to fund projects, resulting in rate increases lower than those that would be otherwise necessary. This use of reserves will result in total reserves being drawn below the minimum amount defined by the components, however they will remain within the 180 to 365 days of O&M range for all years except FYE 2028. Longer-term projections indicate that reserves would rebound above the minimum level by FYE 2030.

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Table 1 outlines the calculated wastewater charges for FYE 2025 through FYE 2029 for Option 1.

Table 1 Proposed Wastewater Rates by Customer Class
Customer Class Current Rate
FYE 2025
Proposed
Delayed to Jul. 1
2025
FYE 2026
Proposed
Jan. 1 2026
FYE 2027
Proposed
Jan. 1 2027
Increase(1) 14.00% CoS
Adj. 14.00% 14.00%
Group I - Residential - Monthly Flat Rate
SFR $51.74 $59.85 $68.22 $77.77
SFR w/ Second Dwelling Unit 77.60 89.77 102.33 116.66
Group I - Residential - Rates per HCF
MFR $5.95 $6.89 $7.85 $8.95
Mobile Home 5.95 6.89 7.85 8.95
Commercial - Rates per HCF
GROUP II - Commercial 2 $5.06 $6.06 $6.91 $7.88
GROUP III - Commercial 3 7.21 8.01 9.13 10.41
GROUP IV - Commercial 4 12.61 12.90 14.71 16.76
Industrial Pretreatment Class III 8.14 9.03 10.29 11.73 Group V - School - Monthly Rates per Student
Elementary School (per student) $1.02 $1.18 $1.34 $1.53 Junior High School (per student) 1.53 1.77 2.01 2.30
High School (per student) 2.03 2.36 2.68 3.06
Boarding School (per student) 10.56 11.98 13.65 15.56
Breweries - Rates per HCF
B1 - Brewery without a restaurant and hauls waste
for outside treatment $5.06 $6.06 $6.91 $7.88
B2 - Brewery without a restaurant that does not haul
waste for outside treatment 14.06 14.63 16.67 19.01
B3 - Brewery with a restaurant and hauls waste for
outside treatment 12.61 12.90 14.71 16.76
B4 - Brewery with a restaurant that does not haul
waste for outside treatment 17.34 17.76 20.25 23.08
Notes:

HCF – hundred cubic feet; MFR – multi family resident; SFR – single family resident. (1) P roposed rates for FYE 2025 include a cost- of-service adjustment and increases for specific rates vary from the 14.0- percent overall rate revenue increase.

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SECTION 2 INPUTS AND ASSUMPTIONS
Financial, operational, and billing information provided by the City serve as the backbone of the revenue requirement and cost-of-service analysis. The projections developed for this analysis are based on several sources of information including the budgeted revenues and expenditures for FY 2023/24, actual revenues and expenditures from several prior fiscal years, EWPCF charge records, and other pertinent information such as the Council approved Utilities Reserve Policy. The analyses were completed by adding supplemental information and calculations to the City’s existing financial model.

2.1 Growth and Wastewater Usage
The escalation factors used in this analysis are based on a review of both long-term and recent cost escalation factors from the Engineering News-Record Index Construction Cost Index, an industry benchmarking resource, and based on input from Carlsbad staff based on realized cost escalations. Other costs were escalated based on recent and specific cost trends. A customer growth escalation factor, used to project revenues, wastewater accounts, and wastewater discharge, is included based on the City’s planning growth estimates. These factors are presented in Table 2.

Table 2 Escalation Factors
Escalation Factor FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 General Inflation 4.0% 2.5% 2.5% 2.5% 2.5%
Labor Inflation 4.0% 3.0% 3.0% 3.0% 3.0%
Labor - PERS (Normal Cost) 13.2% 13.2% 13.2% 13.2% 13.2% Labor - PERS (UAL) 17.0% 16.8% 16.6% 16.5% 16.3%
Labor - Health Insurance 6.4% 6.1% 5.9% 5.7% 5.7%
EWA Operating 3.0% 3.0% 3.0% 3.0% 3.0%
Chemicals Inflation 4.0% 4.0% 4.0% 4.0% 4.0%
Utilities Inflation 4.0% 4.0% 4.0% 4.0% 4.0%
Depreciation Funding 1.2% 1.2% 1.2% 1.2% 1.2%
Interest Earnings 2.5% 2.5% 2.5% 2.5% 2.5%
Customer Demand Growth 0.6% 0.2% 0.4% 1.0% 1.0%
Gnrl Infltn + Cstmr Dmnd Grwth 4.6% 2.7% 2.9% 3.5% 3.5% No Annual Increase 0.0% 0.0% 0.0% 0.0% 0.0%
One Time Expense -100.0% -100.0% -100.0% -100.0% -100.0%

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2.2 User Rate Categories
Carlsbad classifies its wastewater customers as follows:
 Group I:
» SFR.
» Single family residential with second dwelling unit.
» Mobile Home.
» Multi-Family Residential.
 Group II - Commercial 2.
 Group III - Commercial 3.
 Group IV - Commercial 4.
 Group V - Schools:
» Elementary Schools.
» Junior High Schools.
» High Schools.
» Boarding Schools.
 Group VI - Large volume (no accounts).
 Breweries:
» B1 - Brewery without a restaurant and hauls waste for outside treatment. » B2 - Brewery without a restaurant that does not haul waste for outside treatment. » B3 - Brewery with a restaurant and hauls waste for outside treatment. » B4 - Brewery with a restaurant that does not haul waste for outside treatment.  Industrial pretreatment class III.

SFR customers are charged a fixed monthly fee. SFR with an accessory-dwelling unit (ADU) has a higher fixed monthly fee to account for the additional discharges associated with the ADU as compared to a normal SFR account. All commercial groups and group VI customers are subject to a volumetric charge based on water usage. Schools are charged based on the number of students, as that influences a school’s impact on the wastewater system.

The volumetric charges vary between customer classes based on each class’s assumed flow and loadings.

Wastewater customers’ effluent discharges are not individually metered; instead, each user’s discharges are estimated using wastewater billing records and/or metered water consumption records and assumed strength characteristics. The City’s billing system has a detailed listing of historic water consumption by customer, property use classification, and month.

Commercial customers are grouped into Group II, Group III and Group IV depending on their discharge characteristics. Customers in the Brewery category are split into separate rate classes based on whether or not they also operate as a restaurant, and whether they haul their brewing waste offsite for treatment.

The Group VI - Large Volume rate category is currently not in use as the only customer in this category is located outside the service area and no longer has a business presence within the City.

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SECTION 3 REVENUE REQUIREMENT ANALYSIS
The revenue requirement analysis is a comprehensive test of a utility’s fiscal health, scrutinizing the adequacy of current revenues, and setting the basis for rate planning. It reviews the utility’s revenues, expenses, debts, and reserve policies, and other requirements assessing the viability of each metric going forward. Where cash flows and balances are insufficient, the revenue requirement analysis determines the needed additional cash flows to meet all funding goals.

The City’s FYE 2024 budget expenses serve as the base year for O&M costs. Furthermore, Carollo collected information related to current cash and restricted fund balances and policies, the budgeted capital improvement program expenditures, and all other operating and non-operating future revenues and expenditures.

Once the revenue requirement is established by compiling all of the City’s cost drivers, three tests are utilized to define the annual revenues necessary.
 The Cash Flow Sufficiency Test looks for a net positive cash flow at the end of each fiscal year to examine whether a utility is generating enough revenues to meet O&M expenses, debt service payments, policy driven additions to working capital (and reserves), miscellaneous capital outlays, replacement funding, and rate funded capital expenditures. When revenues exceed expenses, an increase in rate revenues is recommended.
 The Debt Service Coverage Test assesses a utility’s ability to meet their annual debt service obligations. Bond issuances regularly include a stipulation that the agency must maintain sufficient cash flows to meet annual debt service payments plus an additional amount by its covenant. Typical debt service coverage ratio (DSCR) target ranges from 1.25 to 1.40 times annual debt service payment, depending on an agency’s specific financial situation and the type of debt instrument issued. This means that for a utility’s every $100 in debt obligation, it needs to generate $125 to $140 in net operating income. When the calculated DSCR falls below the target, an increase in rate revenues is recommended. The City’s DSCR requirement is 1.20. The main analysis presented in this report assumes that the City has no plan to issue additional debt other than the planned State Revolving Fund (SRF) debt service loans for FYE 2025 and FYE 2026.  The Reserves Test determines whether sufficient cash balances are maintained to ensure continuation of their operations and any financial obligations in the event of unforeseen costs or revenue shortfalls.

This test is not legally binding but provides an assurance for a utility’s financial stability. When the end of the year balance falls before the target, an increase in rate revenues is recommended. However, reserve targets can be reduced in some cases in order to mitigate rate payer impacts.

3.1 Fiscal Policies
Utility fund policies are intended to be implemented as a measure of safety and security against future events that may negatively impact the utility’s financial health. Fund balances can address variability and timing of expenditures and receipts, as well as occasional disruptions in activities, costs, or revenues. The general objectives of these policies are to facilitate stable and predictable rates and funding sources, along with equitable recovery of costs from customers as they are being incurred (or accrued).

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Overall, a utility’s fund policies are a collection of rules and guidelines. The collective use of individual funds will allow the utility to minimize its exposure to revenue shortfalls and to mitigate the rate increases that would otherwise be necessary to fund the CIP. As a part of the Revenue Requirement Analysis, the utility’s fiscal policies were incorporated to assess their impact on rates in relation to capital funding and reserves.

The City’s utilities reserve policy sets a minimum reserve target based on components for 90-days of O&M costs, 1 year of annual debt service payments, 25-percent of the five year annual average CIP, a rate stabilization reserve set at 5-percent of annual rate revenues, and 1-percent of the system’s replacement value in an emergency reserve ($4.4 million for FYE 2025). The policy also includes general guidance to maintain total of these component reserves equivalent to between 180 and 365 days of O&M expenditures.

3.2 Operating Revenues
Operating revenues are projected from budgeted revenues based on the escalation factors shown in Table 2. Table 3 below shows the projected user rate revenues based on the current rates and prior to the inclusion of any rate increases for FYE 2025 through FYE 2029. This base level of rate revenue is expected to increase modestly over the study period based on the expected level of growth in customer accounts.

Table 3 Current Rate Revenues (in millions)
FYE 2024
(budget) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Commodity Usage $23.557 $25.907 $25.962 $26.059 $26.316 $26.586 Sewer Pre-Treat 0.012 0.012 0.013 0.013 0.013 0.014 Total Wastewater Rate Revenues $23.569 $25.920 $25.974 $26.072 $26.329 $26.599 Notes:
(1) Li ne or column totals may not tie due to rounding.

In addition to rate revenues, the City also receives other offsetting revenues that can be used to decrease the amount of revenues needed from user rates. Table 4 summarizes the projected offsetting revenues for the wastewater fund.

Table 4 Offsetting Revenues (in millions)
FYE 2024
(budget) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Fines & Forfeitures $0.120 $0.121 $0.121 $0.121 $0.123 $0.124 Income from Property & Investments(1) 0.744 0.503 0.205 0.177 0.176 0.156 Interdepartmental 0.120 0.125 0.128 0.131 0.134 0.138 Other Revenues 0.067 0.070 0.071 0.073 0.075 0.077 Total Offsetting Revenues $1.051 $0.819 $0.525 $0.503 $0.508 $0.495 Notes:
(1) Includes interest earned on the City’s fund balance based on the rate implementation. (2) Li ne or column totals may not tie due to rounding.

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3.3 Operations and Maintenance Expenditures
The cost-of-service analysis utilizes the wastewater fund’s FYE 2024 budget as the basis for forecasting future revenue needs. O&M expenditures are assumed to increase commensurate with cost inflation and projected cost increases associated with increases in wastewater flows due to growth and higher treatment standards. Revenues and expenses are projected for future fiscal years using the annual escalation factors shown in Table 2. Table 5 presents a summary of the projected operating expenditures for FYE 2025 through FYE 2029. Detailed O&M projections are included in Appendix A.

Table 5 Operating Expenditures (in millions)
FYE 2024
(budget) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Personnel $3.322 $3.608 $3.726 $3.848 $3.973 $4.102 Encina (EWPCF) Operations 6.000 6.180 6.365 6.556 6.753 6.956 Maintenance & Equipment 4.100 3.981 4.086 4.194 4.305 4.419 Capital Outlay 0.025 0.026 0.026 0.027 0.028 0.028 Budget Adjustment (1.425) (1.456) (1.491) (1.528) (1.566) (1.605) Total Operating Expenses $12.022 $12.340 $12.713 $13.097 $13.492 $13.900 Notes:
(1) Li ne or column totals may not tie due to rounding.

3.4 Capital Improvement Program Funding
The City completed a wastewater master plan update in 2019 as well as an asset management master plan and a SCADA master plan. The plans developed capital improvement strategies, and the City has continually worked to refine the CIP based on project execution timelines, system needs, and funding availability. The City categorizes its capacity expansion-related projects as ‘connection projects’ and replacement-related projects as ‘replacement projects.’ Along with the City identified collection system projects, the EWPCF expects to continue its own reinvestment through rehabilitation and replacement projects.

The City has budgeted $53.22 million (in 2024 dollars) for 15 replacement projects for the next 5 years. In addition, there are projects associated with the EWA’s general improvement projects and planned asset replacements totaling approximately $40.69 million. The City also has budgeted $13.56 million for 7 connection (expansion related) projects for the next 5 years. Table 6 shows the projected CIP project costs for FYE 2025 through FYE 2029. The capital costs develop by the City are adjusted to the midpoint of construction. Based on discussion with the City, the funding analysis includes additional 2.0-percent annual cost escalation factor for FYE 2025 and FYE 2026 to account for increases in construction and contracting costs. Project level detail of the CIP is included in Appendix B.

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Table 6 Capital Improvement Plan Expenditures (in millions) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Connection Fee Fund Projects $1.421 $1.312 $2.107 $4.700 $2.031 Replacement Fund Projects 6.598 13.102 9.325 12.615 11.580 Encina Projects 8.450 8.003 7.757 7.952 8.529
Total Sewer Projects $16.469 $22.417 $19.189 $25.267 $22.140 Total Escalated Cost $16.798 $25.187 $22.316 $30.412 $27.581 Notes:
(1) Li ne or column totals may not tie due to rounding.

The City frequently adjusts this CIP based on engineering and planning needs for the wastewater system.

Prior to the completion of the wastewater master plan and asset management master plan, the City’s CIP spending had been limited. The City continued to set aside funds for capital projects throughout that time in anticipation of increased investments, however, not to the level required by the wastewater master plan. While the use of these reserves to fund a share of capital projects will help to mitigate the necessary level of rate increases, significant rate increases will still be required due to the magnitude of the capital improvements that are necessary based on the recommendations of the sewer master plan and on the EWPCF’s CIP needs.

As shown in Table 6, the escalated CIP is projected to total approximately $122.29 million over the next 5 years. Table 7, on the next page, illustrates the anticipated funding sources to support these capital projects. At the beginning of FYE 2025, the City is expected to have a combined balance of $6.143 million between connection fee fund and replacement fund. Due to the level of capital spending needed, capital reserves will be drawn below the minimum of 25-percent of five year rolling average costs starting in FYE 2025 as they are spent to mitigate rate increases. Longer-term projections show the capital reserves rebounding above the minimum level in FYE 2030.

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Table 7 Capital Improvement Plan Funding (in millions)
FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Escalated Capital Costs (escalated) $16.798 $25.187 $22.316 $30.412 $27.581 Amount to be Rate Funded 4.594 14.868 12.615 21.131 21.278 Amount to be Funded with Reserves and
Loans 12.204 10.319 9.700 9.281 6.303

Beginning Capital Funds Balance
(Connection Fee and Replacement) $6.442 $4.567 $4.101 $3.528 $0.152 Transfers and Replacement Funding 5.361 5.423 5.486 5.549 5.612 Connection Fees 0.401 0.329 0.114 0.204 0.538
Loan Proceeds 0.500 4.101 0.000 0.000 0.000
Use of Replacement Funds (12.204) (10.319) (9.700) (9.281) (6.303) Year-End Transfer from Operating Fund 4.067 0.000 3.528 0.152 2.765 Year-End Balance $4.567 $4.101 $3.528 $0.152 $2.765 Notes:
(1) Li ne or column totals may not tie due to rounding.

An important aspect of the capital funding plan is that the City intends to draw on both existing replacement reserves and existing connection fee reserves to fund capital projects. Since the implementation of the City’s existing connection fees, reduced volumetric discharges due to conservation and changes in planned developments have reshaped the CIP projects that are necessary to serve new users. While some of the projects initially conceived and included in the connection fees have changed, other projects have been modified or expanded to take their place. Further, replacements and upgrades to the City’s existing infrastructure are required to maintain the assets that serve new users and to maintain the excess system capacity that will be needed to serve users that have not yet connected to the system. To these ends, the City plans to allocate existing connection fee reserves, as well as a share of future connection fees, to pay for replacement projects that have an excess capacity component.

3.5 Recommended Revenue Requirements
Rate revenue increases will be necessary in order to meet the City’s projected revenue requirements, with funding of the capital program as the primary driver. Table 8, on the next page, summarizes the revenue requirement projection. Additional details of the revenue requirement calculations are shown in Appendix C.

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Table 8 Revenue Requirement Summary (in millions)
FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Pre-Rate Increase
Rate Revenues without Increases $25.907 $25.962 $26.059 $26.316 $26.586 Revenues from Prior Years’ Increases 0.000 3.635 7.807 12.672 15.559 Offsetting Revenues (Inc. Pre Treatment) 0.831 0.538 0.516 0.522 0.509 Revenues $26.738 $30.134 $34.383 $39.510 $42.654
LESS:

Operating Expenditures $13.795 $14.204 $14.625 $15.058 $15.505 One-time Funding (Budget Analysis Amount) (1.456) (1.491) (1.528) (1.566) (1.605) Rate Funded Capital 4.594 14.868 12.615 21.131 21.278 Debt Service (SRF Loan) 0.000 0.000 0.294 0.294 0.294 Replacement Funding 5.361 5.423 5.486 5.549 5.612
Expenses $22.295 $33.004 $31.492 $40.466 $41.084
Cash Flow Surplus/(Deficit) $4.443 ($2.870) $2.891 ($0.956) $1.570 Rate Revenue Increase 14.00% 14.00% 14.00% 7.00% 7.00%
Post-Rate Increase
Revenues from Rate Increases $3.627 $4.143 $4.741 $2.729 $2.950 Less: Rate Increase Delay(1) ($1.814) ($2.072) ($2.371) ($1.365) ($1.475) Adjustment for Implementation Delay(2) ($1.814) $0.000 $0.000 $0.000 $0.000 Total Operating Revenues With Increases $26.738 $32.206 $36.753 $40.874 $44.129 Operating Cash Flows Available for Capital
and Reserves $4.443 ($0.798) $5.261 $0.409 $3.045
Operating Fund Reserve
Beginning Operating Fund Balance $4.546 $4.922 $4.123 $5.856 $6.113 Cash Flow 4.443 (0.798) 5.261 0.409 3.045
Transfers to Capital Reserve (4.067) 0.000 (3.528) (0.152) (2.765) Ending Operating Fund Balance $4.922 $4.123 $5.856 $6.113 $6.393 Ending Capital Fund Balance 4.567 4.101 3.528 0.152 2.765 Combined Ending Balance $9.489 $8.224 $9.385 $6.265 $9.158 Total Days of O&M Costs 281 days 236 days 261 days 170 days 240 days Operating Reserve Days of O&M Costs 130 days 106 days 146 days 148 days 151 days Notes:
(1) Adjustment to account for rate implementation on January 1 of each fiscal year. (2) Adjustment to reflect delay of rate implementation from January 1, 2025 to July 1, 2025. (3) Li ne or column totals may not tie due to rounding.

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SECTION 4 COST-OF-SERVICE ANALYSIS
The purpose of a cost-of-service (COS) analysis is to provide a rational basis for distributing the full costs of wastewater service to each customer in proportion to the demands they place on the system. The COS analysis yields an appropriate method for allocating costs, which could be continued until substantial changes in cost drivers or customer flow or loading patterns occur.

Using a COS analysis, user rates are developed to allocate O&M, debt service, and rehabilitation and replacement costs to system users. Allocating costs begins by developing unit costs for each billable constituent: treatment flow, BOD, TSS, and collections flow. Unit costs are then applied to the flow and loading of each customer category in order to allocate the costs to each customer. The City’s current rate structure was developed using a COS analysis. The overall procedure used to develop the user rates is as follows:
 Revenue Needs. Define the annual revenue that must be recovered from user rates and permit users.  Functional Allocation. Determine the percentage allocation of O&M and capital costs to the billable constituents: treatment flow, BOD, TSS, and collection flow.  Unit Costs. Develop unit costs for each billable constituent by dividing the total cost allocated to that constituent by the total wastewater flow or loadings of that constituent.  Customer Category Rates. Calculate customer rates based on each customer type’s wastewater discharge characteristics.

Note: The cost-of-service analysis values presented and discussed in this section are included for reference in Appendix D.

4.1 Revenue Needs
The revenue needs are defined as the amount of revenues that must be recovered through user rates and industrial user rates in order to cover annual expenditures less any offsetting revenues. Expenditures and offsetting revenues for FYE 2025 are shown in Table 9 below.

Table 9 Expenditures and Offsetting Revenues (in millions) FYE 2025
O&M Expenses $13.795
One-Time Funding (Budget Analysis Amount) (1.456)
Rate-Funded capital 4.594
Debt Service 0.000
Replacement Funding 5.361
Adjustment to Reflect Full Year Increase 3.627
Operating Cash Flows (Available for Capital and Reserves) 4.443 Less: Offsetting Revenues (Inc. Pre Treatment) (0.831)
Rate Revenues Required $29.534
Notes:
(1) Li ne or column totals may not tie due to rounding.

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For FYE 2025, wastewater rates must be set to recover $29.53 million in annual revenue requirements.

Because the calculated rate revenue increases reflected a January 1, 2025 implementation, and will be further delayed to July 1, 2025, the rate revenue requirements for each year include an “Adjustment to Reflect Full Year Increase.” This line item adjusts the required rate revenue to reflect a full year increase to match the full year of projected discharges and customer bills that are used to calculate the rates for each year.

4.2 Functional Allocation
The American Water Works Association (AWWA) defines a two-step process for recovering costs for wastewater services. First, capital and O&M costs should be allocated to applicable functional categories.

A functional category is a primary function of the utility that costs can be allocated to, then recovered based on how customers utilize the system. For this study, four functional categories were assumed as follows:
 Treatment flow costs are associated with the treatment of sewage at the EWPCF based on volume and regardless of strength. The City does not meter sewage discharges. Instead, flows by each customer class are estimated using water consumption. The flow component is measured in assumed flow in HCF.
 BOD costs are associated with providing the transportation and treatment of dissolved organisms within sewage effluent. BOD costs are allocated based on assumed BOD strength in a user class’s discharges. BOD is measured in pounds.
 TSS costs relate to providing the transportation and treatment of solid matter within sewage effluent.

TSS costs are allocated based on assumed TSS strength in a user class’s discharges. TSS is measured in pounds.
 Collection flow costs represent the collection and transportation of sewage discharges to the EWPCF for treatment. The City does not meter sewage discharges. Instead, flows by each customer class are estimated using water consumption. The flow component is measured in assumed flow in HCF.

Once the functional categories have been defined, each operating and capital cost is allocated on a line item basis to one or more of these functional categories. The functional costs are then used to develop unit costs for each category’s billable constituent.

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4.2.1 Functional Allocation Factors
Annual expenditures and off-setting non-rate revenues are allocated on a line-by-line item basis between the functional components outlined in Table 10. The allocation metrics shown above are consistent with industry standards. Items that cannot be reasonably allocated between these functional categories are allocated “As-All-Others” and costs are split proportionally based on the allocation split of all other items.

Table 10 Functional Allocation Factors
Allocation Factor Treatment
Flow BOD TSS Collection
Flow
As All
Other
(Weighted
Average)
Total
Treatment Flow/BOD/TSS 40.3% 28.6% 31.1% 0.0% - 100.0%
Collections - 5.0% 5.0% 90.0% - 100.0%
Staff Allocation - 3.3% 3.3% 60.2% 33.1% 100.0%
Vehicles - 5.0% 5.0% 90.0% - 100.0%
Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% - 100.0% Weighted Average O&M 26.6% 20.6% 22.3% 30.5% - 100.0%
Weighted Average Total Rate Revenue
Requirements 20.8% 17.0% 18.4% 43.8% - 100.0%
Notes:
(1) Li ne or column totals may not tie due to rounding.

The allocation factors shown in Table 10 were determined as follows:

Treatment Flow/BOD/TSS: This allocation factor is used to allocate the ongoing costs the City pays to the EWPCF for wastewater treatment. It represents the estimated average allocation of the City’s EWPCF charges and was determined based on detailed records of the City’s EWPCF invoices by allocating specific invoice elements to Treatment Flow, BOD, and TSS.

Collections: This allocation factor is applied to line item costs that are specifically attributable to the City’s wastewater collection activities. Collections costs are driven primarily by flow, and therefore they are allocated 90 percent to collections flow. The City’s collections staff also spend time and resources reacting to and preventing issues within the collection system that are related to the BOD and TSS carried in the wastewater. These issues include material buildup, pipe degradation, and odor problems among others.

To recognize these activities, a small share of collections costs is allocated to BOD and TSS at 5 percent each.

Staff Allocation: The staff allocation was determined using an analysis of the City’s wastewater staff positions and the typical costs for each position. Operations and maintenance staff as well as asset management staff were allocated to the functional categories using the collections allocation, as their responsibilities relate to the collection system. All other staff costs are allocated to the As All Other category to be redistributed based on the weighted average O&M costs.

Vehicles: The vehicles allocation was determined based on the responsibilities of the staff members who typically utilize City vehicles. These include predominantly operations and maintenance personnel and as such, the majority of vehicle costs are allocated based on the collections allocation and split between Collection Flow, BOS, and TSS.

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Capital Improvement Plan: Costs related to capital improvements are allocated to reflect the proposed CIP over the next 10 years. As shown in Table 11, capital costs for the collection system are assigned to the Collection Flow component. Capital costs for EWPCF projects are split between Treatment Flow, BOD, and TSS based on a typical allocation for municipal wastewater treatment plants. Using the 10-year CIP rather than a single year reflects that CIP projects are long-lived investments and helps to avoid large swings in cost allocations that could result from changes in the types of projects being completed from year-to-year.

Weighted Average – O&M: This allocation reflects the overall allocation of O&M costs.

Weighted Average – Total Revenue Requirements: This allocation reflects the overall allocation of total revenue requirements.

4.2.2 Functional Allocation Results
Table 11 shows the functional allocation of projected O&M costs for FYE 2025. The resulting allocated O&M is then included along with the other revenue requirement elements to determine the overall revenue requirements allocation as shown in Table 13. The total allocated revenue requirements for each functional category are then used to determine the unit costs by billable constituent and subsequently the rates. Additional detail showing the line item allocations is included in Appendix D.

Table 11 CIP Functional Allocation (in millions, 2024 Dollars) CIP Allocation Treatment
Flow BOD TSS Collection
Flow Ten-Year Total
Encina Projects - Treatment $27.024 $24.975 $26.923 $0.000 $78.922 Carlsbad Projects - Collections 0.000 0.000 0.000 119.361 119.361 Allocated Cash Funded CIP Costs $27.024 $24.975 $26.923 $119.361 $198.283 CIP Percentage Allocation 13.6% 12.6% 13.6% 60.2% 100.0% Notes:
(1) Li ne or column totals may not tie due to rounding.

Table 12 O&M Functional Allocation (in millions)
O&M Cost Allocation Treatment
Flow BOD TSS Collection
Flow
As All Other
(Weighted
Average)
Total
Personnel $0.000 $0.121 $0.121 $2.172 $1.195 $3.608 Maintenance & Equipment 0.000 0.064 0.064 1.154 2.981 4.263 Encina Services 2.376 1.687 1.835 0.000 0.000 5.898 Capital Outlay 0.003 0.003 0.003 0.015 0.000 0.026 Budget Adjustment 0.000 (0.034) (0.034) (0.615) (0.772) (1.456) Allocated Costs $2.380 $1.841 $1.989 $2.726 $3.404 $12.340 Reallocation of "As All Other" 0.906 0.701 0.758 1.038 Total O&M Allocation $3.286 $2.542 $2.747 $3.765 $12.340 O&M Percentage Allocation 26.63% 20.60% 22.26% 30.51% 100.0% Notes:
(1) Li
ne or column totals may not tie due to rounding.

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Table 13 Revenue Requirements Functional Allocation (in millions) Revenue Requirements Allocation Treatment
Flow BOD TSS Collection
Flow
As All Other
(Weighted
Average)
Total
Allocated O&M $3.286 $2.542 $2.747 $3.765 $12.340
Replacement Funding 0.731 0.675 0.728 3.227 0.000 5.361 Rate Funded Capital 0.626 0.579 0.624 2.766 0.000 4.594 Debt Service 0.000 0.000 0.000 0.000 0.000 0.000
Adj. to Reflect Full Year Increase 0.000 0.000 0.000 0.000 3.627 3.627 Operating Cash Flows 0.000 0.000 0.000 0.000 4.443 4.443 LESS: Offsetting Revenues 0.000 0.000 0.000 0.000 (0.831) (0.831) Allocated Costs $4.643 $3.796 $4.099 $9.758 $7.239 $29.534 Reallocation of "As All Other" 1.507 1.233 1.331 3.168 7.239 Total Allocation $6.150 $5.029 $5.429 $12.926 $29.534 O&M Percentage Allocation 20.82% 17.03% 18.38% 43.77%
Notes:
(1) Li ne or column totals may not tie due to rounding.

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SECTION 5 RATE DESIGN ANALYSIS

5.1 Customer Characteristics
The City does not individually meter wastewater usage by its customers. Metering wastewater is an expensive and generally inefficient process. Single family residential customers, including duplex and flat billed multi-family customers tracked as ‘M1’ customers in the billing system data, incur a flat monthly charge for service. Schools are charged on a per student basis, and all other customer classes are charged based on a percentage of water consumption, which is outlined in this report.

For the purposes of this study, City staff provided wastewater billing records, including January 2019 through June 2022. FY 2021/22 data were utilized to develop usage information by customer class and by month. Wastewater billing records list monthly charges by customer as well as the amount of water used by each customer. Water consumption was not provided for those customers who receive a flat monthly bill (i.e., single family residences and schools). For these customers, data from the water utility billing system was used to estimate discharges to the sewer system. In order to test the validity of the customer data, two tests were performed: an accuracy test and a reliability test.

The accuracy test verifies that the correct data is being used by performing a price out on the provided data set in order to calculate revenues and compare the result to the City’s actual revenues. An acceptable margin of error for this test is +/-3 percent (actual revenues compared to revenues calculated from the billing records). Based on preliminary actuals for FYE 2022, the actual wastewater rate revenues collected by the City amounted to $16.057 million. Using the customer data set provided, the calculated amount came to $15.699 million, a difference of $0.36 million or 2.24 percent. This minimal level of discrepancy validates that the data provided is sufficiently accurate to be used in the model and calculations.

Performing a reliability test is also necessary in order to confirm that the correct data is being used. From a statistical standpoint, the definition of reliability is the consistency of a set of measurements. In other words, "Can the provided data be considered a ‘normal’ year?" It is important to verify that a normalized year of data is being used as the foundation for developing rates; otherwise, revenues may be over or under collected. For example, during a wet year, consumption may be reduced. If a test for reliability is not performed under these circumstances, then the customer base may be understated. Rates would then be set at a level higher than needed and revenues would be over collected. While there is no guarantee that a ‘normal’ year will occur in the years addressed by this study, for the sake of projections, it is prudent to assume that this will be the case.

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After the provided customer data sets were validated, the number of accounts, the amount of flow, BOD, and TSS for each customer class were determined. This allowed for the allocation of costs from the various functional categories (as described in the previous section) to each customer class. The customer classes are defined as follows:
 Single Family Residential includes single family residences, duplexes and M1 (multiple PDUs) accounts. These users are charged a flat monthly wastewater bill. The analysis of water usage was used to determine an estimated wastewater discharge of 164.54 gallons per day (gpd) or 6.69 HCF per month. The estimated discharge was calculated by applying an 80-percent return to sewer factor to the average water use for minimum two months of each of the last three fiscal years. This amount represents the estimated monthly indoor water use that is discharged to the sewer by each single family customer.
 Multi-Family Residential includes multi-family residences and mobile homes. These users are charged based on their water usage (per HCF).
 Group II Commercial includes soft water services, car washes, office buildings, professional buildings, laundromats, department and retail stores, warehouses, hospital convalescent homes and indoor theaters. These users are charged based on their water usage (per HCF).  Group III Commercial includes hotels and motels without restaurants, repair and service stations, shopping centers, amusement parks, nightclubs, nurseries and greenhouses, commercial laundries, manufacturing and lumber yards. These users are charged based on their water usage (per HCF).  Group IV Commercial includes hotels and motels with restaurants, wholesale bakeries, supermarkets, mortuaries, and restaurants. These users are charged based on their water usage (per HCF).  Group V includes schools:
» Elementary Schools are billed on a per-student basis. » Middle Schools are billed on a per-student basis.
» High Schools are billed on a per-student basis.
» Boarding Schools are billed on a per-student basis.
 Group VI Large Volume includes organizations and social services. These users are charged based on their water usage (per HCF). Currently, there is no accounts under this class.  Breweries include all businesses where beer or beverage brewing takes place. Breweries are split into four classes based on the strength of their discharge. Each brewery class has specific concentration assumptions depending on whether or not they have an attached restaurant and whether or not they haul their brewing waste offsite for treatment. The brewery classes are:
» B1 - Brewery without a restaurant and hauls waste for outside treatment. These users are charged based on their water usage (per HCF).
» B2 - Brewery without a restaurant that does not haul waste for outside treatment. These users are charged based on their water usage (per HCF).
» B3 - Brewery with a restaurant and hauls waste for outside treatment. These users are charged based on their water usage (per HCF).
» B4 - Brewery with a restaurant and hauls waste for outside treatment. These users are charged based on their water usage (per HCF).

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 Industrial Pretreatment Class III includes any user discharging waste other than domestic waste, having a reasonable potential to adversely affect the Encina Water Pollution Control Facility and requires annual inspection and permits every three years. These users are charged based on their water usage.

5.1.1 Class Flow and Loading Assumptions
Return to sewer factors and loading assumptions for each class are based on typically expected values for each type of customer as well as additional analysis completed for previous rate planning efforts. The loading assumptions for most classes are source from the California Revenue Program Guidelines, Appendix G. Assumptions for breweries were developed during previous studies and reflect typical values for breweries published by brewing industry groups. The baseline assumptions are adjusted using a mass- balance calculation that compares the flow and loading estimated based on metered water use, return to sewer assumptions, and loading concentration assumptions to the City’s flow and loads measured by Encina for billing purposes.

Table 14 shows the flow mass balance for the FY 2021/22 billing data. Based on the billing data, the calculated flow per Equivalent Dwelling Unit (EDU) for single family customers, the assumed flow per student for schools, and assumed return to sewer factors for volumetric billed classes, estimated wastewater flows are 6.71 million gallons per day (MGD). EWA’s billing records (based on their FYE 2022 Annual Comprehensive Financial Report [ACFR]) indicated billed flow for Carlsbad at 5.74 MGD, 14.5- percent below the estimated amount. Based on this comparison, estimated flows for all customer classes and return to sewer factors for volumetric classes are reduced by 14.5-percent for subsequent calculations.

The mass balance analysis indicated the need for significant adjustments to BOD and TSS concentration assumptions. This level of discrepancy is typical for agencies whose concentration assumptions are based on Appendix G of the California Revenue Program Guidelines. Since those guidelines were developed agencies have experienced significant indoor water conservation leading to increased constituent concentrations in their wastewater. To account for this discrepancy, adjustments will be applied proportionally for all customer classes.

Table 15 shows the BOD mass balance for the FY 2021/22 billing data. Based on the adjusted flows from Table 14 and the assumed BOD concentration for each customer class, total BOD is estimated at 11,706 pounds per day. EWA’s billing records (based on their FYE 2022 ACFR) indicated billed BOD for Carlsbad at 17,639 pounds per day, 50.7-percent above the estimated amount. Based on this comparison, estimated BOD for all customer classes and assumed concentrations are increased by 50.7-percent for subsequent calculations.

Table 16 shows the TSS mass balance for the FY 2021/22 billing data. Based on the adjusted flows from Table 14 and the assumed TSS concentration for each customer class, total TSS is estimated at 10,962 pounds per day. EWA’s billing records (based on their FYE 2022 ACFR) indicated billed TSS for Carlsbad at 20,790 pounds per day, 89.6-percent above the estimated amount. Based on this comparison, estimated TSS for all customer classes and assumed concentrations are increased by 89.6-percent for subsequent calculations.

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Table 14 Wastewater Flow Mass Balance – FY 2021/22 Data Customer Class
Billed/Estimated
Water Use (HCF)
Initial RTS
Assumption
Estimated
Wastewater
Flow
Mass Balance
Adjustment
Estimated
Wastewater
Flow Adjusted RTS
Prior to Mass Balance Mass Balance Adjusted
GROUP I – SFR (inc. M1):

Est. Flow = 6.69 HCF/month/EDU x 252,817 EDUs billed/year 1,735,877 (251,498) 1,484,378 0.0% GROUP I - MFR/Mobile Homes 646,426 90.0% 581,783 (84,290) 497,493 77.0% GROUP II - Commercial 2 383,006 90.0% 344,706 (49,942) 294,764 77.0% GROUP III - Commercial 3 405,248 90.0% 364,723 (52,842) 311,881 77.0% GROUP IV - Commercial 4 199,917 90.0% 179,925 (26,068) 153,857 77.0% Institutional 680 90.0% 612 (89) 523 77.0%
GROUP V - Elementary Schools
Est. Flow = 6,905 Students x 8 gpd/student x 200 days / 748 gal/HCF 14,770 (2,140) 12,630 0.0% GROUP V - Junior High Schools
Est. Flow = 2,692 Students x 12 gpd/student x 200 days / 748 gal/HCF 8,637 (1,251) 7,386 0.0% GROUP V - High Schools
Est. Flow = 3,965 Students x 16 gpd/student x 200 days / 748 gal/HCF 16,963 (2,458) 14,505 0.0% GROUP V - Boarding Schools
Est. Flow = 180 Students x 44.7 gpd/student x 365 days / 748 gal/HCF 3,922 (568) 3,354 0.0% GROUP VI - Large Volume (no accounts) 0 90.0% 0 0 0 77.0% Brewery - B2 4,786 82.5% 3,948 (572) 3,376 70.5%
Brewery - B3 9,939 90.0% 8,945 (1,296) 7,649 77.0%
Brewery - B4 3,088 82.5% 2,548 (369) 2,178 70.5%
Industrial Pretreatment Class III 0 90.0% 8,140 (1,179) 6,960 77.0% Total (HCF) 1,653,090 3,275,498 (474,562) 2,800,936
Total MGD 6.71 (0.97) 5.74
Total Flows From EWA Billing (MGD) (FYE 2022
ACFR)
adjustment: -14.5% 5.74
Notes:
(1) Li ne or column totals may not tie due to rounding.

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Table 15 Wastewater BOD Mass Balance – FY 2021/22 Data
Customer Class
Estimated Wastewater Flow with
Mass Balance Adjustment
Estimated BOD
Prior to Mass Balance
BOD Mass
Balance
Adjustment
Estimated BOD
With to Mass Balance
HCF MG mg/L lbs lbs lbs mg/L
GROUP I - SFR 1,484,378 1,110.32 200 1,853,206 939,228 2,792,433 301 GROUP I - MFR/Mobile Homes 497,493 372.12 200 621,106 314,784 935,891 301 GROUP II - Commercial 2 294,764 220.48 130 239,816 121,542 361,358 196 GROUP III - Commercial 3 311,881 233.29 328 639,224 323,967 963,191 495 GROUP IV - Commercial 4 153,857 115.09 820 787,554 399,142 1,186,695 1,236 Institutional 523 0.39 130 425 215 640 196
GROUP V - Elementary Schools 12,630 9.45 130 10,249 5,195 15,444 196 GROUP V - Junior High Schools 7,386 5.52 130 5,994 3,038 9,032 196 GROUP V - High Schools 14,505 10.85 130 11,771 5,966 17,737 196 GROUP V - Boarding Schools 3,354 2.51 130 2,721 1,379 4,101 196 GROUP VI - Large Volume (no accounts) 0 0.00 80 0 0 0 121 Brewery - B2 3,376 2.53 1,265 26,665 13,514 40,180 1,906 Brewery - B3 7,649 5.72 820 39,154 19,844 58,997 1,236 Brewery - B4 2,178 1.63 1,610 21,894 11,096 32,991 2,426 Industrial Pretreatment Class III 6,960 5.21 299 12,972 6,574 19,546 450 Total (lbs) 2,800,936 2,095 4,272,752 2,165,483 6,438,235 Pounds per Day 11,706 17,639
Pounds per Day Measured by EWA
(FYE 2022 ACFR)
adjustment: 50.7% 17,639
Notes:
mg/L - milligrams per liter.
(1) Li ne or column totals may not tie due to rounding.

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Table 16 Wastewater TSS Mass Balance – FY 2021/22 Data
Customer Class
Estimated Wastewater Flow
with Mass Balance
Adjustment
Estimated TSS
Prior to Mass Balance
TSS Mass
Balance
Adjustment
Estimated TSS (lbs)
With to Mass Balance
HCF MG mg/L lbs lbs lbs mg/L
GROUP I - SFR 1,484,378 1,110.32 200 1,853,206 1,661,375 3,514,580 379 GROUP I - MFR/Mobile Homes 497,493 372.12 200 621,106 556,814 1,177,920 379 GROUP II - Commercial 2 294,764 220.48 121 221,825 198,863 420,688 229 GROUP III - Commercial 3 311,881 233.29 279 542,962 486,758 1,029,720 529 GROUP IV - Commercial 4 153,857 115.09 680 653,093 585,490 1,238,583 1,290 Institutional 523 0.39 100 327 293 620 190
GROUP V - Elementary Schools 12,630 9.45 100 7,884 7,068 14,952 190 GROUP V - Junior High Schools 7,386 5.52 100 4,611 4,133 8,744 190 GROUP V - High Schools 14,505 10.85 100 9,055 8,117 17,172 190 GROUP V - Boarding Schools 3,354 2.51 100 2,093 1,877 3,970 190 GROUP VI - Large Volume (no accounts) 0 0.00 80 0 0 0 152 Brewery - B2 3,376 2.53 810 17,078 15,310 32,388 1,537 Brewery - B3 7,649 5.72 680 32,469 29,108 61,577 1,290 Brewery - B4 2,178 1.63 1,090 14,823 13,289 28,111 2,067 Industrial Pretreatment Class III 6,960 5.21 477 20,735 18,589 39,324 905 Total (lbs) 2,800,936 1,110.32 4,001,267 3,587,083 7,588,350 Pounds per Day 10,962 20,790
Pounds per Day Measured by EWA
(FYE 2022 ACFR)
adjustment: 89.6% 20,790
Notes:
(1) Li ne or column totals may not tie due to rounding.

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Using these assumptions and adjusted flow and loading discussed above, and wastewater billing records, the number of accounts, flows, and loading were projected for each customer class based on the City’s account growth assumptions. Projected statistics for FYE 2025 for each customer class are summarized in Table 17.

The City’s rate structure includes a minimum monthly bill provision in which volumetric users are charged for a minimum of 1 EDU (the single family charge) for months where their otherwise calculated bill would be less than that amount. The incremental flow and loads associated with those minimum charges is accounted for in the unit cost calculations so that the rates accurately reflect the amount of units billed, inclusive of those indicated by the minimum charges.

The incremental flow associated with the minimum charges is calculated by applying the flow per EDU to the number of minimum charges occurring. Incremental loading is calculated by applying the adjusted residential concentrations for BOD and TSS to the incremental flow. The incremental amount billed in minimum charges is shown in Table 17.

Table 17 Expected Billed Units by Customer Class for FY 2024/25 Customer Class Monthly Account Flow (HCF) BOD (lbs) TSSb(lbs) GROUP I – SFR 21,844 1,499,777 2,821,402 3,551,041
GROUP I – MFR/Mobile Homes 784 502,654 945,600 1,190,140 GROUP II – Commercial 2 1,102 297,822 365,107 425,052 GROUP III – Commercial 3 247 315,117 973,183 1,040,402 GROUP IV – Commercial 4 167 155,453 1,199,006 1,251,432 Institutional 3 529 647 626
Elementary School 20 12,761 15,604 15,107
Middle School 4 7,463 9,125 8,835
High School 4 14,655 17,921 17,350
Boarding School 1 3,388 4,143 4,011
GROUP VI – Large Volume (no accounts) 0 0 0 0
Breweries
B1 0 0 0 0
B2 7 3,411 40,597 32,724
B3 12 7,728 59,609 62,216
B4 4 2,201 33,333 28,403
Industrial Pretreatment Class III 1 7,033 19,749 39,732 Incremental Amount Billed in Minimum Charges 308,704 580,737 730,921 Total 24,200 3,138,696 7,085,763 8,397,992
Notes:
(1) Li ne or column totals may not tie due to rounding.

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5.2 Unit Cost Calculation
Unit costs for each billable constituent are calculated by dividing the total allocated revenue requirements from Table 13 by the billed units from Table 17. Table 18 shows the calculation of unit costs for FYE 2025.

Table 18 Unit Cost per Billable Constituents
Unit Cost Calculation Treatment Flow BOD TSS Collection Flow Allocated Rate Revenue (Millions) $6.150 $5.029 $5.429 $12.926 Unit Basis for Rate Design Estimated Sewer
Flows (HCF)
Estimated BOD
Discharges (lbs)
Estimated TSS
Discharges
(lbs)
Estimated Sewer
Flows (HCF)
FYE 2025 Billed Units 3,138,696 7,085,763 8,397,992 3,138,696 FYE 2025 Unit Costs $1.959 per HCF $0.710 per lb $0.646 per lb $4.118 per HCF Notes:
(1) Li ne or column totals may not tie due to rounding.

5.3 Rate Design
Based on the rate evaluation performed under the previous tasks, it was determined that in general, the City’s current rate structure is capable of meeting the City's goals. The recommended rates are based on “cost-of-service” principles that incorporate the work performed in previous tasks and adhere to Proposition 218 requirements.

Rates for each class are determined using two general steps:
 First, a unit cost per HCF of wastewater discharge is determined for each class based on the unit costs per billable constituent from Table 18 and the assumed BOD and TSS concentrations from Tables 15 and 16.
 Next, each class’s unit cost per HCF of discharge is used along with other assumptions to determine the proposed rate.
» For single family and other flat rate customers, the class unit cost per HCF is multiplied by the assumed flow per month to determine the monthly charge. » For customers charged based on water usage, each class’s unit cost per HCF is multiplied by its adjusted return-to-sewer factor to determine the rate per HCF of water consumption. » For schools, the class unit cost per HCF is multiplied by the assumed flow per student to determine the monthly rate per student.

The following sections outline the calculations used to determine rates for each customer class.

5.3.1 Class Unit Costs per HCF Discharges
As noted above, the first step in the rate calculations is determining each class’s unit cost per HCF of sewage discharged. This calculation is performed by converting the BOD and TSS mg/L concentrations from Tables 15 and 16 to a mass load concentration in lb/HCF. Next, the mass load in lb/HCF is multiplied by its respective unit cost per lb from Table 16 to calculate a component unit cost per HCF. Finally, the component unit costs per HCF for BOD and TSS are added to the unit costs for Treatment Flow and Collection Flow from Table 18 (already in terms of per HCF) to determine the total unit cost per HCF.

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An example of this calculation for Group 1 residential customers is shown in Table 19. An identical calculation is used to determine the $/HCF unit cost for each class as summarized in Table 20.

Table 19 Group I Unit Cost per HCF Calculation
Group I SFR Unit Cost per HCF Example Concentration
(mg/L)
Mass Load
lb/HCF Unit Cost $/lb Unit Cost $/HCF
Discharged
Item A B C D
BOD 301 1.881 $0.710 $1.34
TSS 379 2.367 $0.646 $1.53
Treatment Flow N/A N/A N/A $1.96
Collections Flow N/A N/A N/A $4.12
Total Unit Cost per HCF N/A N/A N/A $8.94
Mass Load, lb per HCF (B) = [Concentration, mg/L (A)] x [3.785 gallons per L] x [748 gallons per HCF] / [453,592 mg per lb]
Unit Cost, $/HCF (D) = [Mass Load, lb/HCF (B)] x [Unit Cost, $/lb (C)] Notes:
(1) Li ne or column totals may not tie due to rounding.

