Water and Wastewater Financial Plan Updates
CITY of COTATI Preliminary Findings
1963 February 25, 2025
HILDEBRAND
CONSULTING
Agenda
1. Water Financial Plan
Financial inputs
• Capital spending forecast
• Proposed rates
2. Sewer Financial Plan
• Financial inputs
• Capital spending forecast
• Proposed rates
3. Project Schedule
2 Legal Requirements
for Setting Water and Sewer Rates In California
Proposition 218 (Article XIIID, Section 6 of California Constitution) • Revenues shall not exceed funds required to provide service; nor used for another purpose
• Amount shall not exceed the proportional cost of the service attributable to the parcel
• Service must be actually used or immediately available • Approval process includes 45-day notice, public hearing, and written majority protest. Does not require a voting process (unlike taxes). 3 Study Findings Summary
A 5-year rate schedule was adopted in 2022 for both Water and Wastewater rates.
This current study updated both financial plans in order to check whether the respective utilities are "on track" with the 2022 projections.
Both financial plan updates have found that utility rates will need to be modified due to changes in both revenues and expenses.
4 Water Utility
Water Operating Expenses
FY2024/25 Budget
In-Lieu Housing Payments
3.5%
Salaries and Benefits $747,000 Salaries and
Professional Services $184,500 Benefits
SCWA Water 32.7%
Maintenance $121,500 Purchases
30.5%
Utilities $133,600
Conservation $28,800
Taxes, Insurance and Other $121,800
Adminstration $171,100
SCWA Water Purchases $697,300
In-Lieu Housing Payments $80,000
Total Budget: $2,285,600 Professional
Services
Adminstration
8.1%
7.5%
Maintenance
Taxes, Insurance 5.3%
and Other Conservation L Utilities
5.3% 1.3% 5.8%
6 Annual Inflation Assumptions
Salaries.................. 3%
Benefits. 4%
Utilities .......18%, then 8% (2 years), then 5%
Insurance.....15%, then 6% (3 years), then 3%
Water Purchases..... 12%, then 6%
Subregional..........6%, then averaging 4%
All other costs...........3%
7 Water Capital Spending
$4.5 Includes Cypress
$4.0 Storage Tank and
associated water
$3.5 main
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033 FY2034 FY2035 Recent average Capital: Forecasted average Capital:
$406K $1.3M
8 Water Capital Project List
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Total
1 Well 1A/Well 3 Treatment Renewal and Replacement $150,000 $150,000 2 Well 2 Renewal/Remediation $60,000 $175,000 $235,000
3 Water and Sewer Renewal and Replacement $150,000 $150,000 4 Distribution System Monitoring $0
5 Well No. 4 $0
6 West Sierra Tank Recoating $838,000 $838,000
7 BP-1: Cypress Tank Booster Pumps $226,000 $600,000 $826,000 8 T-1: New Cypress Storage Tank $226,000 $2,600,000 $2,826,000 9 P-5: Sycamore Lane Water Main Replacement $650,000 $650,000 10 P-3, 4: Cypress Tank New Water Main $80,000 $180,000 $950,000 $1,210,000 11 P-1: Portal Street, Mercantile, Aaron Main Replacement $100,000 $1,490,000 $1,590,000 12 SCADA Water $53,000 $53,000
13 Well 3 Emergency Repairs 80000 80000
14 Total Capital Spending (FY 2025 dollars) $193,000 $555,000 $632,000 $4,150,000 $1,588,000 $1,490,000 $8,608,000 9 Water Proposed Capital Funding Strategy
$4.5
$4.0 Projected Debt Financed
$3.5 • Projected Cash Financed
$3.0 •Actual Spending
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033 FY2034 FY2035 10 Proposed Water Financial Plan
/ Non-Rate Revenue = Existing Rate Revenue • Additional Rate Revenue $6 • Operating Expenses II Debt • Cash Capital
$5
$4
Total Revenue / Expenses ($M)
$3
HIII
$2
Revenues Expenses
$0
FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033 FY2034 FY2035 - Combined Ending Fund Balance - - • Target Reserve Level — Minimum Reserve Levels $5
$4
$3
$2 --------------
------
FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033 FY2034 FY2035 Proposed Forecasted
Rate Revenue Increase: 11.0% 11.0% 11.0% 8.0% 8.0% 8.0% 7.0% 6.0% 6.0% 6.0% (previously adopted) 6.0% 6.0% 6.0%
Debt Coverage Ratio: na 2.18 1.32 1.57 1.68 1.61 1.86 2.03 2.26 2.41 Debt Proceeds: $5.0M $2.4M
11 Financial Changes since 2022 Water Rate Study
• Revenue
• Annual Usage revenue is lower by 16% ($220 thousand) due to decrease in water usage
• Projected Capital Spending from 2025 - 2032
• 2022 projection: $5.8M
• Updated projection: $10.4M (79% increase)
• Operating Expenses for FY 2026
• Previously projected to be $2.27M
• Actual budget is $2.42M (increase of 6%)
The increase is largely driven by water supply, utilities, insurance, & salaries (includes UAL) 12 Proposed 5-Year Water Rate Schedule
Proposed Water Rates?