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Table 20 All Classes Unit Cost per HCF Calculation
Customer Class Unit Costs
per HCF Discharged BOD (mg/L) Mass Load
lb/HCF BOD ($/HCF) TSS (mg/L) Mass Load
lb/HCF TSS ($/HCF)
Flow
(Collection
and
Treatment)
($/HCF)
Total $ Per
HCF
Discharged
GROUP I - SFR & Minimum Charges 301 1.881 $1.34 379 2.367 $1.53 $6.08 $8.94 GROUP I - MFR/Mobile Homes 301 1.881 $1.34 379 2.367 $1.53 $6.08 $8.94 GROUP II - Commercial 2 196 1.226 $0.87 229 1.427 $0.92 $6.08 $7.87 GROUP III - Commercial 3 495 3.088 $2.19 529 3.301 $2.13 $6.08 $10.40 GROUP IV - Commercial 4 1,236 7.712 $5.47 1,290 8.049 $5.20 $6.08 $16.76 Institutional 196 1.223 $0.87 190 1.184 $0.77 $6.08 $7.71 Elementary Schools 196 1.223 $0.87 190 1.184 $0.77 $6.08 $7.71 Junior High Schools 196 1.223 $0.87 190 1.184 $0.77 $6.08 $7.71 High Schools 196 1.223 $0.87 190 1.184 $0.77 $6.08 $7.71 Boarding Schools 196 1.223 $0.87 190 1.184 $0.77 $6.08 $7.71 GROUP VI - Large Volume (no accounts) 121 0.752 $0.53 152 0.947 $0.61 $6.08 $7.22 Breweries
B1 196 1.226 $0.87 229 1.427 $0.92 $6.08 $7.87
B2 1,906 11.899 $8.45 1,537 9.591 $6.20 $6.08 $20.73 B3 1,236 7.712 $5.47 1,290 8.049 $5.20 $6.08 $16.76 B4 2,426 15.142 $10.75 2,067 12.903 $8.34 $6.08 $25.17 Industrial Pretreatment Class III 450 2.808 $1.99 905 5.649 $3.65 $6.08 $11.72 Notes:
(1) Li ne or column totals may not tie due to rounding.

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5.3.2 Customer Class Rate Calculations
Charges for customers that pay flat monthly fees are determined by multiplying their $/HCF unit cost by their assumed monthly flow. The calculation of monthly charges for single-family and applicable multi- family, duplex, and flat charges is shown in Table 21. The calculated FYE 2025 charge for a single EDU customer is $59.85, equal to the $/HCF unit cost multiplied by the estimated monthly flow of 6.69 HCF.

For single family customers with an ADU, and EDU flow factor of 1.5 is applied to reflect the additional sewage discharged by the ADU. This results in a calculated charge for FYE 2025 of $89.77.

Table 21 Group I Monthly Rate Calculation
Unit Cost
$/HCF
Discharged
EDU Flow
Factor
Monthly
Discharge (HCF)
Proposed Monthly
Rate (per Account)
GROUP I – Single-Family & Minimum Charges $8.94 1.0 6.69 $59.85 Single Family with ADU $8.94 1.5 10.04 $89.77
Table 22 shows the rate calculation for classes that pay rates based on their billed water consumption in HCF. The rates are determined by multiplying each class’s $/HCF unit cost by the adjusted return to sewer factor to determine the rate per HCF of water consumed.

Table 22 Rate per HCF of Water Consumption Calculation
Usage Based Rates Unit Cost $/HCF
Discharged
Return to Sewer
Factor
Calculated Monthly Rate
(per HCF of Water Used)
GROUP I – Multi-Family/Mobile Homes $8.94 76.96% $6.89 GROUP II - Commercial 2 $7.87 76.96% $6.06
GROUP III - Commercial 3 $10.40 76.96% $8.01
GROUP IV - Commercial 4 $16.76 76.96% $12.90
Brewery - B1 $7.87 76.96% $6.06
Brewery - B2 $20.73 70.55% $14.63
Brewery - B3 $16.76 76.96% $12.90
Brewery - B4 $25.17 70.55% $17.76
GROUP VI - Large Volume (no accounts) $7.22 76.96% $5.56 Industrial Pretreatment Class III $11.72 76.96% $9.03
Charges for schools that pay rates on a per-student basis are determined by multiplying their $/HCF unit cost by their assumed monthly flow per student. The calculation of monthly charges for each type of school is shown in Table 23.

Table 23 Schools Rates Calculation
Group V - Schools Rates Unit Cost $/HCF
Discharged
Assumed Flow
per Student
(gpd)
Assumed Flow
per Student
(HCF per Month)
Proposed
Monthly Rate
(per Student)
GROUP V - Elementary Schools $7.71 6.84 0.15 $1.18
GROUP V - Junior High Schools $7.71 10.26 0.23 $1.77 GROUP V - High Schools $7.71 13.68 0.30 $2.36
GROUP V - Boarding Schools $7.71 38.18 1.55 $11.98
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5.3.3 Proposed Rates
Table 24 shows the proposed rates for January 1, 2025 (delayed to July 1, 2025), which are determined based on the COS analysis and Rate Design analysis as discussed above. Effective rates for each customer class in the first year vary from the overall 14-percent increase due to the updated cost allocation and rate design calculations. Rates for 2026 through 2029 are determined by applying the proposed rate revenue increases for those years to the 2025 rates.

Table 24 Proposed Wastewater Rates by Customer Class
Customer Class Current Rate
FYE 2025
Proposed
Delayed to Jul. 1
2025
FYE 2026
Proposed
Jan. 1 2026
FYE 2027
Proposed
Jan. 1 2027
Increase(1) 14.00% CoS
Adj. 14.00% 14.00%
Group I - Residential - Monthly Flat Rate
Single Family Resident (SFR) $51.74 $59.85 $68.22 $77.77 SFR w/ Second Dwelling Unit 77.60 89.77 102.33 116.66
Group I - Residential - Rates per HCF
Multi Family Resident (MFR) $5.95 $6.89 $7.85 $8.95
Mobile Home 5.95 6.89 7.85 8.95
Commercial - Rates per HCF
GROUP II - Commercial 2 $5.06 $6.06 $6.91 $7.88
GROUP III - Commercial 3 7.21 8.01 9.13 10.41
GROUP IV - Commercial 4 12.61 12.90 14.71 16.76
Industrial Pretreatment Class III 8.14 9.03 10.29 11.73 Group V - School - Monthly Rates per Student
Elementary School (per student) $1.02 $1.18 $1.34 $1.53 Junior High School (per student) 1.53 1.77 2.01 2.30
High School (per student) 2.03 2.36 2.68 3.06
Boarding School (per student) 10.56 11.98 13.65 15.56
Breweries - Rates per HCF
B1 – Brewery without a restaurant and hauls
waste for outside treatment $5.06 $6.06 $6.91 $7.88
B2 – Brewery without a restaurant that does
not haul waste for outside treatment 14.06 14.63 16.67 19.01 B3 – Brewery with a restaurant and hauls
waste for outside treatment 12.61 12.90 14.71 16.76
B4 – Brewery with a restaurant that does not
haul waste for outside treatment 17.34 17.76 20.25 23.08 Notes:
(1) R ates are rounded to the nearest $0.01.

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SECTION 6 ALTERNATIVE OPTION
Using the same FYE 2024 budget, CIP, and assumptions, Carollo developed a scenario should the City decide to utilize bonds to mitigate impact of CIP funding on the rate payers. This chapter summarizes the findings and results of the alternative option with bond issuance.

6.1 Bond Issuance
Issuing bonds could help to mitigate immediate impact of CIP funding on the rate payers by recovering the cost over the future years. City has a SRF loan in the amount of $4,601,000 entering repayment in FYE 2027 with annual debt service of $293,749. Anticipated draws on this loan are in Table 25 below. The calculated coverage during the Study period is shown well above the requirement of 1.20 x, indicating the City’s capacity to issue additional debt if appropriate.

For the alternative option, additional debt issuances totaling $40.0M are assumed as shown in the table below. These potential bonds are assumed with loan terms of 30 years, 5.0 percent interest rates, and

1.0 percent of issuance cost. The debt service payments are calculated based on the assumptions shown in the table below. The table also illustrates the City’s capacity to meet its debt service coverage ratio requirement of 1.20 x with the assumed bonds.

Table 25 Alternative Option – Bond Summary
FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Assumptions SRF Loan SRF Loan Bond Bond
Term 20 years 20 years 30 years n/a 30 years
Interest Rate 2.45% 2.45% 5.00% n/a 5.00%
Issuance Costs n/a n/a 1.00% n/a 1.00%
Total Proceeds $500,0001 $4,101,0001 $25,000,000 n/a $15,000,000

Annual Debt Service Payment3 $- $- $1,936,462 $1,936,462 $2,922,090 DSCR (Target of 1.25x) No Debt No Debt 8.71 x 9.24 x 6.55 x Notes:
(1) Planned draws for the existing SRF loan.
(2) A nnual debt service payment shows the combined payments for all of the loans and bonds issued at any given year .

6.2 Recommended Revenue Requirements – Alternative Option With the additional debt issuances lower rate increases, as compared to those discussed in the previous sections, could be implemented. With the assumed debt issuances, the alternative option includes rate increases at 8-percent per year for FYE 2025 and FYE 2026 and at 3-percent per year thereafter. Though the combined fund balance in FYE 2026 falls below the minimum targets due to bond issuance timing, reserves would rebound in the following year. Table 26 below summarizes the revenue requirement projection.

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Table 26 Alternative Option with Bond Funding – Revenue Requirement Summary (in millions) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Pre-Rate Increase
Rate Revenues without Increases $25.907 $25.962 $26.059 $26.316 $26.586 Revenues from Prior Years’ Increases 0.000 2.077 4.336 5.300 6.312 Offsetting Revenues (Inc. Pre Treatment) 0.831 0.538 0.491 0.624 0.693 Revenues $26.738 $28.576 $30.886 $32.240 $33.591
LESS:

Operating Expenditures $13.795 $14.204 $14.625 $15.058 $15.505 One-time Funding (Budget Analysis Amount) (1.456) (1.491) (1.528) (1.566) (1.605) Rate Funded Capital 4.594 14.788 0.000 6.973 1.843
Debt Service 0.000 0.000 1.936 1.936 2.922
Replacement Funding 5.361 5.423 5.486 5.549 5.612
Expenses $22.295 $32.924 $20.519 $27.951 $24.278
Cash Flow Surplus/(Deficit) $4.443 ($4.348) $10.367 $4.289 $9.313 Rate Revenue Increase 8.00% 8.00% 3.00% 3.00% 3.00%
Post-Rate Increase
Revenues from Rate Increases $2.073 $2.243 $0.912 $0.948 $0.987 Less: Rate Increase Delay(1) ($1.036) ($1.122) ($0.456) ($0.474) ($0.493) Adjustment for Implementation Delay(2) ($1.036) $0.000 $0.000 $0.000 $0.000 Total Operating Revenues With Increases $26.738 $29.698 $31.342 $32.714 $34.084 Operating Cash Flows Available for Capital
and Reserves $4.443 ($3.226) $10.823 $4.763 $9.806
Operating Fund Reserve
Beginning Operating Fund Balance $4.546 $4.842 $1.615 $7.136 $7.313 Cash Flow 4.443 (3.226) 10.823 4.763 9.806
Transfers to Capital Reserve (4.147) 0.000 (5.302) (4.587) (8.646) Ending Operating Fund Balance $4.842 $1.615 $7.136 $7.313 $8.473 Ending Capital Fund Balance 4.647 4.100 15.002 4.587 8.646 Combined Ending Balance $9.489 $5.715 $22.138 $11.900 $17.119 Days of O&M Costs – Total Reserves 281 days 164 days 617 days 322 days 450 days Days of O&M Costs – Operating Reserve Only 128 days 42 days 178 days 177 days 199 days Notes:
(1) Adjustment to account for rate implementation on January 1 of each fiscal year. (2) Adjustment to reflect delay of rate implementation from January 1, 2025 to July 1, 2025. (3) Li ne or column totals may not tie due to rounding.

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6.3 Proposed Rates – Alternative Option
Based on the adjusted revenue requirement shown in Table 27, the cost of service analysis and rate designs are conducted in similar matter detailed in Sections 4 and 5. The resulting rates for alternative options are summarized in the table below. The proposed rates for January 1, 2025 (delayed to July 1, 2025), are determined based on the COS analysis and Rate Design analysis as discussed above.

Effective rates for each customer class in the first year vary from the overall 8-percent increase due to the updated cost allocation and rate design calculations. Rates for 2026 through 2029 are determined by applying the proposed rate revenue increases for those years to the 2025 rates.

Table 27 Alternative Option with Bond Funding – Proposed Wastewater Rates by Customer Class Customer Class Current Rate
FYE 2025
Proposed
Delayed to Jul. 1
2025
FYE 2026
Proposed
Jan. 1 2026
FYE 2027
Proposed
Jan. 1 2027
Increase(1) 8.00% CoS Adj. 8.00% 3.00%
Group I - Residential - Monthly Flat Rate
Single Family Resident (SFR) $51.74 $56.70 $61.23 $63.07 SFR w/ Second Dwelling Unit 77.60 85.04 91.84 94.60
Group I - Residential - Rates per HCF
Multi Family Resident (MFR) $5.95 $6.53 $7.05 $7.26
Mobile Home 5.95 6.53 7.05 7.26
Commercial - Rates per HCF
GROUP II - Commercial 2 $5.06 $5.74 $6.20 $6.39
GROUP III - Commercial 3 7.21 7.59 8.20 8.44
GROUP IV - Commercial 4 12.61 12.22 13.20 13.60
Industrial Pretreatment Class III 8.14 8.55 9.24 9.51
Group V - School - Monthly Rates per Student
Elementary School (per student) $1.02 $1.12 $1.21 $1.24 Junior High School (per student) 1.53 1.68 1.81 1.86
High School (per student) 2.03 2.23 2.41 2.48
Boarding School (per student) 10.56 11.35 12.25 12.62
Breweries - Rates per HCF
B1 – Brewery without a restaurant and
hauls waste for outside treatment $5.06 $5.74 $6.20 $6.39 B2 – Brewery without a restaurant that
does not haul waste for outside treatment 14.06 13.86 14.96 15.41 B3 – Brewery with a restaurant and hauls
waste for outside treatment 12.61 12.22 13.20 13.60
B4 – Brewery with a restaurant that does
not haul waste for outside treatment 17.34 16.83 18.17 18.72 Notes:
(1) R ates are rounded to the nearest $0.01.

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CITY OF CARLSBAD 35
Table 28 compares the rate revenue increases required for the baseline option presented in the previous section to those required for the alternative option.

Table 28 Comparison of Rate Revenue Increases for Baseline Option to Alternative with Additional Bonds Financial Forecast Option FYE 2025 FYE 2026 FYE 2027
Baseline Option - No Additional Bonds 14.0% 14.0% 14.0% Alternative Option - $40 million in Additional Bonds 8.0% 8.0% 3.0% Figure 2 compares the monthly single family bill for the baseline and alternative options.

Figure 2 Single Family Bill Comparison
$51.74
$59.85
$68.22
$77.77
$51.74
$56.70 $61.23 $63.07
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
FYE 2025 FYE 2026 FYE 2027
Monthly Single Family Bill
Baseline Option - No Additional Bonds
Alternative Option - $40 million in Additional Bonds
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APPENDIX A PROJECTED O&M

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CITY OF CARLSBAD
Wastewater Financial Model
Operation & Maintenance
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
O&M Escalators 2024 2025 2026 2027 2028 2029
General Inflation 5.00% 4.00% 2.50% 2.50% 2.50% 2.50%
Labor Inflation 5.00% 4.00% 3.00% 3.00% 3.00% 3.00%
Labor - PERS (Normal Cost) 13.20% 13.20% 13.20% 13.20% 13.20% 13.20% Labor - PERS (UAL) 16.66% 16.95% 16.79% 16.63% 16.47% 16.31% Labor - Health Insurance 6.63% 6.38% 6.13% 5.90% 5.70% 5.70% EWA Operating 10.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Chemicals Inflation 7.00% 4.00% 4.00% 4.00% 4.00% 4.00% Utilities Inflation 7.00% 4.00% 4.00% 4.00% 4.00% 4.00% Construction Inflation 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% Depreciation Funding 1.17% 1.16% 1.15% 1.15% 1.15% 1.15% Interest Earnings 2.30% 2.50% 2.50% 2.50% 2.50% 2.50%
Customer Demand Growth 0.75% 0.61% 0.21% 0.38% 0.99% 1.02% Gnrl Infltn + Cstmr Dmnd Grwth 5.75% 4.61% 2.71% 2.88% 3.49% 3.52% No Annual Increase 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
One Time Expense -100.00% -100.00% -100.00% -100.00% -100.00% -100.00% O&M Summary

REVENUES
Charges for Services 23,568,818$ 25,919,790$ 29,609,082$ 33,879,632$ 39,001,750$ 42,158,596$ Fines and Forfeitures 120,000 120,730 120,980 121,430 122,630 123,890 Income from Property & Investments 744,011 503,337 204,758 177,128 176,089 156,499 Interdepartmental 120,000 124,800 127,920 131,120 134,400 137,760 Other Revenues 67,000 69,680 71,422 73,205 75,040 76,916 TOTAL 24,619,830$ 26,738,337$ 30,134,162$ 34,382,515$ 39,509,908$ 42,653,661$

EXPENDITURES
Personnel 3,322,088$ 3,608,180$ 3,726,452$ 3,847,915$ 3,972,679$ 4,101,841$ Maintenance & Equipment 13,975,595 14,067,207 14,383,443 14,707,878 15,040,746 15,382,190 Capital Outlay 24,651 25,637 26,278 26,935 27,608 28,299 Other Financing Uses 10,090,113 - - - - - TOTAL 27,412,447$ 17,701,025$ 18,136,173$ 18,582,727$ 19,041,034$ 19,512,330$ NET OPERATING SURPLUS (DEFICIT) (2,792,617)$ 9,037,312$ 11,997,989$ 15,799,788$ 20,468,874$ 23,141,331$

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24.05% 9.97%
Fines and Forfeitures
5225 Late Charges Customer Demand Growth 120,000$ 120,730$ 120,980$ 121,430$ 122,630$ 123,890$ Other Fines and Forfeitures Customer Demand Growth - - - - - - Total Fines and Forfeitures 120,000$ 120,730$ 120,980$ 121,430$ 122,630$ 123,890$ Income from Property & Investments
5300 Interest Income - Pooled Cash [ Calculated ] 744,011$ 503,337$ 204,758$ 177,128$ 176,089$ 156,499$ 5305 Interest-Unrealzd Gains/Losses General Inflation - - - - - - 5310 Interest Income Frm Othr Inv General Inflation - - - - - - 5360 Sale of Capital Assets (cash adj) General Inflation - - - - - - 5361 Donated Assets General Inflation - - - - - - Other Income from Property & Investments General Inflation - - - - - - Total Income from Property & Investments 744,011$ 503,337$ 204,758$ 177,128$ 176,089$ 156,499$ Interdepartmental
5430 Eng Labor General Inflation 120,000$ 124,800$ 127,920$ 131,120$ 134,400$ 137,760$ Other Interdepartmental General Inflation - - - - - - Total Interdepartmental 120,000$ 124,800$ 127,920$ 131,120$ 134,400$ 137,760$ Other Revenues
5550 Prior Year Fee Refunds General Inflation -$ -$ -$ -$ -$ -$ 5636 Loss Recovery General Inflation - - - - - - 5639 Misc Reimbursement Exp. General Inflation 65,000 67,600 69,290 71,020 72,800 74,620 5664 MISC AR Write Offs General Inflation - - - - - - 5674 Misc Revenues General Inflation 2,000 2,080 2,132 2,185 2,240 2,296 4691 MISC OTHER FED One Time Expense - - - - - - 4750 MISC RV FROM OTHER AGENCIES One Time Expense - - - - - - Other General Inflation - - - - - - Total Other Revenues 67,000$ 69,680$ 71,422$ 73,205$ 75,040$ 76,916$ TOTAL REVENUES 24,619,830$ 26,738,337$ 30,134,162$ 34,382,515$ 39,509,908$ 42,653,661$

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CITY OF CARLSBAD
Wastewater Financial Model
Operation & Maintenance
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
CODE LINE ITEM ESCALATOR FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 EXPENDITURES Working Budget Projection Projection Projection Projection Projection Personnel
6100 Reg Salaries Labor Inflation 2,130,695$ 2,215,920$ 2,282,400$ 2,350,870$ 2,421,400$ 2,494,040$ 6101 Incentive Pay Labor Inflation - - - - - - 6135 Hazard Pay Labor Inflation 49,586 51,570 53,120 54,710 56,350 58,040 6150 IOD Worker's Comp Labor Inflation - - - - - - 6200 Overtime Salaries Labor Inflation 65,000 67,600 69,630 71,720 73,870 76,090 6210 Standby Pay Labor Inflation 25,470 26,490 27,280 28,100 28,940 29,810 6300 Parttimes Salaries Labor Inflation - - - - - - 6305 Intern Salaries Labor Inflation 3,646 3,790 3,900 4,020 4,140 4,260 6400 Temporary Help Labor Inflation - - - - - - 6501 Health Insurance Labor - Health Insurance 428,473 455,810 483,750 512,290 541,490 572,350 6510 Life Insurance General Inflation 1,438 1,500 1,540 1,580 1,620 1,660 6511 AD&D - City Paid General Inflation 716 740 760 780 800 820 6520 Vision Insurance General Inflation - - - - - - 6530 Medicare General Inflation 32,138 33,420 34,260 35,120 36,000 36,900 6629 Cell Phone Reimbursement General Inflation - - - - - - 6630 Auto Allowance General Inflation 1,138 1,180 1,210 1,240 1,270 1,300 6640 Earned Leave Accrual Labor Inflation - - - - - - 6651 Healthy Emp Awards General Inflation - - - - - - 6653 Final Vacation Pay Labor Inflation - - - - - - 6654 Final Sick Leave Pay Labor Inflation - - - - - - 6655 Disability General Inflation 12,829 13,340 13,670 14,010 14,360 14,720 6656 Unemployment General Inflation 11,079 11,520 11,810 12,110 12,410 12,720 6657 Worker's Compensation General Inflation 55,000 57,200 58,630 60,100 61,600 63,140 6720 PERS Labor - PERS (Normal Cost) 272,272 292,501 301,277 310,315 319,625 329,213 6723 PERS Unfunded Liab Exp Labor - PERS (Normal Cost) 232,471 375,598 383,215 390,950 398,805 406,778 6721 PERS (GASB 68 CONTRA ACCOUNT) One Time Expense - - - - - - 6722 Operation Expense One Time Expense - - - - - - 6730 Social Security One Time Expense - - - - - - 6740 Deferred Comp One Time Expense 137 - - - - - Other Personnel One Time Expense - - - - - - Total Personnel Costs Total Costs 3,322,088$ 3,608,180$ 3,726,452$ 3,847,915$ 3,972,679$ 4,101,841$

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Wastewater Financial Model
Operation & Maintenance
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Maintenance & Equipment
7111 Other Mach & Equip General Inflation -$ -$ -$ -$ -$ -$ 7115 Vehicle Rentals General Inflation - - - - - - 7119 Misc Rentals General Inflation 10,000 10,400 10,660 10,930 11,200 11,480 7120 Misc Leases General Inflation - - - - - - 7210 Office Equip Maint General Inflation - - - - - - 7211 Communication Equip Maintenance General Inflation 1,000 1,040 1,070 1,100 1,130 1,160 7215 Software Maintenance General Inflation 27,228 28,320 29,030 29,760 30,500 31,260 7216 Computer Maintenance General Inflation - - - - - - 7220 Vehicle Maintenance General Inflation 15,000 15,600 15,990 16,390 16,800 17,220 7221 Wash and Wax General Inflation 4,500 4,680 4,800 4,920 5,040 5,170 7222 Other Equip Maint General Inflation - - - - - - 7226 Pipeline Maintenance General Inflation 84,600 87,980 90,180 92,430 94,740 97,110 7230 Routine Building Maintenance General Inflation - - - - - - 7241 Asphalt Repairs General Inflation 10,000 10,400 10,660 10,930 11,200 11,480 7249 Maintenance, Repair and Rehab General Inflation 3,000 3,120 3,200 3,280 3,360 3,440 7400 Audit General Inflation - - - - - - 7410 Legal General Inflation - - - - - - 7435 Administrative General Inflation - - - - - - 7490 Misc Professional Services General Inflation 417,278 433,970 444,820 455,940 467,340 479,020 7500 Encina Services EWA Operating 6,000,000 6,180,000 6,365,400 6,556,360 6,753,050 6,955,640 Encina Services (Pension Payoff) No Annual Increase (281,750) (289,850) (298,183) (306,756) (315,575) 7550 Miscellaneous Outside Services General Inflation 450,520 468,540 480,250 492,260 504,570 517,180 7551 Bank Services General Inflation 43,213 44,940 46,060 47,210 48,390 49,600 7553 Comm Arts Support General Inflation - - - - - - 7554 Regulatory/Permitting Fees General Inflation 38,350 39,880 40,880 41,900 42,950 44,020 7556 Misc Services General Inflation - - - - - - 7558 Laundry and Uniform Mainteance General Inflation 5,000 5,200 5,330 5,460 5,600 5,740 7559 Electrical/SCADA Services General Inflation 33,443 34,780 35,650 36,540 37,450 38,390 7560 Water Sampling Services General Inflation - - - - - - 7562 FOG Inspection Services General Inflation 20,000 20,800 21,320 21,850 22,400 22,960 7563 Smartcover WIFI/Alarm Services General Inflation 50,000 52,000 53,300 54,630 56,000 57,400 7564 Landscaping Services General Inflation 130,280 135,490 138,880 142,350 145,910 149,560 7710 Ads and Publishing General Inflation 2,000 2,080 2,130 2,180 2,230 2,290 7711 Dues and Subscriptions General Inflation 10,500 10,920 11,190 11,470 11,760 12,050 7712 Books and Publications General Inflation 500 520 530 540 550 560 7713 Audio Visual Materials General Inflation - - - - - -

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Wastewater Financial Model
Operation & Maintenance
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
7715 Printing General Inflation 7,500 7,800 8,000 8,200 8,410 8,620 7720 Postage General Inflation 4,500 4,680 4,800 4,920 5,040 5,170 7725 Office Supplies General Inflation 5,000 5,200 5,330 5,460 5,600 5,740 7726 Office Furniture & Equipment General Inflation 5,000 5,200 5,330 5,460 5,600 5,740 7730 Computer Software General Inflation 10,000 10,400 10,660 10,930 11,200 11,480 7731 Misc. Computer Hardware General Inflation 4,000 4,160 4,260 4,370 4,480 4,590 7735 Promo Materials General Inflation 5,000 5,200 5,330 5,460 5,600 5,740 7745 Food Expense General Inflation - - - - - - 7750 Heat and Light Utilities Inflation 310,551 322,970 335,890 349,330 363,300 377,830 7751 Telephone & Communications Utilities Inflation 12,000 12,480 12,980 13,500 14,040 14,600 7752 Waste Dispoal Services Utilities Inflation 10,696 11,120 11,560 12,020 12,500 13,000 7753 Water Utilities Inflation 37,440 38,940 40,500 42,120 43,800 45,550 7801 Building Maintenance General Inflation - - - - - - 7810 Electrical Supplies General Inflation 500 520 530 540 550 560 7811 Janitorial Supplies General Inflation 300 310 320 330 340 350 7820 Parts-Vehicles General Inflation 500 520 530 540 550 560 7821 Parts-Equip General Inflation 209,255 217,620 223,060 228,640 234,360 240,220 7830 Rock and Mineral Products General Inflation 4,000 4,160 4,260 4,370 4,480 4,590 7831 Asphalt General Inflation 500 520 530 540 550 560 7850 Small Tools General Inflation 1,500 1,560 1,600 1,640 1,680 1,720 7851 Safety Equipment General Inflation 21,750 22,620 23,190 23,770 24,360 24,970 7852 Uniforms and Accessories General Inflation 5,000 5,200 5,330 5,460 5,600 5,740 7853 Meters/Fittings General Inflation - - - - - - 7857 Personal Protective Equipment General Inflation - - - - - - 7880 Gasoline and Oil Utilities Inflation 2,000 2,080 2,160 2,250 2,340 2,430 7883 Chemicals Chemicals Inflation 82,340 85,630 89,060 92,620 96,320 100,170 7886 Training Supplies General Inflation - - - - - - 7896 Medical Supplies - Disposable General Inflation - - - - - - 7899 Misc Supplies General Inflation 16,400 17,060 17,490 17,930 18,380 18,840 8110 Employee Training General Inflation 3,000 3,120 3,200 3,280 3,360 3,440 8120 Tuition Reimbursement General Inflation - - - - - - 8130 Training/Training Related Travel General Inflation 4,500 4,680 4,800 4,920 5,040 5,170 8520 Conference Travel General Inflation 3,171 3,300 3,380 3,460 3,550 3,640 8522 Misc. Meals/Miles General Inflation 3,211 3,340 3,420 3,510 3,600 3,690 8530 Bad Debt Exp - Other Inv/Bills General Inflation 20,000 20,800 21,320 21,850 22,400 22,960

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Wastewater Financial Model
Operation & Maintenance
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
8532 Disposal of Assets General Inflation - - - - - - 8534 Reg Over/Short General Inflation - - - - - - 8542 NED Rental Assistance Payments No Annual Increase - - - - - - 8544 Lateral Assistance Program No Annual Increase 25,000 25,000 25,000 25,000 25,000 25,000 8610 Settlements General Inflation - - - - - - 8700 Contingencies No Annual Increase - - - - - - 8809 Vehicle Direct Charges General Inflation 2,628 2,730 2,800 2,870 2,940 3,010 8810 Vehicle Maintenance (2) General Inflation 138,960 144,520 148,130 151,830 155,630 159,520 8811 Vehicle Replacement General Inflation 179,573 186,760 191,430 196,220 201,130 206,160 8830 General Liab General Inflation 441,210 458,860 470,330 482,090 494,140 506,490 8860 Information Technologies General Inflation 322,955 335,870 344,270 352,880 361,700 370,740 8890 Misc Interdepartmental Charges General Inflation 843,808 877,560 899,500 921,990 945,040 968,670 8891 Mis Chg Back General Inflation - - - - - - 8892 Utility Billing Chargeback General Inflation - - - - - - 8910 Fiscal Agent Fees General Inflation - - - - - - 8911 Arbitrage Costs General Inflation - - - - - - 8922 Int Exp-Capitalized Interest One Time Expense - - - - - - Other - Heat & Light No Annual Increase - - - - - - Other - Parts & Equipment No Annual Increase - - - - - - Other - Smart Covers No Annual Increase - - - - - - Addt'l Maintenance & Equipment General Inflation - - - - - - Other Maintenance & Equipment [ Calculated Below ] (1,424,566) (1,455,673) (1,491,457) (1,528,179) (1,565,868) (1,604,625) Total Maintenance & Equipment Costs 13,975,595$ 14,067,207$ 14,383,443$ 14,707,878$ 15,040,746$ 15,382,190$ Capital Outlay
9005 Capital Outlay < $10k - New General Inflation -$ -$ -$ -$ -$ -$ 9006 Capital Outlay < $10k - Repl General Inflation - - - - - - 9010 Cap Outlay - Vehicles General Inflation 24,651 25,637 26,278 26,935 27,608 28,299 9020 Computer Equip > $10k - Repl General Inflation - - - - - - 9021 Office Equipment General Inflation - - - - - - 9022 Other Equipment General Inflation - - - - - - 9030 Office Furniture General Inflation - - - - - - 9050 Capitalized Assets One Time Expense - - - - - - Other Capital Outlay General Inflation - - - - - - Total Capital Outlay Costs 24,651$ 25,637$ 26,278$ 26,935$ 27,608$ 28,299$

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CITY OF CARLSBAD
Wastewater Financial Model
Operation & Maintenance
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Other Financing Uses
9999 Replacement Funding One Time Expense 10,090,113$ -$ -$ -$ -$ -$ Transfer Out - Debt Service General Inflation - - - - - - Total Other Financing Uses Costs 10,090,113$ -$ -$ -$ -$ -$ TOTAL EXPENDITURES 27,412,447$ 17,701,025$ 18,136,173$ 18,582,727$ 19,041,034$ 19,512,330$ 7 8 9 10 11 12
ADDITIONAL O&M EXPENDITURES FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029  PW Director Salary - est. 10% Labor Inflation -$ -$ -$ -$ -$ -$  Addt'l O&M 2 General Inflation - - - - - -  One-time (EWA spill costs) One Time Expense - - - - - -  One-time (Optimization, etc.) One Time Expense - - - - - -  less: Added Revenue General Inflation - - - - - -  Less: Budget Analysis Amount ` One Time Expense (1,424,566) (1,455,673) (1,491,457) (1,528,179) (1,565,868) (1,604,625)  Added O&M General Inflation - - - - - - (1,424,566)$ (1,455,673)$ (1,491,457)$ (1,528,179)$ (1,565,868)$ (1,604,625)$ RATE REVENUES WITHOUT INCREASES - FOR REFERENCE FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Commodity Usage Customer Demand Growth 23,556,818$ 25,907,310$ 25,961,657$ 26,059,185$ 26,315,997$ 26,585,563$ Sewer Pre-Treat General Inflation 12,000$ 12,480$ 12,792 13,112 13,440 13,776 Sewer Laterals General Inflation - - - - - - Other Charges for Services General Inflation - - - - - - 23,568,818$ 25,919,790$ 25,974,449$ 26,072,297$ 26,329,437$ 26,599,339$

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2025 WASTEWATER COST-OF-SERVICE STUDY
JANUARY 2025 / FINAL / CAROLLO

CITY OF CARLSBAD

APPENDIX B CAPITAL IMPROVEMENT PLAN
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CITY OF CARLSBAD
Wastewater Financial Model
Capital Improvement Plan
SEWER REPLACEMENT PROJECTS FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Include Project ID Project Title
 34922 Vista Carlsbad Interceptor - Agua Hedionda LS and Forcemain (VC12-VC13) 104,000$ 75,000$ 75,000$ 75,000 -  35723 Orion Center (3,778,500) (204,985) -  38401 Sewer Lift Station Repairs and Upgrades 150,000 150,000 150,000 150,000 150,000 150,000  39502 Vista Carlsbad Interceptor - Reach VC3 -
 40153 Village and Barrio Traffic Circles 500,000 -  55011 Buena Interceptor Sewer Improvements 1,500,000 1,500,000 2,950,000 3,540,000 3,540,000  55031 Sewer System Rehabilitation and Replacement 2,500,000 1,850,000 1,850,000 1,850,000 1,850,000 2,670,000  55131 Sewer Condition Assessment 100,000 100,000 100,000 100,000 100,000  55201 Odor and Corrosion Prevention Program -
 55261 Foxes Landing Lift Station Wetwell and Pump Replacement -  55352 Vista Carlsbad Interceptor - Buena Vista Lift Station Improvements 85,700 35,000 50,000 100,000 100,000 120,000  55361 North Batiquitos Lift Station Forcemain Rehabilitation (125,000) -  55371 Buena Interceptor Sewer Access Road Improvements (650,000) (200,000) - 400,000 -  55421 SCADA Improvements 380,734 -
 55441 Buena Interceptor Sewer Realignment - East Segment 400,000 800,000 3,600,000 1,800,000 -  55451 Agua Hedionda Lift Station Biological Monitoring and Maintenance -  55471 North Batiquitos Access Road Improvement 25,500 -  55481 Sewer Line Capacity Improvements 200,000 694,000 1,057,000 -  55491 Vallecitos Interceptor Sewer Cleaning and CCTV -  55501 Villas Sewer Lift Station Replacement 75,000 -  55511 Vista Carlsbad Interceptor - Rehabilitation (VC1 and VC2) 90,000 70,000 120,000 -  55521 Cannon Road Lift Station Improvements 50,000 -  55541 Chinquapin Lift Station Improvements 920,000 -  55551 Vista/Carlsbad Interceptor - Point Repair Reaches (VC13 & VC14) 1,200,000 -  55561 Poinsettia Lift Station Rehabilitation 650,000 300,000 8,000,000 -  58011 Encina Capital Projects (EWPCF) 6,277,600 8,450,000 8,002,500 7,757,200 7,952,000 8,528,800  60544 Terramar Area Coastal Improvements -
 NEW Vallecitos Land Outfall Replacement - Segment B 200,000 200,000 200,000 5,000,000 5,000,000  Spend Down of Available Balance 28,077,196
 Adjust for Burn Rate on New Appropriations - - - - - -  Project Adjustments From Dashboard - - - - - - TOTAL SEWER REPLACEMENT PROJECTS 35,928,230$ 15,048,015$ 21,104,500$ 17,082,200$ 20,567,000$ 20,108,800$ 1 City of Carlsbad Amount (total - EWA) 6,598,015$ 13,102,000$ 9,325,000$ 12,615,000$ 11,580,000$

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CITY OF CARLSBAD
Wastewater Financial Model
Capital Improvement Plan
SUMMARY OF SEWER REPLACEMENT PROJECTS FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

UNESCALATED
R&R 35,928,230$ 15,048,015$ 21,104,500$ 17,082,200$ 20,567,000$ 20,108,800$ Expansion - - - - - - TOTAL: 35,928,230$ 15,048,015$ 21,104,500$ 17,082,200$ 20,567,000$ 20,108,800$

ESCALATED
R&R 35,928,230$ 15,348,975$ 23,713,016$ 19,865,335$ 24,755,026$ 25,050,646$ Expansion - - - - - - TOTAL: 35,928,230$ 15,348,975$ 23,713,016$ 19,865,335$ 24,755,026$ 25,050,646$ SEWER CONNECTION PROJECTS FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Include Project ID Project Title
 34921 Vista Carlsbad Interceptor - Agua Hedionda LS and Forcemain (VC12-VC13) 220,000$  38861 Vista Carlsbad Interceptor - Lagoon Bridge Replacement (VC11B)  39491 Vista Carlsbad Interceptor - Reach VC14 To VC15  39501 Vista Carlsbad Interceptor - Reach VC3 30,000 387,000 405,000  55012 Buena Interceptor Sewer Improvements - 500,000  55041 Sewer Monitoring Program (Capacity) 44,000 30,800  55351 Vista Carlsbad Interceptor - Buena Vista Lift Station Improvements 67,000 67,000  55391 Faraday and El Camino Real Sewer Replacement - Orion to Palomar Airport Road 1,100,000  55401 Las Palmas Trunk Sewer (255,000) - 800,000 2,000,000 3,700,000  55461 Sewer Modeling (100,000)
 55531 El Fuerte Lift Station Pump Addition 200,000 450,000  NEW Vallecitos Land Outfall Replacement - Segment B 40,000 40,000 40,000 1,000,000 2,000,000  PA031 Loan Repay - Sewer Conn to Sewer Repl
 Spend Down of Available Balance 4,304,931
 Adjust for Burn Rate on New Appropriations - - - - - -  Project Adjustments From Dashboard - - - - - - TOTAL SEWER CONNECTION PROJECTS 5,499,931$ 1,421,000$ 1,312,000$ 2,107,000$ 4,700,000$ 2,030,800$ SUMMARY OF SEWER CONNECTION PROJECTS FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

UNESCALATED
R&R -$ -$ -$ -$ -$ -$ Expansion 5,499,931 1,421,000 1,312,000 2,107,000 4,700,000 2,030,800 TOTAL: 5,499,931$ 1,421,000$ 1,312,000$ 2,107,000$ 4,700,000$ 2,030,800$

ESCALATED
R&R -$ -$ -$ -$ -$ -$ Expansion 5,499,931 1,449,420 1,474,163 2,450,285 5,657,054 2,529,880 TOTAL: 5,499,931$ 1,449,420$ 1,474,163$ 2,450,285$ 5,657,054$ 2,529,880$

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JANUARY 2025 / FINAL / CAROLLO

CITY OF CARLSBAD

APPENDIX C REVENUE REQUIREMENT ANALYSIS
Feb. 11, 2025
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CITY OF CARLSBAD
Wastewater Financial Model
Revenue Requirement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

CASH FLOW TESTS

REVENUES
Rate Revenues 23,556,818$ 25,907,310$ 29,596,290$ 33,866,520$ 38,988,310$ 42,144,820$ Other Charges for Services 12,000 12,480 12,792 13,112 13,440 13,776 Fines and Forfeitures 120,000 120,730 120,980 121,430 122,630 123,890 Income from Property & Investments 744,011 503,337 204,758 177,128 176,089 156,499 Interdepartmental 120,000 124,800 127,920 131,120 134,400 137,760 Other Revenues 67,000 69,680 71,422 73,205 75,040 76,916 TOTAL REVENUES 24,619,830$ 26,738,337$ 30,134,162$ 34,382,515$ 39,509,908$ 42,653,661$

EXPENDITURES
Ongoing Operating Expenses
Personnel 3,322,088$ 3,608,180$ 3,726,452$ 3,847,915$ 3,972,679$ 4,101,841$ Encina Operations 6,000,000 6,180,000 6,365,400 6,556,360 6,753,050 6,955,640 Maintenance & Equipment 4,100,161 3,981,400 4,086,360 4,194,187 4,304,974 4,418,775 Capital Outlay 24,651 25,637 26,278 26,935 27,608 28,299 Replacement Funding 10,090,113 - - - - - Transfer Out - Debt Service - - - - - - Other Operating Expenses
One-time Funding (Budget Analysis Amount) (1,424,566) (1,455,673) (1,491,457) (1,528,179) (1,565,868) (1,604,625) Rate Funded Capital 2,797,106 4,594,379 14,868,096 12,615,227 21,130,721 21,277,733 Debt Service - - - 293,749 293,749 293,749 Total Operating Expenditures 24,909,552$ 16,933,923$ 27,581,129$ 26,006,193$ 34,916,913$ 35,471,412$ Policy Expenditures
Replacement Funding 5,300,000$ 5,361,480$ 5,423,140$ 5,485,510$ 5,548,590$ 5,612,400$ Transfers to Capital Fund - - - - - - Additions to Meet Minimum Fund Balances - - - - - - Total Policy Expenditures 5,300,000$ 5,361,480$ 5,423,140$ 5,485,510$ 5,548,590$ 5,612,400$

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CITY OF CARLSBAD
Wastewater Financial Model
Revenue Requirement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
POLICY OVERRIDES (input in Dashboard)
Replacement Funding No Override No Override No Override No Override No Override No Override Transfers to Capital Fund -$ -$ -$ -$ -$ -$ Additions to Meet Minimum Fund Balances (*) -$ -$ -$ -$ -$ -$ TOTAL EXPENDITURES 30,209,552$ 22,295,403$ 33,004,269$ 31,491,703$ 40,465,503$ 41,083,812$ CASH FLOW SURPLUS (DEFICIT) (5,589,723)$ 4,442,933$ (2,870,107)$ 2,890,812$ (955,595)$ 1,569,849$

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CITY OF CARLSBAD
Wastewater Financial Model
Revenue Requirement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

DEBT COVERAGE TEST

1.25 x Bond Coverage
Calculation of Net Revenues
Operating Revenues
User Charges 23,556,818$ 25,907,310$ 29,596,290$ 33,866,520$ 38,988,310$ 42,144,820$ Other/Misc Revenues - Excludes Interest Earnings 319,000 327,690 333,114 338,867 345,510 352,342 Yes Connection Fees 471,438$ 400,974$ 328,896$ 113,883$ 204,368$ 538,144$ Yes Grants - - - - - - Modeled Interest Earnings
Yes Operating Funds 265,571$ 211,226$ 94,672$ 90,448$ 99,795$ 119,693$ Yes Capital Funds 478,440 292,111 110,086 86,680 76,294 36,806 Total Revenues Included in Test 25,091,268$ 27,139,311$ 30,463,059$ 34,496,398$ 39,714,276$ 43,191,804$ Less: Operating Expenses (13,422,249)$ (13,769,580)$ (14,178,212)$ (14,598,462)$ (15,030,703)$ (15,476,256)$ Net Operating Revenues Avaiable for Debt Service 11,669,019$ 13,369,731$ 16,284,847$ 19,897,936$ 24,683,573$ 27,715,548$ Debt Service -$ -$ -$ 293,749$ 293,749$ 293,749$ Coverage - - - 367,186 367,186 367,186 Subtotal: Debt Service and Coverage -$ -$ -$ 660,935$ 660,935$ 660,935$ BOND COVERAGE SURPLUS (DEFICIT) 11,669,019$ 13,369,731$ 16,284,847$ 19,237,002$ 24,022,638$ 27,054,614$

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CITY OF CARLSBAD
Wastewater Financial Model
Revenue Requirement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

REVENUE REQUIREMENT
Revenue Requirement (5,589,723)$ 4,442,933$ (2,870,107)$ 2,890,812$ (955,595)$ 1,569,849$ Cash Flow Driven Surplus Cash Flow Driven Surplus Cash Flow Driven Surplus Month of implementation January January January January January January Calculated Increase (%) 47.46% 0.00% 19.40% 0.00% 4.90% 0.00% Rate Increase Override (INPUT in Dashboard) 20.00% 14.00% 14.00% 14.00% 7.00% 7.00% Rate Increase (%) 20.00% 14.00% 14.00% 14.00% 7.00% 7.00% Cumulative Rate Increase (%) 86.0% 115.2% 145.3% 179.6% 199.2% 220.2% SFR Rate $51.74 $59.85 $68.22 $77.77 $83.22 $89.04

CASH FLOW
Revenues Before Rate Increase 24,619,830$ 26,738,337$ 30,134,162$ 34,382,515$ 39,509,908$ 42,653,661$ Revenues From Rate Increase - 3,627,023 4,143,481 4,741,313 2,729,182 2,950,137 Less: Rate Increase Delay - (1,813,512) (2,071,740) (2,370,656) (1,364,591) (1,475,069) Less: Adjustment for Implementation Delay (1,813,512)
Less: Expenditures (30,209,552) (22,295,403) (33,004,269) (31,491,703) (40,465,503) (41,083,812) Cash Flow (5,589,723)$ 4,442,933$ (798,366)$ 5,261,469$ 408,996$ 3,044,918$ RATE REVENUE REQUIREMENT 23,556,818$ 29,534,333$ 33,739,771$ 38,607,833$ 41,717,492$ 45,094,957$ Total Ending Balance 10,987,236$ 9,488,607$ 8,224,194$ 9,384,662$ 6,265,258$ 9,157,926$ 161 days 205 days 109 days 132 days 65 days 94 days
Operating Fund
Beginning Balance 16,576,959$ 4,545,674$ 4,921,560$ 4,123,194$ 5,856,262$ 6,113,008$ Cash Flow (5,589,723) 4,442,933 (798,366) 5,261,469 408,996 3,044,918 Transfers from Operating to Capital Fund (6,441,562) (4,067,047) - (3,528,400) (152,249) (2,764,885) Ending Operating Fund Balance 4,545,674$ 4,921,560$ 4,123,194$ 5,856,262$ 6,113,008$ 6,393,041$

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CITY OF CARLSBAD
Wastewater Financial Model
Revenue Requirement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Coverage Tests - Post Rate Increase
Calculation of Net Revenues
Operating Revenues
User Charges 23,556,818$ 25,907,310$ 31,668,030$ 36,237,176$ 40,352,901$ 43,619,889$ Other/Misc Revenues 319,000 327,690 333,114 338,867 345,510 352,342 Change selection above
Yes Connection Fees 471,438$ 400,974$ 328,896$ 113,883$ 204,368$ 538,144$ Yes Grants - - - - - -
Modeled Interest Earnings
Yes Operating Funds 265,571$ 211,226$ 94,672$ 90,448$ 99,795$ 119,693$ Yes Capital Funds 478,440 292,111 110,086 86,680 76,294 36,806 Total Revenues Included in Test 25,091,268$ 27,139,311$ 32,534,799$ 36,867,054$ 41,078,867$ 44,666,873$ LESS: Operating Expenses (13,422,249)$ (13,769,580)$ (14,178,212)$ (14,598,462)$ (15,030,703)$ (15,476,256)$ Net Operating Revenues Available for Debt Service 11,669,019$ 13,369,731$ 18,356,587$ 22,268,593$ 26,048,164$ 29,190,617$ Existing Debt Test - Includes debt service only for debt that has been issued and has been input into the model.