Current June 2025 June 2026 June 2027 June 2028 June 2029 Monthly Service Charge
3/4" meter $28.37 $31.49 $34.95 $38.79 $41.89 $45.24
1" meter $46.37 $51.47 $57.13 $63.41 $68.48 $73.96
11/2" meter $90.98 $100.99 $112.10 $124.43 $134.38 $145.13 2" meter $144.72 $160.64 $178.31 $197.92 $213.75 $230.85 3" meter $270.19 $299.91 $332.90 $369.52 $399.08 $431.01 4" meter $449.41 $498.85 $553.72 $614.63 $663.80 $716.90 Water Usage Rates ($/TGAL)
Residential
Tier 1 (0 to 5 TGAL) $2.42 $2.69 $2.99 $3.32 $3.59 $3.88 Tier 2 (5 to 10 TGAL) $3.10 $3.44 $3.82 $4.24 $4.58 $4.95 Tier 3 (over 10 TGAL) $3.87 $4.30 $4.77 $5.29 $5.71 $6.17 Multi-Family, Non-Resid., & Irrigation
All Water Usage $2.67 $2.96 $3.29 $3.65 $3.94 $4.26
1 "TGAL" means thousand gallons
2 New rates implemented on the June 15th of the indicated year 13 Example of Water Bill Impacts with Year 1 Rates
Monthly Water
Meter Use Current Proposed Bill Change per
Size (TGAL) Bill (Year 1) Statement
Single Family
Low Use 3/4" 3 $35.63 $39.56 $3.93
Average Use 3/4" 5 $40.47 $44.94 $4.47
High Use 3/4" 12 $57.41 $63.77 $6.36
Multifamily
Duplex 3/4" 6 $44.39 $49.25 $4.86
Apartment (8 units) 1.5" 20 $144.38 $160.19 $15.81
Non-Residential
Retail Business 1" 4 $57.05 $63.31 $6.26
Restaurant 1" 10 $73.07 $81.07 $8.00
Institution 3" 100 $537.19 $595.91 $58.72
Irrigation 2" 50 $278.22 $308.64 $30.42
14 Sewer Rates
15 Sewer Operating Expenses
FY2024/25 Budget Administration Salaries and
2.0% Benefits
18.2%
Taxes, Insurance and Supplies
Other 0.2%
4.5%
Salaries and Benefits $701,000 Professional
Supplies $7,000 Services
2.8%
Professional Services $110,000
Maintenance $184,000 Maintenance
Utilities $33,000 4.8%
Subregional 0&M & Debt
Subregional O&M & Debt Service $2,507,000 Service Utilities
64.9% 0.9%
Taxes, Insurance and Other $175,200
Administration $76,000
In-Lieu Housing Payments $67,000
Total Budget: $3,860,200
16 Sewer Capital Spending
$1.2
$1.0
$0.8
$0.6
$0.4
$0.2
$0.0
FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033 FY2034 FY2035 Recent average Capital: Forecasted average Capital:
$740K $606K 17
Sewer Capital Project List
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Total
1 Sewer Renewal and Replacement (R&R) Master Plan $70,000 $70,000 2 Sewer Collection System R&R $90,000 $175,000 $500,000 $500,000 $500,000 $1,765,000 3 Sewer Lift Stations R&R $110,000 $150,000 $150,000 $410,000 4 SCADA Sewer $53,000
5 Sewer Lift Station Emergency Generator Project $185,000 $185,000 $370,000 6 Total Capital Spending (FY 2025 dollars) $53,000 $455,000 $360,000 $500,000 $650,000 $650,000 $2,668,000 18 Sewer Financial Plan