Net Operating Revenues Available for Debt Service 11,669,019$ 13,369,731$ 18,356,587$ 22,268,593$ 26,048,164$ 29,190,617$ LESS: Existing Debt Service - - - (293,749) (293,749) (293,749) Revenues Available for Coverage 11,669,019$ 13,369,731$ 18,356,587$ 21,974,844$ 25,754,415$ 28,896,868$ Existing Debt Service Coverage Ratio No Existing Debt No Existing Debt No Existing Debt 75.81 x 88.67 x 99.37 x Total Debt Test - Includes existing and projected debt.

Net Operating Revenues Available for Debt Service 11,669,019$ 13,369,731$ 18,356,587$ 22,268,593$ 26,048,164$ 29,190,617$ Less: Existing Debt Service - - - (293,749) (293,749) (293,749) Less: Projected Debt Service - - - - - -
Revenues Available for Coverage 11,669,019$ 13,369,731$ 18,356,587$ 21,974,844$ 25,754,415$ 28,896,868$ Total Debt Service Coverage Ratio No Debt No Debt No Debt 75.81 x 88.67 x 99.37 x

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2025 WASTEWATER COST-OF-SERVICE STUDY
JANUARY 2025 / FINAL / CAROLLO

CITY OF CARLSBAD

APPENDIX D FUNCTIONAL ALLOCATION
Feb. 11, 2025
Item #8 Page 74 of 265

CITY OF CARLSABAD
Wastewater Financial Model
Functional Allocation
TEST YEAR: FYE 2025
ALLOCATION INDEX FYE 2025 TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES Treatment Flow/BOD/TSS 40.3% 28.6% 31.1% 0.0% 0.0% See "Op Exp for Encina Services" tab for breakdown 50 Percent Customer 0.0% 0.0% 0.0% 0.0% 100.0%
Admin 0.0% 0.0% 0.0% 0.0% 100.0%
Allocation 4 0.0% 0.0% 0.0% 0.0% 100.0%
Allocation 5 0.0% 0.0% 0.0% 0.0% 100.0%
Allocation 6 0.0% 0.0% 0.0% 0.0% 100.0%
Allocation 7 0.0% 0.0% 0.0% 0.0% 100.0%
Flow Only 100.0% 0.0% 0.0% 0.0% 0.0%
Customer Only 0.0% 0.0% 0.0% 0.0% 100.0%
As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0%
Collections 5.0% 5.0% 90.0% 0.0%
Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1%
Vehicles 0.0% 5.0% 5.0% 90.0% 0.0%
Uniforms 0.0% 5.0% 5.0% 90.0% 0.0%
Miscellaneous Professional Services - 7490 0.0% 0.0% 0.0% 0.0% 100.0% Miscellaneous Outside Services - 7550 0.0% 0.0% 0.0% 0.0% 100.0% Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0%
Weighted Average O&M 26.6% 20.6% 22.3% 30.5% 0.0%
Weighed Average Revenue Requirements 20.8% 17.0% 18.4% 43.8% 0.0%

PLANT IN SERVICE RCNLD TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES IM - IMPROVEMENTS 7,187,260$ 100.0% 0% JV - JOINT VENTURE 52,584,214 40.3% 28.6% 31.1% 0% LD - LAND 2,629,102 100% ME - MACHINERY & EQUIPMENT 806,073 100% PP - PIPES & PUMPING 70,927,459 5.0% 5.0% 90.0% 0% Plant-In-Service Sub Total 134,134,107$ 21,182,642$ 18,588,265$ 19,906,053$ 71,021,973$ 3,435,175$ Reallocation of "As All Others" 556,746$ 488,557$ 523,193$ 1,866,678$ (3,435,175)$ Total Allocation 134,134,107$ 21,739,387$ 19,076,823$ 20,429,246$ 72,888,651$ -$ Percentage Allocation 100% 16.2% 14.2% 15.2% 54.3% 0.0%

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CITY OF CARLSABAD
Wastewater Financial Model
Functional Allocation
TEST YEAR: FYE 2025
ALLOCATION INDEX FYE 2025 TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES FYE 2025 ALLOCATION TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES

EXPENDITURES
Personnel
Reg Salaries 2,215,920$ Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Incentive Pay - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Hazard Pay 51,570 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% IOD Worker's Comp - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Overtime Salaries 67,600 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Standby Pay 26,490 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Parttimes Salaries - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Intern Salaries 3,790 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Temporary Help - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Health Insurance 455,810 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Life Insurance 1,500 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% AD&D - City Paid 740 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Vision Insurance - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Medicare 33,420 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Cell Phone Reimbursement - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Auto Allowance 1,180 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Earned Leave Accrual - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Healthy Emp Awards - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Final Vacation Pay - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Final Sick Leave Pay - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Disability 13,340 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Unemployment 11,520 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Worker's Compensation 57,200 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% PERS 292,501 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% PERS Unfunded Liab Exp 375,598 Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% PERS (GASB 68 CONTRA ACCOUNT) - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Operation Expense - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Social Security - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Deferred Comp - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Other Personnel - Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1% Maintenance & Equipment
Other Mach & Equip -$ As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Vehicle Rentals - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc Rentals 10,400 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Misc Leases - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Office Equip Maint - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Communication Equip Maintenance 1,040 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Software Maintenance 28,320 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Computer Maintenance - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Vehicle Maintenance 15,600 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Wash and Wax 4,680 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Other Equip Maint - Collections 0.0% 5.0% 5.0% 90.0% 0.0%

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CITY OF CARLSABAD
Wastewater Financial Model
Functional Allocation
TEST YEAR: FYE 2025
ALLOCATION INDEX FYE 2025 TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES Pipeline Maintenance 87,980 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Routine Building Maintenance - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Asphalt Repairs 10,400 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Maintenance, Repair and Rehab 3,120 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Audit - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Legal - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Administrative - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc Professional Services 433,970 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Encina Services 6,180,000 Treatment Flow/BOD/TSS 40.3% 28.6% 31.1% 0.0% 0.0% Encina Services (Pension Payoff) (281,750) Treatment Flow/BOD/TSS 40.3% 28.6% 31.1% 0.0% 0.0% Miscellaneous Outside Services 468,540 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Bank Services 44,940 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Comm Arts Support - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Regulatory/Permitting Fees 39,880 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Misc Services - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Laundry and Uniform Mainteance 5,200 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Electrical/SCADA Services 34,780 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Water Sampling Services - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% FOG Inspection Services 20,800 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Smartcover WIFI/Alarm Services 52,000 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Landscaping Services 135,490 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Ads and Publishing 2,080 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Dues and Subscriptions 10,920 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Books and Publications 520 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Audio Visual Materials - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Printing 7,800 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Postage 4,680 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Office Supplies 5,200 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Office Furniture & Equipment 5,200 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Computer Software 10,400 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc. Computer Hardware 4,160 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Promo Materials 5,200 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Food Expense - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Heat and Light 322,970 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Telephone & Communications 12,480 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Waste Dispoal Services 11,120 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Water 38,940 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Building Maintenance - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Electrical Supplies 520 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Janitorial Supplies 310 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Parts-Vehicles 520 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Parts-Equip 217,620 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Rock and Mineral Products 4,160 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Asphalt 520 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Small Tools 1,560 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Safety Equipment 22,620 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Uniforms and Accessories 5,200 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Meters/Fittings - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Personal Protective Equipment - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Gasoline and Oil 2,080 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Chemicals 85,630 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Training Supplies - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Medical Supplies - Disposable - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc Supplies 17,060 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Employee Training 3,120 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Tuition Reimbursement - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0%

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CITY OF CARLSABAD
Wastewater Financial Model
Functional Allocation
TEST YEAR: FYE 2025
ALLOCATION INDEX FYE 2025 TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES Training/Training Related Travel 4,680 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Conference Travel 3,300 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc. Meals/Miles 3,340 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Bad Debt Exp - Other Inv/Bills 20,800 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Disposal of Assets - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Reg Over/Short - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% NED Rental Assistance Payments - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Lateral Assistance Program 25,000 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Settlements - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Contingencies - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Vehicle Direct Charges 2,730 Vehicles 0.0% 5.0% 5.0% 90.0% 0.0% Vehicle Maintenance (2) 144,520 Vehicles 0.0% 5.0% 5.0% 90.0% 0.0% Vehicle Replacement 186,760 Vehicles 0.0% 5.0% 5.0% 90.0% 0.0% General Liab 458,860 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Information Technologies 335,870 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc Interdepartmental Charges 877,560 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Mis Chg Back - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Utility Billing Chargeback - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Fiscal Agent Fees - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Arbitrage Costs - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Principal - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Interest Expense - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Int Exp-Capitalized Interest - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other - Heat & Light - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other - Parts & Equipment - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other - Smart Covers - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Addt'l Maintenance & Equipment - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other Maintenance & Equipment (1,455,673) [Non-Encina O&M] 0.0% 2.3% 2.3% 42.3% 53.1% Capital Outlay
Capital Outlay < $10k - New -$ Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Capital Outlay < $10k - Repl - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Cap Outlay - Vehicles 25,637 Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Computer Equip > $10k - Repl - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Office Equipment - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Other Equipment - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Office Furniture - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Capitalized Assets - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Other Capital Outlay - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Operating Expenditures Sub Total 12,339,545$ 2,379,502$ 1,841,048$ 1,989,113$ 2,726,319$ 3,403,562$ Reallocation of "As All Others" 906,311$ 701,224$ 757,619$ 1,038,408$ (3,403,562)$ Total Allocation 12,339,545$ 3,285,814$ 2,542,272$ 2,746,732$ 3,764,727$ -$ Percentage Allocation 100.0% 26.6% 20.6% 22.3% 30.5%

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Feb. 11, 2025
Item #8 Page 78 of 265

CITY OF CARLSABAD
Wastewater Financial Model
Functional Allocation
TEST YEAR: FYE 2025
ALLOCATION INDEX FYE 2025 TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES RATE REVENUE REQUIREMENT FYE 2025 ALLOCATION TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES OPERATING EXPENSES (from above) 12,339,545$ 26.6% 20.6% 22.3% 30.5% 0.0%

NON-OPERATING EXPENSES
Replacement Funding (Depreciation) 5,361,480$ Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Rate Funded Capital 4,594,379 Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Debt Service - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Transfers to Capital Fund - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Replacement Funding - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Transfer Out - Debt Service - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Adj. to Reflect Full Year Increase 3,627,023.3 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% LESS: Offsetting Revenues
Over/Under Collection of Revenues (Available for Capital or Reserves)4,442,933$ As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other Charges for Services (12,480) As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Fines and Forfeitures (120,730) As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Income from Property & Investments (503,337) As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Interdepartmental (124,800) As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other Revenues (69,680) As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Total Rate Revenues to be Collected 29,534,333$ 4,642,700$ 3,796,267$ 4,098,566$ 9,757,870$ 7,238,930$ Reallocation of "As All Others" 1,507,404$ 1,232,582$ 1,330,733$ 3,168,211$ (7,238,930)$ Total Allocation 29,534,333$ 6,150,104$ 5,028,848$ 5,429,300$ 12,926,081$ -$ Percentage Allocation 100% 20.8% 17.0% 18.4% 43.8% 0.0% Check
Rate Revenues from Revenue Requirement 29,534,333$
Rate Revenues from Functional Allocation 29,534,333$
Difference -$

UNIT COST CALCULATIONS TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS ccfs lbs lbs lbs
Amount Allocable to Constituent 6,150,104$ 5,028,848$ 5,429,300$ 12,926,081$ Total Units 3,138,696 7,085,763 8,397,992 3,138,696
PER UNIT COSTS 1.959$ 0.710$ 0.646$ 4.118$

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Feb. 11, 2025
Item #8 Page 79 of 265

CITY OF CARLSABAD
Wastewater Financial Model
Staff Allocation

TITLE BARGAINING
UNIT ORG. KEY FTE

ALLOCATION RANGE MID-POINT
FY 2023 MID-PT

SALARY/WAGE
COST
CMWD

VEHICLE USE UNIFORM TREATMENT

FLOW BOD TSS COLLECTION

FLOW AS ALL OTHERS TOTAL
**Utility Locator** CCEA 5116310 0.3 66 76,211 22,863 100.0% 0.0% Accounting Technician CCEA 5116310 0.1 47 63,128 6,313 100.0% 0.0% Administrative Secretary CCEA 5116310 0.3 43 60,611 18,183 100.0% 0.0% Asset Management Program Specialist CCEA 5116310 0.5 84 91,208 45,604 100.0% 0.0% Associate Engineer CCEA 5116310 0.35 98 104,811 36,684 100.0% 0.0% BUYER/CONTRACT ADMINISTRATOR CCEA 5116310 0.2 63 74,006 14,801 100.0% 0.0% Engineering Technician II CCEA 5116310 0.35 60 71,802 25,131 5.0% 5.0% 90.0% 0.0% 100.0% GIS Associate Analyst CCEA 5116310 0.35 70 79,331 27,766 100.0% 0.0% Management Analyst MGT 5116310 0.2 89,108 17,822 100.0% 0.0% Sanitation Systems Operator II CCEA 5116310 1 89 95,846 95,846 y y 5.0% 5.0% 90.0% 0.0% 100.0% Sanitation Systems Operator II CCEA 5116310 1 89 95,846 95,846 y y 5.0% 5.0% 90.0% 0.0% 100.0% Sanitation Systems Operator III CCEA 5116310 1 103 110,178 110,178 y y 5.0% 5.0% 90.0% 0.0% 100.0% Sanitation Systems Operator II CCEA 5116310 1 89 95,846 95,846 y y 5.0% 5.0% 90.0% 0.0% 100.0% SENIOR SCADA & IMPLEMENTATION TECH.103 SENIOR STORM DRAIN MAINT. WORKERMGT 5116310 0.45 72 80,891 36,401 100.0% 0.0% SCADA & IMPLEMENTATION Technician CCEA 5116310 1 98 104,811 104,811 100.0% 0.0% Secretary CCEA 5116310 0.1 35 56,014 5,601 100.0% 0.0% Secretary CCEA 5116310 0.5 35 56,014 28,007 100.0% 0.0% Senior Engineer MGT 5116310 0.3 127,254 38,176 5.0% 5.0% 90.0% 0.0% 100.0% Senior Management Analyst MGT 5116310 0.25 108,560 27,140 100.0% 0.0% Senior Office Specialist CCEA 5116310 0.3 27 51,709 15,513 100.0% 0.0% ASSISTANT ENGINEER CCEA 5116310 0.35 82 89,398 31,289 5.0% 5.0% 90.0% 0.0% 100.0% Utilities Director MGT 5116310 0.35 193,465 67,713 100.0% 0.0% Utilities Engineering Manager MGT 5116310 0.35 166,392 58,237 5.0% 5.0% 90.0% 0.0% 100.0% Utilities Maintenance Planner MGT 5116310 0.3 89,108 26,732 5.0% 5.0% 90.0% 0.0% 100.0% Utilities Manager MGT 5116310 0.4 166,392 66,557 5.0% 5.0% 90.0% 0.0% 100.0% Utilities Senior Engineer MGT 5116310 0.35 127,254 44,539 5.0% 5.0% 90.0% 0.0% 100.0% Utilities Senior Engineer MGT 5116310 0.35 127,254 44,539 5.0% 5.0% 90.0% 0.0% 100.0% Utilities Superintendent MGT 5116310 1 127,254 127,254 100.0% 0.0% Utilities Technical Services Manager MGT 5116310 0.5 142,921 71,461 100.0% 0.0% Utility Worker II CCEA 5116310 1 66 76,211 76,211 y y 5.0% 5.0% 90.0% 0.0% 100.0% Warehouse Technician CCEA 5116310 0.3 43 60,611 18,183 y y 5.0% 5.0% 90.0% 0.0% 100.0% Wastewater Utility Worker I - UF CCEA 5116310 1 54 67,683 67,683 y y 5.0% 5.0% 90.0% 0.0% 100.0% Wastewater Utility Worker II CCEA 5116310 1 66 76,211 76,211 y y 5.0% 5.0% 90.0% 0.0% 100.0% Wastewater Utility Worker II CCEA 5116310 1 66 76,211 76,211 y y 5.0% 5.0% 90.0% 0.0% 100.0% Wastewater Utility Worker II CCEA 5116310 1 66 76,211 76,211 y y 5.0% 5.0% 90.0% 0.0% 100.0% Wastewater Utility Worker II CCEA 5116310 1 66 76,211 76,211 y y 5.0% 5.0% 90.0% 0.0% 100.0% Wastewater Utility Worker II CCEA 5116310 1 66 76,211 76,211 y y 5.0% 5.0% 90.0% 0.0% 100.0% Wastewater Utility Worker III CCEA 5116310 1 77 85,051 85,051 y y 5.0% 5.0% 90.0% 0.0% 100.0% All Staff Allocation 21.8 3,593,239$ 2,035,039$ -$ 68,055$ 68,055$ 1,224,992$ 673,937$ 2,035,039$ Resulting Allocation 100% 0.0% 3.3% 3.3% 60.2% 33.1% 100% Staff with CMWD Vehicle Use Vehicle Use Units (Assumed equal to allocated FTEs) - 0.62 0.62 11.07 - 12.30 Vehicle Costs Allocation 0.0% 5.0% 5.0% 90.0% 0.0% 100% FTEs with Uniforms Uniform Units (Assumed equal to allocated FTEs) - 0.62 0.62 11.07 - 12.30 Uniforms Cost Allocation 0.0% 5.0% 5.0% 90.0% 0.0% 100% Note: Total salary cost indicated here is based on assuming midpoint of range for each FTE and position as a reasonable means of allocating costs. This number is not a direct match to actual or budgeted costs which reflect each specific staff member's assigned compensation level.

Feb. 11, 2025
Item #8 Page 80 of 265
2025 WASTEWATER COST-OF-SERVICE STUDY
JANUARY 2025 / FINAL / CAROLLO

CITY OF CARLSBAD

APPENDIX E RATE CALCULATIONS
Feb. 11, 2025
Item #8 Page 81 of 265

CITY OF CARLSABAD
Wastewater Financial Model
Customer Allocation & Rates
FYE 2025 PROPOSED
Customer Data Billed Units Summary
FYE 2025 Units
ESTIMATED SEWER FLOWS (HCF) 3,138,696
ESTIMATED BOD DISCHARGE (lbs) 7,085,763
ESTIMATED TSS DISCHARGE (lbs) 8,397,992
CUSTOMER ACCOUNTS 24,200
Allocated Revenue Requirements TREATMENT FLOW BOD TSS COLLECTION FLOW TOTAL Rate Revenue Required 6,150,104$ 5,028,848$ 5,429,300$ 12,926,081$ 29,534,333$ Unit Basis for Rate Design ESTIMATED SEWER

FLOWS (HCF)

ESTIMATED BOD
DISCHARGE (lbs)

ESTIMATED TSS
DISCHARGE (lbs)

ESTIMATED SEWER

FLOWS (HCF)
2025 Units 3,138,696 7,085,763 8,397,992 3,138,696 2025 Unit Cost $1.959 $0.710 $0.646 $4.118
per HCF per lb per lb per HCF
Rate Class Unit Costs - Per HCF Discharged BOD (mg/l) BOD ($/HCF) TSS (mg/l) TSS ($/HCF) Flow ($/HCF) Total $ Per HCF Discharged GROUP I - SFR & Minimum Charges 301 $1.34 379 $1.53 $6.08 $8.94 GROUP I - MFR/Mobile Homes 301 $1.34 379 $1.53 $6.08 $8.94 GROUP II - Commercial 2 196 $0.87 229 $0.92 $6.08 $7.87 GROUP III - Commercial 3 495 $2.19 529 $2.13 $6.08 $10.40 GROUP IV - Commercial 4 1236 $5.47 1290 $5.20 $6.08 $16.76 Other 0 $0.00 0 $0.00 $6.08 $6.08
Brewery - B2 1906 $8.45 1537 $6.20 $6.08 $20.73
Brewery - B3 1236 $5.47 1290 $5.20 $6.08 $16.76
Brewery - B4 2426 $10.75 2067 $8.34 $6.08 $25.17
GROUP VI - Large Volume (no accounts) 121 $0.53 152 $0.61 $6.08 $7.22 Industrial Pretreatment Class III 450 $1.99 905 $3.65 $6.08 $11.72 Institutional 196 $0.87 190 $0.77 $6.08 $7.71
GROUP V - Elementary Schools 196 $0.87 190 $0.77 $6.08 $7.71 GROUP V - Junior High Schools 196 $0.87 190 $0.77 $6.08 $7.71 GROUP V - High Schools 196 $0.87 190 $0.77 $6.08 $7.71
GROUP V - Boarding Schools 196 $0.87 190 $0.77 $6.08 $7.71 ALLOCATION YEAR:

Feb. 11, 2025
Item #8 Page 82 of 265

CITY OF CARLSABAD
Wastewater Financial Model
Customer Allocation & Rates
GROUP I - SFR & Minimum Charges $8.94 1.0 6.69 $59.84 $59.85 SFR with ADU $8.94 1.5 10.04 $89.76 $89.77
GROUP I - MFR/Mobile Homes $8.94 76.96% $6.88 $6.89
GROUP II - Commercial 2 $7.87 76.96% $6.06 $6.06
GROUP III - Commercial 3 $10.40 76.96% $8.01 $8.01
GROUP IV - Commercial 4 $16.76 76.96% $12.90 $12.90
Other $6.08 0.00% $0.00 $0.00
Brewery - B2 $20.73 70.55% $14.62 $14.63
Brewery - B3 $16.76 76.96% $12.90 $12.90
Brewery - B4 $25.17 70.55% $17.76 $17.76
GROUP VI - Large Volume (no accounts) $7.22 76.96% $5.56 $5.56 Industrial Pretreatment Class III $11.72 76.96% $9.02 $9.03 Institutional $7.71 76.96% $5.93 $5.94
Institutional Rates Total $ Per HCF
Discharged
Assumed Flow per
Student (gpd)
Adjustment for
Student Days
Effective Flow per
Student (HCF per
Month)
Calculated Monthly Rate
(per Student)
No Rounding
Proposed Monthly Rate
(per Student) Rounded
GROUP V - Elementary Schools $7.71 6.84 55% 0.15 $1.18 $1.18 GROUP V - Junior High Schools $7.71 10.26 55% 0.23 $1.76 $1.77 GROUP V - High Schools $7.71 13.68 55% 0.30 $2.35 $2.36 GROUP V - Boarding Schools $7.71 38.18 100% 1.55 $11.97 $11.98 Calculated Monthly Rate
(per Account or Dwelling
Unit)
No Rounding
Calculated Monthly Rate (per HCF of
Water Used) Rounded
Proposed Monthly Rate (per Account
or Dwelling Unit)
Rounded
GROUP I - SFR & Minimum Charges Estimated Monthly
Discharge (HCF)
Total $ Per HCF
Discharged EDU Flow Factor
Discharge Based Rates Total $ Per HCF
Discharged
Return to Sewer
Factor
Calculated Monthly Rate
(per Account or Dwelling
Unit)
No Rounding
Feb. 11, 2025
Item #8 Page 83 of 265
2025 WASTEWATER COST-OF-SERVICE STUDY
JANUARY 2025 / FINAL / CAROLLO

CITY OF CARLSBAD

APPENDIX F PROJECTED FLOW AND LOADS
Feb. 11, 2025
Item #8 Page 84 of 265

CITY OF CARLSBAD
Wastewater Financial Model
Customer Data Projection
NOTE FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

ESTIMATED SEWER FLOWS (HCF)
GROUP I - SFR & Minimum Charges Calculated Sewer Flows SFR and Duplex w/ Mass Balance Adjustment1,484,378 1,479,614 1,490,691 1,499,777 1,502,923 1,508,569 1,523,436 1,539,042 Additional Billed Due to Minimum Charges 305,534 304,553 306,833 308,704 309,351 310,513 313,573 316,785 GROUP I - SFR & Minimum Charges Adjusted to Reflect Minimum Charges 1,789,912 1,784,167 1,797,525 1,808,481 1,812,275 1,819,083 1,837,010 1,855,827 GROUP I - MFR/Mobile Homes 497,493 495,896 499,609 502,654 503,708 505,601 510,583 515,813 COMMERCIAL, C1 Included in Group I 0 0 0 0 0 0 0 0
GROUP II - Commercial 2 294,764 293,818 296,017 297,822 298,446 299,567 302,520 305,619 GROUP III - Commercial 3 311,881 310,880 313,208 315,117 315,778 316,964 320,088 323,366 GROUP IV - Commercial 4 153,857 153,363 154,511 155,453 155,779 156,364 157,905 159,523 Other 0 0 0 0 0 0 0 0
Brewery - B2 3,376 3,366 3,391 3,411 3,419 3,431 3,465 3,501 Brewery - B3 7,649 7,625 7,682 7,728 7,745 7,774 7,850 7,931 Brewery - B4 2,178 2,172 2,188 2,201 2,206 2,214 2,236 2,259 GROUP VI - Large Volume (no accounts) 0 0 0 0 0 0 0 0
Industrial Pretreatment Class III 6,960 6,938 6,990 7,033 7,047 7,074 7,143 7,217 Institutional 523 522 526 529 530 532 537 543
GROUP V - Elementary Schools 12,630 12,590 12,684 12,761 12,788 12,836 12,962 13,095 GROUP V - Junior High Schools 7,386 7,362 7,417 7,463 7,478 7,506 7,580 7,658 GROUP V - High Schools 14,505 14,458 14,567 14,655 14,686 14,741 14,887 15,039 GROUP V - Boarding Schools 3,354 3,343 3,368 3,388 3,395 3,408 3,442 3,477 Total Estimated Sewer Flows (HCF) 3,106,470 3,096,498 3,119,681 3,138,696 3,145,280 3,157,096 3,188,209 3,220,867 ESTIMATED BOD DISCHARGE (lbs)
GROUP I - SFR & Minimum Charges 2,792,433 2,783,470 2,804,309 2,821,402 2,827,320 2,837,942 2,865,909 2,895,266 Additional Billed Due to Minimum Charges 574,775 572,930 577,219 580,737 581,956 584,142 589,899 595,941 GROUP I - SFR & Minimum Charges Adjusted to Reflect Minimum Charges 3,367,208 3,356,400 3,381,528 3,402,139 3,409,276 3,422,083 3,455,808 3,491,207 GROUP I - MFR/Mobile Homes 935,891 932,887 939,871 945,600 947,583 951,143 960,516 970,355 COMMERCIAL, C1 Included in Group I 0 0 0 0 0 0 0 0
GROUP II - Commercial 2 361,358 360,198 362,895 365,107 365,873 367,247 370,866 374,665 GROUP III - Commercial 3 963,191 960,099 967,287 973,183 975,224 978,888 988,535 998,661 GROUP IV - Commercial 4 1,186,695 1,182,886 1,191,742 1,199,006 1,201,521 1,206,035 1,217,920 1,230,396 Other 0 0 0 0 0 0 0 0
Brewery - B2 40,180 40,051 40,351 40,597 40,682 40,835 41,237 41,659 Brewery - B3 58,997 58,808 59,248 59,609 59,735 59,959 60,550 61,170 Brewery - B4 32,991 32,885 33,131 33,333 33,403 33,528 33,859 34,206 GROUP VI - Large Volume (no accounts) 0 0 0 0 0 0 0 0
Industrial Pretreatment Class III 19,546 19,483 19,629 19,749 19,790 19,865 20,061 20,266 Institutional 640 638 643 647 648 651 657 664
GROUP V - Elementary Schools 15,444 15,394 15,510 15,604 15,637 15,696 15,850 16,013 GROUP V - Junior High Schools 9,032 9,003 9,070 9,125 9,144 9,179 9,269 9,364 GROUP V - High Schools 17,737 17,680 17,812 17,921 17,958 18,026 18,203 18,390 GROUP V - Boarding Schools 4,101 4,088 4,118 4,143 4,152 4,168 4,209 4,252 Total BOD Discharge (lbs) 7,013,010 6,990,499 7,042,834 7,085,763 7,100,627 7,127,301 7,197,540 7,271,268 Feb. 11, 2025
Item #8 Page 85 of 265

CITY OF CARLSBAD
Wastewater Financial Model
Customer Data Projection
NOTE FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 ESTIMATED TSS DISCHARGE (lbs)
GROUP I - SFR & Minimum Charges 3,514,580 3,503,299 3,529,527 3,551,041 3,558,490 3,571,858 3,607,058 3,644,007 Additional Billed Due to Minimum Charges 723,416 721,094 726,493 730,921 732,454 735,206 742,451 750,057 GROUP I - SFR & Minimum Charges Adjusted to Reflect Minimum Charges 4,237,997 4,224,393 4,256,020 4,281,962 4,290,944 4,307,064 4,349,510 4,394,063 GROUP I - MFR/Mobile Homes 1,177,920 1,174,139 1,182,929 1,190,140 1,192,636 1,197,117 1,208,914 1,221,298 COMMERCIAL, C1 Included in Group I 0 0 0 0 0 0 0 0
GROUP II - Commercial 2 420,688 419,338 422,477 425,052 425,944 427,544 431,757 436,180 GROUP III - Commercial 3 1,029,720 1,026,415 1,034,099 1,040,402 1,042,585 1,046,501 1,056,815 1,067,640 GROUP IV - Commercial 4 1,238,583 1,234,607 1,243,850 1,251,432 1,254,057 1,258,768 1,271,173 1,284,194 Other 0 0 0 0 0 0 0 0
Brewery - B2 32,388 32,284 32,526 32,724 32,793 32,916 33,240 33,581 Brewery - B3 61,577 61,379 61,839 62,216 62,346 62,581 63,197 63,845 Brewery - B4 28,111 28,021 28,231 28,403 28,463 28,570 28,851 29,147 GROUP VI - Large Volume (no accounts) 0 0 0 0 0 0 0 0
Industrial Pretreatment Class III 39,324 39,198 39,492 39,732 39,816 39,965 40,359 40,772 Institutional 620 618 622 626 627 630 636 643
GROUP V - Elementary Schools 14,952 14,904 15,016 15,107 15,139 15,196 15,346 15,503 GROUP V - Junior High Schools 8,744 8,716 8,781 8,835 8,853 8,886 8,974 9,066 GROUP V - High Schools 17,172 17,117 17,245 17,350 17,386 17,452 17,624 17,804 GROUP V - Boarding Schools 3,970 3,957 3,987 4,011 4,020 4,035 4,075 4,116 Total TSS Discharge (lbs) 8,311,766 8,285,087 8,347,114 8,397,992 8,415,609 8,447,224 8,530,471 8,617,852

CUSTOMER ACCOUNTS
GROUP I - SFR & Minimum Charges 21,620 21,550 21,712 21,844 21,890 21,972 22,189 22,416 GROUP I - MFR/Mobile Homes 776 774 779 784 786 789 796 805 COMMERCIAL, C1 Included in Group I 0 0 0 0 0 0 0 0
GROUP II - Commercial 2 1,091 1,087 1,096 1,102 1,105 1,109 1,120 1,131 GROUP III - Commercial 3 244 243 245 247 247 248 250 253 GROUP IV - Commercial 4 165 164 166 167 167 168 169 171 Other 0 0 0 0 0 0 0 0
Brewery - B2 7 7 7 7 7 7 7 7
Brewery - B3 12 12 12 12 12 12 12 12
Brewery - B4 4 4 4 4 4 4 4 4
GROUP VI - Large Volume (no accounts) 0 0 0 0 0 0 0 0
Industrial Pretreatment Class III 1 1 1 1 1 1 1 1
Institutional 3 3 3 3 3 3 3 3
GROUP V - Elementary Schools 20 20 20 20 20 20 21 21
GROUP V - Junior High Schools 4 4 4 4 4 4 4 4
GROUP V - High Schools 4 4 4 4 4 4 4 4
GROUP V - Boarding Schools 1 1 1 1 1 1 1 1
Total Accounts 23,952 23,875 24,054 24,200 24,251 24,342 24,582 24,834 Feb. 11, 2025
Item #8 Page 86 of 265

CITY OF CARLSBAD
Wastewater Financial Model
Customer Data Projection
NOTE FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

SFR & MINIMUM CHARGES
GROUP I - SFR & Minimum Charges 21,620 21,550 21,712 21,844 21,890 21,972 22,189 22,416 Additional Billed Due to Minimum Charges Monthly 673 671 676 680 681 684 691 698 Total Minimum Charges (Monthly) 22,293 22,221 22,388 22,524 22,571 22,656 22,879 23,114 -0.321% 0.749% 0.610% 0.210%

BILLED/ESTIMATED WATER USE (HCF)
GROUP I - SFR & Minimum Charges 0 0 0 0 0 0 0 0
GROUP I - MFR/Mobile Homes 646,426 644,351 649,175 653,132 654,502 656,961 663,435 670,231 COMMERCIAL, C1 0 0 0 0 0 0 0 0
GROUP II - Commercial 2 383,006 381,777 384,635 386,979 387,791 389,248 393,084 397,111 GROUP III - Commercial 3 405,248 403,947 406,971 409,452 410,311 411,852 415,911 420,171 GROUP IV - Commercial 4 199,917 199,275 200,767 201,991 202,414 203,175 205,177 207,279 Other 0 0 0 0 0 0 0 0
Brewery - B2 4,786 4,771 4,806 4,836 4,846 4,864 4,912 4,962 Brewery - B3 9,939 9,907 9,981 10,042 10,063 10,101 10,201 10,305 Brewery - B4 3,088 3,078 3,101 3,120 3,127 3,138 3,169 3,202 GROUP VI - Large Volume (no accounts) 0 0 0 0 0 0 0 0
Industrial Pretreatment Class III 9,044 9,015 9,082 9,138 9,157 9,191 9,282 9,377 Institutional 680 678 683 687 689 691 698 705
GROUP V - Elementary Schools 0 0 0 0 0 0 0 0
GROUP V - Junior High Schools 0 0 0 0 0 0 0 0
GROUP V - High Schools 0 0 0 0 0 0 0 0
GROUP V - Boarding Schools 0 0 0 0 0 0 0 0
Total Accounts 1,662,134 1,656,798 1,669,202 1,679,377 1,682,899 1,689,222 1,705,869 1,723,343

NUMBER OF STUDENTS
GROUP V - Elementary Schools 6,905 6,883 6,934 6,977 6,991 7,018 7,087 7,159 GROUP V - Junior High Schools 2,692 2,683 2,703 2,720 2,726 2,736 2,763 2,791 GROUP V - High Schools 3,965 3,952 3,982 4,006 4,015 4,030 4,069 4,111 GROUP V - Boarding Schools 180 179 181 182 182 183 185 187 Feb. 11, 2025
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2025 WASTEWATER COST-OF-SERVICE STUDY
JANUARY 2025 / FINAL / CAROLLO

CITY OF CARLSBAD

APPENDIX G PROJECTIONS FOR ALTERNATIVE OPTION

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CITY OF CARLSABAD
Wastewater Financial Model - Alternative Option With Bonds Functional Allocation
TEST YEAR: FYE 2025
ALLOCATION INDEX FYE 2025 TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES Treatment Flow/BOD/TSS 40.3% 28.6% 31.1% 0.0% 0.0% See "Op Exp for Encina Services" tab for breakdown 50 Percent Customer 0.0% 0.0% 0.0% 0.0% 100.0%
Admin 0.0% 0.0% 0.0% 0.0% 100.0%
Allocation 4 0.0% 0.0% 0.0% 0.0% 100.0%
Allocation 5 0.0% 0.0% 0.0% 0.0% 100.0%
Allocation 6 0.0% 0.0% 0.0% 0.0% 100.0%
Allocation 7 0.0% 0.0% 0.0% 0.0% 100.0%
Flow Only 100.0% 0.0% 0.0% 0.0% 0.0%
Customer Only 0.0% 0.0% 0.0% 0.0% 100.0%
As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0%
Collections 5.0% 5.0% 90.0% 0.0%
Staff Allocation 0.0% 3.3% 3.3% 60.2% 33.1%
Vehicles 0.0% 5.0% 5.0% 90.0% 0.0%
Uniforms 0.0% 5.0% 5.0% 90.0% 0.0%
Miscellaneous Professional Services - 7490 0.0% 0.0% 0.0% 0.0% 100.0% Miscellaneous Outside Services - 7550 0.0% 0.0% 0.0% 0.0% 100.0% Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0%
Weighted Average O&M 26.6% 20.6% 22.3% 30.5% 0.0%
Weighed Average Revenue Requirements 20.8% 17.0% 18.4% 43.8% 0.0%

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CITY OF CARLSABAD
Wastewater Financial Model - Alternative Option With Bonds Functional Allocation
TEST YEAR: FYE 2025
ALLOCATION INDEX FYE 2025 TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES Pipeline Maintenance 87,980 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Routine Building Maintenance - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Asphalt Repairs 10,400 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Maintenance, Repair and Rehab 3,120 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Audit - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Legal - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Administrative - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc Professional Services 433,970 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Encina Services 6,180,000 Treatment Flow/BOD/TSS 40.3% 28.6% 31.1% 0.0% 0.0% Encina Services (Pension Payoff) (281,750) Treatment Flow/BOD/TSS 40.3% 28.6% 31.1% 0.0% 0.0% Miscellaneous Outside Services 468,540 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Bank Services 44,940 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Comm Arts Support - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Regulatory/Permitting Fees 39,880 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Misc Services - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Laundry and Uniform Mainteance 5,200 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Electrical/SCADA Services 34,780 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Water Sampling Services - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% FOG Inspection Services 20,800 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Smartcover WIFI/Alarm Services 52,000 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Landscaping Services 135,490 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Ads and Publishing 2,080 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Dues and Subscriptions 10,920 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Books and Publications 520 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Audio Visual Materials - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Printing 7,800 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Postage 4,680 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Office Supplies 5,200 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Office Furniture & Equipment 5,200 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Computer Software 10,400 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc. Computer Hardware 4,160 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Promo Materials 5,200 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Food Expense - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Heat and Light 322,970 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Telephone & Communications 12,480 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Waste Dispoal Services 11,120 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Water 38,940 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Building Maintenance - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Electrical Supplies 520 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Janitorial Supplies 310 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Parts-Vehicles 520 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Parts-Equip 217,620 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Rock and Mineral Products 4,160 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Asphalt 520 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Small Tools 1,560 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Safety Equipment 22,620 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Uniforms and Accessories 5,200 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Meters/Fittings - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Personal Protective Equipment - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Gasoline and Oil 2,080 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Chemicals 85,630 Collections 0.0% 5.0% 5.0% 90.0% 0.0% Training Supplies - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Medical Supplies - Disposable - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc Supplies 17,060 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Employee Training 3,120 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Tuition Reimbursement - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0%

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CITY OF CARLSABAD
Wastewater Financial Model - Alternative Option With Bonds Functional Allocation
TEST YEAR: FYE 2025
ALLOCATION INDEX FYE 2025 TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES Training/Training Related Travel 4,680 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Conference Travel 3,300 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc. Meals/Miles 3,340 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Bad Debt Exp - Other Inv/Bills 20,800 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Disposal of Assets - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Reg Over/Short - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% NED Rental Assistance Payments - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Lateral Assistance Program 25,000 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Settlements - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Contingencies - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Vehicle Direct Charges 2,730 Vehicles 0.0% 5.0% 5.0% 90.0% 0.0% Vehicle Maintenance (2) 144,520 Vehicles 0.0% 5.0% 5.0% 90.0% 0.0% Vehicle Replacement 186,760 Vehicles 0.0% 5.0% 5.0% 90.0% 0.0% General Liab 458,860 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Information Technologies 335,870 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Misc Interdepartmental Charges 877,560 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Mis Chg Back - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Utility Billing Chargeback - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Fiscal Agent Fees - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Arbitrage Costs - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Principal - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Interest Expense - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Int Exp-Capitalized Interest - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other - Heat & Light - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other - Parts & Equipment - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other - Smart Covers - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Addt'l Maintenance & Equipment - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other Maintenance & Equipment (1,455,673) [Non-Encina O&M] 0.0% 2.3% 2.3% 42.3% 53.1% Capital Outlay
Capital Outlay < $10k - New -$ Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Capital Outlay < $10k - Repl - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Cap Outlay - Vehicles 25,637 Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Computer Equip > $10k - Repl - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Office Equipment - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Other Equipment - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Office Furniture - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Capitalized Assets - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Other Capital Outlay - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Operating Expenditures Sub Total 12,339,545$ 2,379,502$ 1,841,048$ 1,989,113$ 2,726,319$ 3,403,562$ Reallocation of "As All Others" 906,311$ 701,224$ 757,619$ 1,038,408$ (3,403,562)$ Total Allocation 12,339,545$ 3,285,814$ 2,542,272$ 2,746,732$ 3,764,727$ -$ Percentage Allocation 100.0% 26.6% 20.6% 22.3% 30.5%

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CITY OF CARLSABAD
Wastewater Financial Model - Alternative Option With Bonds Functional Allocation
TEST YEAR: FYE 2025
ALLOCATION INDEX FYE 2025 TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES RATE REVENUE REQUIREMENT FYE 2025 ALLOCATION TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS NOTES OPERATING EXPENSES (from above) 12,339,545$ 26.6% 20.6% 22.3% 30.5% 0.0%

NON-OPERATING EXPENSES
Replacement Funding (Depreciation) 5,361,480$ Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Rate Funded Capital 4,594,379 Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Debt Service - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Transfers to Capital Fund - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Replacement Funding - Capital Improvement Plan 13.6% 12.6% 13.6% 60.2% 0.0% Transfer Out - Debt Service - As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Adj. to Reflect Full Year Increase 2,072,584.8 As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% LESS: Offsetting Revenues
Over/Under Collection of Revenues (Available for Capital or Reserves)4,442,933$ As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other Charges for Services (12,480) As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Fines and Forfeitures (120,730) As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Income from Property & Investments (503,337) As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Interdepartmental (124,800) As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Other Revenues (69,680) As Weighted Average 0.0% 0.0% 0.0% 0.0% 100.0% Total Rate Revenues to be Collected 27,979,894$ 4,642,700$ 3,796,267$ 4,098,566$ 9,757,870$ 5,684,491$ Reallocation of "As All Others" 1,183,714$ 967,906$ 1,044,981$ 2,487,891$ (5,684,491)$ Total Allocation 27,979,894$ 5,826,414$ 4,764,172$ 5,143,547$ 12,245,761$ -$ Percentage Allocation 100% 20.8% 17.0% 18.4% 43.8% 0.0% Check
Rate Revenues from Revenue Requirement 27,979,894$
Rate Revenues from Functional Allocation 27,979,894$
Difference -$

UNIT COST CALCULATIONS TREATMENT FLOW BOD TSS COLLECTION FLOW AS ALL OTHERS ccfs lbs lbs lbs
Amount Allocable to Constituent 5,826,414$ 4,764,172$ 5,143,547$ 12,245,761$ Total Units 3,138,696 7,085,763 8,397,992 3,138,696
PER UNIT COSTS 1.856$ 0.672$ 0.612$ 3.902$

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CITY OF CARLSBAD
Wastewater Financial Model - Alternative Option With Bonds Revenue Requirement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

CASH FLOW TESTS

REVENUES
Rate Revenues 23,556,818$ 25,907,310$ 28,038,590$ 30,395,430$ 31,615,830$ 32,897,870$ Other Charges for Services 12,000 12,480 12,792 13,112 13,440 13,776 Fines and Forfeitures 120,000 120,730 120,980 121,430 122,630 123,890 Income from Property & Investments 744,011 503,337 204,758 152,049 278,551 340,394 Interdepartmental 120,000 124,800 127,920 131,120 134,400 137,760 Other Revenues 67,000 69,680 71,422 73,205 75,040 76,916 TOTAL REVENUES 24,619,830$ 26,738,337$ 28,576,462$ 30,886,346$ 32,239,890$ 33,590,606$

EXPENDITURES
Ongoing Operating Expenses
Personnel 3,322,088$ 3,608,180$ 3,726,452$ 3,847,915$ 3,972,679$ 4,101,841$ Encina Operations 6,000,000 6,180,000 6,365,400 6,556,360 6,753,050 6,955,640 Maintenance & Equipment 4,100,161 3,981,400 4,086,360 4,194,187 4,304,974 4,418,775 Capital Outlay 24,651 25,637 26,278 26,935 27,608 28,299 Replacement Funding 10,090,113 - - - - - Transfer Out - Debt Service - - - - - - Other Operating Expenses
One-time Funding (Budget Analysis Amount) (1,424,566) (1,455,673) (1,491,457) (1,528,179) (1,565,868) (1,604,625) Rate Funded Capital 2,797,106 4,594,379 14,788,096 - 6,972,224 1,842,321 Debt Service - - - 1,936,462 1,936,462 2,922,090 Total Operating Expenditures 24,909,552$ 16,933,923$ 27,501,129$ 15,033,679$ 22,401,130$ 18,664,340$ Policy Expenditures
Replacement Funding 5,300,000$ 5,361,480$ 5,423,140$ 5,485,510$ 5,548,590$ 5,612,400$ Transfers to Capital Fund - - - - - - Additions to Meet Minimum Fund Balances - - - - - - Total Policy Expenditures 5,300,000$ 5,361,480$ 5,423,140$ 5,485,510$ 5,548,590$ 5,612,400$

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CITY OF CARLSBAD
Wastewater Financial Model - Alternative Option With Bonds Revenue Requirement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
POLICY OVERRIDES (input in Dashboard)
Replacement Funding No Override No Override No Override No Override No Override No Override Transfers to Capital Fund -$ -$ -$ -$ -$ -$ Additions to Meet Minimum Fund Balances (*) -$ -$ -$ -$ -$ -$ TOTAL EXPENDITURES 30,209,552$ 22,295,403$ 32,924,269$ 20,519,189$ 27,949,720$ 24,276,740$ CASH FLOW SURPLUS (DEFICIT) (5,589,723)$ 4,442,933$ (4,347,807)$ 10,367,157$ 4,290,170$ 9,313,866$

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CITY OF CARLSBAD
Wastewater Financial Model - Alternative Option With Bonds Revenue Requirement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

DEBT COVERAGE TEST

1.25 x Bond Coverage
Calculation of Net Revenues
Operating Revenues
User Charges 23,556,818$ 25,907,310$ 28,038,590$ 30,395,430$ 31,615,830$ 32,897,870$ Other/Misc Revenues - Excludes Interest Earnings 319,000 327,690 333,114 338,867 345,510 352,342 Yes Connection Fees 471,438$ 400,974$ 328,896$ 113,883$ 204,368$ 538,144$ Yes Grants - - - - - - Modeled Interest Earnings
Yes Operating Funds 265,571$ 211,226$ 93,872$ 64,569$ 87,516$ 144,493$ Yes Capital Funds 478,440 292,111 110,886 87,480 191,035 195,902 Total Revenues Included in Test 25,091,268$ 27,139,311$ 28,905,359$ 31,000,229$ 32,444,259$ 34,128,750$ Less: Operating Expenses (13,422,249)$ (13,769,580)$ (14,178,212)$ (14,598,462)$ (15,030,703)$ (15,476,256)$ Net Operating Revenues Avaiable for Debt Service 11,669,019$ 13,369,731$ 14,727,147$ 16,401,768$ 17,413,555$ 18,652,494$ Debt Service -$ -$ -$ 1,936,462$ 1,936,462$ 2,922,090$ Coverage - - - 2,420,577 2,420,577 3,652,612 Subtotal: Debt Service and Coverage -$ -$ -$ 4,357,039$ 4,357,039$ 6,574,702$ BOND COVERAGE SURPLUS (DEFICIT) 11,669,019$ 13,369,731$ 14,727,147$ 12,044,729$ 13,056,516$ 12,077,792$

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CITY OF CARLSBAD
Wastewater Financial Model - Alternative Option With Bonds Revenue Requirement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

REVENUE REQUIREMENT
Revenue Requirement (5,589,723)$ 4,442,933$ (4,347,807)$ 10,367,157$ 4,290,170$ 9,313,866$ Cash Flow Driven Surplus Cash Flow Driven Surplus Surplus Surplus Month of implementation January January January January January January Calculated Increase (%) 47.46% 0.00% 31.01% 0.00% 0.00% 0.00% Rate Increase Override (INPUT in Dashboard) 20.00% 8.00% 8.00% 3.00% 3.00% 3.00% Rate Increase (%) 20.00% 8.00% 8.00% 3.00% 3.00% 3.00%
Cumulative Rate Increase (%) 86.0% 103.9% 120.2% 126.8% 133.6% 140.6% SFR Rate $51.74 $56.70 $61.23 $63.07 $64.96 $66.91

CASH FLOW
Revenues Before Rate Increase 24,619,830$ 26,738,337$ 28,576,462$ 30,886,346$ 32,239,890$ 33,590,606$ Revenues From Rate Increase - 2,072,585 2,243,087 911,863 948,475 986,936 Less: Rate Increase Delay - (1,036,292) (1,121,544) (455,931) (474,237) (493,468) Less: Adjustment for Implementation Delay (1,036,292)
Less: Expenditures (30,209,552) (22,295,403) (32,924,269) (20,519,189) (27,949,720) (24,276,740) Cash Flow (5,589,723)$ 4,442,933$ (3,226,263)$ 10,823,088$ 4,764,408$ 9,807,334$ RATE REVENUE REQUIREMENT 23,556,818$ 27,979,894$ 30,281,677$ 31,307,293$ 32,564,305$ 33,884,806$ Total Ending Balance 10,987,236$ 9,488,607$ 5,716,297$ 22,138,778$ 11,900,670$ 17,120,342$ 161 days 205 days 76 days 538 days 194 days 335 days
Operating Fund
Beginning Balance 16,576,959$ 4,545,674$ 4,841,560$ 1,615,297$ 7,136,262$ 7,313,008$ Cash Flow (5,589,723) 4,442,933 (3,226,263) 10,823,088 4,764,408 9,807,334 Transfers from Operating to Capital Fund (6,441,562) (4,147,047) - (5,302,123) (4,587,662) (8,647,301) Ending Operating Fund Balance 4,545,674$ 4,841,560$ 1,615,297$ 7,136,262$ 7,313,008$ 8,473,041$

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CITY OF CARLSBAD
Wastewater Financial Model - Alternative Option With Bonds Revenue Requirement
FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Coverage Tests - Post Rate Increase
Calculation of Net Revenues
Operating Revenues
User Charges 23,556,818$ 25,907,310$ 29,160,134$ 30,851,361$ 32,090,067$ 33,391,338$ Other/Misc Revenues 319,000 327,690 333,114 338,867 345,510 352,342 Change selection above
Yes Connection Fees 471,438$ 400,974$ 328,896$ 113,883$ 204,368$ 538,144$ Yes Grants - - - - - - Modeled Interest Earnings
Yes Operating Funds 265,571$ 211,226$ 93,872$ 64,569$ 87,516$ 144,493$ Yes Capital Funds 478,440 292,111 110,886 87,480 191,035 195,902 Total Revenues Included in Test 25,091,268$ 27,139,311$ 30,026,902$ 31,456,160$ 32,918,496$ 34,622,218$ LESS: Operating Expenses (13,422,249)$ (13,769,580)$ (14,178,212)$ (14,598,462)$ (15,030,703)$ (15,476,256)$ Net Operating Revenues Available for Debt Service 11,669,019$ 13,369,731$ 15,848,691$ 16,857,699$ 17,887,793$ 19,145,962$ Existing Debt Test - Includes debt service only for debt that has been issued and has been input into the model.

Net Operating Revenues Available for Debt Service 11,669,019$ 13,369,731$ 15,848,691$ 16,857,699$ 17,887,793$ 19,145,962$ LESS: Existing Debt Service - - - (293,749) (293,749) (293,749) Revenues Available for Coverage 11,669,019$ 13,369,731$ 15,848,691$ 16,563,950$ 17,594,044$ 18,852,213$ Existing Debt Service Coverage Ratio No Existing Debt No Existing Debt No Existing Debt 57.39 x 60.89 x 65.18 x Total Debt Test - Includes exiting and projected debt.

Net Operating Revenues Available for Debt Service 11,669,019$ 13,369,731$ 15,848,691$ 16,857,699$ 17,887,793$ 19,145,962$ Less: Existing Debt Service - - - (293,749) (293,749) (293,749) Less: Projected Debt Service - - - (1,642,713) (1,642,713) (2,628,341) Revenues Available for Coverage 11,669,019$ 13,369,731$ 15,848,691$ 14,921,237$ 15,951,331$ 16,223,872$ Total Debt Service Coverage Ratio No Debt No Debt No Debt 8.71 x 9.24 x 6.55 x

Page 5 ends

Feb. 11, 2025
Item #8 Page 98 of 265

CITY OF CARLSABAD
Wastewater Financial Model - Alternative Option with Bonds Customer Allocation & Rates
FYE 2025 PROPOSED
Customer Data Billed Units Summary
FYE 2025 Units
ESTIMATED SEWER FLOWS (HCF) 3,138,696
ESTIMATED BOD DISCHARGE (lbs) 7,085,763
ESTIMATED TSS DISCHARGE (lbs) 8,397,992
CUSTOMER ACCOUNTS 24,200
Allocated Revenue Requirements TREATMENT FLOW BOD TSS COLLECTION FLOW TOTAL Rate Revenue Required 5,826,414$ 4,764,172$ 5,143,547$ 12,245,761$ 27,979,894$ Unit Basis for Rate Design ESTIMATED SEWER

FLOWS (HCF)

ESTIMATED BOD
DISCHARGE (lbs)

ESTIMATED TSS
DISCHARGE (lbs)

ESTIMATED SEWER

FLOWS (HCF)
2025 Units 3,138,696 7,085,763 8,397,992 3,138,696 2025 Unit Cost $1.856 $0.672 $0.612 $3.902
per HCF per lb per lb per HCF
Rate Class Unit Costs - Per HCF Discharged BOD (mg/l) BOD ($/HCF) TSS (mg/l) TSS ($/HCF) Flow ($/HCF) Total $ Per HCF Discharged GROUP I - SFR & Minimum Charges 301 $1.26 379 $1.45 $5.76 $8.47 GROUP I - MFR/Mobile Homes 301 $1.26 379 $1.45 $5.76 $8.47 GROUP II - Commercial 2 196 $0.82 229 $0.87 $5.76 $7.46 GROUP III - Commercial 3 495 $2.08 529 $2.02 $5.76 $9.86 GROUP IV - Commercial 4 1236 $5.19 1290 $4.93 $5.76 $15.87 Other 0 $0.00 0 $0.00 $5.76 $5.76
Brewery - B2 1906 $8.00 1537 $5.88 $5.76 $19.63
Brewery - B3 1236 $5.19 1290 $4.93 $5.76 $15.87
Brewery - B4 2426 $10.18 2067 $7.90 $5.76 $23.84
GROUP VI - Large Volume (no accounts) 121 $0.51 152 $0.58 $5.76 $6.84 Industrial Pretreatment Class III 450 $1.89 905 $3.46 $5.76 $11.11 Institutional 196 $0.82 190 $0.73 $5.76 $7.31
GROUP V - Elementary Schools 196 $0.82 190 $0.73 $5.76 $7.31 GROUP V - Junior High Schools 196 $0.82 190 $0.73 $5.76 $7.31 GROUP V - High Schools 196 $0.82 190 $0.73 $5.76 $7.31
GROUP V - Boarding Schools 196 $0.82 190 $0.73 $5.76 $7.31 ALLOCATION YEAR:

Feb. 11, 2025
Item #8 Page 99 of 265

CITY OF CARLSABAD
Wastewater Financial Model - Alternative Option with Bonds Customer Allocation & Rates
GROUP I - SFR & Minimum Charges $8.47 1.0 6.69 $56.69 $56.70 SFR with ADU $8.47 1.5 10.04 $85.04 $85.04
GROUP I - MFR/Mobile Homes $8.47 76.96% $6.52 $6.53
GROUP II - Commercial 2 $7.46 76.96% $5.74 $5.74
GROUP III - Commercial 3 $9.86 76.96% $7.59 $7.59
GROUP IV - Commercial 4 $15.87 76.96% $12.22 $12.22
Other $5.76 0.00% $0.00 $0.00
Brewery - B2 $19.63 70.55% $13.85 $13.86
Brewery - B3 $15.87 76.96% $12.22 $12.22
Brewery - B4 $23.84 70.55% $16.82 $16.83
GROUP VI - Large Volume (no accounts) $6.84 76.96% $5.27 $5.27 Industrial Pretreatment Class III $11.11 76.96% $8.55 $8.55 Institutional $7.31 76.96% $5.62 $5.63
Institutional Rates Total $ Per HCF
Discharged
Assumed Flow per
Student (gpd)
Adjustment for
Student Days
Effective Flow per
Student (HCF per
Month)
Calculated Monthly Rate
(per Student)
No Rounding
Proposed Monthly Rate
(per Student) Rounded
GROUP V - Elementary Schools $7.31 6.84 55% 0.15 $1.11 $1.12 GROUP V - Junior High Schools $7.31 10.26 55% 0.23 $1.67 $1.68 GROUP V - High Schools $7.31 13.68 55% 0.30 $2.23 $2.23 GROUP V - Boarding Schools $7.31 38.18 100% 1.55 $11.34 $11.35 Calculated Monthly Rate
(per Account or Dwelling
Unit)
No Rounding
Calculated Monthly Rate (per HCF of
Water Used) Rounded
Proposed Monthly Rate (per Account
or Dwelling Unit)
Rounded
GROUP I - SFR & Minimum Charges Estimated Monthly
Discharge (HCF)
Total $ Per HCF
Discharged EDU Flow Factor
Discharge Based Rates Total $ Per HCF
Discharged
Return to Sewer
Factor
Calculated Monthly Rate
(per Account or Dwelling
Unit)
No Rounding
Feb. 11, 2025
Item #8 Page 100 of 265
RESOLUTION NO. 2025-048

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,

CALIFORNIA, ESTABLISHING A PROCEDURE FOR CUSTOMER AND PROPERTY

OWNER OBJECTIONS TO PROPOSED PROPERTY-RELATED FEES AND

CHARGES FOR WASTEWATER SERVICES
WHEREAS, the City of Carlsbad provides property -related services, including but not limited to, wastewater services, and assesses fees and charges for the costs of providing these services; and WHEREAS, California law requires that any new fee or increase to an existing property -related fee must be adopted in accordance with the substantive and procedural requirements of Article XIII D, section 6 of the California Constitution, or Proposition 218; and WHEREAS, Assembly Bill 2257, codified as Government Code Sections 53759.1 and 53759.2, or AB 2257, became effective January 1, 2025, and authorizes local agencies to adopt certain procedures for the submittal and consideration of public comments regarding proposed wastewater (sewer) or water fees; and
WHEREAS, if a local agency adopts the procedures authorized by AB 2257, then members of the public must timely submit written objections as part of the ratemaking process, to exhaust their administrative remedies as a prerequisite to later litigating the particular issue raised; and WHEREAS, the City Council of the City of Carlsbad has determined that electing to opt-in to the adoption of exhaustion of administrative procedures authorized by AB 2257 allows the City Council to hear substantive concerns by members of the public prior to approving any proposed rate changes and creates a better administrative record to facilitate judicial review.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:

1. That the above recitations are true and correct.

2. That the City of Carlsbad elects to adopt the exhaustion of administrative procedures authorized by Government Codes Sections 53759.1 and 53759.2.

3. That prior to the adoption of any rates changes for wastewater services there will be a period of at least 45 days after the Proposition 218 notice is mailed for customers and property owners to submit written objections.

4. That the City Manager or designee will establish a deadline for the members of the public to submit any written objections to the proposed wastewater fees prior to the majority -protest public hearing.

5. That the City Manager or designee will review all submitted written objection s and provide written responses to all timely written objections.

6. That prior to the close of the majority protest hearing all written object ions and responses will be submitted to the City Council for consideration.

7. That the required Proposition 218 notice will describe these objection procedures , including how to submit written objections, and the deadline by which all written objections must be received.

8. That approving a procedure for customers and property owners to raise object ions to proposed wastewater fees does not constitute a project within t he meaning of the California Environmental Quality Act under Public Resources Code Section 21065 because it has no potential to cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment.

PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 11th day of February 2025, by the following vote, to wit:

AYES:

NAYS:

ABSTAIN:

ABSENT:

Blackburn, Bhat-Patel, Acosta, Burkholder, Shin.

None .

KEITH BLACKBURN, MAYOR
RESOLUTION NO. 1760

A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD

MUNICIPAL WATER DISTRICT OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING AND FILING THE 2025 POTABLE AND RECYCLED WATER COST OF SERVICE STUDY, SETTING A PUBLIC HEARING FOR APRIL 22, 2025, AT 5 P.M., TO APPROVE INCREASES TO RATES FOR POTABLE AND RECYCLED WATER SERVICES EFFECTIVE JULY 1, 2025, AND DIRECTING THE EXECUTIVE

MANAGER OR DESIGNEE TO ISSUE WRITTEN NOTICE OF THE PUBLIC

HEARING
WHEREAS the Carlsbad Municipal Water District provides water and recycled water services to approximately 29,000 connections within a 32.3 square mile service area within the City of Carlsbad; and
WHEREAS, the City and the Carlsbad Municipal Water District, or CMWD, solicited responses to its 2019 Utilities Cost of Service Study Request for Proposals and received four responses, and after an evaluation determined that Carollo Engineers, Inc., was the most qualified consultant; and WHEREAS the City Council and CMWD Board authorized a professional services agreement with Carollo Engineers, Inc., to develop a comprehensive cost-of-service study, including CMWD's potable and recycled water services; and
WHEREAS, CMWD's Final Potable and Recycled Cost-of-Service Study dated February 2025 provides a revenue requirement analysis, cost of service analysis, and a rate design process, including recommended adjustments to potable and recycled water rates; and WHEREAS, the CMWD is proposing potable and recycled water service rate increases effective July 1, 2025, Jan. 1, 2026, and Jan. 1, 2027, consistent with the Final Potable and Recycled Cost-of Service Study dated February 2025; and
WHEREAS, the California Constitution, Article XIII D, section 6, or Proposition 218, requires CMWD to hold a majority -protest public hearing on any proposed new or increased rates and fees and mail a written notice at least 45 days prior to the public hearing to the record owners of each identified parcel upon which the fees or charge for imposition is proposed .

NOW, THEREFORE, BE IT RESOLVED by the Carlsbad Municipal Water District Board of Directors of the City of Carlsbad, California, as follows:

1. That the above recitations are true and correct .

2. The Final Potable and Recycled Water Cost-of-Service Study dated February 2025 (Attachment A) is approved by the CMWD Board.

3. That the CMWD Board of Directors hereby sets a majority -protest public hearing for Tuesday, April 22, 2025, at 5 p.m.

4. That the Executive Manager of designee is directed to written notice of the public hearing.

5. That approving a cost study, setting of a majority -protest public hearing, and sending written notice of the public hearing do not constitute a project within the meaning of the California Environmental Quality Act under Public Resources Code Section 21065 because it has no potential to cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment .

PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Board of Directors of the Carlsbad Municipal Water District of the City of Carlsbad, California, and the City Council of the City of Carlsbad, California , on the 11th day of February 2025, by the following vote, to wit:

AYES:

NAYS:

ABSTAIN:

ABSENT:

Blackburn , Bhat-Patel, Acosta, Burkholder, Shin.

None.

KEITH BLACKBURN, President
Water Cost-of-Service Study
2025 Potable and Recycled Water
Cost-of-Service Study
FINAL / February 2025
Attachment A
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Item #8 Page 105 of 265
2025 POTABLE AND RECYCLED WATER COST OF SERVICE STUDY
FEBRUARY 2025 / FINAL / CAROLLO
CARLSBAD MUNCIPAL WATER DISTRICT i
Contents
SECTION 1 INTRODUCTION 1

1.1 Study Purpose 1

1.2 Potable Water Rate Structure Updates 1

1.3 Overview of the Rate Setting Process 2

1.3.1 Revenue Requirement Analysis 3

1.3.2 Water Demand Analysis 3

1.3.3 Cost-of-Service Analysis 4

1.3.4 Rate Design Analysis & Calculation 4

1.3.5 Rate Adoption 4

1.4 Project Objectives 4

1.4.1 Rate Study Best Practices and Legal Considerations 5

1.5 Current Rate Structure 5

1.6 Project Findings and Recommendations 6
SECTION 2 INPUTS AND ASSUMPTIONS 10

2.1 Forecast Assumptions 10

2.2 Potable and Recycled Water Customer Base 11

2.2.1 Water Demand Forecast 11
SECTION 3 REVENUE REQUIREMENT ANALYSIS 13

3.1 Operating Revenues 13

3.2 Operating Expenses 15

3.3 Water Supply 16

3.4 Capital Improvement Plan Funding 17

3.5 Recommended Revenue Requirements 20

3.5.1 Cash Flow Sufficiency Test 20

3.5.2 Debt Coverage Test 24

3.5.3 SDCWA Surcharge Pass-Through 25
SECTION 4 COST-OF-SERVICE ANALYSIS 29

4.1 Ratemaking Framework 30

4.1.1 California Ratemaking 30

4.1.2 Industry Guidance 30

4.2 Functional Cost Allocation – Potable 31

4.2.1 Functional Cost Categories – Potable 31

4.3 Rate Component Allocation – Potable 33

4.3.1 Rate Component Descriptions – Potable 33

4.4 Extra Capacity Allocation Factors – Potable 34

4.4.1 Max Day Demand – Potable 34

4.4.2 Max Hour Demand – Potable 35
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4.5 Allocation of Revenue Requirements to Cost Components – Potable 36

4.6 Functional Allocation Results – Potable 43

4.6.1 Potable Water Functional Allocation Results 43

4.6.2 Unit Cost Calculation 44

4.7 Customer Class Allocation 44

4.7.1 Potable Volumetric Cost Customer Class Allocation 45

4.7.2 Potable Fixed Cost Customer Class Allocation 46

4.7.3 Potable Water Customer Allocation Results 47

4.7.4 Functional Cost Allocation – Recycled 47

4.7.5 Rate Component Allocation – Recycled 48

4.7.6 Allocation of Revenue Requirements to Cost Components – Recycled 49

4.7.7 Functional Allocation Results – Recycled 53
SECTION 5 RATE DESIGN ANALYSIS 54

5.1 Rate Structure Objectives and Goals 54

5.2 Potable Water Delivery Fees 54

5.3 Potable Water Usage Fees 56

5.3.1 Residential Rates 57

5.3.2 CI&I, Agricultural, and Irrigation Rate Design 60

5.4 Recycled Water Rates 60

5.4.1 Recycled Water Delivery Charges 60

5.4.2 Recycled Water Usage Rates 61

5.5 Proposed Potable Water Rates 62

5.5.1 Water Delivery Fees 62

5.5.2 Water Usage Fees 63

5.6 Proposed Recycled Water Rates 64

5.7 Proposed Fire Service Rates 65

5.8 Airport Capital Charges 65

5.8.1 Airport System Capital Costs 66

5.8.2 Monthly Airport Capital Charge Calculations 67
Appendices

APPENDIX A CUSTOMER AND DEMAND FORECASTS

APPENDIX B WATER SUPPLY PURCHASES AND COSTS

APPENDIX C CAPITAL IMPROVEMENT PLAN

APPENDIX D PROJECTED O&M COSTS

APPENDIX E REVENUE REQUIREMENT ANALYSIS

APPENDIX F POTABLE COST OF SERVICE ANALYSIS

APPENDIX G RECYCLED COST OF SERVICE ANALYSIS

APPENDIX H POTABLE WATER CUSTOMER ALLOCATION
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2025 POTABLE AND RECYCLED WATER COST OF SERVICE STUDY
FEBRUARY 2025 / FINAL / CAROLLO
CARLSBAD MUNICIPAL WATER DISTRICT iii
Tables
Table 1 Proposed Water Usage Fees 7
Table 2 Proposed Water Delivery Fee 8
Table 3 Escalation Factors 10
Table 4 Water System Customer Profile 11
Table 5 Forecasted Water Demand by Customer Class (CCF) 12 Table 6 Current Water Rate Revenue ($ millions) 14
Table 7 Offsetting Revenues - Potable Water ($ millions) 14 Table 8 Offsetting Revenues - Recycled Water ($ millions) 14 Table 9 Expenditures - Potable Water ($ millions) 15
Table 10 Expenditures - Recycled Water ($ millions) 16
Table 11 Water Supply Purchases (AF, $ millions) 17
Table 12 Capital Improvement Plan Expenditures - Potable Water ($ millions) 18 Table 13 Capital Improvement Plan Expenditures - Recycled Water ($ millions) 18 Table 14 Capital Improvement Plan Expenditures and Funding - Potable Water ($ millions) 19
Table 15 Capital Improvement Plan Expenditures and Funding - Recycled Water ($ millions) 19
Table 16 User Revenues and Proposed Increases ($ millions) 21 Table 17 Cash Flow Sufficiency Test - Potable Water ($ millions) 22 Table 18 Cash Flow Sufficiency Test - Recycled Water ($ millions) 23 Table 19 Debt Service Coverage Test - Recycled Water ($ millions) 24 Table 20 SDCWA Pass-through Expenses – Fiscal Year Basis ($ millions) 25 Table 21 SDCWA Variable Pass-through Calculation – Calendar Year Basis ($ millions) 26 Table 22 Eligible Costs to Recover Through SDCWA Fixed Pass-through – Potable Water ($ millions) 26
Table 23 SDCWA Fixed Pass-through Calculation – Potable Water ($ millions) 27 Table 24 Calculated Variable Pass-through Revenues – Potable Water ($ millions) 28 Table 25 Calculated Fixed Pass-through Revenues – Potable Water ($ millions) 28 Table 26 Fiscal Year Pass-through Revenue Summary – Potable Water ($ millions) 28 Table 27 Functionalized O&M Expenses - Potable ($ millions) 32 Table 28 Max Day Allocation 35
Table 29 Max Hour Allocation 35
Table 30 Extra Capacity Allocation 36
Table 31 Functional Allocation Factors - Potable 39
Table 32 Fixed Asset Allocation (Plant-in-Service) - Potable ($ millions) 40 T
able 33 O&M Allocation to Rate Components - Potable ($ millions) 41 Table 34 Revenue Requirements Allocation to Rate Components - Potable ($ millions) 42 Table 35 Functional Allocation Results Summary - Potable Water ($ millions) 43 Table 36 Unit Cost Calculation - Potable Water ($ millions) 44 Table 37 Customer Class Service Units 44
Table 38 Base Allocation ($ millions) 45
Table 39 Max Day Allocation ($ millions) 45
Table 40 Max Hour Allocation ($ millions) 45
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Table 41 Customer Allocation ($ millions) 46
Table 42 Service Allocation ($ millions) 46
Table 43 Potable Water Customer Allocation Summary, FYE 2025 ($ millions) 47 Table 44 Functionalized O&M Expenses - Recycled ($ millions) 48 Table 45 Functional Allocation Factors - Recycled 50
Table 46 Fixed Asset Allocation (Plant-in-Service) - Recycled ($ millions) 50 Table 47 O&M Allocation to Rate Components – Recycled ($ millions) 51 Table 48 Revenue Requirements Allocation to Rate Components – Recycled ($ millions) 52
Table 49 Functional Allocation Results Summary – Recycled ($ millions) 53 Table 50 Fixed Unit Costs – Potable 55
Table 51 Proposed Monthly Water Delivery Fees – Potable 55 Table 52 Proposed Fixed Unit Costs – Fire 56
Table 53 Proposed Monthly Water Delivery Fees – Fire 56 Table 54 Proposed Single-Family Residential Tier Allotments 57 Table 55 Single-Family Rate Design – Base, Max Day, Max Hour 58 Table 56 Single-Family Rate Design Summary, FYE 2025 58 Table 57 Proposed Multi-Family Residential Tier Allotments 59 Table 58 Multi-Family Rate Design – Base, Max Day, Max Hour 59 Table 59 Multi-Family Rate Design Summary, FYE 2025 60
Table 60 CI&I, Agricultural, and Irrigation Rate Design Summary, FYE 2025 60 Table 61 Fixed Unit Costs – Recycled 61
Table 62 Proposed Monthly Water Delivery Fees – Recycled 61 Table 63 Recycled Water Usage Rate Design Summary, FYE 2025 61 Table 64 Proposed Carlsbad Potable Water Delivery Fees 62 Table 65 Calculated SDCWA Pass-Through Fees 62
Table 66 Proposed Total Potable Water Delivery Fees 63
Table 67 Proposed Potable Water Usage Fees 63
Table 68 Proposed Recycled Water Delivery Fees 64
Table 69 Proposed Recycled Water Usage Fees 65
Table 70 Proposed Fire Service Delivery Fees 65
Table 71 Airport Assets and Capital Needs (Millions) 66 Table 72 Annual Airport Capital Charge Calculation 66
Table 73 Projected Annual Airport Capital Charges 67
Table 74 Airport Service Meters 67
T
able 75 Airport Fire Line Connections 67
Table 76 Airport System Capacity Allocation 68
Table 77 Monthly Airport Capital Charge - Service Meters 68 Table 78 Monthly Airport Capital Charge – Fire Line Connections 69 Figures
Figure 1 Conceptual Overview of the Rate-Setting Process 3 Figure 2 Rate Revenues with First Year Increase and Restructuring for Pass-through 21 Figure 3 Cost-of-Service Analysis Steps 29
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POTABLE AND RECYCLED WATER COST-OF-SERVICE STUDY v
Abbreviations
acre-ft acre per feet
ADD Average Day Demand
AF acre feet
AWWA American Water Works Association
Carollo Carollo Engineers, Inc.

CCF or ccf hundred cubic feet
CI&I Commercial, Institutional, & Industrial
CIP Capital Improvement Plan
CMWD or District Carlsbad Municipal Water District
Desal desalination
DSCR Debt Service Coverage Ratio
DU Dwelling Unit
EWA Encina Wastewater Authority
FYE fiscal year ending
IAC Infrastructure-Access-Charge
M1 Manual Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices M1
MDD Maximum Day Demand
MEU Meter Equivalent Unit
MGD or mgd million gallons per day
MHD Max Hour Demand
MWD Metropolitan Water District of Southern California
O&M operations and maintenance
PERS Public Employees' Retirement System
SCADA Supervisory Control And Data Acquisition
SDCWA San Diego County Water Authority
SFR Single-Family Residential
SRF State Revolving Fund
Study Cost-of-Service Study
UAL Unfunded Accrued Liability
UMAPC Uniform Member Agency Purchase Contract
VWD Vallecitos Water District

Feb. 11, 2025
Item #8 Page 110 of 265
2025 POTABLE AND RECYCLED WATER COST OF SERVICE STUDY
FEBRUARY 2025 / FINAL / CAROLLO
CARLSBAD MUNICIPAL WATER DISTRICT 1
SECTION 1 INTRODUCTION
The Carlsbad Municipal Water District (CMWD or the District) supplies potable and recycled water to approximately 29,000 connections within a 32.3 square mile service area in Southern California. In fiscal year ending (FYE) 2024, the District is projected to deliver approximately 14,250 acre-feet (AF) of potable water and 4,230 AF of recycled water to customers. The District currently purchases its potable water supplies from the San Diego County Water Authority (SDCWA) and in 2016 the CMWD Board entered in to a purchase agreement with SDCWA for 2,500 acre-feet per year of desalinated water as local supply.

Desalinated water supplies are produced at the Carlsbad Desalination Plant (Desal). Recycled water is produced at the Carlsbad Water Recycling Facility, as well as purchased from the Vallecitos Water District (VWD).

1.1 Study Purpose
The District retained Carollo Engineers, Inc. (Carollo) to perform a comprehensive Cost-of-Service Study (Study) of the District’s potable water, recycled water, and wastewater systems and to develop a rate plan for the upcoming five-year period, FYE 2025 through FYE 2029. Although this Study presents a five-year rate projection, the District is adopting rates for the next two or three years at this time. Carollo’s analysis was guided by the policies and practices of the District, industry best practices for cost -of-service analyses as outlined by the American Water Works Association (AWWA), and requirements for establishing water rates within the State of California. The findings and recommendations of this cost -of-service analysis for potable and recycled water are detailed within this report. The findings of the cost-of-service analysis for wastewater are provided by Carollo in a separate report.

1.2 Potable Water Rate Structure Updates
The current potable water rate structure has been in place since approximately 2010 with periodic updates to the volumetric rates (usage fee) and fixed charges (delivery fee). Only minimal updates have been made to the underlying rate structure since that time. Historically, the District’s rates have combined costs for internal activities such as operating and maintenance, management, and capital improvement with external costs to purchase water from SDCWA.

Since the development of the current rate structure, the District’s operations, cost structure, and demands have evolved, necessitating a fresh look at the rate structure.  Between 2010 and 2023, annual customer demands decreased from approximately 17,000 acre per feet (acre-ft) to 13,500 acre-ft, a 21-percent decrease. This decrease occurred in spite of 5.2-percent growth in the number of connections over that same time. Considering both the growth and the overall demand decrease, annual use per account decreased from 0.61 acre-ft to 0.46 acre-ft, a decrease of approximately 25-percent.
 Continued conservation by single family customers has resulted in average monthly consumption decreasing from 13.5 hundred cubic feet (CCF) per month in 2014 to 11.2 ccf per month in 2022.

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 While demands and water purchases have decreased, the cost for the District to purchase water from SDCWA has increased significantly over time. In 2010, SDCWA accounted for approximately 52- percent of overall operating costs and by 2023, that percentage had risen to 59-percent. Based on SDCWA’s adopted rates for 2025 and the expected customer demands, SDCWA purchases will make up 59-percent of overall operating costs with a further 19-percent of costs related to desalination purchases. Thus, approximately 78-percent of annual operating costs are incurred to purchase supplies from outside entities and therefore largely outside of the District’s contro l. The financial conditions of SDCWA cause further concern as significant increases in its rates is expected in the coming years to alleviate its own financial stresses.

Note: Historical data based on the City of Carlsbad’s 2010 and 2023 Annual Comprehensive Financial Reports and rate models from prior rate setting efforts.

The proposed updates to the rate structure address these changes through the inclusion of pass -through charges for SDCWA costs and by including updates to the single family rate tiers.

Fixed and variable pass-through charges will recover from the District’s potable customers, the costs incurred to purchase imported water from SDCWA. A monthly fixed pass-through will recover the fixed costs charged to the District by SDCWA. A variable pass-through per CCF will recover the variable supply, transportation, and treatment costs for water purchases. The pass-through charges will allow the District better flexibility and transparency in rate planning as the internal and external costs can be add ressed separately. Costs for desalinated water purchases are not included in the pass-through because the take- or-pay contract that governs the purchase amounts and rates helps to stabilize costs to the District.

The single family rates will be updated to be based on a two-tier structure rather than the current three- tier structure. This update reflects the current usage patterns of single family customers and the conservation that has occurred since the current tiers were initially developed. It also reflects that a portion of the costs that were previously included in the tiered rates will now be recovered in the pass- through.

1.3 Overview of the Rate Setting Process
Rate analyses are performed periodically so that revenues continue to adequately fund utility operations, maintenance, and necessary capital investments, and so that the rates paid by customers accurately reflect the costs of the services that they receive. In California, water rates must adhere to the cost-of-service requirements imposed by Proposition 218 and the State Constitution. Proposition 218 requires that property related fees and charges, including water rates, do not exceed the reasonable and pro portional cost of providing the service. The District’s last rate study was completed by Carollo in 2021 and provided rates for FYE 2022 through FYE 2024.

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The District also has obligations to
safeguard and preserve the State’s limited
water resources. Article X (2) of the State
Constitution establishes the need to
preserve the State’s water supplies and
discourage the wasteful or unreasonable
use of water by encouraging conservation.

To achieve these multi-faceted
requirements—rates that must
simultaneously be equitable and reasonable
while meeting the Districts policy goals—
Carollo’s cost-of-service approach tests the
adequacy of existing revenues, recommends
additional revenues where needed, and
develops rates built on comprehensive cost
allocation and customer data analyses.

Carollo reviewed the District’s current cost-
of-service rate setting process. The
processes presented below are advocated
by the AWWA. While the process is
described in a linear step-by-step approach,
it is an iterative process, where the ultimate
objective is to balance revenues with costs
in an equitable manner for customers.

1.3.1 Revenue Requirement Analysis
The methodology that the District applies to establish annual rate revenue needs is consistent with industry standards established by the Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices M1 (M1 Manual), which is published by AWWA, a national industry trade group that makes recommendations on generally accepted practices in the water and sewer industry. The revenue requirements analysis compares the forecasted revenues of the utility to its forecasted operating and capital reserve costs to determine the adequacy of the existing rates to recover the utility’s costs. If any shortfalls exist, rates may need to increase.

1.3.2 Water Demand Analysis
Forecasting water sales and purchases is a critical component in the rate setting process. As part of the budget process, the District forecasts the expected water usage based on historical demand, proposed changes to rates, regulatory impacts, weather, and other variables. These forecasted water demands are then compared against forecasted revenue requirements, and rates are developed in order to recover costs. Future demands are based on historic sales and escalated for projected growth and per capita demand changes.

Revenue Requirement Analysis
Compares existing revenues of the district to
its operating, capital reserves, and policy
driven costs to establish the adequacy of the
existing cost recovery levels.

Water Demand Analysis
Forecasts water sales based on historical
billings, modifications to the rate structure,
and any regulatory restrictions.

Cost-of-Service Analysis
Identifies and apportions annual revenue
requirements to functional components based
on its application to the District's system, and
then allocates to customer classes and tiers
based on system usage.

Rate Design & Calculation
Considers both the level and structure of the
rate design to collect the distributed revenue
requirements from each class of service.

Rate Adoption
The Study presents the basis for the rates
proposed to be adopted in compliance with
Proposition 218.

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1.3.3 Cost-of-Service Analysis
After determining the revenue requirement, this step outlines the cost to deliver each unit of water and to serve each customer. This process takes each item in the water system’s budget and allocates each item’s cost based on what function is served. For example, some cost items support the ability to deliver additional, more expensive water, while other costs are incurred to provide customer service or to fund capital replacement. Organizing the budget in terms of end function allows the creation of a nexus between the budget item and the rate. This organization bridges the costs incurred by the District and the unique and varied benefits delivered to each customer.

1.3.4 Rate Design Analysis & Calculation
The rate design involves developing a rate structure that proportionately recovers costs from customers.

The rate structure must be tailored to the customer demand and account profile; built upon a nexus between costs and the rates that customers are charged; resilient enough to handle changing cost and demand scenarios; and flexible enough to meet multiple other unique criteria.

The rate design allows the District to develop unit costs that can then be layered based on requirements to meet customer needs. This is a critical process for establishing tiered rates, as increasing usage incurs additional supply, infrastructure, operating, and maintenance costs making excess water more expensive to provide.

The final part of the rate design analysis is the rate calculation. This provides the nexus between the revenue requirements, the functional cost allocation, and the final rates that customers are charged. This process connects planned expenditures to the designed rates by establishing rates to match the estimated revenue generation with expenditures.

1.3.5 Rate Adoption
To comply with the requirements of Proposition 218, the results of the Study are documented in this Report to support the District’s public outreach regarding the proposed changes and provide the rationale and justifications behind the changes and the anticipated financial impacts. While the document should be easily understood, it must provide sufficient detail to fully support and document the rate setting process.

In order to adjust rates, the District must provide a written notice 45 days prior to adoption of the rates.

During this 45-day notice period, any property owner or tenant directly responsible for the payment of water or sewer service fees may submit a written protest to the proposed rate increases. If written protests against the proposed rate increases are not presented by a majority of affected District property owners or customers, the Board of Directors will be authorized to adopt the rate increases.

As the following sections of this Report will demonstrate, this process creates a fair and equitable foundation for each charge and rate that the District levies.

1.4 Project Objectives
The Study aims to achieve several objectives related to the District’s rate setting, cost recovery, and financial planning methodologies. Specific objectives for the project include the following.

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 Review of the current financial plans for the District’s potable and recycled water systems to identify opportunities to improve long-term financial standing.
 Evaluation and development of policy recommendations for the existing potable water and recycled water rate structures to achieve the objectives of the District. Namely, the rate structure should:
» Be easy to understand.
» Maintain continued compliance with cost-of-service requirements.  Thorough documentation of the cost-of-service analysis, including the functional allocation and classification of costs, and the allocation of costs among customer classes.  Preparation of a rate design framework that proportionately recovers costs from the District’s customers and meets the goals outlined above.
 Develop a potable rate structure that separates the costs the District incurs for water purchased from SDCWA.

The Study identifies what actions the District should implement to maintain the financial viability of the system in light of changing consumer demands, increasing purchased water costs, regulatory requirements, and future infrastructure investments.

1.4.1 Rate Study Best Practices and Legal Considerations Rates are typically designed to achieve multiple objectives. While industry standards provide a basis for testing reasonableness, this basis does not on its own meet legal requirements—particularly the unique legal requirements for agencies in California.

Within the cost-of-service approach and legal requirements, an agency’s practices form the basis of the detailed rate structure design elements, making it distinct to the agency and the community it serves.

Within the District's rate structure, these policies and practices encompass the entire structure including the selection of rate design, methodology for allotting the amount of water use within customer tier allocations, and how costs are allocated to be recovered in the upper tiers. With its rate struc ture, the District is able to satisfy its policy and practices objectives and proportionally recover costs from its customers.

1.5 Current Rate Structure
The CMWD maintains separate rate structures for potable and recycled water customers. The following section identifies how the District is currently charging their potable and recycled water customers.

Currently, potable and recycled water customers have two components to their bill:

1. Water Delivery Fee.

2. Water Usage Fee.

The Water Delivery Fee is a fixed monthly charge. It is assessed based on meter size and is intended to capture the costs associated with providing customer service for each account, as well as a portion of the costs of providing and maintaining the system capacity to serve each account. The customer service component of the charge is equal to all customers while the capacity component varies based on meter equivalent ratios as identified in the AWWA M1 Manual.

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The Water Usage Fee is a volumetric charge based on the amount of water consumed each month, as measured by each customer’s water meter. It is intended to capture the costs of the water utility that vary with the amount of water provided.

Customers with private fire protection lines pay a monthly fixed charge based on the size of that connection to recover the capacity and account service costs required to serve that connection. The account component is equal for all line sizes, the capacity component varies by connection size and is determined using fire line connection specific ratios as determined in the AWWA M1 Manual.

1.6 Project Findings and Recommendations
Based on the analysis projections, the District will need to increase water rate revenues to keep pace with increases in wholesale water supply costs, inflationary increases in operating expenses, and necessary capital improvements to the District’s systems. The use of reserves, grant awards, and low interest financing to fund a share of capital projects will help to mitigate the necessary level of rate increases. It is recommended that the District reviews its revenues and expenditures on an annual basis t o verify that the implemented rates are adequately recovering costs. The District has historically set rates on a calendar year basis. Tables and figures throughout the report show results in fiscal years to match the District’s accounting practices.

The key findings and recommendations are as follows:
 Proposed Potable Water Rate Structure: The District has decided to adjust water rates to be the sum of a volumetric water consumption charge plus the pass through of SDCWA Infrastructure- Access-Charge (IAC), a fixed monthly charged assessed based on meter size to maintain connections to the SDCWA system. Due to cost-of-service changes for this pass-through, Carollo proposes reducing the single family residential (SFR) tier structure from three tiers to two, now that SDCWA costs are no longer included in the tiered rates. All other customers’ proposed user rates largely retain the District’s current rate structure.
 Rate Implementation Timing: “Subsequent to the development of the rates proposed in this report, the District opted to delay rate increased until July 1, 2025. This will allow time to update the customer billing system to include the pass-through charges. Rather than recalculating rates, the implementation of the rates developed based on a January 1, 2025 increase will be delayed by six months. The District will resume its typical calendar year rate increases starting January 1, 2026 . The delay in 2025 will result in decreased revenues of approximately $2.9 million for potable water and $0.2 million for recycled water which will be covered with reserves. Future increases, beyond FYE 2027 may need to be higher than those presented to replenish the reserves.  Proposed Potable Water Rate Revenue Increases: With the separation of SDCWA costs into the pass-through, the overall increase in rate revenues will now reflect the weighted average of the pass- through increases and the increases to the District’s internal rates. Based on the results of the study, the proposed potable water rates reflect overall revenue increases of 13.2-percent on January 1, 2025 (delayed to July 1, 2025), 13.4-percent on January 1, 2026, 6-percent on January 1, 2027, and 5 -percent on January 1, 2028 and January 1, 2029. Rate increase drivers include increases in SDCWA costs, inflationary increases in operating expenses, and continued funding of capital and reserves.

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» SDCWA’s adopted increases for calendar year 2025 will result in an increase in costs for the District of approximately 15-percent. The study also assumes a calendar year increase of 15- percent for 2026 and increases between 4-percent and 5-percent thereafter based on SDCWA’s long-term forecasts.
» Internal operating expenses have faced inflationary pressure higher than the implemented rate increases over the past several years. Increases for the District’s internal rates are necessary to meet and maintain positive operating cash flows and the minimum operating reserve in light of this inflation. Forgoing increases would result in ongoing operating deficits that would require larger increases to address in later years. Further, forgoing rate increases could result in the District not meeting its debt coverage obligations on the recycled water loans which consider both potable and recycled water revenues. Finally, forgoing increases would result in less funding for Capital Improvement Plan (CIP) critical to replacing aged infrastructure and minimizing main breaks and subsequent interruptions in water delivery.
» The District has identified capital projects necessary for the continued reliable and efficient operation of the system, with average costs of approximately $11 million per year over the next five years. The impact of the CIP on rate increases over the next five years will be minimal as the District has utilized its replacement and connection fee reserves to help stabilize rates.  Recycled Water Rate Revenue Increases: Annual user rate revenue increases of 4.5-percent for FYE 2025 through FYE 2029 will be required to fund recycled water activities. The proposed user rates largely retain the District’s current rate structure and will include a cost-of-service adjustment in FYE 2025 based on the updated cost-of-service allocations followed by an across-the-board increase in FYE 2026 and beyond. The recycled water rate structure does not include a separate pass-through charge.

Table 1 and Table 2 outline the current and proposed water usage and water delivery fees.

Table 1 Proposed Water Usage Fees
Customer Class Current Rates Proposed Rates – Delayed to July 1, 2025 Tier Limit Rate Tier Limit Total Rate SDCWA
Pass-
Through
Carlsbad
Potable Water Usage Fees
Single Family
Residential 1 10 ccf $4.00 1 10 $5.19 $4.01 $1.18
2 18 ccf $4.97 2 >10 ccf $5.52 $4.01 $1.51
3 > 18 ccf $7.69 3 n/a - - -
Multi-Family Residential 1 5 ccf $3.95 1 5 $5.19 $4.01 $1.18 2 10 ccf $6.13 2 > 10 ccf $5.37 $4.01 $1.36
Commercial,
Institutional, & Industrial n/a All ccf $4.52 n/a All ccf $5.31 $4.01 $1.30 Agricultural n/a All ccf $4.89 n/a All ccf $5.41 $4.01 $1.40 Irrigation n/a All ccf $5.69 n/a All ccf $5.45 $4.01 $1.44 Recycled Water Usage Fees
Recycled n/a All ccf $4.26 N/A All ccf $4.43 n/a n/a
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Table 2 Proposed Water Delivery Fee
Meter Size Current Rates Proposed Rates – Delayed to July 1, 2025 Potable Monthly Charge Total Monthly Charge SDCWA Carlsbad 5/8" $28.94 $33.68 $16.66 $17.02
3/4" $38.84 $43.56 $22.77 $20.79
1" $58.65 $65.99 $37.66 $28.33

1.5" $108.17 $121.60 $74.43 $47.17
2" $167.60 $190.64 $120.85 $69.79
2 1/2" $236.93 $269.57 $173.39 $96.18
3" $306.26 $348.50 $225.93 $122.57
4" $504.35 $576.27 $378.31 $197.96
6" $999.57 $1,130.71 $744.26 $386.45
8" $1,593.84 $1,821.10 $1,208.47 $612.63
10" $2,287.15 $2,628.02 $1,751.52 $876.50
Recycled Monthly Charge Current Rates Monthly Charge
5/8" $25.36 $27.37
3/4" $35.54 $38.30
1" $55.91 $60.16

1.5" $106.81 $114.81
2" $167.90 $180.39
2 1/2" $239.17 $256.91
3" $310.44 $333.42
4" $514.07 $552.02
6" $1,023.14 $1,098.52
8" $1,634.02 $1,754.33
10" $2,346.71 $2,519.43
Fire Monthly Charge Current Rates Monthly Charge
5/8" $8.67 $9.37
3/4" $8.79 $9.39
1" $9.02 $9.46

1.5" $9.62 $9.70
2" $10.33 $10.11
2 1/2" $11.15 $10.74
3" $11.98 $11.60
4" $14.35 $14.17
6" $20.26 $23.39
8" $27.36 $39.29
10" $35.65 $63.20
12" $55.76 $96.35
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The proposed rates shown in the previous tables include a cost-of-service adjustment and increases. For 2025 specific rates vary from the effective 13.2-percent (potable, inclusive of internal and pass-through adjustments) and 4.5-percent (recycled) overall rate revenue increases due to the updated cost of serve allocations and rate structure updates.

Proposed Carlsbad rates for 2026 and subsequent years are calculated by applying the proposed overall rate revenue increase to the 2025 rate proportionally. The proposed rates for subsequent years are shown in Table 64 through Table 70. Estimated SDCWA Pass-through rates for future years are calculated based on the projected costs from SDCWA and expected water sales and number of accounts. Implemented pass-through charges may vary from those presented as they will be based on the actual rates and charges adopted by SDCWA.

Customers with private fire protection connections are charged a fixed monthly fee based on the size of their connection.

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SECTION 2 INPUTS AND ASSUMPTIONS
Financial, operational, and billing information provided by the District serves as the backbone of the revenue requirement and cost-of-service analysis. The projections developed for this analysis are based on several sources of information including the budgeted revenues and expenditures for FYE 2025, actual revenues and expenditures from several prior fiscal years, outstanding debt obligations, water purchase records, and other pertinent information such as the City Council’s Utilities Reserve Policy. The analyses were completed by adding supplemental information and calculations to the District’s existing financial models.

2.1 Forecast Assumptions
The escalation factors used in this analysis are based on a review of both long-term and recent cost escalation factors from the Engineering News-Record Index, an industry benchmarking resource, and informed by input from Carlsbad staff to reflect realized cost escalations. Other costs were escalated based on recent and specific cost trends. The escalators used for the Metropolitan Water District (MWD) and SDCWA pass-through costs are presented in Appendix B of this Study. Other escalation factors include account growth and changes in per account demands from each customer class. These factors for both potable and recycled water are presented in Table 3.

Table 3 Escalation Factors
Escalation Factor FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 General Inflation 4.0% 2.5% 2.5% 2.5% 2.5%
Labor Inflation 4.0% 3.0% 3.0% 3.0% 3.0%
Labor - PERS (Normal Cost) 13.2% 13.2% 13.2% 13.2% 13.2% Labor - PERS (UAL) 17.0% 16.8% 16.6% 16.5% 16.3%
Labor - Health Insurance 6.4% 6.1% 5.9% 5.7% 5.7%
Chemicals Inflation 5.0% 5.0% 5.0% 5.0% 5.0%
Utilities Inflation 5.0% 5.0% 5.0% 5.0% 5.0%
Construction Inflation 2.5% 2.5% 2.5% 2.5% 2.5%
Property Tax Increase 3.0% 3.2% 3.3% 3.0% 3.1%
Depreciation Funding 1.2% 1.2% 1.2% 1.2% 1.2%
Interest Income 2.5% 2.5% 2.5% 2.5% 2.5%
Customer Growth 0.6% 0.2% 0.4% 1.0% 1.0%
Notes:

PERS – Public Employees’ Retirement System; UAL – Unfunded Accrued Liability

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2.2 Potable and Recycled Water Customer Base
Detailed customer billing records for July 2019 through June 2022 were analyzed along with other summary level data to develop customer demand and account projections for the study. After discussions with the District, Carollo applied growth and price out adjustments (to correct the customer data to the actual revenues collected) to project the number of accounts for FYE 2025. Cost of service allocations and rate design allocations were performed using projected accounts and demands for FYE 202 5.

Table 4 summarizes the projected FYE 2025 number of accounts and demand by customer class, including the percentage of the totals. Currently, the District serves approximately 28,300 potable water accounts and 980 recycled water accounts. Water demands for FYE 2025 are expected at 6.21 million ccf of potable water and 1.85 million ccf of recycled water demands.

Table 4 Water System Customer Profile
Customer Class Number of
Accounts
Account
Percentage of
Total
FYE 2025
Demand (ccf)
Demand
Percentage of
Total
Single Family Residential 24,521 83.7% 3,361,234 41.7%
Multi-Family Residential 1,284 4.4% 817,637 10.1%
Commercial, Institutional, & Industrial (CI&I) (1) 1,707 5.8% 1,252,320 15.5% Agricultural 12 0.0% 81,534 1.0%
Irrigation 793 2.7% 702,011 8.7%
Subtotal: Potable Water 28,317 6,214,735
Recycled Water 978 3.3% 1,852,895 23.0%
Total Water Service Customers 29,295 100.0% 8,067,630 100.0% Private Fire Protection Connections 1,116
Notes:
(1) CI&I – Commercial, Institutional, & Industrial, Temporary accounts are included in this category. (2) Line or column totals may not tie due to rounding.