/ Non-Rate Revenue = Existing Rate Revenue • Additional Rate Revenue $7 • Cash Capital
• Operating Expenses Il Debt
$6
$5
Total Revenue / Expenses ($M) $4
$3
$2
Expenses Revenues
$1
$0
FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033 FY2034 FY2035 $3 - Combined Ending Fund Balance
- - •Target Reserve Level
$2 ----
------
$0
FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033 FY2034 FY2035 Proposed Forecasted
Rate Revenue Increase: 10.0% 10.0% 10.0% 10.0% 5.0% 4.0% 4.0% 3.0% 3.0% 3.0% Previously Adopted 9.0% 9.0% 5.0% 19
Financial Changes since 2022 Sewer Rate Study
• Revenue
• Usage revenue is lower by 12% ($208 thousand) due to decrease in water usage • Projected Capital Spending from 2025 - 2032
• 2022 projection: $2.1M
• Updated projection: $4.2M (100% increase)
• Operating Expenses for FY 2026
• (no significant difference)
20 Proposed Sewer Rate Schedule
Proposed Sewer Rates?
Current June 2025 June 2026 June 2027 June 2028 June 2029 Monthly Service Charge
3/4" meter $53.25 $58.58 $64.44 $70.88 $77.97 $81.87
1" meter $87.717 $96.48 $106.13 $116.74 $128.41 $134.83 1 1/2" meter $173.12 $190.43 $209.47 $230.42 $253.46 $266.13 2" meter $276.01 $303.61 $333.97 $367.37 $404.117 $424.32 3" meter $516.28 $567.91 $624.70 $687.17 $755.89 $793.68 4" meter $859.42 $945.36 $1,039.90 $1,143.89 $1,258.28 $1,321.19 Sewer Usage Rates ($/TGAL) I
All Customers $6.22 $6.84 $7.52 $8.27 $9.10 $9.56
" Residential customers without separate irrigation meters will be charged based on the lesser of the estimated actual use and the actual water usage. All other customers will have sewer service charges based on the metered water consumption from all sources except those sources that are not discharged to the city sewer as determined by the City Engineer.
' New rates implemented on the June 15th of the indicated year 21 Example of Sewer Bill Impacts with Year 1 Rates
Monthly
Meter Sewer Use Current Proposed Change per
Size (TGAL) Bill Bill Statement
[Single Family
Low Use 3/4" 2 $65.69 $72.26 $6.57
Average Use 3/4" 3 $71.91 $79.10 $7.19
High Use 3/4" 8 $103.01 $113.30 $10.29
Multifamily
Duplex (2 units) 3/4" 5 $84.35 $92.78 $8.43
Apartment (8 units) 1.5" 10 $235.32 $258.83 $23.51
Non-Residential
Retail Business 3/4" 2 $65.69 $72.26 $6.57
Restaurant 10 $149.91 $164.88 $14.97
Institution 2" 25 $431.51 $474.61 $43.10
22 Schedule
1. Preliminary Recommendations to City Council - February 25 V
2. Final Recommendation to City Council - March 11
3. Mail Prop 218 Notices - Late March
4. Public Hearing- May 27
5. Implement Rates - June 15
23