2.2.1 Water Demand Forecast
Water demand drives several key components of the revenue requirement analysis, as a large portion of the District’s water revenues and operations and maintenance (O&M) costs are tied to the amount of water usage. Changes in demands for existing customers are not expected and thus the forecasted water demand was calculated using the customer growth escalation factor presented in Table 3. Table 5 shows the projected water demands by customer class for FYE 2025 through FYE 2029. Detailed projections of customer accounts and demands are included for reference in Appendix A.

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Table 5 Forecasted Water Demand by Customer Class (CCF) Customer Class FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 Potable Water Demands
Single Family Residential 3,361,234 3,368,511 3,376,457 3,405,566 3,437,943 Multi-Family Residential 817,637 819,407 821,340 828,421 836,297 CI&I (1) 1,252,320 1,255,392 1,268,512 1,286,310 1,302,463 Agricultural 81,534 81,711 81,903 82,610 83,395
Irrigation 702,011 703,531 705,190 711,270 718,032
Total Potable Water Demands 6,214,735 6,228,552 6,253,402 6,314,176 6,378,129 Recycled Water Demands 1,852,895 1,856,907 1,861,287 1,877,333 1,895,181 Total All Customers 8,067,630 8,085,459 8,114,689 8,191,509 8,273,310 Notes:
(1) Demands of temporary accounts is included in this category. (2) Line or column totals may not tie due to rounding.

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SECTION 3 REVENUE REQUIREMENT ANALYSIS
The revenue requirement analysis is a comprehensive test of a utility’s fiscal health, scrutinizing the adequacy of current revenues, and setting the basis for rate planning. It reviews the utility’s revenues, expenses, debts, and reserve policies, and other requirements assessing the viability of each metric going forward. Where cash flows and balances are insufficient, the revenue requirement analysis determines the needed additional cash flows to meet all funding goals.

The District’s FYE 2025 budget expenses serve as the base year for O&M costs. Furthermore, Carollo collected information related to current cash and restricted fund balances and policies, the budgeted capital improvement plan expenditures, and all other operating and non-operating future revenues and expenditures.

Once the revenue requirement is established by compiling all of the District’s cost drivers, three tests are utilized to define the annual revenues necessary.

1. The cash flow sufficiency test looks for a net positive cash flow at the end of each fiscal year. This test looks at whether revenues exceed expenses; when they do not, this test recommends additional revenue.

2. The second test is the debt service coverage test. Utility bond or loan issuances regularly include a stipulation that the agency maintain sufficient cash flows to cover the planned debt service, plus an additional percentage of that debt service, typically between 25 and 40 percent. Debt coverage is often presented as a ratio, for example a 25 percent coverage target is shown as 1.25x.

3. The third test is the reserve sufficiency test which determines whether projected cash balances are sufficient to guard the utility in the event of unforeseen costs or revenue shortfalls. As an essential service provider, the District needs to maintain resources to continue water servi ce in the event of natural disasters or other emergencies. Reserves provide a source of funds for immediate repairs or other needs so that disruptions to service can be minimized or avoided.

3.1 Operating Revenues
The District’s primary source of water revenues is water service fees in the form of monthly fixed charges per meter, volumetric charges per CCF consumed, and a fixed pass-through rate that recover costs from SDCWA. Approximately 86 percent of revenues are generated by user rates, including both internal and pass-through rates. The remaining 14 percent of revenue is generated from a variety of sources including administrative fees, tax revenues, and investments.

Operating revenues were projected for the next five years by applying the escalation factors outlined in Table 3 to the District’s FYE 2025 budgeted revenues. Table 6 shows the District’s projected potable and recycled water rate revenues for FYE 2025 through FYE 2029, before applying any proposed rate increases.

Increases in commodity and delivery charge revenues are projected based on customer growth. Recycled water revenues escalate in the same manner. Currently, the potable water rate revenues cover both internal District costs as well as external costs for water purchases. As discussed later in this study, the proposed rates will separate rates and revenues associated with potable water purchases from those for internal activities.

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Table 6 Current Water Rate Revenue ($ millions)
Revenue Item FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Potable Water
Commodity Charges $29.3 $29.4 $29.5 $29.8 $30.1
Delivery Charges $13.5 $13.5 $13.5 $13.7 $13.8
Total Potable Water $42.8 $42.9 $43.1 $43.5 $43.9
Recycled Water
Commodity Charges $7.9 $7.9 $7.9 $8.0 $8.1
Delivery Charges $1.4 $1.4 $1.5 $1.5 $1.5
Total Recycled Water $9.3 $9.3 $9.4 $9.4 $9.5
Notes:
(1) Line or column totals may not tie due to rounding.

In addition to above rate revenues above, the District also receives other offsetting revenues. Table 7 summarizes the projected offsetting revenues for the potable water funds, and Table 8 summarizes the projected offsetting revenues for the recycled water funds.

Table 7 Offsetting Revenues - Potable Water ($ millions) Revenue Item FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Non-Rate Charges for Services $0.41 $0.46 $0.47 $0.49 $0.50 Tax Revenues $3.68 $3.80 $3.92 $4.04 $4.17
Licenses and Permits $0.00 $0.00 $0.00 $0.00 $0.00
Intergovernmental $0.03 $0.03 $0.03 $0.03 $0.03
Fines & Forfeitures $0.18 $0.18 $0.19 $0.19 $0.19
Income from Prop & Investments $2.46 $1.90 $1.70 $1.57 $1.44 Interdepartmental $0.05 $0.05 $0.05 $0.05 $0.05
Other Revenues $0.10 $0.10 $0.10 $0.11 $0.11
Total Offsetting Operating Revenues $6.90 $6.51 $6.46 $6.47 $6.49

Developer Connection Fees $1.30 $0.45 $0.83 $2.23 $2.40 Notes:
(1) Line or column totals may not tie due to rounding.

Table 8 Offsetting Revenues - Recycled Water ($ millions) Revenue Item FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Non-Rate Charges for Services $0.001 $0.001 $0.001 $0.001 $0.001 Intergovernmental $0.000 $0.000 $0.000 $0.000 $0.000
Fines and Forfeitures $0.086 $0.088 $0.090 $0.092 $0.094 Income from Property & Investments $0.097 $0.106 $0.107 $0.077 $0.049 Interdepartmental $0.011 $0.011 $0.011 $0.012 $0.012
Other Revenues $0.863 $0.891 $0.921 $0.948 $0.977
Other Financing Sources $0.000 $0.000 $0.000 $0.000 $0.000 Total Offsetting Revenues $1.058 $1.098 $1.130 $1.130 $1.134 Notes:
(1) Line or column totals may not tie due to rounding.

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3.2 Operating Expenses
Most operating expenses were projected for the next five years by applying the escalation factors outlined in Table 3 to the District’s FYE 2024 budgeted expenditures. Costs for water purchases from outside agencies were calculated based on projected water demands and wholesale rates. Table 9 and Table 10 illustrate operating expenditures over the five-year projection period for potable and recycled water, respectively. Potable operating expenses are projected to increase approximately $ 18.9 million by FYE 2029. The increases are largely due to the rise in purchased water costs. Throughout this Study period, there are no transfers to Capital Reserve. The transfers will be paused as existing reserve levels are sufficient to meet capital needs and to mitigate rate increases over the study period. These transfers are projected to begin again in FYE 2030.

Recycled operating expenses are projected to increase approximately $1.0 million over the projection period. However, that increase in operating costs will be offset by a decrease in overall debt service as the 2005 and 2006 State Revolving Fund (SRF) loans are fully repaid in 2025 and 2027, respectively. Debt service for new SRF loans will begin during the study period and total approximately $0.5 million per year.

However, the repayment of the 2005 and 2006 loans will still result in an overall decrease in debt service.

Detailed projections of O&M costs are included for reference in Appendix D.

Table 9 Expenditures - Potable Water ($ millions)
Expense Item FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Internal Expenses
Personnel $5.19 $5.36 $5.53 $5.71 $5.90
Desal Purchases $9.98 $10.94 $11.22 $11.51 $11.80
Maintenance & Equipment (w/o depreciation) (1) $6.48 $6.78 $6.92 $7.09 $7.27 Capital Outlay $0.05 $0.05 $0.05 $0.06 $0.06
Rate Funded Capital $0.00 $0.00 $0.00 $0.00 $4.14
Pass-Through Expenses
SDCWA Purchases $23.59 $26.87 $29.49 $30.95 $32.40
SDCWA & MWD Fixed Charges $8.09 $9.64 $10.57 $11.01 $11.42 Total Operating Expenses $53.39 $59.64 $63.79 $66.33 $72.98 Notes:
(1) Value is presented without depreciation since it is not a cash expense. (2) Line or column totals may not tie due to rounding.

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Table 10 Expenditures - Recycled Water ($ millions)
Expense Item FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Personnel $1.96 $2.03 $2.09 $2.16 $2.23
Recycled Water Purchases (VWD) $2.94 $3.93 $4.12 $4.33 $4.55 Recycled Water Costs (EWA) $1.93 $1.86 $1.91 $1.96 $2.01 Maintenance & Equipment (w/o depreciation) (1) $2.10 $2.16 $2.20 $2.27 $2.33 Capital Outlay $0.01 $0.01 $0.01 $0.01 $0.01
Debt Service $2.39 $1.92 $1.92 $0.69 $0.69
Rate Funded Capital $0.00 $0.00 $0.00 $1.09 $0.93
Total Operating Expenditures $11.32 $11.91 $12.26 $12.50 $12.74 Notes:
(1) Value is presented without depreciation since it is not a cash expense. (2) Line or column totals may not tie due to rounding.

3.3 Water Supply
The District obtains its potable water from SDCWA, which in turn has two main sources: imported water (largely from the Colorado River) and locally produced water from the Carlsbad Desalination Plant.

Desalinated water deliveries began in 2016 per the Uniform Member Agency Purchase Contract (UMAPC).

The District is required to purchase a minimum 2,500 acre-feet of desalinated water per year, and purchases are expected to remain at that level through FYE 2029.

The District produces recycled water at the Carlsbad Water Recycling Facility (CWRF) and purchases recycled water from VWD. Recycled water purchased from Vallecitos is strategically used in portions of the CMWD service area closest to interagency interties and to reduce pumping costs between different elevations. The District is developing a new take-or-pay agreement with VWD for 2,700 acre-feet per year through the study period. The agreement will also set rates for the FYE 2026 at FYE 2027 at $1,454 per acre-foot, $1,527 per acre-ft, respectively. After that time, VWD purchase rate increases are assumed at 5- percent per year.

The agreement to purchase 2.700 acre-ft per year from VWD would result in a decrease in the amount of recycled water sourced from the Encina Wastewater Authority (EWA). The District expects to cost savings due to the reduction in EWA recycled water production. For the purpose of this analysis, the reduction in costs from EWA is set at 7-percent based on EWA’s budget for the Carlsbad Water Recycling Facility and the expected decrease in water produced at that facility.

Table 11 presents a summary of the District’s forecasted potable and recycled water purchases in FYE 2025 through FYE 2029. Detailed projections of water purchases and costs are included for reference in Appendix B.

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Table 11 Water Supply Purchases (AF, $ millions)
Source of Supply FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Potable Water
Potable Water Demands 14,267 14,299 14,356 14,495 14,642 Unaccounted for Water (system loss) 713 715 718 725 732 Total Potable Water to Purchase 14,980 15,014 15,074 15,220 15,374 SDCWA
Water Purchases (AF) 12,480 12,514 12,574 12,720 12,874 Fixed Charges $8.1 $9.6 $10.6 $11.0 $11.4
Variable Charges $23.6 $26.9 $29.5 $30.9 $32.4
Total SDCWA Purchase Costs $31.7 $36.5 $40.1 $42.0 $43.8 Desalination
Water Purchases (AF) 2,500 2,500 2,500 2,500 2,500
Fixed Charges $5.6 $6.3 $6.8 $7.0 $7.1
Variable Charges $3.4 $3.5 $3.6 $3.7 $3.8
Other Charges $0.6 $0.6 $0.6 $0.7 $0.7
Total DESAL Purchase Costs $9.6 $10.4 $11.0 $11.3 $11.6 Recycled Water
Recycled Water Demands 4,254 4,263 4,273 4,310 4,351
Unaccounted for Water 213 213 214 215 218
Total Recycled Water to Purchase 4,466 4,476 4,487 4,525 4,568 Water from CWRF 2,080 1,776 1,787 1,825 1,868
VWD Water Purchases (AF) 2,386 2,700 2,700 2,700 2,700
VWD Charges $2.9 $3.9 $4.1 $4.3 $4.5
EWA Charges $1.9 $1.9 $1.9 $2.0 $2.0
Total Recycled Purchase Costs $4.9 $5.8 $6.0 $6.3 $6.6
Total Water Purchases $46.2 $52.7 $57.1 $59.6 $62.0
Notes:
(1) Line or column totals may not tie due to rounding.

3.4 Capital Improvement Plan Funding
The District finalized a master plan for the potable and recycled water systems in 2019 as well as an asset management plan and a Supervisory Control and Data Acquisition (SCADA) master plan. Ongoing planning efforts have continued since that time to further identify and prioritize projects. Based on the results of those studies, the District plans to increase capital investment over the coming years to repair and replace critical infrastructure and maintain water system reliability.

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Prior to the completion of the plans, the District’s CIP spending had been limited. However, the District continued to set aside funds for capital projects throughout that time in anticipation of increased investments. This prudent financial planning, which led to the reserve balance the District has accumulated, will allow for capital improvements to be completed for the potable water system while minimizing rate impacts.

Table 12 and Table 13 summarize the projected CIP expenditures for the potable and recycled water systems. Over the study period, potable system improvements will total $54.8 million and recycled water improvements will total $9.4 million. The capital costs develop by the City are adjusted to the midpoint of construction. Based on discussion with the City, the funding analysis includes an additional 2.0 -percent annual cost escalation factor for FYE 2025 and FYE 2026 to account for increases in construction and contracting costs. A detailed summary showing the District’s projects can be found in Appendix C.

Table 12 Capital Improvement Plan Expenditures - Potable Water ($ millions) CIP FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Connection Fee Fund Projects $1.8 $4.4 $0.6 $5.0 $5.0
Replacement Fund Projects $7.0 $6.2 $4.8 $10.0 $10.0
Total Potable Water Projects $8.6 $10.1 $5.2 $15.0 $15.0 Total Escalated Cost $8.8 $10.6 $5.5 $15.0 $15.0
Notes:
(1) Line or column totals may not tie due to rounding.

Table 13 Capital Improvement Plan Expenditures - Recycled Water ($ millions) CIP FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Connection Fee Fund Projects $2.8 $2.0 $0.8 $1.9 $0.9
Replacement Fee Fund Projects $0.3 $0.4 $0.0 $0.0 $0.0
Total Recycled Water Projects $3.1 $2.4 $0.8 $1.9 $0.9
Total Escalated Cost $3.2 $2.5 $0.8 $2.0 $0.9
Notes:
(1) Line or column totals may not tie due to rounding.

The District’s potable and recycled CIP expenses and funding are shown in Table 14 and Table 15. The transfers and replacement funding line item represents the transfer of operating revenues to the capital reserve for depreciation funding as well as any planned additional transfers for cash funding of capital.

An important aspect of the capital funding plan is that the District intends to draw on both existing replacement reserves and existing connection fee reserves to fund capital projects. Since the implementation of the District’s existing connection fees, reduced water consumption due to conservation and changes in planned developments have reshaped the CIP projects that are necessary to serve new users. While some of the projects initially conceived and included in the connection fees have changed, other projects have been modified or expanded to take their place. Further, replacements and upgrades to the District’s existing infrastructure are required to maintain the assets that serve new users and to maintain the excess system capacity that will be needed to serve users that have not yet connected to the system.

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To these ends, the District plans to allocate existing connection fee reserves, as well as a share of future connection fees, to pay for replacement projects that have an excess capacity component. The District plans to update their connection fees in a future study within the next twelve months.

The District continually seeks sources of outside funding from grants and low interest loans to offset the rate impacts of capital funding. The District has secured $2.75 million and $1.8 million in grants for recycled water projects in FYE 2025 and 2026, respectively. Additionally, a final $3 million draw from SRF loans is projected for FYE 2025. The projected debt service associated with that draw is included in the “Debt Service” line of Table 10.

Table 14 Capital Improvement Plan Expenditures and Funding - Potable Water ($ millions) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Total Potable Water Projects (Escalated) $8.8 $10.6 $5.5 $15.0 $15.0 Amount to be Rate Funded $0.0 $0.0 $0.0 $0.0 $4.1
Amount to be Funded with Reserves $8.8 $10.6 $5.5 $15.0 $10.9

Beginning Capital Funds Balance (Connection
Fee and Replacement) $69.3 $61.8 $51.7 $47.1 $34.3
Transfers and Replacement Funding $0.0 $0.0 $0.0 $0.0 $0.0 Connection Fees $1.3 $0.4 $0.8 $2.2 $2.4
Use of Replacement Funds for Projects ($7.0) ($6.2) ($4.8) ($10.0) ($5.9) Use of Connection Fee Funds for Projects ($1.8) ($4.4) ($0.6) ($5.0) ($5.0) Year-End Balance $61.8 $51.7 $47.1 $34.3 $25.9
Change in Reserves ($7.5) ($10.1) ($4.6) ($12.8) ($8.5) Notes:
(1) Line or column totals may not tie due to rounding.

Table 15 Capital Improvement Plan Expenditures and Funding - Recycled Water ($ millions) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Total Recycled Water Projects (Escalated) $3.2 $2.5 $0.8 $2.0 $0.9 Amount to be Rate Funded $0.0 $0.0 $0.0 $1.1 $0.9
Amount to be Funded with Reserves, Debt, and
Grants $3.2 $2.5 $0.8 $0.9 $0.0

Beginning Capital Funds Balance (Connection
Fee and Replacement) $3.4 $4.6 $3.2 $1.8 $0.9
Transfers and Replacement Funding(1) ($1.3) ($0.8) ($0.5) $0.0 $0.0 Grants $2.8 $1.8 $0.0 $0.0 $0.0
SRF Loan Disbursements $3.0 $0.0 $0.0 $0.0 $0.0
Connection Fees $0.0 $0.0 $0.0 $0.0 $0.0
Use of Replacement Funds for Projects ($3.2) ($2.1) ($0.8) ($0.9) $0.0 Use of Connection Fee Funds for Projects $0.0 ($0.4) $0.0 $0.0 $0.0 Year-End Balance $4.6 $3.2 $1.8 $0.9 $0.9
Change in Reserves $1.3 ($1.5) ($1.3) ($0.9) $0.0
Notes:
(1) Assumed transfer of reserves from rate revenues to Operating Fund to balance reserves. (2) Line or column totals may not tie due to rounding.

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3.5 Recommended Revenue Requirements
Rate revenue increases will be necessary in order to meet the District’s projected operating needs and to continue to fund capital investments. The increases for potable water are primarily driven by increasing purchased water cost from SDCWA and the delivery of desalinated water pursuant to the UMAPC. The increases for recycled water are driven primarily by increased purchases from VWD as well as increased treatment costs from EWA.

The recommended increases will enable the District to continue to fully fund its capital program and meet its debt service requirements. Furthermore, by initiating annual increases, the District can mitigate larger increases in the future and avoid the need for substantial debt issuances.

3.5.1 Cash Flow Sufficiency Test
The cash flow sufficiency test evaluates revenues received by the District to see that they are adequately covering both operating and non-operating expenses. Table 17 and Table 18 provide the cash flow sufficiency tests for potable and recycled water, respectively. The financial analysis included projections for a five-year period, and the District may adopt rate updates for a period of up to five years.

3.5.1.1 POTABLE WATER
Based on the analysis, rate increases are needed to adequately recover internal revenue requirements as well as pass-through costs from SDCWA. Figure 2 shows the revenue generated, over a full year, by the existing rate structure compared to the proposed rate structure for 2025. As shown, the current rate structure combines revenue requirements for CMWD with costs for purchases from SDCWA. Based on the current revenue requirements, of the $43.7 million in user rates and charges generated, $29.5 million is attributed to SDCWA costs and the remaining $14.2 million is attributed to internal O&M and capital costs.

The proposed rate structure includes separate fixed and variable components for CMWD revenue requirements and SDCWA pass-through costs. The proposed rates would generate a total of $49.5 million, over a full year, with $33.7 million attributable to SDCWA and the remaining $15.8 million for internal requirements.

The proposed rates represent an overall increase in user rates and charges of 13.2-percent for 2025 in which increases in SDCWA costs are the main driver. SDCWA has adopted significant increases for calendar year 2025 that will result in a 14.3-percent increase in the costs paid by CMWD to SDCWA for imported water. The CMWD internal rates will increase by 10.9-percent to cover increases in operating costs, to maintain the operating component of reserves, and to continue to meet debt coverage obligations.

After 2025, proposed pass-through increases are calculated based on projected rate increases from SDCWA, projected imported water purchases, and projected sales. The study assumes a 15 -percent increase in SDCWA costs for 2026, approximately 4-percent in 2027 and 2028, and approximately 3- percent in 2029. Increases in the CMWD rates are proposed at 10-percent per year in 2026 and 2027 and projected at 7.5-percent per year for 2028 and 2029. Table 16 shows the proposed rate and pass-through revenues and increases for each fiscal year. The Revenues Prior to Each Year’s Increase assume that the increases from proposed increases in previous years are implemented as proposed.

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For example, the revenues prior to increases for FYE 2026 are inclusive of the increases proposed for FYE 2025 as well as customer growth.

Figure 2 Rate Revenues with First Year Increase and Restructuring for Pass-through Table 16 User Revenues and Proposed Increases ($ millions) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Revenues Prior to Each Year's Increase
SDCWA Portion/SDCWA Pass-throughs $29.5 $33.8 $39.1 $41.0 $43.0 Carlsbad Portion/Carlsbad Rates $14.2 $15.8 $17.5 $19.4 $21.1 Total User Rates and Charges $43.7 $49.6 $56.5 $60.4 $64.1 Revenues with Full Year of Increases and Pass-Through Adjustments SDCWA Pass-throughs $33.7 $38.9 $40.7 $42.6 $44.4
Carlsbad Rates $15.8 $17.4 $19.2 $20.9 $22.6
Total User Rates and Charges $49.5 $56.3 $59.9 $63.4 $67.0 Effective Rate Increases
SDCWA Pass-throughs 14.3% 15.0% 4.2% 3.8% 3.2%
Carlsbad Rates 10.9% 10.0% 10.0% 7.5% 7.5%
Total (All User Rates and Charges) 13.2% 13.4% 6.0% 5.0% 4.6% The projected rate increases and proposed rates presented in this study were developed assuming rates would be implemented on January 1, 2025. Subsequent to the development of the rates, the District opted to delay the implementation to July 1, 2025 to allow sufficient time for the billing system to be updated to reflect the new rate structure and pass-through charges. For FYE 2025, the delay will result in a revenue decrease of $2.9 million.

Combined Rates,
CMWD Portion
(Delivery Fee), $14.2
Combined Rates
(SDCWA Portion),
$29.5
CMWD Fixed Rates , $7.7
CMWD Variable Rates, $8.0
Fixed Pass-Through, $8.8
Variable Pass-Through, …
$43.7
$49.5
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
Current Rate
Structure
Proposed Rate
Structure
(FYE 2025)
Millions
SDCWA
Pass-
Through
CMWD
Cost
Recovery
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The proposed potable water rate revenue increases, to be implemented on July 1, 2025, would be a full cost-of-service adjustment, and rate adjustments will vary by customer class and rate component. For FYE 2026 and onward, the percentage rate revenue increase is recommended to be applied to the 202 5 cost- of-service-based rates on January 1 of each year.

Over time, the District has been proactive in annually contributing to the replacement of its system. Based on the current fund balances, the District can mitigate the necessary rate adjustments by spending down reserves to fund capital projects over the next several years.

Table 17 Cash Flow Sufficiency Test - Potable Water ($ millions) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Pre-Rate Increase
CMWD Rate Revenues without Increases $14.2 $14.3 $14.3 $14.5 $14.6 Revenue from Previous Years’ Increases $0.0 $1.6 $3.1 $4.9 $6.5 Pass-through Revenues(1) $31.6 $36.4 $39.9 $41.8 $43.7
Other Offsetting Revenues $6.9 $6.5 $6.5 $6.5 $6.5
Operating Revenues $52.7 $58.7 $63.8 $67.7 $71.2
Less Operating Expenditures ($53.4) ($59.6) ($63.8) ($66.3) ($73.0) Cash Flow Surplus/(Deficit) ($0.7) ($0.9) $0.1 $1.4 ($1.8) Post Rate Increase
CMWD Rate Revenue Increase 10.91% 10.00% 10.00% 7.50% 7.50% Revenue from CMWD Rate Increase $1.6 $1.6 $1.7 $1.5 $1.6 (Less): Rate Increase Delay(2) ($0.8) ($0.8) ($0.9) ($0.7) ($0.8) Adjustment for Implementation Delay(3) ($2.9) $0.0 $0.0 $0.0 $0.0 Cash Flow Surplus/(Deficit) ($2.8) ($0.1) $0.9 $2.1 ($1.0) Operating Fund Reserve
Beginning Operating Fund Balance $16.3 $13.5 $13.3 $14.3 $16.4 Operating Cash Flow ($2.8) ($0.1) $0.9 $2.1 ($1.0)
Other Transfers $0.0 $0.0 $0.0 $0.0 $0.0
Ending Operating Fund Balance $13.5 $13.3 $14.3 $16.4 $15.4 Ending Capital Funds Balance $61.8 $51.7 $47.1 $34.3 $25.9 Combined Ending Cash Balance $75.3 $65.0 $61.4 $50.7 $41.2 Total Days of O&M Costs 515 Days 398 Days 351 Days 279 Days 219 Days Operating Fund Days of O&M Costs 92 Days 82 Days 82 Days 90 Days 77 Days Notes:
(1) See Table 26 for Pass-through revenue calculation
(2) Adjustment to account for rate implementation on January 1 of each fiscal year. (3) Adjustment to reflect delay of rate implementation from January 1, 2025 to July 1, 2025. (4) Line or column totals may not tie due to rounding.

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3.5.1.2 Recycled Water
Based on the analysis, 4.5-percent rate revenue increases are needed in each year to adequately cover the revenue requirements of the recycled water system. Like the potable rate increases discussed above, the implementation of recycled water rates will be delayed until July 1, 2025. This delay will result in a revenue decrease of $0.2 million. The proposed recycled water rate revenue increases for 202 5 will be implemented by a full cost-of-service adjustment, and rate adjustments will vary by rate component. For 2026 and onward, the percentage rate revenue increase is recommended to be applied to the 202 5 cost- of-service-based rates.

The proposed rate increases are set to maintain the affordability of recycled water while working toward maintaining positive cash flows. As shown, the recycled water fund will draw down on reserves for FYE 2025 through FYE 2028 before stabilizing in FYE 2029. After that time, and with continued rate increases, positive cash flows are projected and reserves will be replenished over time. To mitigate the use of reserves over the study period, the District could consider taking additional SRF loan draws. Additional funds beyond those taken thus far may be available for eligible projects and could offset the use of reserves.

Additional detail of the revenue requirement analysis is included for reference in Appendix E.

Table 18 Cash Flow Sufficiency Test - Recycled Water ($ millions) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Pre-Rate Increase
Rate Revenues without Increases $9.3 $9.3 $9.4 $9.4 $9.5 Revenue from Previous Years’ Increases $0.0 $0.4 $0.9 $1.3 $1.8 Offsetting Revenues $1.1 $1.1 $1.1 $1.1 $1.1
Operating Revenues $10.4 $10.8 $11.4 $11.9 $12.5
Less Operating Expenditures ($11.3) ($11.9) ($12.3) ($12.5) ($12.7) Cash Flow Surplus/(Deficit) ($1.0) ($1.1) ($0.9) ($0.6) ($0.2) Post Rate Increase
Rate Revenue Increase 4.5% 4.5% 4.5% 4.5% 4.5%
Revenue from Increase $0.4 $0.4 $0.5 $0.5 $0.5
(Less): Rate Increase Delay(1) ($0.2) ($0.2) ($0.2) ($0.2) ($0.3) Adjustment for Implementation Delay(2) ($0.2) $0.0 $0.0 $0.0 $0.0 Cash Flow Surplus/(Deficit) ($1.0) ($0.9) ($0.7) ($0.3) $0.0 Operating Fund Reserve
Beginning Operating Fund Balance $1.1 $1.5 $1.4 $1.2 $0.9 Cash Flow ($1.0) ($0.9) ($0.7) ($0.3) $0.0
Other Transfers(3)
Table continues on next page.
$1.3 $0.8 $0.5 $0.0 $0.0
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FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
Ending Operating Fund Balance $1.5 $1.4 $1.2 $0.9 $0.9
Ending Capital Funds Balance $4.6 $3.2 $1.8 $0.9 $0.9
Combined Ending Cash Balance $6.1 $4.6 $3.1 $1.8 $1.8
Total Days of O&M Costs 250 Days 168 Days 109 Days 62 Days 60 Days Operating Fund Days of O&M Costs 61 Days 52 Days 44 Days 31 Days 31 Days Notes:
(1) Adjustment to account for rate implementation in January 1 of each year. (2) Adjustment to reflect delay of rate implementation from January 1, 2025 to July 1, 2025. (3) Assumed transfer of reserves from rate revenues to Operating Fund to balance reserves. (4) Line or column totals may not tie due to rounding.

3.5.2 Debt Coverage Test
The District's current and projected debt obligations are State Revolving Fund loans. P er the Construction Installment Sale Agreement between the District and the State Water Resources Control Board, require the Districts’ annual operating revenues to be sufficient to cover annual operating expenses plus 120-percent of the annual debt service payments. This is stated as a debt service coverage ratio (DSCR) of

1.20x. The outstanding debt agreements allow both potable and recycled water revenues to be used in the calculation of debt coverage. Based on the proposed rate revenue increases, the District will meet its debt coverage obligation on exiting SRF debt in all years. With projected debt service included, the coverage factor will fall slightly below the target in FYE 2025 due to the six-month delay in rate increases to July 1, 2025. Table 19 presents the calculation of the DSCR.

Table 19 Debt Service Coverage Test - Recycled Water ($ millions) Budget Item FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Revenues Available For Coverage (Potable and Recycled Combined) User Charges(1) $53.0 $63.0 $68.7 $73.0 $77.2
Tax Revenues $4.5 $4.7 $4.8 $4.9 $5.1
Other/Misc Revenues $1.2 $1.2 $1.3 $1.3 $1.4
Connection Fees $1.3 $0.4 $0.8 $2.2 $2.4
Grants $2.8 $1.8 $0.0 $0.0 $0.0
Interest Earnings $2.3 $1.7 $1.5 $1.3 $1.2
Combined Revenues Available for Coverage $65.0 $72.8 $77.1 $82.8 $87.2 Potable Water Operating Expenses ($53.3) ($59.6) ($63.7) ($66.3) ($68.8) Recycled Water Operating Expenses ($8.9) ($10.0) ($10.3) ($10.7) ($11.1) Net Revenue Available for Debt Service $2.7 $3.2 $3.1 $5.8 $7.3 Recycled Water Existing Debt Service $1.9 $1.4 $1.4 $0.2 $0.2 DSCR - Existing Loans 1.47x 2.29x 2.16x 31.28x 39.18x

Recycled Water Projected Debt Service $0.5 $0.5 $0.5 $0.5 $0.5 DSCR - Existing and Projected Loans 1.15x 1.69x 1.59x 8.38x 10.5x Notes:
(1) FYE 2025 includes adjustment to reflect implementation delay. (2) Line or column totals may not tie due to rounding.

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3.5.3 SDCWA Surcharge Pass-Through
The District has decided to delineate cost recovery between Carlsbad-specific expenses and a pass- through charge recovering SDCWA-related expenses. The operating expenses in Table 9 provide an overview of this distinction. Table 20 presents the detailed line items associated with Carlsbad expenses and the SDCWA surcharge.

SDCWA has historically updated, and plans to continue to update, its rates and charges on a calendar year basis. Accordingly, the proposed pass-through rates and charges are also calculated on a calendar year basis.

The variable pass-through rate is calculated by dividing projected calendar year variable SDCWA costs by projected calendar year sales. Calendar year costs are calculated by converting expected fiscal year water purchases to a calendar year basis and applying SDCWA adopted or projected variable rates. For 2025, the calculated SDCWA pass-through charge is $4.01 per CCF, applied to all potable water sales. The calculation for the calendar year variable pass-through is in Table 21.

Table 20 SDCWA Pass-through Expenses – Fiscal Year Basis ($ millions) Budget Item FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Variable SDCWA Costs
Transportation $2.06 $1.90 $2.08 $2.19 $2.29
SDCWA M&I Supply $15.93 $18.24 $20.02 $21.01 $21.99
SDCWA Treatment $5.61 $6.73 $7.39 $7.75 $8.12
Subtotal Variable SDCWA Costs $23.59 $26.87 $29.49 $30.95 $32.40 Fixed SDCWA Costs
Customer Service Charge $0.96 $1.12 $1.22 $1.27 $1.31
Emergency Storage Charge $2.23 $2.55 $2.79 $2.89 $3.00
Infrastructure Access Charge $2.07 $2.18 $2.42 $2.52 $2.62 Supply Reliability Charge $1.65 $1.91 $2.09 $2.17 $2.24 Fixed Transportation Charge $0.52 $1.12 $1.22 $1.27 $1.31 MWD Capacity Reservation Charge $0.26 $0.31 $0.35 $0.38 $0.40 MWD Readiness to Service Charge $0.40 $0.44 $0.49 $0.52 $0.54 Subtotal Fixed SDCWA Costs $8.10 $9.64 $10.57 $11.01 $11.42 Total SDCWA Costs $31.69 $36.51 $40.06 $41.96 $43.82
Notes:
(1) Line or column totals may not tie due to rounding.

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Table 21 SDCWA Variable Pass-through Calculation – Calendar Year Basis ($ millions) Budget Item CY 2025 CY 2026 CY 2027 CY 2028 CY 2029
Transportation $1.76 $2.03 $2.13 $2.24 $2.34
SDCWA M&I Supply $16.93 $19.55 $20.50 $21.52 $22.46
SDCWA Treatment $6.25 $7.21 $7.56 $7.94 $8.29
Total to Collect Through Pass-through $24.94 $28.79 $30.19 $31.70 $33.09 Potable Water Sales (ccf)(1) 6,221,643 6,240,977 6,283,789 6,346,152 6,401,784 Calculated SDCWA Pass-through Rate
($/ccf)
$4.01 $4.62 $4.81 $5.00 $5.17
Notes:
(1) Calendar year sales.
(2) Line or column totals may not tie due to rounding.

Like the variable pass-through rate, the fixed pass-through charges are calculated on a calendar year basis to correspond to SDCWA’s rate setting. The fixed pass-through charge will be assessed per meter, by size, based on the number of meter equivalent units (MEUs) assigned to each size of meter. Its calculation includes two components based on the way that fixed SDCWA costs are assessed to CMWD. A unit charge per MEU is calculated for each component then multiplied by the MEU ratio for each meter size to calculate the component charge for each meter size. The components are then summed to calculate the SDCWA fixed pass-through for each meter size. Table 22 shows the calculation of the unit charge for each component and Table 23 shows the resulting calculated surcharges by meter size.

SDCWA’s Customer Service, Emergency Storage, Supply Reliability, and Fixed Transportation charges along with the MWD Capacity Reservation and Readiness to Serve charges are assessed to CMWD based on rolling average consumption. For the pass-through calculation, they are combined and recovered per MEU assuming a 5/8-inch meter as the base size like CMWD’s current fixed charges.

SDCWA assesses its Infrastructure Access Charge (IAC) on a 3/4-inch MEU basis and the fixed pass- through charge is therefore calculated using the same 3/4-inch basis. SDCWA charges the IAC to CMWD based on the number of MEUs reported for December of the previous year. Because the pass -through calculation is based on the projected number of MEUs in each year accounting for growth, the IAC component of the pass-through may be lower than SDCWA’s charge per MEU. For example, SDCWA’s adopted IAC for CY 2025 is $4.55 per MEU, while the calculated pass-through is $4.42 per MEU.

Table 22 Eligible Costs to Recover Through SDCWA Fixed Pass-through – Potable Water ($ millions) Budget Item CY 2025 CY 2026 CY 2027 CY 2028 CY 2029
Customer Service Charge $1.04 $1.20 $1.25 $1.29 $1.34
Emergency Storage Charge $2.38 $2.73 $2.84 $2.95 $3.04
Supply Reliability Charge $1.78 $2.05 $2.13 $2.21 $2.28 Fixed Transportation Charge $1.04 $1.20 $1.25 $1.29 $1.34 MWD Capacity Reservation Charge $0.30 $0.33 $0.37 $0.39 $0.41 MWD Readiness to Service Charge (Adjusted to
CY basis) $0.42 $0.47 $0.50 $0.53 $0.56
Less: SDCWA Fixed in Fire Service Rate ($0.11) ($0.13) ($0.14) ($0.14) ($0.15) Feb. 11, 2025
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Budget Item CY 2025 CY 2026 CY 2027 CY 2028 CY 2029
Total to Collect Through Surcharge (Millions)
Table continues on next page. $6.84 $7.84 $8.19 $8.51 $8.81 Potable MEUs (5/8" Basis)1 46,566 46,756 46,893 47,212 47,687 Calculated SDCWA Pass-Through per MEU
(5/8” Basis) $12.24 $13.97 $14.56 $15.03 $15.39

Infrastructure Access Charge (Millions) $2.00 $2.36 $2.47 $2.57 $2.66 Calculated IAC per MEU (3/4” Basis) 37,714 37,868 37,979 38,238 38,622 Calculated SDCWA IAC Pass-Through per
MEU (3/4” Basis) $4.42 $5.20 $5.42 $5.60 $5.75
Notes:
(1) Calendar year.
(2) Line or column totals may not tie due to rounding.

Table 23 SDCWA Fixed Pass-through Calculation – Potable Water ($ millions) Meter Size 5/8” MEU
Ratio
3/4" MEU
Ratio
CY 2025 CY 2026 CY 2027 CY 2028 CY 2029
Unit Charge per MEU – 5/8-inch Basis
Component $12.24 $13.97 $14.56 $15.03 $15.39
Unit Charge per MEU – 3/4-inch Basis
Component $4.42 $5.20 $5.42 $5.60 $5.75
5/8" 1.00 1.00 $16.66 $19.17 $19.99 $20.63 $21.15
3/4" 1.50 1.00 $22.77 $26.15 $27.27 $28.15 $28.84
1" 2.50 1.60 $37.66 $43.24 $45.08 $46.54 $47.68

1.5" 5.00 3.00 $74.43 $85.44 $89.08 $91.95 $94.21
2" 8.00 5.20 $120.85 $138.78 $144.69 $149.35 $153.04

2.5" 11.50 7.40 $173.39 $199.10 $207.58 $214.27 $219.56 3" 15.00 9.60 $225.93 $259.43 $270.48 $279.19 $286.08
4" 25.00 16.40 $378.31 $434.45 $452.96 $467.55 $479.10
6" 50.00 30.00 $744.26 $854.35 $890.74 $919.43 $942.10
8" 80.00 52.00 $1,208.47 $1,387.74 $1,446.86 $1,493.48 $1,530.34 10" 115.00 78.00 $1,751.52 $2,011.75 $2,097.48 $2,165.07 $2,218.54 Fiscal year pass-through revenues are calculated by applying the calculated calendar year pass-through rates and charges to calendar year sales, then averaging the appropriate calendar years for each fiscal year. For example, FYE 2025 revenues are calculated as the average of CY 2024 and CY 2025 revenues.

Table 24 and Table 25 show the calculation of fiscal year variable pass-through and fixed pass-through revenues, respectively. Table 26 shows the combined fiscal year pass through revenue.

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Table 24 Calculated Variable Pass-through Revenues – Potable Water ($ millions) CY 2024 CY 2025 CY 2026 CY 2027 CY 2028 CY 2029
Variable Pass-through Revenue
Variable Pass-through ($/ccf) $3.59 $4.01 $4.61 $4.80 $5.00 $5.17 CY Sales (ccf) 6,195,775 6,221,643 6,240,977 6,283,789 6,346,152 6,401,784 CY Revenue (millions) $22.25 $24.94 $28.79 $30.19 $31.70 $33.09 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
FY Variable Pass-through Revenue
(million) $23.59 $26.87 $29.49 $30.95 $32.40
Notes:
(1) Line or column totals may not tie due to rounding.

Table 25 Calculated Fixed Pass-through Revenues – Potable Water ($ millions) CY 2024 CY 2025 CY 2026 CY 2027 CY 2028 CY 2029
Fixed Pass-through Revenues
Unit Charge per MEU – 5/8" Basis
Component $9.03 $12.24 $13.97 $14.56 $15.03 $15.39
Unit Charge per MEU – 3/4" Basis
Component $4.79 $4.42 $5.20 $5.42 $5.60 $5.75

CY MEUs - 5/8" Basis 46,252 46,566 46,756 46,893 47,212 47,687 CY MEUs - 3/4" Basis 37,460 37,714 37,868 37,979 38,238 38,622

CY Revenue 5/8" Basis (million) $5.01 $6.84 $7.84 $8.19 $8.51 $8.81 CY Revenue 5/8" Basis (million) $2.15 $2.00 $2.36 $2.47 $2.57 $2.66 Combined CY Revenue (million) $7.17 $8.84 $10.20 $10.66 $11.08 $11.47 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
FY Fixed Pass-through Revenue
(million) $8.00 $9.52 $10.43 $10.87 $11.28
Amount recovered in Fire Service
Rate (million) $0.10 $0.12 $0.13 $0.14 $0.15
Notes:
(1) Line or column totals may not tie due to rounding.

Table 26 Fiscal Year Pass-through Revenue Summary – Potable Water ($ millions) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029
FY Variable Pass-through Revenue (million) $23.59 $26.87 $29.49 $30.95 $32.40 FY Variable Pass-through Revenue (million) $8.00 $9.52 $10.43 $10.87 $11.28 Total FY Pass-through Revenue (million) $31.6 $36.4 $39.9 $41.8 $43.7 Notes:
(1) Line or column totals may not tie due to rounding.

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SECTION 4 COST-OF-SERVICE ANALYSIS
The purpose of a cost-of-service analysis is to provide a rational basis for distributing the full costs of the District’s water service to each customer in proportion to the demands they place on the system. The Study developed a detailed cost allocation that serves as the basis for the proposed rate adjustments. This analysis yields an appropriate method for allocating costs, which could be sustained unless substantial changes in cost drivers or customer consumption patterns occur.

The Cost-of-Service analysis follows a step-by-step approach to tying the District’s expenses to the rates charged to customers. Those steps are outlined in the figure below.

Figure 3 Cost-of-Service Analysis Steps
Based on the revenue requirement analysis outlined in the preceding chapter, the functional allocation designates each budget item to a functional category, which is then translated into a specific cost/rate component. Those functional categories and their associated costs are allocated to the distinct customer classes based on each class’s unique account, meter, and demand characteristics. A customer class consists of users that commonly create or share responsibility for certain costs incurred by the utility, which is determined by customer consumption data (including peak demand) in order to combine similar groups of customers.

Cost Functionalization
The District's expenses are
allocated to functional
categories on a line-by-line
basis.

Rate Component Allocation
The functional categories are
allocated to cost components
based on system usage statistics
and engineering standards.

Customer Class and Tier
Allocation
The cost components are
reallocated to each class or tier
based on demand profiles.

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4.1 Ratemaking Framework

4.1.1 California Ratemaking
This Report should not be considered legal guidance, and it does not offer any assurances of compliance with any other state, federal, or other laws. However, it is guided by the best available legal guidance and strives to match that guidance.

Rate analyses are performed periodically to ensure revenues continue to adequately fund utility operations, maintenance, and necessary capital investments. In California, water rates must adhere to the cost-of-service requirements imposed by Proposition 218 and the State Constitution. Proposition 218 requires that property related fees and charges, including water rates, do not exceed the reasonable and proportional cost of providing the service. In general:
 Rates must be based on the cost of providing water service.  Tiered pricing is an acceptable methodology under Proposition 218.  Increasing block rates that pass incrementally higher costs of expensive water onto incrementally higher demand users is an acceptable methodology of proportionately allocating the costs of service under Proposition 218.

Recently, Assembly Bill 1827 was passed and approved to clarify how rates and fees may include the incrementally higher costs of water service due to:
 The higher water usage demand of parcels.
 The maximum potential water use.
 Projected peak water usage.
 And any combination of the above.

AB 1827 also states that:
“The incrementally higher costs of water service associated with higher water usage demands, the maximum potential water use, or projected peak water usage may be allocated using any method that reasonably assesses the water service provider’s cost of serving those parcels that are increasing potential water usage demand, maximum potential water use, or projected peak water usage.

In addition to any other method consistent with Section 6 of Article XIII D of the California Constitution, the incrementally higher costs of water service associated with higher water usage demand, maximum potential water use, or projected peak water usage may be allocated among customer classes, within customer classes, or both, based on meter size or peaking factors, as those methods reasonably assess the water service provider’s cost of serving parcels that increase water usage demand, maximum potential water use, or projected peak water usage.”

4.1.2 Industry Guidance
While Proposition 218 and the state constitution are the ultimate test for rates in California, industry guidance and commonly accepted rate setting practices can serve as a template for achieving cost -based rates. The AWWA M1 Manual outlines the two most widely used methods for allocation of functionalized costs to cost components:

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 Base Extra Capacity Method, where costs are allocated among: (1) a base category to provide baseline water service or average day demand; (2) an extra capacity category to provide peak demand service, often split into maximum day and maximum hour components; (3) a customer category to provide services that do not vary with water usage, such as customer service and billing; and (4) direct fire protection.
 Commodity Demand Method, where costs are allocated among: (1) a commodity category for costs that are directly driven by demand; (2) a demand category for building and maintaining peak system capacity; (3) a customer category to provide services that do not vary with water usage , such as customer service and billing; and (4) direct fire protection.

Both methodologies recognize that cost-of-service “depends not only on the total volume of water used, but also on the rate of use, or peak demand requirements.” Costs incurred by the District are not incurred uniformly, or simply based on the total quantity or volume of water used. The cost -of-service changes based on both when, how, and how much water is used. Both methodologies account for this by including an extra capacity or demand category, in recognition of costs associated with capacity that is not used consistently which impacts operating costs and capital asset related costs to accommodate peak flows.

For this analysis, the Base Extra Capacity methodology was selected. The following sections discuss how costs are allocated to the system’s functions, cost components, and customer classes using this methodology.

4.2 Functional Cost Allocation – Potable

4.2.1 Functional Cost Categories – Potable
The functional cost allocation assigns the revenue requirement for the test year by major function. The Study developed a list of functions specific to the District’s water system. Each functional component is allocated to specific cost components, which can then be assigned to rates. The functional components used for the District are:

Customer Account Service: Costs, materials and outside services directly related to customer communication such as outreach, printing, and postage.

Meters and Services: Costs associated with water meters and service connections.

Administration: Costs related to the overall management and oversight of the water system including legal costs, permitting and regulatory fees, studies, and other related items. This category also includes the costs that the water utility pays to other City of Carlsbad departments for services that they provide such as customer billing and information technology services.

Distribution: Costs associated with delivering water to customers including the operation and maintenance of the water distribution system facilities.

Treatment: The District’s internal costs associated with treating water purchased from SDCWA and desalinated water. These costs include chemicals, lab costs, and water sampling.

SDCWA Variable: The variable portion of the costs that the District pays to SDCWA for purchases of treated water supplies. Under the proposed rates, these costs are recovered using the variable pass- through rate discussed previously.

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SDCWA Fixed: The fixed portion of the costs that the District pays to SDCWA for treated water supplies not including the Infrastructure Access Charge (IAC). Under the proposed rates, these costs are recovered using the fixed pass-through charge discussed previously.

SDCWA IAC: This category includes the costs of the SDCWA IAC, a fixed charge that SDCWA levies on the District based on the District’s count of MEUs. Under the proposed rates, these costs are recovered using the fixed pass-through charge discussed previously.

Desalination: The costs that the District pays to purchase desalinated water as dictated by its purchase agreement with SDCWA.

Conservation: Costs associated with conservation programs, such as rebates, and communications aimed at increasing overall water supply and reliability through encouraging or mandating customers that use large amounts of water to reduce water usage in order to increase water supply and reliability.

Fire Protection: Costs that the District incurs specifically related to providing and maintaining facilities for fire protection. The ability to provide fire protection service is intrinsic to the water system based on typical water system planning and engineering. Those intrinsic characteristics are accounted for in costs allocated to the other categories, most notably within the Meters and Services and Distribution categories.

Cross Connection Control: Costs related to the District’s cross-connection control program.

Engineering: Costs related to the District’s engineering activities.

General: Costs associated with other expenses that provide an overall benefit to the water system such as staff costs for management personnel who oversee all aspects of the water operation. This category also includes costs that do not fit any of the other categories such as asphalt repairs, landscaping services, miscellaneous supplies, and other overhead expenses.

4.2.1.1 O&M Expense Functionalization – Potable
The District’s O&M expenses were functionalized into each of the above categories using the FYE 202 5 budgeted operating expenses. Table 27 presents a summary of the O&M cost functionalization. A detailed table of the functionalization is included in Appendix F.

Table 27 Functionalized O&M Expenses - Potable ($ millions) Functional Component Personnel Maintenance &
Equipment
Budget
Adjustments
Total Allocated Resulting
Allocation
Customer Account Service $0.00 $0.06 $0.00 $0.05 0.1%
Meters and Services $0.40 $1.21 -$0.13 $1.49 2.8%
Admin $1.22 $2.75 -$0.32 $3.66 6.9%
Distribution $1.81 $2.44 -$0.34 $3.92 7.3%
Treatment $0.00 $0.29 -$0.02 $0.27 0.5%
SDCWA Variable $0.00 $23.59 $0.00 $23.59 44.2%
SDCWA Fixed $0.00 $6.02 $0.00 $6.02 11.3%
SDCWA IAC $0.00 $2.07 $0.00 $2.07 3.9%
Desal
Table continues on next page. $0.00 $9.98 $0.00 $9.98 18.7% Feb. 11, 2025
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Functional Component Personnel Maintenance &
Equipment
Budget
Adjustments
Total Allocated Resulting
Allocation
Conservation $0.11 $0.01 -$0.01 $0.11 0.2%
Fire Protection $0.00 $0.06 $0.00 $0.05 0.1%
Cross Connection Control $0.36 $0.08 -$0.03 $0.40 0.7%
Engineering $0.63 $0.24 -$0.07 $0.79 1.5%
General $0.66 $0.40 -$0.08 $0.97 1.8%
Total O&M Expenses $5.19 $49.21 -$1.01 $53.39 100.0%
Notes:
(1) Line or column totals may not tie due to rounding.

4.3 Rate Component Allocation – Potable
After O&M costs are functionalized, they can be allocated to rate components along with capital costs and other revenue requirement elements. These rate components are the foundation of the individual rates, with each component corresponding to individual or multiple rate components.

The District’s rate components are used to allocate costs to the fixed monthly service charges and the volumetric rates. The volumetric components include base, extra capacity (maximum day and maximum hour), and SDCWA. The customer related rate components (customer, service, and private fire protection) are the basis of the fixed monthly service charges. Revenues from the proposed pass-throughs are applied as offsets to the appropriate categories, variable pass-through revenues offset the SDCWA category and fixed pass-through revenues offset the Service category.

Fire protection costs are separated into private and public. While private fire protection costs are only allocated to private fire customers through the private fire service charge, the public fire protection costs are attributable to all other customer classes and recovered via the service component.

4.3.1 Rate Component Descriptions – Potable
The following describes each of the cost components for the District.

4.3.1.1 Volumetric Components
Base: This category includes a portion of operating and capital costs related to internal source of supply and distribution costs, up to a level that meets the District’s baseline (average day) demands throughout the year. Base also includes a portion of general and administrative costs associated with the operations and management of those functions as well as the variable portion of desalination costs.

Extra Capacity – Max Day: This category includes a portion of O&M and capital costs for water distribution related to meeting maximum day demands. Max day also includes a portion of general and administrative costs associated with the operations and management of those functions. Lastly, the costs of the District conservation activities are included in this category.

These costs are incremental to those required for Base service. For example, they include capital costs related to oversizing the system to meet excess max day demand.

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System peaking factors are used to determine the appropriate allocations to the Extra Capacity cost components. For the purpose of this study, the maximum day peaking factor is 1.96 based on the District’s water use records. This means that the maximum day demand is assumed to be 1.96 times the average day demand. This is a reduction from the 2.06 maximum day peaking factor determined in the previous Study. The impact is that proportionately more costs will be recovered at the Base component.

The calculation of the allocation basis from these peaking factors is detailed in the next section.

Extra Capacity – Max Hour: The Max Hour category is similar to the Max Day category but covers the additional costs related to peak above Max Day. These costs are incremental to those required for Base and Max Day service. The Max Hour peaking factor is 2.90 times the average hour demand. The Max Hour peaking factor was developed in the District’s master plan. This value is unchanged from the previous Study.

SDCWA: This category includes the variable costs of purchasing treated water from SDCWA.

4.3.1.2 Fixed Components
Service: Costs associated with customer meters and service lines and the associated capacity. The fixed costs charged to the District by SDCWA are also included in this component. These costs are included in the fixed charge based on the meter’s hydraulic capacity. The fixed portion of desalination costs are also allocated to this component.

Customer: Costs related to operational support activities including accounting, administration, billing, and customer service. These expenditures are common to all customers and are reasonably uniform across the different customer classes.

Private Fire Protection: Costs associated with providing private fire protection services via dedicated connections. A portion of the distribution system and service costs are included as the system must have sufficient hydraulic capacity to support the pressures and flow demands for fire protection service.

4.4 Extra Capacity Allocation Factors – Potable
For costs related to either Max Day or Max Hour, the peaking factors for each component need to be normalized into a 100 percent scale to allow allocation of costs. The peaking factors are generated as a ratio of the peak demand for a given time period (max day, max hour, etc.) to the average demand for the same time period.

For Base-Extra Capacity, this relies on Max Day Demand (MDD) and Max Hour Demand (MHD) flow criteria. District staff provided average day demand (ADD) and MDD conditions for the past three fiscal years based on SCADA monitoring data. The MHD peaking factor is based on the District’s 2019 Master Plan.

4.4.1 Max Day Demand – Potable
For MDD, the highest demand day is approximately 26.50 million gallons per day (mgd) based on the peak demand from FYE 2021 which occurred on August 26, 2020. When divided by the average day demand of 13.50 mgd for that same year, the resulting peak factor is 1.96. That peak factor is then applied to the projected demands for the FYE 2025 rate design year to calculate peak demands and allocations for the cost-of-service analysis.

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Table 20 outlines the calculation of the allocation basis from these peaking factors. Base corresponds with ADD of 12.50 mgd, which is set at 100 percent. The incremental Max Day capacity required above ADD to meet MDD is 12.00 mgd, or 96 percent of base.

The percentages associated with total MDD capacity need to be normalized into a 100 percent basis. After normalizing, 49 percent of capacity is associated with Base demand and 51 percent is associated with the incremental capacity needed to meet MDD. Table 28 shows the calculation of the MDD allocation.

Table 28 Max Day Allocation
Peaking Factor MGD Percent of Base Normalized
Allocation
Base (Average Day) 12.50 100% 51%
Incremental Max Day 12.04 96% 49%
Total Max Day 24.54 196% 100%
Notes:
(1) Line or column totals may not tie due to rounding.

4.4.2 Max Hour Demand – Potable
Table 29 outlines the calculation of the allocation basis from the MHD peaking factors. The District’s 2019 master plan determined a MHD peaking factor of 2.90. Applied to the ADD of 12.50 mgd, the 2.90 MHD factor results in estimated max hour demands of 36.26 mgd. Base corresponds with ADD of 12.00 mgd, which is set at 100 percent. The incremental Max Day capacity required above ADD to meet MDD is

12.04 mgd, or 96 percent of base. The incremental Max Hour capacity required above MHD is 11.71 mgd, or 94 percent of base.

The percentages associated with total MHD capacity need to be normalized into a 100 percent basis. After normalizing, 34 percent of capacity is associated with Base demand, 33 percent is associated with the incremental capacity needed to meet MDD, and 32 percent is associated with the incremental capacity needed to meet MHD.

Table 29 Max Hour Allocation
Peaking Factor MGD Percent of Base Normalized Allocation Base (Average Day) 12.50 100% 34%
Incremental Max Day 12.04 96% 33%
Incremental Max Hour 11.71 94% 32%
Total 36.26 290% 100%
Notes:
(1) Line or column totals may not tie due to rounding.

Certain costs related to distribution system O&M or sizing are split between the extra capacity components, max day and max hour. The allocation for those costs is outlined in Table 30. The allocation is developed based on the incremental max day and max hour demands’ proportional share of total extra capacity. With the incremental max day demands of 12.04 mgd and incremental max hour demands of

11.71 mgd, the extra capacity allocation is 51 percent to max day and 49 percent to max hour.

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Table 30 Extra Capacity Allocation
Peaking Factor MGD Extra Capacity MGD Extra Capacity
Allocation
Base (Average Hour) 12.50 n/a n/a
Incremental Max Day 12.04 12.04 51%
Incremental Max Hour 11.71 11.71 49%
Total 36.26 23.75 100%
Notes:
(1) Line or column totals may not tie due to rounding.

4.5 Allocation of Revenue Requirements to Cost Components – Potable
The next step in the Cost-of-Service analysis is to allocate revenue requirements to each cost component outlined in Section 4.4.1. Each functional category allocation from Section 4.3.1 is then reallocated to a rate component.

The percentages connecting each functional category with a rate component are outlined in Table 31.

These percentages are then used to distribute the O&M functional category totals from Table 27 into the rate components, with results summarized in Table 33.

Other revenue requirement elements including capital costs, replacement funding, and offsetting revenues are also allocated rate components in this step, shown in Table 34. Finally, revenue requirement elements allocated to each rate component are summed to determine the total revenue requirements, by rate component, for the FYE 2025 test year. The resulting allocation is shown in Table 35.

Functionalized O&M expenses and the other revenue requirement elements are allocated to the rate categories based on the how and why the costs are incurred, and the services provided to each rate payer by those activities. The O&M expenses and other revenue requirement elements are allocated to rate components as follows:

Customer Account Service: These costs are equal for all retail customers regardless of their water demands or the size of their water meters. Thus, to account for each billed connection’s share of these costs, they are allocated to the customer rate component.

Administration and Management: These costs are equal for all customers regardless of their water demands or the size of their water meters. Thus, to account for each billed connection’s share of these costs, they are allocated to the customer and private fire protection rate components.

Meters and Services: This category includes service costs that are common to all customers as well as costs that vary based on the size of each connection. Meters and services costs are split between the customer, service, and private fire components. They are allocated between private fire and service proportional to the number of potable MEUs and private fire protection MEUs.

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Distribution: Distribution costs are split between the max day, max hour, and private fire components.

This allocation accounts for the oversizing of the distribution system, including pipelines, pump stations, storage facilities and other infrastructure to meet peak demands and accounts for the share associated with private fire protection connections. This system oversizing drive increased operating and capital costs which are in turn recovered from the extra capacity components.

Treatment: These costs are variable and equal for each unit of water sold, they are allocated to the base rate component.

SDCWA Fixed and SDCWA IAC: These costs are assessed to the District, by SDCWA, on a fixed basis tied to a combination of rolling average water purchases, MEUs, and maximum capacity demands. Therefore, these costs are allocated to the service rate component to reflect the capacity needed to serve each customer. However, since these costs will now be recovered through the fixed pass-through charge, projected revenues from that charge are applied to offset this component.

SDCWA Variable: These costs are allocated to the SDCWA component which is later allocated to each customer class based on their allocated share of SDCWA water purchases. These costs will be recovered through the variable pass-through rate and the revenues from that rate are applied as an offset to these costs.

Desalination: These costs are related to supply and include fixed and variable components based on the purchase agreement between the District and SDCWA. The fixed portion of the costs is allocated to the service component to be recovered from each user based on their capacity as indicated by the size of their water meter. The variable portion is allocated to base to be recovered in proportion to the amount of water used by each customers.

Conservation: These costs are allocated to the max day rate component as the conservation program is aimed at helping users reduce their incremental demands.

Fire Protection: These costs are allocated to the service and the private fire rate components proportionally based on the number of MEUs for normal service meters and private fire protection connections.

Cross Connection Control: These costs are fixed in nature and are allocated to the service rate component.

Engineering: The District’s engineering efforts include planning and managing capital projects as well as supporting operations. These costs are allocated across the rate components based on the allocation of the water system’s fixed assets.

General: These costs are for items and activities that provide a general benefit to the water system. They are therefore allocated to the rate components based on the weighted average of O&M expenses.

Capital Costs: Capital-related revenue requirements including replacement funding and transfers to the capital replacement reserve are allocated based on the water system’s fixed assets. This reflects that the District, as well as most utilities, spend CIP typically in accordance with the current functionalization of the system. For instance, if 25 percent of the value of the system is related to storage tanks and reservoirs, as is the case with the District, then it is reasonable to assign approximately 25 percent of the CIP to storage tanks and reservoirs because it is assumed the District will invest a proportional amount of maintenance, repair, and replacement on storage. While some agencies rely on project specific capital allocations, that process can lead to shifting and rate spiking as projects of different types are completed.

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Allocating capital costs using the overall fixed asset replacement cost ties the long -term costs of capital investments to the District’s physical system while avoiding rate spikes and shifting allocations. A summary of the allocation of fixed assets is shown in Table 32.

Offsetting Revenues and Operating Cash Flows: Offsetting revenues and cash flows are allocated based on the weighted average allocation of all other revenue requirements.

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The allocation factors used in the potable water functional allocation are outlined in Table 31.

Table 31 Functional Allocation Factors - Potable
Allocation Customer Service Base Max Day Max Hour Fire SDCWA IAC SDCWA Fixed
As All
Others
Customer Only(1) 96.2% 3.8%
Customer Only - No Fire 100.0%
Service Only(2) 98.4% 1.6%
Service Only - No Fire 100.0%
SDCWA Only 100.0%
Desal Fixed/Var(3) 59.5% 40.5%
Max Day 100.0%
Max Hour 100.0%
Base/Max Day (4) 50.9% 49.1%
Base/Max Day/Max Hour (4) 34.5% 33.2% 32.3%
Max Day/Max Hour (4) 50.7% 49.3%
Max Day/Hour w/ Fire(5) 47.7% 50.7% 1.6%
Plant-In-Service(6) 15.9% 6.0% 38.7% 37.7% 1.6%
As All Others 100.0%
Notes:
(1) Allocation proportional to the number of connections for retail potable customers and private fire protection connections. (2) Allocation proportional to the number of MEUs for retail potable customers and private fire protection MEUs with private fire protection component adjusted to reflect only the portion of the system related to providing system wide fire protection. (3) Allocation split fixed (Service) and variable (Base) components in proportion to fixed and variable desalination costs based on the purchase agreement with SDCWA. (4) Allocation based on extra capacity demands as described in 4.4. (5) Max Day/Max Hour allocation adjusted to account for private fire connections share of infrastructure costs. (6) Allocation of fixed assets as shown in Table 32.
(7) Line or column totals may not tie due to rounding.

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Table 32 Fixed Asset Allocation (Plant-in-Service) - Potable ($ millions) Asset Class Replacement
Value
Customer Service Base Max Day Max Hour Systemwide Fire
Protection
Land $11.57 100.0%
Buildings $12.32 100.0%
Water Service & Meters $5.50 100.0%
Machinery & Equipment $13.44 100.0%
District Fire Connections $0.01 100.0%
Reservoirs $322.00 28.9% 27.8% 27.1% 16.2%
Pipes & Pumping $1,193.00 43.1% 41.9% 15.0%
Construction in Progress $0.00
Total Allocation $1,557.85 $42.84 $93.08 $603.58 $587.33 $231.02 Percentage Allocation 2.7% 6.0% 38.7% 37.7% 14.8%
Reallocation of Systemwide Fire Protection to Service and Private Fire Protection Customer Service Base Max Day Max Hour Private Fire
Protection
Fixed Asset Allocation for Cost-of-Service 15.9% 6.0% 38.7% 37.7% 1.6% Notes:
(1) Line or column totals may not tie due to rounding.

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Table 33 O&M Allocation to Rate Components - Potable ($ millions) Operating Expenditures Customer Service Base Max Day Max Hour Private Fire SDCWA As All Others
Total
Customer Account Service $0.05 - - - - - - - $0.05
Meters and Services - $1.46 - - - $0.02 - - $1.49
Admin $3.52 - - - - $0.14 - - $3.66
Distribution - - - $1.87 $1.99 $0.06 - - $3.92
Supply - - $0.14 $0.13 - - - - $0.27
SDCWA Variable - - - - - - $23.59 - $23.59
SDCWA Fixed - $5.92 - - - $0.10 - - $6.02
SDCWA IAC - $2.07 - - - - - - $2.07
Desal - $5.94 $4.05 - - - - - $9.98
Conservation - - - $0.11 - - - - $0.11
Fire Protection - $0.05 - - - $0.00 - - $0.05
Cross Connection Control - $0.39 - - - $0.01 - - $0.40
Engineering - $0.13 $0.05 $0.31 $0.30 $0.01 - - $0.79
General - - - - - - - $0.97 $0.97
Operating Expenditures Subtotal $3.57 $15.96 $4.23 $2.42 $2.29 $0.35 $23.59 $0.97 $53.39 Reallocation of "As All Others" $0.12 $0.54 $0.14 $0.08 $0.08 $0.01 ($0.97) - Total Allocation $3.69 $16.50 $4.37 $2.50 $2.36 $0.36 $23.59 - $53.39 Notes:
(1) Line or column totals may not tie due to rounding.

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Table 34 Revenue Requirements Allocation to Rate Components - Potable ($ millions) Rate Revenue Requirement Customer Service Base Max Day Max Hour Private Fire SDCWA As All Others Total
Operating Expenses $3.69 $16.50 $4.37 $2.50 $2.36 $0.36 $23.59 - $53.39 Debt - - - - - - - - -
Rate Funded Capital - - - - - - - - -
Replacement Funding (Depreciation
Funding)
- - - - - - - - -
Cash Funded Capital - $1.11 $0.42 $2.71 $2.63 $0.12 - - $6.98 Cash Flows - - - - - - - ($2.78) ($2.78)
Less Offsetting Revenues - ($12.79) ($0.42) ($2.71) ($2.63) ($0.12) ($23.59) $0.45 ($41.81) Total Rate Revenues to be Collected $3.69 $4.82 $4.37 $2.50 $2.36 $0.36 - ($2.33) $15.78 Reallocation of "As All Others" ($0.48) ($0.62) ($0.56) ($0.32) ($0.30) ($0.05) Direct Pass Through $2.33 -
Total Allocation $3.22 $4.20 $3.81 $2.18 $2.06 $0.31 - - $15.78 Note:
(1) Line or column totals may not tie due to rounding.

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4.6 Functional Allocation Results – Potable
Once each revenue requirement element is allocated, a combined allocation of the District’s expenses is used as the basis for allocating rate revenue requirements to each functional category and subsequently to each customer class. The functional allocation also defines the split between costs recovered through fixed rate components and those recovered through variable rate components.

4.6.1 Potable Water Functional Allocation Results
The results of the potable water functional allocation analysis are shown in Table 35. The largest component of the system's costs is related to variable supply costs for imported water from SDCWA.

However, this Study allocates all SDCWA-related costs to a direct pass-throughs.

The Service, Customer, and Fire cost components are collected through the CMWD fixed rate components and total approximately 49 percent of the District's potable costs. These costs are recovered through Carlsbad’s monthly delivery fee. The District’s water usage fees recover the remaining 51 percent of costs, which are allocated to the Base, Max Day, and Max Hour components.

Table 35 Functional Allocation Results Summary - Potable Water ($ millions) Allocation Basis Revenue Requirement
($ millions)
Percent of Total Functional Allocation
Customer $3.22 20.4%
Service $4.20 26.6%
Base $3.81 24.1%
Max Day $2.18 13.8%
Max Hour $2.06 13.0%
Fire $0.31 2.0%
Total $15.78 100.0%
Notes:
(1) Line or column totals may not tie due to rounding.

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4.6.2 Unit Cost Calculation
The amount of costs allocable to customers is calculated with the unique units associated with each cost function. For example, the customer component is the same for all meter sizes and is calculated by dividing the allocated customer costs by the number of accounts. The resulting value will then be allocated to each customer class in the final cost of service step. Table 36 presents this calculation.

Table 36 Unit Cost Calculation - Potable Water ($ millions) Customer Service Base Max Day Max Hour
Allocation Basis Number of
Accounts
Number of MEUs Usage (ccf) Max Day Usage Max Hour Usage Total Units 353,194 1,159,848 6,214,735 32,808 2,020
Amount
Allocable to
Constituent
$3.22 $4.20 $3.81 $2.18 $2.06
Unit Costs $9.11 $3.62 $0.61 $66.44 $1,019.56

4.7 Customer Class Allocation
The final step in the cost-of-service analysis is the allocation of costs to each customer class. This step utilizes the results of the functional allocation and service units to proportionally allocate costs based on the level of service provided to each customer (rate) class. Service units are metrics for each customer class such as the number of accounts, number of meters by size, and usage characteristics that define the level of service provided to each class. Each functional cost component is divided amongst the customer classes in proportion to each class’s share of the service units used to allocate the respective functional component.

Table 37 presents the total service units, otherwise known as the customer class characteristics, of each customer class. These totals are used to proportionally allocate the functional cost components between each customer class. The values presented in Table 37 are the projected values for FYE 2025.

Table 37 Customer Class Service Units
Service Unit Single
Family Multi-Family CI&I Agricultural Irrigation Fire Total Number of Accounts
(Customer) 24,521 1,284 1,707 12 793 1,116 29,433
Number of MEUs
(Service) 28,141 5,482 8,445 173 4,183 50,230 96,654
Annual Water Usage
(ccf) 3,361,234 817,637 1,252,320 81,534 702,011 - 6,214,735 Max Month (ccf) 335,466 72,733 125,869 9,418 85,564 - 629,050 Max Day (ccf) 17,496 3,793 6,565 491 4,463 - 32,808
Max Hour (ccf) 1,077 234 404 30 275 - 2,020
Notes:
(1) Line or column totals may not tie due to rounding.

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4.7.1 Potable Volumetric Cost Customer Class Allocation Costs allocated to the variable functional categories (Base, Max Day, and Max Hour) are allocated based on the amount of demand in each of those categories for each class. This directly ties the incremental cost of water to each class's consumption and to volumetric rate tiers (where applicable). Every unit of water has both an element of base, max day, and max hour costs. The elements are allocated across the total projected FYE 2025 demand and are summed to determine the total cost allocated to each class.

The amounts allocable to constituents from Table 35 are multiplied by each customer class’s proportionate units, respective to the rate component. For example, single family customers use an annual sum of 3,361,234 ccf, which makes up approximately 54 percent of total system usage. Therefore, 54 percent of the total Base rate component allocable costs are assessed to single family customers and recovered through a volumetric rate.

4.7.1.1 Base Allocation
Base costs are allocated to each class in proportion to their share of annual water usage, as shown in Table 38.

Table 38 Base Allocation ($ millions)
Allocation Basis Total Single Family Multi-Family CI&I Agricultural Irrigation Annual Water Usage (ccf) 6,214,735 3,361,234 817,637 1,252,320 81,534 702,011 Allocation (%) 100% 54% 13% 20% 1% 11%
Allocated Customer
Costs $4.20 $2.55 $0.50 $0.76 $0.02 $0.38
Notes:
(1) Line or column totals may not tie due to rounding.

4.7.1.2 Extra Capacity Allocations
Max Day and Max Hour costs are allocated to each class in proportion to their shares of Max Day in Table 39 and Max Hour demands in Table 40.

Table 39 Max Day Allocation ($ millions)
Allocation Basis Total Single Family Multi-Family CI&I Agricultural Irrigation Max Day Usage (ccf) 32,808 17,496 3,793 6,565 491 4,463 Allocation (%) 100% 53% 12% 20% 1% 14%
Allocated Customer
Costs $2.18 $1.16 $0.25 $0.44 $0.03 $0.30
Notes:
(1) Line or column totals may not tie due to rounding.

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Table 40 Max Hour Allocation ($ millions)
Allocation Basis Total Single Family Multi-Family CI&I Agricultural Irrigation Max Hour Usage (ccf) 2,020 1,077 234 404 30 275
Allocation (%) 100% 53% 12% 20% 1% 14%
Allocated Customer
Costs $2.06 $1.10 $0.24 $0.41 $0.03 $0.28
Notes:
(1) Line or column totals may not tie due to rounding.

4.7.1.3 Supply Allocations
In the previous Study, the rate structure did not employ a pass-through to recover SDCWA costs.

Therefore, the cost-of-service methodology reflected the steps necessary to allocate available water supplies based on using the lower cost source to fulfill base demand and desalinated water – the more expensive source – to fulfill any remaining base demand requirements and all peak demand requirements.

This Study passes all costs associated with SDCWA, including variable, IAC, and fixed costs, through to the customer directly, as calculated in Table 21 and Table 23. Therefore, only the internal Carlsbad costs remain to be allocated by customer class, as shown in the sections above.

4.7.2 Potable Fixed Cost Customer Class Allocation
Similar to the calculation for variable customer class allocation, the amounts allocable to constituents from Table 35 are multiplied by each customer class’s proportionate units. Fixed costs are allocated based on each class's share of accounts and MEUs. Customer costs are allocated based on the number of accounts and Service costs are allocated based on the number of MEUs. All costs allocated to the Private Fire rate component are allocated directly to fire customers. For example, there are 24,521 single family accounts in FYE 2025, which make up approximately 87 percent of all accounts. Therefore, 87 percent of the total Customer rate component allocable costs are assessed to single family customers and recovered through a monthly fixed charge.

Table 41 and Table 42 summarize the service units and the percentage allocations used to allocate fixed costs to each customer class.

Table 41 Customer Allocation ($ millions)
Allocation Basis Total Single Family Multi-Family CI&I Agricultural Irrigation Number of Accounts 28,317 24,521 1,284 1,707 12 793
Allocation (%) 100% 87% 5% 6% 0% 3%
Allocated Customer
Costs $3.22 $2.79 $0.15 $0.19 $0.00 $0.09
Notes:
(1) Line or column totals may not tie due to rounding.

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Table 42 Service Allocation ($ millions)
Allocation Basis Total Single Family Multi-Family CI&I Agricultural Irrigation Number of MEUs 46,424 28,141 5,482 8,445 173 4,183
Allocation (%) 100% 61% 12% 18% 0% 9%
Allocated Customer
Costs $4.20 $2.55 $0.50 $0.76 $0.02 $0.38
Notes:
(1) Line or column totals may not tie due to rounding.

4.7.3 Potable Water Customer Allocation Results
Table 43 summarizes the total revenue requirements allocated to each potable water customer class for FYE 2025. These allocated costs are subsequently used to determine the fixed delivery charges and volumetric rates for each customer class. Additional detail of the customer allocation analysis is included for reference in Appendix H.

Table 43 Potable Water Customer Allocation Summary, FYE 2025 ($ millions) Functional
Component Service Unit Single-
Family
Multi-
Family CI&I Agricultural Irrigation Private Fire
Customer Accounts $2.79 $0.15 $0.19 $0.00 $0.09 -
Base Annual
Usage (ccf) $2.06 $0.50 $0.77 $0.05 $0.43 -
Max Day Max Day
Usage (ccf) $1.16 $0.25 $0.44 $0.03 $0.30 -
Max Hour Max Hour
Usage (ccf) $1.10 $0.24 $0.41 $0.03 $0.28 -
Service MEUs $2.55 $0.50 $0.76 $0.02 $0.38 -
Fire MEUs - - - - - $0.31
Total $9.65 $1.63 $2.57 $0.13 $1.48 $0.31
Notes:
(1) Line or column totals may not tie due to rounding.

4.7.4 Functional Cost Allocation – Recycled

4.7.4.1 Functional Cost Categories – Recycled
The functional cost allocation for recycled water follows an approach similar to that laid out for potable water in the previous sections. The allocation assigns the revenue requirement for the test year by major function. The Study developed a list of functions specific to the District’s recycled water system. Each functional component is allocated to specific cost components, which can then be assigned to rates. The recycled water functional components used for the District are:

Customer Account Service: Costs for materials and outside services directly related to customer communication such as outreach, printing, and postage.

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Meters and Services: Costs associated with recycled water meters and service connections.

Administration: Costs related to the overall management and oversight of the recycled water system including legal costs, permitting and regulatory fees, studies, and other related items. This category also includes the costs that the recycled water utility pays to other City of Carlsbad departments for services that they provide such as customer billing and information technology services.

Distribution: Costs associated with delivering recycled water to customers including the operation and maintenance of the water distribution system facilities.

Supply: The costs that the District pays to purchase recycled water from Vallecitos Water District as well as the costs paid to the Encina Wastewater Authority for the operation of the CWRF.

Cross Connection Control: Costs related to the District’s cross-connection control program.

Engineering: Costs related to the District’s engineering activities.

4.7.4.2 O&M Expense Functionalization – Recycled
The District’s O&M expenses were functionalized into each of the above categories using the FY 202 5 budgeted operating expenses. Table 44 presents a summary of the O&M cost functionalization. A detailed table of the functionalization is included in Appendix G.

Table 44 Functionalized O&M Expenses - Recycled ($ millions) Functional Category Personnel Maintenance &
Equipment
Budget
Adjustments Total Allocated Resulting
Allocation
Customer Account Service $0.00 $0.01 $0.00 $0.01 0.1%
Meters And Services $0.05 $0.30 -$0.01 $0.34 3.8%
Admin $0.31 $0.69 -$0.02 $0.98 10.9%
Distribution $0.38 $1.22 -$0.03 $1.56 17.4%
Supply $0.00 $4.80 -$0.10 $4.70 52.6%
Cross Connection Control $0.43 $0.06 -$0.01 $0.48 5.3%
Engineering $0.65 $0.01 -$0.01 $0.65 7.3%
General $0.15 $0.09 -$0.01 $0.23 2.6%
Total O&M Expenses $1.96 $7.17 -$0.20 $8.94 100.0%
Notes:
(1) Line or column totals may not tie due to rounding.

4.7.5 Rate Component Allocation – Recycled
After O&M costs are functionalized, they can be allocated to rate components along with capital costs and other revenue requirement elements. These rate components are the foundation of the individual rates, with each component corresponding to individual or multiple rate components.

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The District’s rate components are used to allocate costs to the fixed monthly service charges and the volumetric rates. For recycled water, the volumetric components include base, and supply. Due to the relative homogeneity of the recycled water customer base a uniform volumetric charge is applied to all customers, thus the extra capacity components are not necessary in the recycled water allocation. The customer related rate components (customer, and service) are the basis of the fixed monthly service charges.

4.7.5.1 Rate Component Descriptions – Recycled
The following describes each of the cost components for the District.

Volumetric Components
Base: This category includes the District’s volumetric costs for delivering recycled water to customers.

Supply: This category includes the variable costs of purchasing recycled water from Vallecitos and the costs the District pays to the Encina Wastewater Authority for the operation of the CWRF.

Fixed Components
Service: Costs associated with customer meters and service lines and the associated capacity. These costs are included in the fixed charge based on the meter’s hydraulic capacity.

4.7.6 Allocation of Revenue Requirements to Cost Components – Recycled Functionalized O&M expenses and the other revenue requirement elements are allocated to the rate categories based on the how and why the costs are incurred, and the services provided to each rate payer by those activities. The O&M expenses and other revenue requirement elements are allocated to rate components as follows:

Customer Account Service: These costs are considered to be equal for all customers regardless of their water demands or the size of their water meters and are thus allocated to the customer rate component.

Administration: These costs are fixed in nature and are allocated to the service rate component.

Meters and Services: This category includes service costs that are common to all customers as well as costs that vary based on the size of each connection. Meters and services costs are split between the customer and service categories. Twenty-five percent of costs are allocated to customer and 75-percent of costs are allocated to service.

Distribution: Distribution costs are allocated to the base component.

Supply: These costs are common for all units of water sold and do not vary based on system peaking.

They are allocated to the supply rate component.

Cross Connection Control: Due to the regulatory requirements of providing recycled water service, the recycled water system has a more extensive cross connection control program than the potable system.

These costs are allocated 50-percent to the service component and 50-percent to base rate component.

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Engineering: The District’s engineering efforts include planning and managing capital projects as well as supporting operations. These costs are allocated across the rate components based on the allocation of the recycled water system’s fixed assets.

Capital Costs: Capital-related revenue requirements including replacement funding and transfers to the capital replacement reserve are allocated based on the recycled water system’s fixed assets. This reflects that the District, as well as most utilities, spend CIP typically in accordance with the current functionalization of the system. A summary of the allocation of fixed assets in shown in Table 36.

Offsetting Revenues and Operating Cash Flows: Offsetting revenues and cash flows are allocated based on the weighted average allocation of all other revenue requirements.

The allocation factors used in the recycled water functional allocation are outlined in Table 45.

Table 45 Functional Allocation Factors - Recycled
Allocation Factor Customer Service Base Supply
Customer Only 100%
Customer and Meter Service 20% 80%
Service Only 100%
Base Only 100%
Service and Base 50% 50%
Supply Only 100%
Plant In Service 25% 60% 15%
Notes:
(1) Line or column totals may not tie due to rounding.

Table 46 shows the allocation of recycled water fixed assets.

Table 46 Fixed Asset Allocation (Plant-in-Service) - Recycled ($ millions) Asset Class Replacement Value Service Base Supply
Mains $99.16 25.0% 75.0% 0.0%
Water Stations $11.94 25.0% 75.0% 0.0%
Water Facility $28.18 25.0% 0.0% 75.0%
Total Allocation $139.28 $34.82 $83.32 $21.14
Percentage Allocation 25.0% 59.8% 15.2%
Notes:
(1) Line or column totals may not tie due to rounding.

Table 47 shows the allocation of O&M costs to rate components and Table 48 shows the allocation of revenue requirements to rate components.

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Table 47 O&M Allocation to Rate Components – Recycled ($ millions) Operating Expenditures Customer Service Base Supply As All Others Total Customer Account Service $0.01 - - - - $0.01
Meters and Services $0.07 $0.27 - - - $0.34
Admin - $0.98 - - - $0.98
Distribution - - $1.56 - - $1.56
Supply - - - $4.70 - $4.70
Cross Connection Control - $0.24 $0.24 - - $0.48
Engineering - $0.16 $0.39 $0.10 - $0.65
General - - - - $0.23 $0.23
Operating Expenditures Subtotal $0.07 $1.65 $2.18 $4.80 $0.23 $8.94 Reallocation of "As All Others" $0.00 $0.04 $0.06 $0.13 ($0.23) - Total Allocation $0.08 $1.69 $2.24 $4.93 - $8.94
Notes:
(1) Line or column totals may not tie due to rounding.

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Table 48 Revenue Requirements Allocation to Rate Components – Recycled ($ millions) Rate Revenue Requirement Customer Service Base Supply As All Others Total Operating Expenses $0.08 $1.69 $2.24 $4.93 - $8.94
Debt - - $2.39 - - $2.39
Rate Funded Capital - - - - - -
Replacement Funding (Depreciation Funding) - - - - - -
Transfer to Capital Fund - - - - - -
Cash Flows - - - - ($0.96) ($0.96)
Less Offsetting Revenues - - - - ($0.64) ($0.64)
Total Rate Revenues to be Collected $0.08 $1.69 $4.63 $4.93 ($1.60) $9.72 Reallocation of "As All Others" ($0.01) ($0.24) ($0.65) ($0.70) $1.60 - Total Allocation $0.06 $1.45 $3.97 $4.23 - $9.72
Notes:
(1) Line or column totals may not tie due to rounding.

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4.7.7 Functional Allocation Results – Recycled
Once each revenue requirement element is allocated, a combined allocation of the District’s expenses is used as the basis for allocating rate revenue requirements to each functional category and subsequently to each customer class. The functional allocation also defines the split between costs recovered through fixed rate components and those recovered through variable rate components.

4.7.7.1 Recycled Water Functional Allocation Results
The results of the recycled water functional allocation analysis are shown in Table 49. The Service and Customer components are collected through fixed rate components and total approximately 1 5.4 percent of the District's potable costs. These costs are recovered through the monthly delivery fee. The recycled water usage fees recover the remaining 84.6 percent of costs, which are allocated to the Base and Supply components.

Table 49 Functional Allocation Results Summary – Recycled ($ millions) Allocation Basis Revenue Requirement
($ millions)
Percent of Total Functional Allocation
Customer $.06 0.7%
Service $1.45 15.0%
Base $3.97 40.9%
Supply $4.23 43.5%
Total Revenue Requirements $9.72 100.0%
Notes:
(1) Line or column totals may not tie due to rounding.

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SECTION 5 RATE DESIGN ANALYSIS
The rate design analysis links the cost allocated to each customer class with the projected demand for each class. The resulting rates from this analysis must fully recover costs. Additionally, the analysis should demonstrate that each customer class is paying their fair and proportionate share of system costs.

5.1 Rate Structure Objectives and Goals
With costs equitably allocated to each customer class, as outlined in Section 4, the District has some flexibility in designing a rate structure that meets its policy and fiscal objectives. In determining the appropriate rates and rate structures, the District considered various rate design alternatives and the resulting impacts to both the District and its customers. Carollo utilized multiple criteria in judging each rate structure.

1. Clear and understandable.

2. Easily administered.

3. Follows cost-of-service principles.

4. Provides revenue stability.

5. Provides affordability.

6. Complies with legal and regulatory requirements.

Given the numerous and competing elements of rate design, selection of an appropriate rate structure is complex. There is no single structure that meets all objectives equally. The rate recommendations presented within this report proportionally recover costs from system users, help to stabilize annual rate revenues, and are easy to both administer and understand by the District's customers as they provide consistency with the existing rate structure. The following sections summarize the calculations and methodologies used to develop the proposed rates.

5.2 Potable Water Delivery Fees
Delivery charges are intended to recover the District's fixed operating costs. The proposed delivery charges are a combination of the Customer and Service functional components. Separate delivery charges were developed for recycled customers to reflect the specific costs of the recycled water system.

To determine the delivery charge, the meter unit cost is multiplied by the meter capacity ratios previously developed by the District to calculate the meter Service cost. These ratios are based on ratios identified in the AWWA M6 Manual 'Water Meters – Selection, Installation, Testing, and Maintenance' and represent the types of meters used by the District. The ratios are calculated using the average of maximum flow for meters of each size.

The service cost is then added to the customer cost to calculate the cost based fixed charges. Table 50 presents the results of this calculation for FYE 2025.

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The proposed revenue adjustments, as a percentage, do not equal or necessarily correlate to an equivalent percentage increase to rates or monthly bills. The results of the cost -of-service analysis and rate design will affect users differently based on their meter size and water consumptions habits. Since calculated SCDWA costs are fully passed through, the proposed revenue adjustments only pertain to the rates recovering internal Carlsbad costs.

Table 50 Fixed Unit Costs – Potable
Monthly Fixed Charges Customer Service
Allocated Fixed Revenue Requirements $3,219,000 $4,200,098 Accounts MEU
Customer Units 28,317 46,424
Per Account Per MEU
Monthly Unit Charges $9.47 $7.54
Table 51 shows the calculation of the monthly water delivery fees for each meter size for FYE 2025.

Table 51 Proposed Monthly Water Delivery Fees – Potable Meter Size Meter Equivalent Ratio Customer Component Service Component Total Fixed Charge 5/8" 1.00 $9.47 $7.54 $17.02
3/4" 1.50 $9.47 $11.31 $20.79
1" 2.50 $9.47 $18.85 $28.33

1.5" 5.00 $9.47 $37.70 $47.17
2" 8.00 $9.47 $60.31 $69.79
2 1/2" 11.50 $9.47 $86.70 $96.18
3" 15.00 $9.47 $113.09 $122.57
4" 25.00 $9.47 $188.48 $197.96
6" 50.00 $9.47 $376.97 $386.45
8" 80.00 $9.47 $603.15 $612.63
10" 115.00 $9.47 $867.03 $876.50
Notes:
(1) Line or column totals may not tie due to rounding.

Table 52 summarizes the proposed fixed charges for customers with private fire line service. The service connection size is the basis of the charge for customers that have fire line service. The size of the connection determines the flow capacity, or quantity of water that can be drawn from the District's system in the event of a fire. Service connection size can be measured either by consumption meter size or by service line size. In cases where an installed meter restricts the capacity of the connection and measur es total water consumption, the charges will be based on the meter size. For fire lines that have a meter that is in place only to inform the District when water is drawn through the pipe and does not restrict water flows, the charge will be based on the service line size. Setting charges based on service connection size ensures legal compliance and ratepayer equity.

This Study updated the capacity ratio basis for fire lines, in accordance with AWWA best practices. The proposed monthly water delivery fees are calculated using the capacity ratio formula presented in AWWA Chapter 4.8, which raises the fire line diameter to 2.63 power. For example, the capacity ratio for a 1.5-inch fire line is equal to 1.5^2.63, which is 2.90.

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The total allocated revenue requirements for private fire protection are split between an amount to be collected on a per account basis and an amount to be collected on a fire line capacity unit basis. The split between these components is based on the detailed cost allocation. Line items that include a private fire service allocation that are customer related are allocated to the account charge, those that are allocated to the service component are collected via the capacity unit component of the charge.

Table 52 Proposed Fixed Unit Costs – Fire
Item Amount
Allocated 2025 Revenue Requirement $312,943
Percent Recovered Through Account Charges 40%
Number of Accounts 1,116
Monthly Fixed Charge Per Account $9.33
Recovered through Unit Charges 60%
Effective Number of Fire line Capacity Units 124,089
Monthly Fixed Charge Per MEU $0.13
Notes:
(1) Line or column totals may not tie due to rounding.

Table 53 Proposed Monthly Water Delivery Fees – Fire
Meter Size Fireline Capacity
Ratio
Customer Component Service Component Total Fixed Charge 5/8" 0.29 $9.33 $0.04 $9.37
3/4" 0.47 $9.33 $0.06 $9.39
1" 1.00 $9.33 $0.13 $9.46

1.5" 2.90 $9.33 $0.37 $9.70
2" 6.19 $9.33 $0.78 $10.11
2 1/2" 11.13 $9.33 $1.41 $10.74
3" 17.98 $9.33 $2.27 $11.60
4" 38.32 $9.33 $4.84 $14.17
6" 111.31 $9.33 $14.06 $23.39
8" 237.21 $9.33 $29.96 $39.29
10" 426.58 $9.33 $53.87 $63.20
12” 689.04 $9.33 $87.02 $96.35
Notes:
(1) Line or column totals may not tie due to rounding.

5.3 Potable Water Usage Fees
The District’s rate structure uses tiered rates and uniform rates to accurately and proportionally recover costs from water customers. Tiered rates are most effective for customer classes with individual users that are relatively consistent in use type and/or account characteristics. For example, the characteristics and demand patterns of single-family residential users are relatively consistent and can be analyzed to establish tiered rate structures. Conversely the account characteristics and demand patterns for non- residential users vary more widely based on the specific type of business or entity receiving service and the size of that entity, among other factors. This variability makes it difficult to establish tiered rate Feb. 11, 2025
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structures that appropriately distribute costs to non-residential users without the development of more complex rate structures or individualized water budgets.

Based on the above concerns, the District’s tiered customers include single-family and multi-family residential classes, referred to collectively as residential customers. All other customer classes are billed a class specific uniform rate, regardless of usage.

5.3.1 Residential Rates
The current rates for single-family customers utilize a three-tiered inclining block structure and multi- family utilize a two-tier structure. Tier allotments are based on the water needs for each customer and on the actual usage patterns observed in the customer billing data. Water usage in the highest tier reflects excess use and places greater pressure on the system. Since the development of the current rate structure , single family customers have conserved considerably and no longer peak the system as si gnificantly as they did in the past. The restructuring of the rates to recover SDCWA costs using the pass -through charge also led to updating the allocation of variable desalination costs to base, previously those costs helped to support the incremental charges for the upper tiers. To address those changes, this Study proposes a two- tiered inclining block structure for all residential customers. The incrementally higher rate for tier 2 reflects the increased max day and max hour costs for tier 2 usage, as evidenced by the higher peak factors calculated for tier 2 as compared to tier 1. Usage allotments for each tier would continue to be constant throughout the course of the year.

5.3.1.1 Single-Family Rate Design
The single-family residential tiered rates provide a strong relationship between the District's cost of providing the water service and each customer's payment for that service. The tiered rates built from the functional allocation presented in Table 35 and are structured to recover Base, Max Day, and Max Hour cost. Based on an analysis of customer billing data and the changes to SDCWA cost recovery, Carollo proposes changing the single-family rate tier break structure from three to two tiers throughout the five- year rate analysis period.

Table 54 Proposed Single-Family Residential Tier Allotments Customer Class Tier Allotment
Single-Family Residential Tier 1 10 ccf
Tier 2 > 10 ccf
The Tier 1 allotment of 10 ccf corresponds roughly to the median monthly consumption for single -family customers and falls just below the average monthly use of 11 ccf. This level of consumption is considered to be efficient for indoor usage and places a lower burden on the system’s infrastructure and operational costs due to lower peak demands. The Tier 2 rate will be applied to all usage above the Tier 1 limit. This level of usage places an incrementally higher burden on the system than tier 1 and is therefore responsible for a greater share of peaking related costs. Usage above 10 ccf per month places the greatest burden on the system due to the highest peaking and thus pays the highest rate.

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Single-family tiered rates are calculated by allocating the rate component costs that were allocated to the single-family customer class to each tier, then dividing the total costs allocated to each tier by the projected consumption in each tier. The cost allocations are developed based on the demands and extra capacity needs of each tier, as determined by an evaluation of the District’s billing data and the overall system demand characteristics discussed previously.

Base costs are allocated to each tier in proportion to water use in each tier as they are the same for all units of water regardless of peaking. Max Day and Max Hour costs are allocated to each tier based on the Max Day and Max Hour extra capacity of each tier, respectively. Billing data for single family customers was evaluated on a per-tier basis to determine each tier’s extra capacity. A detailed summary of that evaluation is included in Appendix F. Percentage allocations for Base, Max Day, and Max Hour costs are calculated for each component proportional to each tier’s share of demands, Max Day, and Max Hour, as shown in Table 55.

Table 55 Single-Family Rate Design – Base, Max Day, Max Hour Tier FYE 2025 Demand Max Day Extra Capacity Max Hour Extra Capacity ccf Base Alloc. mgd Alloc. mgd Alloc.

Tier 1 2,248,418 66.9% 3.14 49.6% 8.17 62.9%
Tier 2 1,112,816 33.1% 3.20 50.4% 4.83 37.1%
Total 3,361,234 100% 6.34 100% 13.00 100%
Notes:
(1) Line or column totals may not tie due to rounding.

Using the percentage allocations calculated in Table 55, the total revenue requirement for each functional component is assigned to Tiers 1 and 2. Rates are calculated by dividing the total costs allocated to each tier by that tier’s corresponding usage. The resulting proposed FYE 2025 single-family water usage fees are presented in Table 56. Rates for each tier are calculated by dividing the total revenue requirements for each tier by the projected demands within each tier.

Table 56 Single-Family Rate Design Summary, FYE 2025
Functional Component FYE 2025 Revenue
Requirement
($ millions)
Tier 1 Tier 2
Base $2.06 $1.38 $0.68
Max Day $1.16 $0.58 $0.59
Max Hour $1.10 $0.69 $0.41
Total Requirements $4.32 $2.65 $1.68
FYE 2025 Demand (ccf) 2,248,418 1,112,816
Calculated FYE 2025 Carlsbad Rate $1.18/ccf $1.51/ccf
Proposed FYE 2025 SDCWA Rate $4.01/ccf $4.01/ccf
Proposed FYE 2025 Total Rate $5.19/ccf $5.52/ccf
Notes:
(1) Line or column totals may not tie due to rounding.

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5.3.1.2 Multi-Family Rate Design
The multi-family residential tiered rates provide a strong relationship between the District's cost of providing the water service and the customer's payment for that service. The tiered rates build from the functional allocation presented in Table 43 are structured to recover Base, Max Day, and Max Hour costs, which are costs related to internal expenditures. Carollo does not propose any changes to the current multi-family rate tier break structure during the five-year rate analysis period.

Multi-family customers do not have yards and homeowners’ associations maintain separate meters for irrigation. On average each multi-family dwelling unit (DU) uses less water than an average single-family customer. Therefore, the tier per DU allotments for multi-family customers are lower than per account allotments of the single-family class.

This Study recommends maintaining the two-tier structure for multi-family customers. Tier 1 allotment per dwelling unit remains at 5 ccf, which ties closely to average minimum month use per dwelling unit. Any usage above 5 ccf will be charged the multi-family Tier 2 rate.

Table 57 Proposed Multi-Family Residential Tier Allotments Customer Class Tier Allotment per
Dwelling Unit
Multi-Family Residential (per DU) Tier 1 5 ccf
Tier 2 > 5 ccf
Notes:
(1) Line or column totals may not tie due to rounding.

Multi-family tiered rates are calculated by allocating the rate component costs that were allocated to the multi-family customer class to each tier, then dividing the total costs allocated to each tier by the projected consumption in each tier. The cost allocations are developed based on the demands and extra capacity needs of each tier, as determined by an evaluation of the District’s billing data.

Base costs are allocated to each tier in proportion to the water use in each tier as they are the same for all units of water regardless of peaking. Max Day and Max Hour costs are allocated to each tier based on the Max Day and Max Hour extra capacity of each tier, respectively. Billing data for multi-family customers was evaluated on a per-tier basis to determine each tier’s extra capacity. A detailed summary of that evaluation is included in Appendix F. Percentage allocations for Base, Max Day, and Max Ho ur costs are calculated for each component proportional to each tier’s share of demands, Max Day, and Max Hour, as shown in Table 58.

Table 58 Multi-Family Rate Design – Base, Max Day, Max Hour Tier FYE 2025 Demand Max Day Extra Capacity Max Hour Extra Capacity ccf Base Alloc. mgd Alloc. mgd Alloc.

Tier 1 642,996 78.6% 0.84 70.0% 2.31 77.0%
Tier 2 174,641 21.4% 0.36 30.0% 0.69 23.0%
Total 817,637 100% 1.20 100% 3.00 100%
Note:
(1) Line or column totals may not tie due to rounding.

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Using the percent allocations calculated in Table 58, the total revenue requirement for each functional component is divided between Tiers 1 and 2. The resulting proposed FYE 2025 multi-family water usage fees are presented in Table 59. Rates for each tier are calculated by dividing the total revenue requirements for each tier by the projected demands within each tier.

Table 59 Multi-Family Rate Design Summary, FYE 2025
Functional Component FYE 2025 Revenue
Requirement ($ millions)
Tier 1
($/ccf)
Tier 2
($/ccf)
Base $0.50 $0.39 $0.11
Max Day $0.25 $0.18 $0.08
Max Hour $0.24 $0.18 $0.05
Total Requirements $0.99 $0.75 $0.24
FYE 2025 Demand (ccf) 642,996 174,641
Proposed FYE 2025 Carlsbad Rate $1.18/ccf $1.36/ccf
Proposed FYE 2025 SDCWA Rate $4.01/ccf $4.01/ccf
Proposed FYE 2025 Total Rate $5.19/ccf $5.37/ccf
Notes:
(1) Line or column totals may not tie due to rounding.

5.3.2 CI&I, Agricultural, and Irrigation Rate Design
The water usage fee for the remaining customer classes are uniform rates charged for each ccf of consumption. Rates are calculated for each customer class by dividing each class’s allocated share of variable revenue requirements by its projected consumption. A summary of the rate calculation for CI&I, Agricultural, and Irrigation customers is shown in Table 60.

Table 60 CI&I, Agricultural, and Irrigation Rate Design Summary, FYE 2025 Customer
Class
Base
($
millions)
Max Day
($ millions
Max Hour
($
millions)
Total Costs
to Recover
($ millions)
Projected
Demand (ccf)
Carlsbad
Rate
($/ccf)
SDCWA
Rate ($/ccf)
Total Rate
($/ccf)
CI&I $0.77 $0.44 $0.41 $1.62 1,252,320 $1.30 $4.01 $5.31 Agricultural $0.05 $0.03 $0.03 $0.11 81,534 $1.40 $4.01 $5.41 Irrigation $0.43 $0.30 $0.28 $1.01 702,011 $1.44 $4.01 $5.45 Notes:
(1) Line or column totals may not tie due to rounding.

5.4 Recycled Water Rates

5.4.1 Recycled Water Delivery Charges
Recycled water delivery charges are calculated using the same methodology as the potable water delivery charges discussed previously, but with the revenue requirements and customer units of the recycled water system. Table 61 shows the recycled water unit costs per account and per MEU.

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Table 61 Fixed Unit Costs – Recycled
Monthly Fixed Charges Customer Service
Allocated Fixed Revenue Requirements $64,681 $1,454,174 Accounts MEU
Customer Units 978 5,543
Per Account Per MEU
Monthly Unit Charges $5.51 $21.86
Table 62 shows the calculation of recycled water delivery charges for FYE 2025.

Table 62 Proposed Monthly Water Delivery Fees – Recycled Meter Size Meter Equivalent Ratio Customer Component Service Component Total Fixed Charge 5/8" 1.00 $5.51 $21.86 $27.37
3/4" 1.50 $5.51 $32.79 $38.30
1" 2.50 $5.51 $54.65 $60.16

1.5" 5.00 $5.51 $109.30 $114.81
2" 8.00 $5.51 $174.88 $180.39
2 1/2" 11.50 $5.51 $251.39 $256.91
3" 15.00 $5.51 $327.90 $333.42
4" 25.00 $5.51 $546.50 $552.02
6" 50.00 $5.51 $1,093.01 $1,098.52
8" 80.00 $5.51 $1,748.81 $1,754.33
10" 115.00 $5.51 $2,513.92 $2,519.43

5.4.2 Recycled Water Usage Rates
Recycled water usage rates are calculated by dividing the total variable revenue requirements by the projected recycled water demands. Table 63 shows the calculation of the recycled water usage rate for FYE 2025.

Table 63 Recycled Water Usage Rate Design Summary, FYE 2025 Customer Class Base
($ millions)
Supply
($ millions)
Total Costs to
Recover
($ millions)
Projected Demand
(ccf) Rate ($/ccf)
Recycled $3.97 $4.23 $8.20 1,852,895 $4.43

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5.5 Proposed Potable Water Rates
Tables 64 through Table 67 present proposed potable water rates for the next three years. As discussed previously, the implementation of the rates initially calculated for January 1, 2025 will be delayed until July 1, 2025. Proposed rates for July 1, 2025 reflect the calculated overall revenue requirement increases as well as a cost-of-service adjustment to reflect the updated rate structure and cost allocations. As such, the percentage increase in each individual rate will vary in the first year.

5.5.1 Water Delivery Fees
Table 64 Proposed Carlsbad Potable Water Delivery Fees
Meter Size
FYE 2025
Proposed
Delayed to Jul. 1, 2025
FYE 2026
Proposed
Jan. 1, 2026
FYE 2027
Proposed
Jan. 1, 2027
CMWD Increase 10.91% with COS Adjustment 10.00% 10.00%
5/8" $17.02 $18.72 $20.59
3/4" $20.79 $22.87 $25.15
1" $28.33 $31.16 $34.27

1.5" $47.17 $51.89 $57.08
2" $69.79 $76.77 $84.45
2 1/2" $96.18 $105.80 $116.38
3" $122.57 $134.82 $148.31
4" $197.96 $217.76 $239.53
6" $386.45 $425.09 $467.60
8" $612.63 $673.89 $741.28
10" $876.50 $964.15 $1,060.57
Table 65 Calculated SDCWA Pass-Through Fees
Meter Size
FYE 2025
Proposed
Delayed to Jul. 1, 2025
FYE 2026
Proposed
Jan. 1, 2026
FYE 2027
Proposed
Jan. 1, 2027
5/8" $16.66 $19.17 $19.99
3/4" $22.77 $26.15 $27.27
1" $37.66 $43.24 $45.08

1.5" $74.43 $85.44 $89.08
2" $120.85 $138.78 $144.69
2 1/2" $173.39 $199.10 $207.58
3" $225.93 $259.43 $270.48
4" $378.31 $434.45 $452.96
6" $744.26 $854.35 $890.74
8" $1,208.47 $1,387.74 $1,446.86
10" $1,751.52 $2,011.75 $2,097.48
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Table 66 Proposed Total Potable Water Delivery Fees
Meter Size Current
FYE 2025
Proposed
Delayed to Jul. 1, 2025
FYE 2026
Proposed
Jan. 1, 2026
FYE 2027
Proposed
Jan. 1, 2027
5/8" $28.94 $33.68 $37.89 $40.58
3/4" $38.84 $43.56 $49.02 $52.42
1" $58.65 $65.99 $74.40 $79.35

1.5" $108.17 $121.60 $137.33 $146.16
2" $167.60 $190.64 $215.55 $229.14
2 1/2" $236.93 $269.57 $304.90 $323.96
3" $306.26 $348.50 $394.25 $418.79
4" $504.35 $576.27 $652.21 $692.49
6" $999.57 $1,130.71 $1,279.44 $1,358.34
8" $1,593.84 $1,821.10 $2,061.63 $2,188.14
10" $2,287.15 $2,628.02 $2,975.90 $3,158.05

5.5.2 Water Usage Fees
Table 67 Proposed Potable Water Usage Fees
Customer Class Tier Current
($/ccf)
FYE 2025
Proposed
Delayed to Jul. 1, 2025
FYE 2026
Proposed
Jan. 1, 2026
FYE 2027
Proposed
Jan. 1, 2027
SDCWA Pass-
Through All $4.01 $4.62 $4.81

CMWD Increase 10.91% with COS
Adjustment 10.00% 10.00%
Single Family
Residential
Tier 1 $4.00 $1.18 $1.30 $1.43
Tier 2 $4.97 $1.51 $1.67 $1.83
Tier 3 $7.69 n/a n/a n/a
Multi-Family
Residential
Tier 1 $3.95 $1.18 $1.29 $1.42
Tier 2 $6.13 $1.36 $1.50 $1.65
CI&I n/a $4.52 $1.30 $1.42 $1.57
Agricultural n/a $4.89 $1.40 $1.54 $1.69
Irrigation n/a $5.69 $1.44 $1.58 $1.74
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POTABLE AND RECYCLED WATER COST-OF-SERVICE STUDY 64
Customer Class Tier Current
($/ccf)
FYE 2025
Proposed
Delayed to Jul. 1, 2025
FYE 2026
Proposed
Jan. 1, 2026
FYE 2027
Proposed
Jan. 1, 2027
Total Water Usage Fees
Single Family
Residential
Tier 1 $4.00 $5.19 $5.92 $6.24
Tier 2 $4.97 $5.52 $6.29 $6.64
Tier 3 $7.69 n/a n/a n/a
Multi-Family
Residential
Tier 1 $3.95 $5.19 $5.91 $6.23
Tier 2 $6.13 $5.37 $6.12 $6.46
CI&I n/a $4.52 $5.31 $6.04 $6.38
Agricultural n/a $4.89 $5.41 $6.16 $6.50
Irrigation n/a $5.69 $5.45 $6.20 $6.55

5.6 Proposed Recycled Water Rates
Table 68 and Table 69 present the current and proposed recycled water rates for the next three years, as well as projected rates for FYE 2028 and FYE 2029.

Table 68 Proposed Recycled Water Delivery Fees
Meter Size Current
FYE 2025
Proposed
Delayed to Jul. 1, 2025
FYE 2026
Proposed
Jan. 1, 2026
FYE 2027
Proposed
Jan. 1, 2027
Increase -- 4.50% with COS
Adjustment 4.50% 4.50%
5/8" $25.36 $27.37 $28.61 $29.89
3/4" $35.54 $38.30 $40.03 $41.83
1" $55.91 $60.16 $62.87 $65.70

1.5" $106.81 $114.81 $119.98 $125.38
2" $167.90 $180.39 $188.51 $197.00
2 1/2" $239.17 $256.91 $268.47 $280.55
3" $310.44 $333.42 $348.42 $364.10
4" $514.07 $552.02 $576.86 $602.82
6" $1,023.14 $1,098.52 $1,147.95 $1,199.61
8" $1,634.02 $1,754.33 $1,833.27 $1,915.77
10" $2,346.71 $2,519.43 $2,632.80 $2,751.28
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2025 POTABLE AND RECYCLED WATER COST OF SERVICE STUDY
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POTABLE AND RECYCLED WATER COST-OF-SERVICE STUDY 65
Table 69 Proposed Recycled Water Usage Fees
Customer Class Current
($/ccf)
FYE 2025
Proposed
Delayed to Jul. 1, 2025
FYE 2026
Proposed
Jan. 1, 2026
FYE 2027
Proposed
Jan. 1, 2027
Increase -- 4.50% with COS
Adjustment 4.50% 4.50%
Recycled $4.26 $4.43 $4.63 $4.84

5.7 Proposed Fire Service Rates
Table 70 presents the current and adopted fire service delivery fee rates over the next three years, as well as projected rates for FYE 2028 and FYE 2029.

Table 70 Proposed Fire Service Delivery Fees
Meter Size Current
FYE 2025
Proposed
Delayed to Jul. 1, 2025
FYE 2026
Proposed
Jan. 1, 2026
FYE 2027
Proposed
Jan. 1, 2027
Effective Increase -- 4.5% with COS
Adjustment 10.00% 10.00%
5/8" $8.67 $9.37 $10.31 $11.34
3/4" $8.79 $9.39 $10.33 $11.36
1" $9.02 $9.46 $10.40 $11.44

1.5" $9.62 $9.70 $10.67 $11.74
2" $10.33 $10.11 $11.13 $12.24
2 1/2" $11.15 $10.74 $11.81 $12.99
3" $11.98 $11.60 $12.76 $14.04
4" $14.35 $14.17 $15.59 $17.15
6" $20.26 $23.39 $25.73 $28.30
8" $27.36 $39.29 $43.22 $47.54
10" $35.65 $63.20 $69.52 $76.47
12" $55.76 $96.35 $105.98 $116.58

5.8 Airport Capital Charges
The District owns and operates distribution and fire protection infrastructure that is in place exclusively to serve the McClellan-Palomar Airport (Airport). The operation, maintenance, and eventual replacement of the Airport system is undertaken by the District as a service to the San Diego County Department of Public Works. Because the assets servicing the airport are incremental to the District’s greater system, the cost to replace those assets should be recovered exclusively from Airport customers. This section outlines the calculation of proposed Airport capital charges based on the expected capital improvements needed at the airport over the next 25-years and the number and size of airport service meter and fire line service connections served by the airport system.

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POTABLE AND RECYCLED WATER COST-OF-SERVICE STUDY 66
Revenues collected through the Airport capital charges have been projected based on the analysis discussed below and are included in the “Non-Rate Charges For Services” line in Table 7. Revenues from the Airport capital charges could be held aside to be spent specifically on airport projects. Alternatively , they can be treated as offsetting revenues with the understanding that once Airport projects need to be completed they will be funded along with the District’s other CIP projects recognizing that the District will have been previously compensated through the capital charges.

5.8.1 Airport System Capital Costs
The District maintains records of the Airport assets, the replacement cost associated with each asset, and the estimated timing of those replacements. As shown in Table 71 the total value of the Airport assets is $6.81 million (2023 dollars). However, only a portion of the assets are expected to be replaced over the evaluation period resulting in escalated capital requirements of $2.40 million over the next 25 years.

Table 71 Airport Assets and Capital Needs (Millions)
Asset Type Replacement Cost
(2023 dollars)
Capital Required over the Next
25 Years (Escalated)
Hydrants $1.18 $0.80
Valves $0.45 $0.29
Blow Off $0.19 $0.13
Air Vacuum Assembly $0.06 $0.03
Water Main $4.93 $1.15
Total Airport Specific Assets $6.81 $2.40
Notes:
(1) Line or column totals may not tie due to rounding.

The annual cost of projected capital replacements varies year-to-year and would therefore cause significant charge volatility if passed directly to the Airport customers. The proposed capital charges will be based on an increasing annual payment structure designed to generate the total capital needs, $2.40 million, over a 25-year period assuming annual increases of 3.5-percent. Table 72 shows the calculated total annual Airport capital charge in 2023 dollars, $61,506. The projected total charge for future years is calculated by applying the 3.5-percent per year charge growth rate, as shown in Table 73.

The total charge for each year serves as the basis for calculating charges per service meter or fire line connection discussed in the next section.

Table 72 Annual Airport Capital Charge Calculation
Calculation Item Value
Capital Required over the Next 25 Years (Escalated) (millions) FV $2.40 Annual Payment Increase (growth) g 3.50%
Interest Rate r 0.00%
Number of Years n 25
Annual Total Airport Charge (2023 Dollars) P $61,506
𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸: 𝑃𝑃 =
𝐹𝐹𝐹𝐹
((1+𝑟𝑟)𝑛𝑛−(1+𝑔𝑔)𝑛𝑛) ( 𝑟𝑟−𝑔𝑔)⁄
Notes:
(1) Line or column totals may not tie due to rounding.

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CARLSBAD MUNICIPAL WATER DISTRICT
POTABLE AND RECYCLED WATER COST-OF-SERVICE STUDY 67
Table 73 Projected Annual Airport Capital Charges
Year Total Airport Charge
FYE 2025 Annual Charge
(includes 2-years of escalation at 3.5% applied to the 2023 value) $65,887 FYE 2026 $68,193
FYE 2027 $70,580
FYE 2028 $73,050
FYE 2029 $75,607

5.8.2 Monthly Airport Capital Charge Calculations
The Airport system serves meters for offices, restaurants, hospitality, and other general facilities (referred to as service meters) as well as larger capacity fire line connections for fire suppression water in the above-mentioned areas as well as in hangers, fueling areas, maintenance areas and other facilities.

Table 74 shows the number of service meters, by size, as well as the number of MEUs.

Table 74 Airport Service Meters
Meter Size MEU Ratio Connections MEUs
5/8" 1 1 1
3/4" 1.5 1 1.5
1" 2.5 8 20

1.5" 5 4 20
2" 8 5 40
Total Service Meters 19 82.5
Table 75 shows the fire line connections, by size, as well as the number fire capacity units. As discussed in Section 5.2, fire capacity units are determined by raising the line size in inches to the 2.63 power.

Table 75 Airport Fire Line Connections
Fire line Size Capacity Factor Connections Capacity Units 4" 38.32 1 38
6" 111.31 4 445
8" 237.21 6 1,423
Total Fire lines 11 1,907
Notes:
(1) Line or column totals may not tie due to rounding.

The total Airport capital charge to be collected is allocated between service meter connections and fire line connections to reflect the capacity needs of each type of service. The allocation is based on estimated flow requirements as shown in Table 76. Flow for service meters is calculated assuming 20 gpm per MEU, resulting in total service meter capacity requirements of 1,650 gpm. Fire flow requirements are assumed at 4,000 gpm based on the fire flow assumption used in the District’s master plan. These flow capacities result in a capital charge cost allocation of 29.2-percent for service meters and 70.8-percent for fire line connections.

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CARLSBAD MUNICIPAL WATER DISTRICT
POTABLE AND RECYCLED WATER COST-OF-SERVICE STUDY 68
Table 76 Airport System Capacity Allocation
Service Section Capacity (gpm) Share of Capacity
Service Meters Flow Capacity (20 gpm per MEU) 1650 29.2% Fire Flow Requirements (gpm) 4000 70.8%
Total Flow Capacity Required (gpm) 5650 100%
Notes:
(1) Line or column totals may not tie due to rounding.

Table 77 shows the calculation of the Airport capital charge for service meters. The charge is calculated using the following steps:

First, the service meters’ share of the total annual charge is calculated by applying the service meters share of capacity, 29.2-percent to the total annual charges from Table 73. Next, a unit cost per MEU is determined by dividing the service meters’ share of the total annual charges by the number of service meter MEUs and dividing by 12 to reflect a monthly amount. Lastly, the monthly charge per MEU is multiplied by the MEU ratio for each meter size to determine a monthly charge by meter size.

Table 77 Monthly Airport Capital Charge - Service Meters FYE 2025 FYE 2026 FYE 2027
Service Meters Share of Total Charge 29.2% $19,241 $19,915 $20,612 Service Meter MEUs 82.5 82.5 82.5
Monthly Charge Per MEU $19.44 $20.12 $20.82
Meter Size MEU Ratio
FYE 2025
Proposed
Delayed to Jul. 1
2025
FYE 2026
Proposed
Jan. 1 2026
FYE 2027
Proposed
Jan. 1 2027
5/8" 1 $19.44 $20.12 $20.82
3/4" 1.5 $29.15 $30.17 $31.23
1" 2.5 $48.59 $50.29 $52.05

1.5" 5 $97.18 $100.58 $104.10
2" 8 $155.49 $160.93 $166.56
Notes:
(1) Line or column totals may not tie due to rounding.

Table 78 shows the calculation of the Airport capital charge for fire line connections. The charge is calculated using the following steps:

First, the fire line connections’ share of the total annual charge is calculated by applying the fire line share of capacity, 70.8-percent to the total annual charges from Table 73. Next, a unit cost per capacity unit is determined by dividing the fire line connections’ share of the total annual charges by the number of fire line capacity units and dividing by 12 to reflect a monthly amount. Last, the monthly charge per capacity unit is multiplied by the capacity factor for each connection size to determine a monthly charge by fire line connection size.

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POTABLE AND RECYCLED WATER COST-OF-SERVICE STUDY 69
Table 78 Monthly Airport Capital Charge – Fire Line Connections FYE 2025 FYE 2026 FYE 2027
Fire Connections Share of Total Charge 70.8% $46,646 $48,278 $49,968 Fire line Capacity Units 1907 1907 1907
Monthly Charge per Fire line Capacity Unit $2.04 $2.11 $2.18 Line Size Capacity Factor
FYE 2025
Proposed
Delayed to Jul. 1
2025
FYE 2026
Proposed
Jan. 1 2026
FYE 2027
Proposed
Jan. 1 2027
4" 38.32 $78.12 $80.85 $83.68
6" 111.31 $226.91 $234.86 $243.08
8" 237.21 $483.56 $500.48 $518.00
Notes:
(1) Line or column totals may not tie due to rounding.

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2025 POTABLE AND RECYCLED WATER RATE STUDY
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POTABLE AND RECYCLED WATER COST-OF-SERVICE STUDY

APPENDIX A CUSTOMER AND DEMAND FORECASTS
Feb. 11, 2025
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CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Customer Data - Demand Projection
Adjustment to Potable Sales Based on Priceout Check -0.37% SFR Growth Input 0.90% 0.88% 0.65% 0.22% 0.24% 0.86% 0.95% SINGLE FAMILY FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 TOTAL 3,310,144 3,339,402 3,361,234 3,368,511 3,376,457 3,405,566 3,437,943 MFR Growth Input 0.90% 0.88% 0.65% 0.22% 0.24% 0.86% 0.95% MULTI FAMILY FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 TOTAL 805,209 812,326 817,637 819,407 821,340 828,421 836,297 Commercial/Other Growth Input 0.61% 0.12% 0.46% 0.25% 1.05% 1.40% 1.26% COMM/OTHER FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 TOTAL 1,245,118 1,246,631 1,252,320 1,255,392 1,268,512 1,286,310 1,302,463 Ag Growth Input 0.90% 0.88% 0.65% 0.22% 0.24% 0.86% 0.95% AGRICULTURAL FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 TOTAL 80,295 81,005 81,534 81,711 81,903 82,610 83,395 Irr Growth Input 0.90% 0.88% 0.65% 0.22% 0.24% 0.86% 0.95% IRRIGATION FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 TOTAL 691,340 697,451 702,011 703,531 705,190 711,270 718,032 Carlsbad Potable & Recycled Water Financial Model DRAFT REPORT 1-24-2025.xlsm Customer Data - Appendix G Page 1 of 2
Feb. 11, 2025
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CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Customer Data - Demand Projection
RW Price Out Adjustment 1.13%
RW Growth Input 0.90% 0.88% 0.65% 0.22% 0.24% 0.86% 0.95% RECYCLED WATER FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 TOTAL 1,824,731 1,840,860 1,852,895 1,856,907 1,861,287 1,877,333 1,895,181 AF 4,226.03 4,253.66 4,262.87 4,272.93 4,309.76 4,350.74 Conversion: 1 AF = 436 ccf
TOTAL
POTABLE WATER (AF) FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 SFR 7,599 7,666 7,716 7,733 7,751 7,818 7,892
MFR 1,849 1,865 1,877 1,881 1,886 1,902 1,920
Commerical 2,858 2,862 2,875 2,882 2,912 2,953 2,990
Agriculture 184 186 187 188 188 190 191
Irrigation 1,587 1,601 1,612 1,615 1,619 1,633 1,648
Total Potable Water 14,077 14,180 14,267 14,299 14,356 14,495 14,642 Carlsbad Potable & Recycled Water Financial Model DRAFT REPORT 1-24-2025.xlsm Customer Data - Appendix G Page 2 of 2
Feb. 11, 2025
Item #8 Page 182 of 265

CITY OF CARLSBAD
Potable Water and Recycled Water Financial Model
Customer Accounts Projection
Potable Water
Adjustment to Potable Meters Based on Priceout Check -0.46% Accounts Input based on 12-31-23 Carlsbad Meter Counts.pdf FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2024 Single Family
5/8" 21,194 21,262 21,080 21,237 21,367 21,412 21,492 21,704 21,177 3/4" 1,425 1,430 1,401 1,411 1,420 1,423 1,428 1,442 1,407 1" 1,772 1,778 1,827 1,841 1,852 1,856 1,863 1,881 1,836

1.5" 22 22 23 23 23 23 23 24 23
2" 7 7 7 7 7 7 7 7 7

2.5" 1 1 1 1 1 1 1 1 1
3" 0 0 0 0 0 0 0 0 0
4" 0 0 0 0 0 0 0 0 0
6" 0 0 0 0 0 0 0 0 0
8" 0 0 0 0 0 0 0 0 0
10" 0 0 0 0 0 0 0 0 0
TOTAL 24,421 24,499 24,339 24,521 24,670 24,722 24,815 25,060 24,452 Multi-Family
5/8" 314 315 316 319 320 321 322 326 318
3/4" 133 133 134 135 136 136 137 138 135
1" 205 206 206 208 209 210 210 213 207

1.5" 255 256 257 259 260 261 262 264 258
2" 341 342 343 346 348 349 350 353 345

2.5" 0 0 0 0 0 0 0 0 0
3" 12 12 12 12 12 12 12 12 12
4" 4 4 4 4 4 4 4 4 4
6" 2 2 2 2 2 2 2 2 2
8" 0 0 0 0 0 0 0 0 0
10" 0 0 0 0 0 0 0 0 0
TOTAL 1,266 1,270 1,274 1,284 1,292 1,294 1,299 1,312 1,280 Feb. 11, 2025
Item #8 Page 183 of 265

CITY OF CARLSBAD
Potable Water and Recycled Water Financial Model
Customer Accounts Projection
Potable Water
Adjustment to Potable Meters Based on Priceout Check -0.46% Accounts Input based on 12-31-23 Carlsbad Meter Counts.pdf FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2024 Commercial/Other
5/8" 259 260 259 261 262 263 264 266 260
3/4" 149 149 155 156 157 158 158 160 156
1" 298 299 301 303 305 305 306 310 302

1.5" 338 339 339 342 344 345 346 349 341
2" 605 607 624 629 633 634 636 643 627

2.5" 1 1 1 1 1 1 1 1 1
3" 43 43 7 7 7 7 7 7 7
4" 5 5 5 5 5 5 5 5 5
6" 4 4 1 1 1 1 1 1 1
8" 2 2 2 2 2 2 2 2 2
10" 0 0 0 0 0 0 0 0 0
TOTAL 1,704 1,709 1,694 1,707 1,717 1,721 1,727 1,744 1,702 Agricultural
5/8" 0 0 0 0 0 0 0 0 0
3/4" 0 0 0 0 0 0 0 0 0
1" 1 1 1 1 1 1 1 1 1

1.5" 0 0 0 0 0 0 0 0 0
2" 4 4 5 5 5 5 5 5 5

2.5" 0 0 0 0 0 0 0 0 0
3" 2 2 2 2 2 2 2 2 2
4" 4 4 4 4 4 4 4 4 4
6" 0 0 0 0 0 0 0 0 0
8" 0 0 0 0 0 0 0 0 0
10" 0 0 0 0 0 0 0 0 0
TOTAL 11 11 12 12 12 12 12 12 12
Feb. 11, 2025
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CITY OF CARLSBAD
Potable Water and Recycled Water Financial Model
Customer Accounts Projection
Potable Water
Adjustment to Potable Meters Based on Priceout Check -0.46% Accounts Input based on 12-31-23 Carlsbad Meter Counts.pdf FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2024 Irrigation
5/8" 76 76 79 79 80 80 80 81 79
3/4" 57 57 59 59 60 60 60 60 59
1" 179 180 184 186 187 187 188 190 185

1.5" 184 185 183 185 186 186 187 189 184
2" 263 264 271 273 274 275 276 279 272

2.5" 0 0 0 0 0 0 0 0 0
3" 0 0 1 1 1 1 1 1 1
4" 4 4 6 6 6 6 6 6 6
6" 4 4 4 4 4 4 4 4 4
8" 1 1 1 1 1 1 1 1 1
10" 0 0 0 0 0 0 0 0 0
TOTAL 768 770 787 793 798 800 803 811 791
Potable Total MEU Ratio
(5/8" Basis)
MEU Ratio
(SDCWA IAC,
3/4" Basis)
5/8" 1.00 1.00 21,843 21,913 21,733 21,896 22,029 22,076 22,158 22,377 3/4" 1.50 1.00 1,764 1,770 1,749 1,762 1,773 1,776 1,783 1,801 1" 2.50 1.60 2,455 2,463 2,519 2,538 2,554 2,559 2,569 2,594

1.5" 5.00 3.00 799 802 802 808 813 815 818 826
2" 8.00 5.20 1,220 1,224 1,250 1,260 1,267 1,270 1,275 1,287

2.5" 11.50 7.40 2 2 2 2 2 2 2 2
3" 15.00 9.60 57 57 22 22 22 22 22 23
4" 25.00 16.40 17 17 19 19 19 19 19 19
6" 50.00 30.00 10 10 7 7 7 7 7 7
8" 80.00 52.00 3 3 3 3 3 3 3 3
10" 115.00 78.00 0 0 0 0 0 0 0 0
TOTAL 28,170 28,260 28,107 28,317 28,490 28,549 28,657 28,939 Potable MEUs (5/8" Basis) 46,425 46,573 46,079 46,424 46,707 46,805 46,981 47,444 Potable MEUs (SDCWA IAC, 3/4" Basis) 37,573 37,693 37,320 37,600 37,829 37,908 38,051 38,426 Feb. 11, 2025
Item #8 Page 185 of 265

CITY OF CARLSBAD
Potable Water and Recycled Water Financial Model
Customer Accounts Projection
Potable Water
Adjustment to Potable Meters Based on Priceout Check -0.46% Accounts Input based on 12-31-23 Carlsbad Meter Counts.pdf FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2024 Recycled Water
Adjustment to Potable Meters Based on Priceout Check 0.64% MEU Ratio
(5/8" Basis)
5/8" 1.00 5 5 5 5 5 5 5 5
3/4" 1.50 17 17 17 17 18 18 18 18
1" 2.50 249 249 251 253 255 255 256 259

1.5" 5.00 340 341 344 347 349 350 351 354
2" 8.00 331 332 335 337 339 340 341 345

2.5" 11.50 0 0 0 0 0 0 0 0
3" 15.00 9 9 9 9 9 9 9 9
4" 25.00 6 6 6 6 6 6 6 6
6" 50.00 3 3 3 3 3 3 3 3
8" 80.00 0 0 0 0 0 0 0 0
10" 115.00 0 0 0 0 0 0 0 0
TOTAL 960 963 971 978 984 986 990 1,000
Recycled MEUs (5/8" Basis) 5,457 5,502 5,543 5,577 5,589 5,610 5,665 Feb. 11, 2025
Item #8 Page 186 of 265
2025 POTABLE AND RECYCLED WATER RATE STUDY
FEBRUARY 2025 / FINAL / CAROLLO

CARLSBAD MUNICIPAL WATER DISTRICT
POT

ABLE AND RECYCLED WATER COST-OF-SERVICE STUDY

APPENDIX B WATER SUPPLY PURCHASES AND COSTS
Feb. 11, 2025
Item #8 Page 187 of 265
2022 2023 2024 2025 2026 2027 2028 2029

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Water Purchases - Pass Thrus
FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

WATER PURCHASE ESCALATORS
Customer Service Charge Increase (2)(3) 5.00% 5.00% 3.85% 4.90% 15.00% 4.00% 3.78% 3.28% Emergency Storage Charge Increase (2)(3) 2.00% 2.00% 0.00% 3.17% 15.00% 4.00% 3.78% 3.28% Infrastructure Access Charge Increase (2) (3) 1.00% 1.00% 1.89% 4.08% 15.00% 4.00% 3.78% 3.28% Supply Reliability Charge Increase (2)(3) 5.00% 5.00% 5.00% 22.53% 15.00% 4.00% 3.78% 3.28% Fixed Transportation Charge 15.00% 4.00% 3.78% 3.28%
MWD Capacity Reservation Charge Increase (2)(3) 3.00% 3.00% 3.00% 16.10% 11.50% 11.50% 5.00% 5.00% MWD Readiness to Service Charge Increase 6.00% 6.00% 3.00% 4.00% 11.50% 11.50% 5.00% 5.00% Transportation Rate Increase (3) 5.00% 5.00% 5.00% -25.40% 15.00% 4.00% 3.78% 3.28% SDCWA M&I Melded Supply Rate Increase (3) 6.00% 6.00% 6.00% 19.17% 15.00% 4.00% 3.78% 3.28% SDCWA Melded Treatment Rate Increase (3) 2.00% 2.00% 2.00% 25.00% 15.00% 4.00% 3.78% 3.28% Desal - Fixed Capital Increase (1) 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% Desal - Fixed Financing Increase (1) 9.70% 9.70% 9.70% 9.70% 9.70% 9.70% 9.70% 9.70% Desal - Fixed O&M Increase (1) 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% Desal - Fixed Electricity Increase (1) 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% Desal - Variable O&M Increase (1) 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% Desal - Variable Electricity Increase (1) 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% Desal - Conveyance Cost Increase (1) 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% Desal - Indirect Costs Increase (1) 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% Desal - T.O. Inefficiency Increase (1) 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% Desal - Wheeling Increase (1) 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% AF --> ccf 436
ccf --> gallons 748
NOTES:
(1) Source: Desal unit costs from 2023-04-10_Desal Unit Price Projection.pdf (2) Sources: 2024 rates from SDCWA Draft Reccomended Budget https://www.sdcwa.org/wp-content/uploads/2022/10/SDCWA-Draft-Recommended-Budget-FYs-24.25-3.23.pdf, 2025 rates from published rates on SDCWA.org as of 8/28/2024 (3) FY19: SDCWA charge escalators based on information form SDCWA.

Feb. 11, 2025
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CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Water Purchases - Pass Thrus
FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 SDCWA/MWD Purchases
Water Consumption Override
Water Purchases (AF) 12,303 12,195 12,389 12,480 12,514 12,574 12,720 12,874 Water Purchases (ccf) 5,358,969 5,312,299 5,396,655 5,436,472 5,450,980 5,477,072 5,540,885 5,608,035 Water Purchasee (MGD) 10.98 10.89 11.06 11.14 11.17 11.23 11.36 11.49

0.73% 0.61% 0.22% 0.40% 0.97% 1.01%
Customer Data (ccf) 6,176,814 6,132,107 6,176,814 6,214,735 6,228,552 6,253,402 6,314,176 6,378,129 System Loss (input) 4.4% 4.4% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% System Loss (calculated) 5,087,814 5,043,107 5,087,814 5,125,735 5,139,552 5,164,402 5,225,176 5,289,129 14,803 14,695 14,889 14,980 FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Fixed Charges (CY) (1,2,3)
SDCWA IAC charge per MEU (monthly) 4.24$ 4.41$ 4.55$ 5.23$ 5.44$ 5.65$ 5.83$ Carlsbad MEUs for IAC - SDCWA charges based on 12/31 accounts from previous year, FY average accounts are projected for the model by projecting from the 12/31/2023 inputs.36,590 40,519 36,602 37,600 37,829 37,908 38,051 CY Carlsbad IAC Charge 1,861,704$ 2,144,268$ 1,998,480$ 2,360,879$ 2,470,280$ 2,569,024$ 2,663,144$ MWD Readiness to Serve Charge (FY) 397,836$ 388,920$ 374,916$ 395,556$ 441,045$ 491,765$ 516,353$ 542,171$ MWD Readiness to Serve Charge (CY) 393,378$ 381,918$ 385,236$ 418,300$ 466,405$ 504,059$ 529,262$ 555,725$ Allocated Fixed Charges, CY Basis
Customer Service Charge 821,256$ 826,836$ 884,760$ 1,041,588$ 1,197,826$ 1,245,739$ 1,292,823$ 1,335,172$ Emergency Storage Charge 2,073,276 2,045,952 2,083,608 2,375,376 2,731,682 2,840,950 2,948,325 3,044,903 Infrastructure Access Charge 1,861,044 1,861,704 2,144,268 1,998,480 2,360,879 2,470,280 2,569,024 2,663,144 Supply Reliability Charge 1,352,460 1,482,900 1,514,652 1,778,400 2,045,160 2,126,966 2,207,356 2,279,662 Fixed Transportation Charge - 1,041,588 1,197,826 1,245,739 1,292,823 1,335,172 MWD Capacity Reservation Charge 293,856 205,296 229,344 296,328 330,406 368,402 386,822 406,164 MWD Readiness to Serve Charge (Adjusted to CY) 393,378 381,918 385,236 418,300 466,405 504,059 529,262 555,725 Sources: 2024 rates from SDCWA Draft Reccomended Budget https://www.sdcwa.org/wp-content/uploads/2022/10/SDCWA-Draft-Recommended-Budget-FYs-24.25-3.23.pdf 2025 rates from published rates on SDCWA.org as of 8/28/2024 Feb. 11, 2025
Item #8 Page 189 of 265
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CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Water Purchases - Pass Thrus
FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Fixed Charges (FY)
Customer Service Charge 807,228$ 824,046$ 855,798$ 963,174$ 1,119,707$ 1,221,783$ 1,269,281$ 1,313,997$ Emergency Storage Charge 2,041,902 2,059,614 2,064,780 2,229,492 2,553,529 2,786,316 2,894,637 2,996,614 Infrastructure Access Charge 1,857,888 1,861,374 2,002,986 2,071,374 2,179,680 2,415,580 2,519,652 2,616,084 Supply Reliability Charge 1,350,210 1,417,680 1,498,776 1,646,526 1,911,780 2,086,063 2,167,161 2,243,509 Fixed Transportation Charge 520,794 1,119,707 1,221,783 1,269,281 1,313,997 MWD Capacity Reservation Charge 287,640 249,576 217,320 262,836 313,367 349,404 377,612 396,493 MWD Readiness to Service Charge 409,326 387,648 383,577 401,768 442,353 485,232 516,661 542,494 Total Fixed Charges (FY) 6,754,194$ 6,799,938$ 7,023,237$ 8,095,964$ 9,640,123$ 10,566,161$ 11,014,286$ 11,423,189$ Fixed per AF $549 $558 $567 $649 $770 $840 $866 $887
4% 2% 2% 14% 19% 9% 3% 2%
Variable Charges (CY) (1,2,3) CY 2022 CY 2023 CY 2024 CY 2025 CY 2026 CY 2027 CY 2028 CY 2029 Transportation 173$ 173$ 189$ 141$ 162$ 169$ 175$ 181$ Supply 1,009 1,085 1,200 1,355 1,558 1,621 1,682 1,737 Treatment 310 350 400 500 575 598 621 641 Variable Price per AF 1,492$ 1,608$ 1,789$ 1,996$ 2,295$ 2,387$ 2,477$ 2,559$ Variable Costs (CY Basis)
Transportation 2,119,065$ 2,126,548$ 2,350,162$ 1,762,088$ 2,033,957$ 2,132,718$ 2,239,634$ 2,337,235$ Supply 12,359,170 13,337,023 14,921,662 16,933,536 19,546,185 20,495,271 21,522,723 22,460,658 Treatment 3,797,168 4,302,266 4,973,887 6,248,537 7,212,614 7,562,831 7,941,964 8,288,066 Total Variable Costs (CY) 18,275,403$ 19,765,837$ 22,245,711$ 24,944,161$ 28,792,756$ 30,190,819$ 31,704,321$ 33,085,958$ Total Variable Costs (FY) 17,822,757$ 19,020,620$ 21,005,774$ 23,594,936$ 26,868,459$ 29,491,788$ 30,947,570$ 32,395,140$ Total SDCWA & MWD Charges (FY) 24,576,951$ $25,820,558 $28,029,011 $31,690,900 $36,508,581 $40,057,949 $41,961,857 $43,818,328 Feb. 11, 2025
Item #8 Page 190 of 265
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CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Water Purchases - Pass Thrus
FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Variable Pass-Through Calculation - CY Basis
Costs Included in Variable Pass-through For Reference OnlyFor Reference Only Transportation 2,126,548$ 2,350,162$ 1,762,088$ 2,033,957$ 2,132,718$ 2,239,634$ 2,337,235$ Supply 13,337,023$ 14,921,662$ 16,933,536$ 19,546,185$ 20,495,271$ 21,522,723$ 22,460,658$ Treatment 4,302,266$ 4,973,887$ 6,248,537$ 7,212,614$ 7,562,831$ 7,941,964$ 8,288,066$ Variable Price per AF 19,765,837$ 22,245,711$ 24,944,161$ 28,792,756$ 30,190,819$ 31,704,321$ 33,085,958$ Calendar Year Sales (AF) 6,154,460 6,195,775 6,221,643 6,240,977 6,283,789 6,346,152 6,401,784 Calculated Calendar Year Pass-Through per CCF - Charges to all Potable Water Sold 3.21$ 3.59$ 4.009$ 4.614$ 4.805$ 4.996$ 5.168$ Calculated Calendar Year Pass-Through per CCF - Charges to all Potable Water Sold 3.21$ 3.59$ 4.009$ 4.614$ 4.805$ 4.996$ 5.168$ Applied as Calculated Applied as Calculated Applied as Calculated Applied as Calculated Applied as Calculated Applied as Calculated Rounded Calendar Year Pass-Through per CCF 4.01$ 4.62$ 4.81$ 5.00$ 5.17$ Fiscal Variable Year Pass-Through Revenues
Fiscal Year Sales 6,176,814 6,214,735 6,228,552 6,253,402 6,314,176 6,378,129 Fiscal Year Variable Pass-Through Revenues $21,005,774 $23,594,936 $26,868,459 $29,491,788 $30,947,570 $32,395,140 Feb. 11, 2025
Item #8 Page 191 of 265
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CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Water Purchases - Pass Thrus
FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Fixed Pass-Through Calculation - CY Basis
Costs Included in Fixed Pass-through
Carlsbad MEU Basis (CY Basis) For Reference OnlyFor Reference Only Customer Service Charge 826,836$ 884,760$ 1,041,588$ 1,197,826$ 1,245,739$ 1,292,823$ 1,335,172$ Emergency Storage Charge 2,045,952 2,083,608 2,375,376 2,731,682 2,840,950 2,948,325 3,044,903 Supply Reliability Charge 1,482,900 1,514,652 1,778,400 2,045,160 2,126,966 2,207,356 2,279,662 Fixed Transportation Charge - - 1,041,588 1,197,826 1,245,739 1,292,823 1,335,172 MWD Capacity Reservation Charge 205,296 229,344 296,328 330,406 368,402 386,822 406,164 MWD Readiness to Service Charge (Adjusted to CY basis) 381,918 385,236 418,300 466,405 504,059 529,262 555,725 Less: SDCWA Fixed in Fire Service Rate 1.65% (81,438) (83,987) (114,533) (131,301) (137,274) (142,638) (147,570) Carlsbad MEU Basis Costs (CY Basis) 4,861,464$ 5,013,613$ 6,837,048$ 7,838,005$ 8,194,582$ 8,514,774$ 8,809,227$ Potable MEUs (5/8" Basis) (FY) 46,573 46,079 46,424 46,707 46,805 46,981 47,444 Potable MEUs (5/8" Basis) (CY) 46,326 46,252 46,566 46,756 46,893 47,212 47,687 Calculated Monthly Unit Cost per MEU (5/8" Basis) (CY) 8.74$ 9.03$ 12.24$ 13.97$ 14.56$ 15.03$ 15.39$ Implemented Calendar Year Pass-Through per MEU (5/8" Basis) (CY) 8.74$ 9.03$ 12.24$ 13.97$ 14.56$ 15.03$ 15.39$ Applied as Calculated Applied as Calculated Applied as Calculated Applied as Calculated Applied as Calculated Applied as Calculated SDCWA MEU Basis (CY Basis) For Reference OnlyFor Reference Only Infrastructure Access Charge 1,861,704$ 2,144,268$ 1,998,480$ 2,360,879$ 2,470,280$ 2,569,024$ 2,663,144$ Carlsbad MEUs for IAC (3/4" Basis) (FY) 37,693 37,320 37,600 37,829 37,908 38,051 38,426 Carlsbad MEUs for IAC (3/4" Basis) (CY) 37,507 37,460 37,714 37,868 37,979 38,238 38,622 IAC Monthly Unit Cost per MEU (SDCWA IAC, 3/4" Basis) 4.12$ 4.79$ 4.42$ 5.20$ 5.42$ 5.60$ 5.75$ Implemented Calendar Year IAC Pass-Through per MEU (SDCWA IAC, 3/4" Basis) 4.12$ 4.79$ 4.42$ 5.20$ 5.42$ 5.60$ 5.75$ Applied as Calculated Applied as Calculated Applied as Calculated Applied as Calculated Applied as Calculated Feb. 11, 2025
Item #8 Page 192 of 265
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CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Water Purchases - Pass Thrus
FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 SDCWA Fixed Pass-through per Meter Size
Meter Size MEU Ratio (5/8"
Basis)
MEU Ratio
(SDCWA IAC,
3/4" Basis)
For Reference
Only Unrounded Unrounded Unrounded Unrounded Unrounded
5/8" 1.00 1.00 13.821$ 16.65$ 19.17$ 19.98$ 20.63$ 21.14$ 3/4" 1.50 1.00 18.338$ 22.77$ 26.15$ 27.26$ 28.14$ 28.84$ 1" 2.50 1.60 30.244$ 37.65$ 43.24$ 45.08$ 46.53$ 47.68$

1.5" 5.00 3.00 59.530$ 74.43$ 85.43$ 89.07$ 91.94$ 94.21$ 2" 8.00 5.20 97.163$ 120.85$ 138.77$ 144.69$ 149.35$ 153.03$

2.5" 11.50 7.40 139.313$ 173.39$ 199.10$ 207.58$ 214.27$ 219.55$ 3" 15.00 9.60 181.463$ 225.92$ 259.42$ 270.47$ 279.19$ 286.08$ 4" 25.00 16.40 304.354$ 378.31$ 434.45$ 452.96$ 467.55$ 479.09$ 6" 50.00 30.00 595.301$ 744.25$ 854.34$ 890.73$ 919.42$ 942.09$ 8" 80.00 52.00 971.633$ 1,208.46$ 1,387.73$ 1,446.86$ 1,493.47$ 1,530.34$ 10" 115.00 78.00 1,412.284$ 1,751.52$ 2,011.75$ 2,097.47$ 2,165.06$ 2,218.53$ Fixed Pass-through Revenue
Meter Size
5/8" 21,814 21,963 22,052 22,117 22,268 22,491
3/4" 1,755 1,767 1,775 1,780 1,792 1,810
1" 2,529 2,546 2,556 2,564 2,581 2,607

1.5" 805 811 814 816 822 830
2" 1,255 1,263 1,269 1,272 1,281 1,294

2.5" 2 2 2 2 2 2
3" 22 22 22 22 22 23
4" 19 19 19 19 19 20
6" 7 7 7 7 7 7
8" 3 3 3 3 3 3
10" 0 0 0 0 0 0
Calendar Year Fixed Pass-through Revenues 7,165,908$ 8,835,528$ 10,198,884$ 10,664,863$ 11,083,798$ 11,472,371$ Cost 7,157,881$ 8,835,528$ 10,198,884$ 10,664,863$ 11,083,798$ 11,472,371$ Fiscal Year Fixed Pass-through Revenues 3,582,954$ 8,000,718$ 9,517,206$ 10,431,873$ 10,874,330$ 11,278,085$ Feb. 11, 2025
Item #8 Page 193 of 265
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CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Water Purchases - Pass Thrus
FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 SDCWA Fixed Pass-through per Meter Size - Rounded
Meter Size
5/8" 16.66$ 19.17$ 19.99$ 20.63$ 21.15$ 3/4" 22.77$ 26.15$ 27.27$ 28.15$ 28.84$ 1" 37.66$ 43.24$ 45.08$ 46.54$ 47.68$

1.5" 74.43$ 85.44$ 89.08$ 91.95$ 94.21$ 2" 120.85$ 138.78$ 144.69$ 149.35$ 153.04$

2.5" 173.39$ 199.10$ 207.58$ 214.27$ 219.56$ 3" 225.93$ 259.43$ 270.48$ 279.19$ 286.08$ 4" 378.31$ 434.45$ 452.96$ 467.55$ 479.10$ 6" 744.26$ 854.35$ 890.74$ 919.43$ 942.10$ 8" 1,208.47$ 1,387.74$ 1,446.86$ 1,493.48$ 1,530.34$ 10" 1,751.52$ 2,011.75$ 2,097.48$ 2,165.07$ 2,218.54$ Feb. 11, 2025
Item #8 Page 194 of 265
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Contract Desal Water, Min. 2500 AF (1,5) 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Additional desal water, AF (1) - - - - - - - - Total Desal (AF) 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 In ccf 1,089,000 1,089,000 1,089,000 1,089,000 1,089,000 1,089,000 1,089,000 1,089,000 Source: Desal unit costs from 2023-04-10_Desal Unit Price Projection.pdf FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Fixed Charges ($/AF), Calendar Year (4,5)
Capital, Debt Service Charge 641$ 652$ 657$ 763$ 1,016$ 1,042$ 1,068$ 1,094$ Capital, Equity Return Charge 448 485 586 600 627 639 651 664 Fixed O&M 567 615 649 738 787 807 827 848 Fixed Electrictiy 187 193 254 260 267 274 280 287 Annual Management Fee 14 15 15 15 16 16 Variable Charges ($/AF) (4,5)
Variable O&M 130$ 141$ 149$ 149$ 154$ 158$ 161$ 166$ Variable Electricity 803 826 1,185 1,221 1,257 1,295 1,334 1,374 Other Costs ($/AF) (4,5)
Conveyance (Pipeline Debt Payment) $221.46 $227.00 233.25$ $239.08 $245.06 $251.18 $257.46 $263.90 Indirect Costs (2) 33.04 33.53 20.67$ 20.98 21.29 21.61 21.94 22.27 Administration Charge 10.80 11.45 12.15$ 12.88 13.65 14.47 15.34 16.26 Wheeling (Transportation Charge Including credits) (2) 0.00 0.00 (23.26)$ (24.42) (25.64) (26.93) (28.27) (29.69) Feb. 11, 2025
Item #8 Page 195 of 265
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CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Water Purchases - Pass Thrus
FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Fixed Costs ($)
Capital 1,603,500$ 1,630,300$ 1,643,425$ 1,907,397$ 2,540,600$ 2,603,825$ 2,668,825$ 2,735,175$ Financing 1,119,825 1,213,625 1,464,125 1,499,500 1,567,550 1,596,900 1,627,425 1,659,775 Fixed O&M 1,418,700 1,537,400 1,622,750 1,843,769 1,968,575 2,017,800 2,068,250 2,119,950 Fixed Electrictiy 468,275 482,325 635,050 650,926 667,199 683,879 700,976 718,501 Annual Management Fee - - 35,375 36,259 37,166 38,095 39,047 40,024 Variable Costs ($)
Variable O&M 324,625$ 351,775$ 371,300$ 373,100$ 384,250$ 393,850$ 403,700$ 413,800$ Variable Electricity 2,006,650 2,065,000 2,963,275 3,052,173 3,143,738 3,238,051 3,335,192 3,435,248 Other Costs ($)
Conveyance 553,654$ 567,495$ 583,125$ 597,703$ 612,646$ 627,962$ 643,661$ 659,752$ Indirect Costs 82,596 83,835 51,675 52,450 53,237 54,035 54,846 55,669 T.O. Inefficiency 27,004 28,624 30,375 32,198 34,129 36,177 38,348 40,649 Wheeling (Transportation Charge Including credits) - - (58,150) (61,058) (64,110) (67,316) (70,682) (74,216) Total Desal Costs, CY (3) 7,604,828$ 7,960,378$ 9,342,325$ 9,984,419$ 10,944,980$ 11,223,258$ 11,509,589$ 11,804,326$ Desal Costs (FY Basis) 7,604,828$ 7,960,378$ 9,342,325$ 9,984,419$ 10,944,980$ 11,223,258$ 11,509,589$ 11,804,326$ Feb. 11, 2025
Item #8 Page 196 of 265
2022 2023 2024 2025 2026 2027 2028 2029

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Water Purchases - Pass Thrus
FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2022 FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Recycled Water Purchases
Assumptions
Vallecitos Annual Escalation 3.0% 3.0% 3.0% 3.0% 3.0% 5.0% 5.0% 5.0% Reclaimed Water Increases
Expected AF to be Sold (Historical Sales &Customer Data) #N/A 4,189 4,226 4,254 4,263 4,273 4,310 4,351 System Losses 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Recycled Water to be Purchased #N/A 4,398 4,437 4,466 4,476 4,487 4,525 4,568 Source of Supply (in AF)
Vallecitos Water District (VWD) 2,386 2,386 2,386 2,386 2,700 2,700 2,700 2,700 Carlsbad Water Recycling Facility (CWRF) #N/A 2,012 2,051 2,080 1,776 1,787 1,825 1,868 Total Recycled Water (AF) #N/A 4,398 4,437 4,466 4,476 4,487 4,525 4,568 Unit Costs
Vallecitos Water District (VWD) $951 $1,157 $1,194 $1,230 1,454$ $1,527 $1,603 $1,684 Purchase Amount
Vallecitos Water District (VWD) 2,268,646$ 2,761,924$ 2,850,000$ 2,935,500$ 3,925,800$ 4,122,900$ 4,329,045$ 4,545,497$ Outside RW Purchases 2,268,646$ 2,761,924$ 2,850,000$ 2,935,500$ 3,925,800$ 4,122,900$ 4,329,045$ 4,545,497$ Feb. 11, 2025
Item #8 Page 197 of 265
2025 POTABLE AND RECYCLED WATER RATE STUDY
FEBRUARY 2025 / FINAL / CAROLLO

CARLSBAD MUNICIPAL WATER DISTRICT

POTABLE AND RECYCLED WATER COST-OF-SERVICE STUDY

APPENDIX C CAPITAL IMPROVEMENT PLAN

Feb. 11, 2025
Item #8 Page 198 of 265

UNESCALATED
R&R -$ -$ -$ -$ -$ -$ Expansion 1,707,102 1,791,430 4,213,000 600,000 1,849,000 - Total 1,707,102$ 1,791,430$ 4,213,000$ 600,000$ 1,849,000$ -$

ESCALATED
R&R -$ -$ -$ -$ -$ -$ Expansion 1,707,102 1,827,259 4,383,205 624,240 1,923,700 - Total 1,707,102$ 1,827,259$ 4,383,205$ 624,240$ 1,923,700$ -$ Feb. 11, 2025
Item #8 Page 199 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Capital Improvement Plan
ANNUAL CIP ESCALATION: 2.00% 2.00% 0.00% 0.00% 0.00%
Cumulative CIP Escalation 0.00% 2.00% 4.04% 4.04% 4.04% 4.04% BURN RATE FOR NEW APPROPRIATIONS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% WATER REPLACEMENT PROJECTS FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Include Project Number Project Title
 35722 Orion Center -$ -$ -$ -$ -$  39041 Water System Rehabilitation and Replacement 2,800,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$  47222 Maerkle Reservoir Solar Project - 231,413 - - - -  50011 Maerkle Reservoir Transmission Main (578,000) 278,000 2,396,000  50071 Cathodic Protection Program 190,000 190,000 190,000 190,000 190,000 -  50081 Tri-Agency Water Transmission Pipeline Replacement (1,290,000) 483,000 4,017,040  50091 Maerkle Facility Improvements 800,000 200,000 - - - -  50191 Water Valve Repair/Replacement Program 960,000 960,000 960,000 1,000,000 1,000,000 1,000,000  50201 Pressure Reducing Station Program 600,000 - - - 600,000 600,000  50241 Reservoir Condition Assessment and Repair Program 2,040,000 - - - - -  50331 Crestview Drive Transmission Main 284,000 (605,000) - - - -  50351 Limited Access Pipeline Relocation Program 761,000 1,428,000 600,000 - -  50431 Fire Flow Capacity System Improvements 415,000 - - -  50442 San Luis Rey Mission Basin Groundwater Supply - - - - - -  50461 Santa Fe II Reservoir Site Electrical Improvements 110,000 40,000 - - - -  50481 Carlsbad Boulevard Waterline Replacement at Terramar - - - - - -  50501 Normally Closed Valve (Install Motorized Valve) 300,000 - - - - -  50511 Water Infrastructure Condition Assessment Program 410,000 420,000 420,000 450,000 450,000 450,000  50521 Water Loss Monitoring Program (182,911) - - - - -  50551 Palomar Airport Waterline Realignment - - - - - -  50571 Santa Fe II Inlet Pipeline - 350,000  50612 Rancho Carlsbad Groundwater Supply - (200,000) - -  52031 Carlsbad Water Recycling Facility (Encina Capital Projects) - - - - - -  52051 Abandon Potable Services (New Recycled Services) 250,000 - - - - -  52101 Recycled Water Phase 3 - Reservoir (800,000) - - - - -  55422 SCADA Improvements 2,413,000 531,570 - - - -  60192 Valley and Magnolia Complete Streets - 650,000 - - - -  60513 El Camino Real Widening - Arenal Road to La Costa Avenue 1,000,000 - - - - -  Spend Down of Available Balance 36,913,327
WATER REPLACEMENT PROJECTS TOTAL: 47,395,416$ 6,845,983$ 5,931,000$ 4,640,000$ 11,653,040$ 5,400,000$ 10,482,089$ 6,845,983$ 5,931,000$ 4,640,000$ 11,653,040$ 5,400,000$ SUMMARY OF WATER REPLACEMENT PROJECTS FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 R&R 47,395,416$ 6,845,983$ 5,931,000$ 4,640,000$ 11,653,040$ 5,400,000$ Expansion - - - - - - Total 47,395,416$ 6,845,983$ 5,931,000$ 4,640,000$ 11,653,040$ 5,400,000$ R&R 47,395,416$ 6,982,903$ 6,170,612$ 4,827,456$ 12,123,823$ 5,618,160$ Expansion - - - - - - Total 47,395,416$ 6,982,903$ 6,170,612$ 4,827,456$ 12,123,823$ 5,618,160$ Feb. 11, 2025
Item #8 Page 200 of 265

CARLSBAD MUNICIPAL WATER DISTRICT

POTABLE AND RECYCLED WATER COST-OF-SERVICE STUDY

APPENDIX D PROJECTED O&M COSTS
Feb. 11, 2025
Item #8 Page 204 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Potable Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

REVENUES
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Charges for Services
4885 Plan Check General Inflation -$ -$ -$ -$ -$ -$ -$ 4976 Special Benefit District Servc General Inflation - - - - - - - 4995 Admin Fees General Inflation - - - - - - - 5100 Commodity Usage Cust. Grwth + Usage Grwth 28,385,758 29,170,239 6,735,943 7,486,632 8,266,233 9,182,466 9,972,265 5101 Water Delivery Charges Customer Growth 13,013,359 13,373,002 7,492,817 8,327,857 9,195,056 10,214,240 11,092,784 SDCWA Variable Pass-Throughs [Calculated] $23,594,936 $26,868,459 $29,491,788 $30,947,570 $32,395,140 SDCWA Fixed Pass-Throughs [Calculated] 8,000,718 9,517,206 10,431,873 10,874,330 11,278,085 5110 New Account Charges Gnrl Infltn + Cstmr Dmnd Grwth 130,000 137,473 143,810 147,707 151,955 157,251 162,793 5111 Backflow Device Gnrl Infltn + Cstmr Dmnd Grwth 175,000 185,060 193,591 198,836 204,554 211,684 219,145 5113 Quick Turnon Fees Gnrl Infltn + Cstmr Dmnd Grwth 12,000 12,690 13,275 13,634 14,027 14,515 15,027 5114 Misc Services General Inflation - - - - - - - 5115 Scheduled Disconnect Fee Gnrl Infltn + Cstmr Dmnd Grwth 4,000 4,230 4,425 4,545 4,676 4,838 5,009 5124 Service Installation Fees Gnrl Infltn + Cstmr Dmnd Grwth 20,000 21,150 22,125 22,724 23,378 24,192 25,045 5125 Misc Conn Chg Gnrl Infltn + Cstmr Dmnd Grwth - - - - - - - 5127 Non Jurisdictional Fees Gnrl Infltn + Cstmr Dmnd Grwth - - - - - - - Airport Capital Replacement Charge [Calculated] 32,943 68,193 70,580 73,050 75,607 Other Charges for Services Gnrl Infltn + Cstmr Dmnd Grwth - - - - - - - Total Charges for Services 41,740,117$ 42,903,844$ 46,234,582$ 52,655,794$ 57,854,118$ 61,704,138$ 65,240,898$ Tax Revenues
4010 Adjustments - Current Taxes General Inflation -$ -$ -$ -$ -$ -$ -$ 4011 Property Taxes - Current Property Tax Increase 4,101,000 3,418,475 3,519,320 3,632,642 3,753,245 3,865,468 3,984,137 4012 Refunds - Current Taxes Property Tax Increase - - - - - - - 4015 Supplemental Property Taxes Property Tax Increase 85,000 70,854 72,944 75,293 77,792 80,118 82,578 4016 Refunds - Supplemental Taxes Property Tax Increase - - - - - - - 4018 Unitary Tax (combine w/4011) Property Tax Increase 70,000 58,350 60,071 62,006 64,064 65,980 68,005 4020 Prior Years Property Taxes Property Tax Increase 57,000 47,514 48,915 50,490 52,167 53,726 55,376 4021 Refunds - Prior Year Taxes Property Tax Increase (25,000) (20,839) (21,454) (22,145) (22,880) (23,564) (24,288) 4027 Surplus Property Tax Increment Property Tax Increase - - - - - - - 4111 Sales and Use tax Property Tax Increase - - - - - - - Other Tax Revenues Property Tax Increase - - - - - - - Total Tax Revenues 4,288,000$ 3,574,352$ 3,679,796$ 3,798,285$ 3,924,388$ 4,041,728$ 4,165,809$ Feb. 11, 2025
Item #8 Page 205 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Potable Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Licenses and Permits
4452 Fire Protect Sys General Inflation -$ -$ -$ -$ -$ -$ -$ Other Licenses and Permits General Inflation - - - - - - - Total Licenses and Permits -$ -$ -$ -$ -$ -$ -$ Intergovernmental
4525 Homeowners Exemption General Inflation 23,000$ 24,150$ 25,116$ 25,744$ 26,387$ 27,047$ 27,723$ 4632 Federal Grants - Capital One Time Expense - - - - - - - 4691 Misc Other Fed One Time Expense - - - - - - - 4753 SDCWA/MWD Credits One Time Expense - - - - - - - 4754 SDCWA Rebates One Time Expense - - - - - - - Other Intergovernmental General Inflation - - - - - - - Total Intergovernmental 23,000$ 24,150$ 25,116$ 25,744$ 26,387$ 27,047$ 27,723$ Fines & Forfeitures
5221 Reconnect Fees General Inflation 1,300$ 1,365$ 1,420$ 1,455$ 1,491$ 1,529$ 1,567$ 5212 Code Violations General Inflation - - - - - - - 5222 Return Check Fee General Inflation 5,850 6,143 6,388 6,548 6,712 6,879 7,051 5225 Late Charges General Inflation 150,000 157,500 163,800 167,895 172,092 176,395 180,805 5226 Door Hanger Fee General Inflation 4,600 4,830 5,023 5,149 5,277 5,409 5,545 5229 Misc Fines General Inflation - - - - - - - Other Fines & Forfeitures General Inflation - - - - - - - Total Fines & Forfeitures 161,750$ 169,838$ 176,631$ 181,047$ 185,573$ 190,212$ 194,968$ Income from Prop & Investments
5300 Interest Income - Pooled Cash [Calculated] -$ 2,550,720$ 2,171,010$ 1,608,758$ 1,403,408$ 1,264,022$ 1,120,273$ 5305 Interest - Unrealized Gains/Losses General Inflation - - - - - - - 5313 Interest Income-Leases One Time Expense - - - - - - - 5315 Interest Income - Property Tax Interest Income 4,500 4,613 4,728 4,846 4,967 5,091 5,219 5320 Facilities Rentals General Inflation - - - - - - - 5325 GASB 87 Lease Revenue REVENUE One Time Expense - - - - - - - 5341 Other Rentals and Leases General Inflation 46,980 49,329 51,302 52,585 53,899 55,247 56,628 5342 Cell Site Leases General Inflation 210,564 221,092 229,936 235,684 241,576 247,616 253,806 5360 Sale of Capital Assets General Inflation - - - - - - - 5361 Donated Assets One Time Expense - - - - - - - 5362 Scrap & Recycle General Inflation - - - - - - - Other Income from Prop & Investments General Inflation - - - - - - - Total Income from Prop & Investments 262,044$ 2,825,754$ 2,456,976$ 1,901,873$ 1,703,851$ 1,571,976$ 1,435,925$ Feb. 11, 2025
Item #8 Page 206 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Potable Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Interdepartmental
5430 Eng Labor General Inflation 42,000$ 44,100$ 45,864$ 47,011$ 48,186$ 49,391$ 50,625$ 5442 Reimbursed Work for Other Dept. General Inflation 2,000 2,100 2,184 2,239 2,295 2,352 2,411 Other Interdepartmental General Inflation - - - - - - - Total Interdepartmental 44,000$ 46,200$ 48,048$ 49,249$ 50,480$ 51,742$ 53,036$ Other Revenues
5542 Major Facilities General Inflation -$ -$ -$ -$ -$ -$ -$ 5550 Prior Year Fee Refunds General Inflation - - - - - - - 5632 Str Lights/Signs General Inflation - - - - - - - 5634 Misc Damages General Inflation - - - - - - - 5636 Loss Recovery General Inflation 50,000 52,500 54,600 55,965 57,364 58,798 60,268 5638 Misc Reimbursement Losses General Inflation - - - - - - - 5639 Misc Reimbursement Expenses General Inflation - - - - - - - 5664 Misc AR Write Offs General Inflation - - - - - - - 5674 Misc Revenues General Inflation 40,000 42,000 43,680 44,772 45,891 47,039 48,215 Other General Inflation - - - - - - - Total Other Revenues 90,000$ 94,500$ 98,280$ 100,737$ 103,255$ 105,837$ 108,483$ Other Financing Sources
5900 Transfers In No Annual Increase -$ -$ -$ -$ -$ -$ -$ Other Other Financing Sources General Inflation - - - - - - - Total Other Financing Sources -$ -$ -$ -$ -$ -$ -$ TOTAL REVENUES 46,608,911$ 49,638,638$ 52,719,429$ 58,712,728$ 63,848,053$ 67,692,679$ 71,226,842$ Feb. 11, 2025
Item #8 Page 207 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Potable Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 CODE LINE ITEM ESCALATOR FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029

EXPENDITURES
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Personnel
6100 Reg Salaries Labor Inflation 2,825,713$ 3,024,270$ 3,145,241$ 3,239,598$ 3,336,786$ 3,436,890$ 3,539,996$ 6135 Hazard Pay Labor Inflation - 42,663 44,370$ 45,701$ 47,072$ 48,484$ 49,938$ 6101 Incentive Pay Labor Inflation - - - - - - - 6140 Other Personnel Labor Inflation - - - - - - - 6150 IOD Worker's Comp Labor Inflation - - - - - - - 6200 Overtime Salaries Labor Inflation 111,214 125,000 130,000 133,900 137,917 142,055 146,316 6210 Standby Pay Labor Inflation 24,470 23,550 24,492 25,227 25,984 26,763 27,566 6300 Parttime Salaries Labor Inflation - - - - - - - 6305 Intern Salaries Labor Inflation 12,760 12,760 13,270 13,669 14,079 14,501 14,936 6310 Elected Officials' Salaries Labor Inflation - 8,000 8,320 8,570 8,827 9,091 9,364 6400 Temporary Help Labor Inflation 40,000 60,000 62,400 64,272 66,200 68,186 70,232 6405 Retired Annuitant Projects Labor Inflation 4,761 - - - - - - 6501 Health Insurance Labor - Health Insurance 453,494 600,070 638,354 677,486 717,457 758,352 801,578 6510 Life Insurance Labor Inflation 2,049 2,088 2,172 2,237 2,304 2,373 2,444 6511 AD&D City Paid Labor Inflation 1,029 1,044 1,086 1,118 1,152 1,186 1,222 6520 Vision Insurance Labor Inflation - - - - - - - 6530 Medicare Labor Inflation 43,195 46,002 47,842 49,277 50,756 52,278 53,847 6620 MTG Physicals Labor Inflation - - - - - - - 6629 Cell Phone Allowance Labor Inflation - - - - - - - 6630 Auto Allowance Labor Inflation 1,625 1,625 1,690 1,741 1,793 1,847 1,902 6640 Earned Leave Accrual Labor Inflation - - - - - - - 6651 Healthy Emp Awards Labor Inflation - - - - - - - 6653 Final Vacation Pay Labor Inflation - - - - - - - 6654 Final Sick Leave Pay Labor Inflation - - - - - - - 6655 Disability Labor Inflation 25,513 18,206 18,934 19,502 20,087 20,690 21,311 6656 Unemployment Labor Inflation 14,513 15,856 16,490 16,985 17,494 18,019 18,560 6657 Worker's Compensation Labor Inflation 59,130 79,050 82,212 84,678 87,219 89,835 92,530 6720 PERS Labor - PERS (Normal Cost) 346,620 383,967 415,172 427,627 440,456 453,669 467,280 6721 PERS (GASB 68 Contra Account) One Time Expense - - - - - - - PERS - Repayment Labor - PERS (UAL) - - - - - - - 6722 OPEB Expense One Time Expense - - - - - - - 6723 PERS Unfunded Liability Expense Labor - PERS (Normal Cost) 352,474 338,150 533,118 543,929 554,908 566,056 577,373 6730 Social Security Labor Inflation - - - - - - - 6740 Deferred Comp Labor Inflation 478 478 497 512 527 543 560 6741 Def Comp Match Labor Inflation - - - - - - - Other Personnel Labor Inflation - - - - - - - Total Personnel Costs 4,319,038$ 4,782,779$ 5,185,660$ 5,356,027$ 5,531,016$ 5,710,819$ 5,896,955$ Feb. 11, 2025
Item #8 Page 208 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Potable Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Maintenance & Equipment
7110 Office Equip Rental General Inflation -$ - -$ -$ -$ -$ -$ 7111 Other Mach & Equip General Inflation 2,000 10,595 11,019 11,294 11,577 11,866 12,163 7115 Vehicle Rentals General Inflation 17,150 17,150 17,836 18,282 18,739 19,207 19,688 7119 Misc Rentals General Inflation 14,000 51,000 53,040 54,366 55,725 57,118 58,546 7120 Misc Leases General Inflation - - - - - - - 7210 Office Equip Maintenance General Inflation - - - - - - - 7211 Communication Equip Maintenance General Inflation 3,000 3,000 3,120 3,198 3,278 3,360 3,444 7215 Software Maintenance General Inflation 67,703 23,777 24,728 25,347 25,980 26,630 27,296 7216 Computer Maintenance General Inflation - - - - - - - 7220 Vehicle Maint General Inflation 30,000 30,000 31,200 31,980 32,780 33,599 34,439 7221 Wash and Wax General Inflation 33,455 23,450 24,388 24,998 25,623 26,263 26,920 7222 Other Equip Maintenance General Inflation 100 100 104 107 109 112 115 7225 Car Wash Repairs General Inflation - - - - - - - 7226 Pipeline Maintenance General Inflation 110,750 54,500 56,680 58,097 59,549 61,038 62,564 7227 Fire Hydrant Maintenance - City General Inflation 36,301 38,963 40,521 41,534 42,573 43,637 44,728 7228 FIRE HYDRANT MAINTENANCE - OTHER General Inflation 15,000 15,000 15,600 15,990 16,390 16,799 17,219 7230 Routine Building Maintenance General Inflation 5,000 5,000 5,200 5,330 5,463 5,600 5,740 7241 Asphalt Repairs General Inflation 149,360 100,000 104,000 106,600 109,265 111,997 114,797 7244 Street Sweeping General Inflation - - - - - - - 7249 Maintenance, Repair and Rehab General Inflation 10,830 12,760 13,270 13,602 13,942 14,291 14,648 7400 Audit General Inflation - - - - - - - 7410 Legal General Inflation 70,000 57,907 60,223 61,728 63,272 64,853 66,475 7435 Administrative General Inflation 45,000 45,000 46,800 47,970 49,169 50,398 51,658 7480 Claims Admin General Inflation - - - - - - - 7490 Misc Professional Services General Inflation 767,059 747,360 777,255 796,686 816,603 837,018 857,944 7500 Encina Services General Inflation - - - - - - - 7510 City Generated General Inflation - - - - - - - 7511 Citizen Generated General Inflation - - - - - - - 7550 Miscellaneous Outside Services General Inflation 439,207 531,922 553,199 567,029 581,205 595,735 610,628 7551 Bank Services General Inflation 52,454 52,454 54,552 55,916 57,314 58,747 60,215 7552 Book Binding General Inflation - - - - - - - 7553 Comm Arts Support General Inflation - - - - - - - 7554 Regulatory/Permitting Fees General Inflation 143,400 158,259 164,589 168,704 172,921 177,244 181,676 7556 Misc Services General Inflation - - - - - - - ***PassThru Charges 7557 Customer Service Charge [ Calculated ] 6,885,000 855,798 963,174 1,119,707 1,221,783 1,269,281 1,313,997 Emergency Storage Charge [ Calculated ] - 2,064,780 2,229,492 2,553,529 2,786,316 2,894,637 2,996,614 Infrastructure Access Charge [ Calculated ] - 2,002,986 2,071,374 2,179,680 2,415,580 2,519,652 2,616,084 Supply Reliability Charge [ Calculated ] - 1,498,776 1,646,526 1,911,780 2,086,063 2,167,161 2,243,509 Fixed Transportation Charge [ Calculated ] - - 520,794 1,119,707 1,221,783 1,269,281 1,313,997 MWD Capacity Reservation Charge [ Calculated ] - 217,320 262,836 313,367 349,404 377,612 396,493 MWD Readiness to Service Charge [ Calculated ] - 374,916 395,556 441,045 491,765 516,353 542,171 Feb. 11, 2025
Item #8 Page 209 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Potable Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 7558 Laundry and Uniform Maintenance General Inflation 8,000 8,000 8,320 8,528 8,741 8,960 9,184 7559 Electrical/Scada Services General Inflation 53,904 107,819 112,132 114,935 117,809 120,754 123,773 7560 Water Sampling Services General Inflation 179,260 175,724 182,753 187,322 192,005 196,805 201,726 7561 Water Conservation Services General Inflation 22,500 11,250 11,700 11,993 12,292 12,600 12,915 7564 Landscaping Services General Inflation 136,120 170,068 176,871 181,293 185,825 190,471 195,233 7710 Ads and Publishing General Inflation 500 500 520 533 546 560 574 7711 Dues and Subscriptions General Inflation 42,500 43,115 44,840 45,961 47,110 48,287 49,495 7712 Books and Publications General Inflation 600 600 624 640 656 672 689 7713 Audio-Visual Materials General Inflation - - - - - - - 7715 Printing General Inflation 12,000 12,000 12,480 12,792 13,112 13,440 13,776 7720 Postage General Inflation 7,000 9,000 9,360 9,594 9,834 10,080 10,332 7725 Office Supplies General Inflation 11,000 11,000 11,440 11,726 12,019 12,320 12,628 7726 Office Furniture & Equipment General Inflation 15,000 15,000 15,600 15,990 16,390 16,799 17,219 7730 Computer Software General Inflation 10,000 10,000 10,400 10,660 10,927 11,200 11,480 7731 Misc. Computer Hardware General Inflation 5,000 8,000 8,320 8,528 8,741 8,960 9,184 7735 Promo Materials General Inflation 11,708 6,000 6,240 6,396 6,556 6,720 6,888 7741 Preschool General Inflation - - - - - - - 7745 Food Expense General Inflation - - - - - - - 7750 Heat and Light Utilities Inflation 126,270 135,897 142,692 149,826 157,318 165,184 173,443 7751 Telephone & Communications Utilities Inflation 13,600 13,600 14,280 14,994 15,744 16,531 17,357 7752 Waste Disposal Services Utilities Inflation 30,149 18,196 19,106 20,061 21,064 22,117 23,223 7753 Water Utilities Inflation 19,322 19,322 20,288 21,303 22,368 23,486 24,660 7801 Building Maintenance General Inflation - - - - - - - 7810 Electrical Supplies General Inflation - - - - - - - 7811 Janitorial Supplies General Inflation - - - - - - - 7812 Sign Materials General Inflation - - - - - - - 7820 Parts-Vehicles General Inflation - - - - - - - 7821 Parts-Equip General Inflation 275,897 206,728 214,997 220,372 225,881 231,528 237,317 7830 Rock and Mineral Products General Inflation 15,000 15,000 15,600 15,990 16,390 16,799 17,219 7831 Asphalt General Inflation 5,000 5,000 5,200 5,330 5,463 5,600 5,740 7850 Small Tools General Inflation 5,000 8,000 8,320 8,528 8,741 8,960 9,184 7851 Safety Equipment General Inflation 44,900 44,900 46,696 47,863 49,060 50,286 51,544 7852 Uniforms and Accessories General Inflation 7,284 7,284 7,575 7,765 7,959 8,158 8,362 7853 Meters/Fittings - New Development General Inflation 102,268 62,943 65,461 67,097 68,775 70,494 72,256 7863 Meters/Fittings - Replacement General Inflation 183,431 163,089 169,613 173,853 178,199 182,654 187,221 7855 Fire Hose and Appliances General Inflation - - - - - - - 7856 Rescue Equipment General Inflation - - - - - - - 7857 Personal Protective Equipment General Inflation - - - - - - - 7858 Breathing Apparatus Equipment General Inflation - - - - - - - 7865 Automated Meter Program General Inflation - - - - - - - 7880 Gasoline and Oil Utilities Inflation 2,500 2,500 2,625 2,756 2,894 3,039 3,191 7881 Propane General Inflation 500 500 520 533 546 560 574 7882 Other Petrol Products General Inflation - - - - - - - Feb. 11, 2025
Item #8 Page 210 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Potable Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 7883 Chemicals Chemicals Inflation 55,213 68,485 71,909 75,505 79,280 83,244 87,406 7890 CMWD Purc Water-Outside Agency [ Calculated ] 19,000,000 21,005,774 23,594,936 26,868,459 29,491,788 30,947,570 32,395,140 7892 Desal Costs [ Calculated ] 8,300,000 9,342,325 9,984,419 10,944,980 11,223,258 11,509,589 11,804,326 7899 Misc Supplies General Inflation 45,000 45,000 46,800 47,970 49,169 50,398 51,658 8110 Employee Training General Inflation 6,000 6,000 6,240 6,396 6,556 6,720 6,888 8120 Tuition Reimbursement General Inflation - - - - - - - 8130 Training/Training Related Travel General Inflation 14,928 15,390 16,006 16,406 16,816 17,236 17,667 8500 Depreciation Depreciation Funding 5,000,000 5,000,000 5,058,000 5,116,167 5,175,003 5,234,515 5,294,712 8510 Prop Taxes PD General Inflation 2,869 2,869 2,984 3,058 3,135 3,213 3,294 8520 Conference Travel General Inflation 6,500 3,750 3,900 3,997 4,097 4,200 4,305 8522 Misc. Meals/Miles General Inflation 7,000 3,875 4,030 4,131 4,234 4,340 4,448 8530 Bad Debt Exp - Other Inv/Bills General Inflation 23,000 23,000 23,920 24,518 25,131 25,759 26,403 8532 Disposal of Assets One Time Expense - - - - - - - 8534 Reg Over/Short General Inflation - - - - - - - 8610 Settlements General Inflation - - - - - - - 8615 Interest on Deposit General Inflation - - - - - - - 8621 Interfund Services General Inflation - - - - - - - 8699 Misc Expenditures General Inflation - - - - - - - 8700 Contingencies General Inflation - - - - - - - 8809 Vehicle Direct Charges General Inflation 17,520 3,791 3,943 4,041 4,142 4,246 4,352 8810 Vehicle Maintenance General Inflation 163,344 168,080 174,803 179,173 183,653 188,244 192,950 8811 Vehicle Replacement General Inflation 204,931 194,257 202,028 207,078 212,255 217,562 223,001 8820 Street Lighting General Inflation - - - - - - - 8822 Median Maintenance General Inflation - - - - - - - 8830 General Lab General Inflation 251,630 668,640 695,386 712,770 730,589 748,854 767,576 8840 Copy Services General Inflation - - - - - - - 8855 Records Management Interdept General Inflation - - - - - - - 8860 Information Technologies General Inflation 625,906 747,533 777,434 796,870 816,792 837,212 858,142 8890 Misc Interdepartmental Charges General Inflation 1,898,025 1,983,283 2,062,614 2,114,179 2,167,034 2,221,210 2,276,740 8891 Mis Chg Back General Inflation - - - - - - - 8892 Utility Billing Chargeback General Inflation - - - - - - - 8910 Fiscal Agent Fees General Inflation - - - - - - - 8911 Arbitrage Costs General Inflation - - - - - - - 8912 Misc Debt Expense General Inflation - - - - - - - 8920 Principal [ Calculated ] - - - - - - - 8921 Interest Expense [ Calculated ] - - - - - - - 8922 Int Exp-Capitalized Interest General Inflation - - - - - - - 8930 Amortization Expense General Inflation - - - - - - - 8931 Issuance Costs General Inflation - - - - - - - Other No Annual Increase - - - - - - - Meter Replacements General Inflation - - 194,000 198,850 203,821 208,917 Additional Maintenance & Equipment [ Calculated Below ] (915,975) (924,107) (1,010,006) (1,102,894) (1,166,418) (1,206,540) (1,245,665) Total Maintenance & Equipment Costs 44,948,873$ 48,641,754$ 53,210,994$ 59,347,539$ 63,382,500$ 65,794,909$ 68,182,409$ Feb. 11, 2025
Item #8 Page 211 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Potable Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 Capital Outlay
9003 Non-Budgeted Cap Equip <$10K General Inflation -$ - -$ -$ -$ -$ -$ 9005 Capital Outlay <$10K New General Inflation 1,500 - - - - - - 9006 Capital Outlay < $10K - Repl General Inflation - - - - - - - 9010 Cap Outlay - Vehicles General Inflation 45,365 49,302 51,274 52,556 53,870 55,217 56,597 9018 Non-Budgeted Cap Equip > $10K General Inflation 11,795 - - - - - - 9019 Computer Equip > $10K - New General Inflation 30,223 - - - - - - 9020 Computer Equip > $10K - Repl General Inflation - - - - - - - 9021 Office Equipment General Inflation - - - - - - - 9022 Other Equipment General Inflation - - - - - - - 9030 Office Furniture General Inflation - - - - - - - 9040 Reclass Capital Outlay General Inflation - - - - - - - 9050 Capitalized Assets One Time Expense - - - - - - - Other Capital Outlay General Inflation - - - - - - - Total Capital Outlay Costs 88,883$ 49,302$ 51,274$ 52,556$ 53,870$ 55,217$ 56,597$ Other Financing Uses
9999 Transfers Out One Time Expense 5,000,000$ 5,000,000 -$ -$ -$ -$ -$ Other Other Financing Uses General Inflation - - - - - - - Total Other Financing Uses Costs 5,000,000$ 5,000,000$ -$ -$ -$ -$ -$ Total Expenditures 54,356,794$ 58,473,835$ 58,447,928$ 64,756,123$ 68,967,386$ 71,560,945$ 74,135,962$ Rate Revenues Without Increases FOR REFERENCE - DOES NOT IMPACT MODEL CALCULATIONS With Split out of Pass-throughs Carlsbad Portion
Commodity Usage Cust. Grwth + Usage Grwth 28,385,758$ 29,170,239$ 6,735,943$ 6,750,073$ 6,775,430$ 6,842,202$ 6,912,290$ Water Delivery Charges Customer Growth 13,013,359 13,373,002 7,492,817 7,508,535 7,536,742 7,611,016 7,688,979 Total Rate Revenues Without Increases $41,399,117 $42,543,241 $14,228,760 $14,258,608 $14,312,172 $14,453,218 $14,601,269 Adjusted down for Pass-through Implementation
Without Split out of Pass-throughs
Commodity Usage Cust. Grwth + Usage Grwth 28,385,758$ 29,170,239$ 29,348,040$ 29,409,605$ 29,520,086$ 29,811,005$ 30,116,371$ Water Delivery Charges Customer Growth 13,013,359 13,373,002 13,454,514 13,482,738 13,533,388 13,666,759 13,806,753 Total Rate Revenues Without Increases $41,399,117 $42,543,241 $42,802,554 $42,892,343 $43,053,473 $43,477,764 $43,923,125 Feb. 11, 2025
Item #8 Page 212 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Recycled Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
CODE LINE ITEM ESCALATOR FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028

REVENUES
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Charges for Services
5100 Commodity Usage Customer Growth 7,168,231$ 7,510,773$ 7,858,815$ 8,229,690$ 8,632,333$ 9,109,687$ 5101 Water Delivery Charges Customer Growth 1,316,515 1,379,426 1,443,348 1,511,462 1,585,412 1,673,083 5110 New Acct Charges Gnrl Infltn + Cstmr Dmnd Grwth 1,000 1,057 1,106 1,136 1,169 1,210 5111 Backflow Device Gnrl Infltn + Cstmr Dmnd Grwth 186 197 206 211 217 225 5113 Quick Turnon Fees Gnrl Infltn + Cstmr Dmnd Grwth - - - - - - 5115 SCHEDULED DISCONNET FEE Gnrl Infltn + Cstmr Dmnd Grwth - - - - - - 5124 Service Installation Fees Gnrl Infltn + Cstmr Dmnd Grwth - - - - - - Other General Inflation - - - - - - Total Charges for Services 8,485,932$ 8,891,454$ 9,303,475$ 9,742,500$ 10,219,131$ 10,784,205$ Fines and Forfeitures
5221 Reconnect Fees General Inflation - -$ -$ -$ -$ -$ 5222 Return Check Fee General Inflation 100 105 109 112 115 118 5225 Late Charges General Inflation 4,181 4,390 4,566 4,680 4,797 4,917 5226 Door Hanger Fee General Inflation 29 30 32 32 33 34 5342 Cell Site Leases General Inflation 74,000 77,700 80,808 82,828 84,899 87,021 Other Fines and Forfeitures General Inflation - - - - - - Total Fines and Forfeitures 78,310$ 82,226$ 85,515$ 87,652$ 89,844$ 92,090$ Income from Property & Investments
5300 Interest Income - Pooled Cash [Calculated] - 108,360$ 96,700$ 106,459$ 107,212$ 76,832$ 5305 Interest-Unrealzd Gains/Losses General Inflation - - - - - - 5310 Interest Income Frm Othr Inv General Inflation - - - - - - 5313 Interest Income-Leases One Time Expense - - - - - - 5325 GASB 87 Lease Revenue One Time Expense - - - - - - 5360 Sale of Capital Assets General Inflation - - - - - - 5361 Donated Assets One Time Expense - - - - - - Other Income from Property & Investments General Inflation - - - - - - Total Income from Property & Investments -$ 108,360$ 96,700$ 106,459$ 107,212$ 76,832$ Interdepartmental
5430 Eng Labor General Inflation 10,000 10,500$ 10,920$ 11,193$ 11,473$ 11,760$ Feb. 11, 2025
Item #8 Page 213 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Recycled Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
5442 Reimbursed Work for Other Dept. General Inflation - - - - - - Other Interdepartmental General Inflation - - - - - - Total Interdepartmental 10,000$ 10,500$ 10,920$ 11,193$ 11,473$ 11,760$ Other Revenues
5550 Prior Year Fee Refunds General Inflation - -$ -$ -$ -$ -$ 5639 Misc Reimbursement Exp. General Inflation - - - - - - 5674 Misc Revenues General Inflation - - - - - - 5664 Misc AR Write Offs General Inflation - - - - - - Other Other Revenues General Inflation - - - - - - 4012 Property Taxes - Current Property Tax Increase - 801,864 825,519 852,101 880,391 906,715 4015 Refunds - Current Taxes Property Tax Increase - - - - - 4016 Supplemental Property Taxes Property Tax Increase 16,620 17,110 17,661 18,248 18,793 4018 Refunds - Supplemental Taxes Property Tax Increase - - - - - 4020 Unitary Tax (combine w/4011) Property Tax Increase 13,687 14,091 14,545 15,027 15,477 4021 Prior Years Property Taxes Property Tax Increase 11,145 11,474 11,843 12,237 12,602 4027 Refunds - Prior Year Taxes Property Tax Increase (4,888) (5,032) (5,194) (5,367) (5,527) 4111 Surplus Property Tax Increment Property Tax Increase - - - - - 0 Sales and Use tax Property Tax Increase - - - - - 0 Other Tax Revenues Property Tax Increase - - - - - Total Other Revenues -$ 838,428$ 863,162$ 890,956$ 920,536$ 948,060$ Other Financing Sources
5900 Transfers In No Annual Increase - -$ -$ -$ -$ -$ Other Other Financing Sources General Inflation - - - - - - Total Other Financing Sources -$ -$ -$ -$ -$ -$ TOTAL REVENUES 8,574,242$ 9,930,968$ 10,359,772$ 10,838,760$ 11,348,195$ 11,912,946$ Feb. 11, 2025
Item #8 Page 214 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Recycled Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028

EXPENDITURES
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Projection (Pre-
Rate Increase)
Personnel
6100 Reg Salaries Labor Inflation 1,222,869$ 1,123,946$ 1,168,904$ 1,203,971$ 1,240,090$ 1,277,293$ 6101 Incentive Pay Labor Inflation - - - - - - 6135 Hazard Pay Labor Inflation - 6,919 7,196 7,412 7,634 7,863 6140 Other Personnel Labor Inflation - - - - - - 6150 IOD Worker's Comp Labor Inflation - - - - - - 6200 Overtime Salaries Labor Inflation 33,685 40,000 41,600 42,848 44,133 45,457 6210 Standby Pay Labor Inflation 4,172 4,210 4,378 4,510 4,645 4,784 6300 Parttimes Salaries Labor Inflation 48,480 102,817 106,930 110,138 113,442 116,845 6305 Intern Salaries Labor Inflation 1,823 1,823 1,896 1,953 2,011 2,072 6310 Elected Officials' Salaries Labor Inflation - - - - - - 6405 Retired Annuitant Projects Labor Inflation 42,848 30,000 31,200 32,136 33,100 34,093 6620 Mgt Physicals Labor Inflation - - - - - - 6400 Temproary Help Labor Inflation - - - - - - 6501 Health Insurance Labor - Health Insurance 188,381 175,511 186,709 198,154 209,845 221,806 6510 Life Insurance Labor Inflation 953 845 879 905 932 960 6511 AD&D - City Paid Labor Inflation 484 422 439 452 466 480 6520 Vision Insurance Labor Inflation - - - - - - 6530 Medicare Labor Inflation 19,632 17,321 18,014 18,554 19,111 19,684 6629 Cell Phone Allowance Labor Inflation - - - - - - 6630 Auto Allowance Labor Inflation 488 488 508 523 538 555 6640 Earned Leave Accrual Labor Inflation - - - - - - 6651 Healthy Emp Awards Labor Inflation - - - - - - 6653 Final Vacation Pay Labor Inflation - - - - - - 6654 Final Sick Leave Pay Labor Inflation - - - - - - 6655 Disability Labor Inflation 11,047 6,763 7,034 7,245 7,462 7,686 6656 Unemployment Labor Inflation 6,443 5,901 6,137 6,321 6,511 6,706 6657 Worker's Compensation Labor Inflation 26,030 27,630 28,735 29,597 30,485 31,400 6720 PERS Labor - PERS (Normal Cost) 147,620 142,153 154,295 158,924 163,692 168,603 6722 OPEB Expense One Time Expense - - - - - - 6723 PERS Unfunded Liability Exp Labor - PERS (Normal Cost) 157,707 122,615 198,129 202,147 206,227 210,370 6730 Social Security Labor Inflation - - - - - - 6740 Deffered Comp Labor Inflation 1,886 1,936 2,013 2,074 2,136 2,200 6741 Def Comp Match Labor Inflation - - - - - - Other Personnel Labor Inflation - - - - - - Total Personnel Costs 1,914,548$ 1,811,300$ 1,964,995$ 2,027,862$ 2,092,461$ 2,158,857$ Feb. 11, 2025
Item #8 Page 215 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Recycled Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
Feb. 11, 2025
Item #8 Page 216 of 265

CITY OF CARLSABAD
Potable Water and Recycled Water Financial Model
Recycled Water O&M
FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028
Maintenance & Equipment
7110 Office Equp Rental General Inflation -$ - -$ -$ -$ -$ 7111 Other Mach & Equip General Inflation - - - - - - 7119 Misc Rentals General Inflation 500 500 525 546 560 574 7120 Misc Leases General Inflation - - - - - - 7210 Office Equip Maintenance General Inflation - - - - - - 7211 Communication Equip Maintenance General Inflation - - - - - - 7215 Software Maintenance General Inflation 246 - - - - - 7216 Computer Maintenance General Inflation - - 7220 Vehicle Maint General Inflation - - - - - - 7221 Wash and Wax General Inflation 2,125 1,500 1,575 1,638 1,679 1,721 7222 Other Equip Maintenance General Inflation 500 500 525 546 560 574 7225 Car Wash Repairs General Inflation - - 7226 Pipeline Maintenance General Inflation 63,250 10,000 10,500 10,920 11,193 11,473 7227 FIRE HYDRANT MAINT - CITY General Inflation 5,000 5,000 5,250 5,460 5,597 5,736 7230 Routine Building Mainteance General Inflation 1,000 1,000 1,050 1,092 1,119 1,147 7241 Asphalt Repairs General Inflation 1,000 1,500 1,575 1,638 1,679 1,721 7249 Maintenance, Repair and Rehab General Inflation 3,243 3,243 3,405 3,541 3,630 3,721 7400 Audit General Inflation - - - - - - 7410 Legal General Inflation - - - - - - 7435 Administrative General Inflation - - - - - - 7480 Claims Admin General Inflation - - - - - - 7490 Misc Professional Services General Inflation 285,565 275,882 289,676 301,263 308,795 316,515 7500 Encina Services General Inflation 1,575,000 2,000,000 $1,926,044 1,862,317 1,908,875 1,956,597 Encina Services (Pension Payoff) No Annual Increase (71,778) (73,704) (75,823) (78,002) (80,245) (82,552) 7510 City Generated General Inflation - - - - - - 7511 Citizen Generated General Inflation - - - - - - 7550 Miscellaneous Outside Services General Inflation 173,833 138,025 144,926 150,723 154,491 158,354 7551 Bank Services General Inflation 1,560 1,560 1,638 1,704 1,746 1,790 7552 Book Binding General Inflation - - - - - - 7554 Regulatory/Permitting Fees General Inflation 30,000 16,030 16,832 17,505 17,942 18,391 7556 Misc Services General Inflation - - - - - - 7557 MWD/CWA Fixed Charges General Inflation - - - - - - 7558 Laundry and Uniform Mainteance General Inflation 3,000 3,000 3,150 3,276 3,358 3,442 7559 Electrical/SCADA services General Inflation 40,449 34,400 36,120 37,565 38,504 39,467 7564 Landscaping Services General Inflation 22,000 48,967 51,415 53,472 54,808 56,179 7710 Ads and Publishing General Inflation - - - - - - 7711 Dues and Subscriptions General Inflation 11,403 6,000 6,300 6,552 6,716 6,884 7712 Books and Publications General Inflation 500 500 525 546 560 574 Feb. 11, 2025
Item #8 Page 217 of 265

Carlsbad City CouncilFebruary 11, 2025

Carlsbad City Council
February 11, 2025