Daly City City Council
June 12, 2023

City of Daly City Water Rate Study
Table of Contents

HF&H Consultants, LLC Page ii May 26, 2023
Quantity Charge Rates .................................................................................. 26

6. CUSTOMER BILL IMPACTS ......................................................................... 28 City Customer Bills ............................................................................................. 28 Bill Comparison With Neighboring Agencies ......................................................... 28

TABLES AND FIGURES

Figure 1-1. Proposed Rate Revenue Increases ........................................................... 4 Figure 1-2. Proposed Bi-monthly Base Charge Rates .................................................. 4 Figure 1-3. Proposed Quantity Charge Rates Per HCF ................................................. 5 Figure 1-4. Year End Projected Reserve Fund Balances .............................................. 5 Figure 1-5. Debt Coverage Ratio ............................................................................... 6 Figure 3-1. Modeling Assumptions ........................................................................... 10 Figure 3-2. Revenue Requirement Projections .......................................................... 11 Figure 3-3. Capital Improvement Plan ..................................................................... 12 Figure 3-4. Capital Projects By Function .................................................................. 13 Figure 3-5. Current and Projected Rate Revenues .................................................... 13 Figure 3-6. Projected Cash Reserve Balance at Year End .......................................... 15 Figure 4-1. Estimated Demands and Load Factors By Service Level (FY 2016-17) ....... 18 Figure 4-2. Base/Extra Capacity Allocation Factors (FY 2016-17) ............................... 19 Figure 4-3. Services Provided By City Facilities ......................................................... 20 Figure 4-4. Cost-of-Service Allocations (FY 2017-18) ................................................ 21 Figure 4-5. Quantity Charges (FY 2017-18).............................................................. 22 Figure 5-1. FY 2017-18 to FY 2022-23 Bi-monthly Base Charge Rates ....................... 24 Figure 5-2. FY 2017-18 to FY 2022-23 Bi-monthly Quantity Charge Rates ................. 25 Figure 5-3. Proposed Bi-monthly Base Charges Per Account ..................................... 26 Figure 5-4. Proposed Quantity Charge Rates ............................................................ 26 Figure 6-1. Current and Proposed Bill Comparison (FY 2023-24) ............................... 28 Figure 6-2. Comparison of Residential Bi-monthly with Other Agencies ...................... 29

APPENDIX: RATE MODEL

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Table of Contents

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ACRONYMS

FY fiscal year
BP Breakpoint, as in water consumption tier breakpoint.

COS cost of service
HCF hundred cubic feet of metered water sold; 748 gallons; a cube of water 4.6 feet on edge.

GCD gallons per capita per day
GPD gallons per day
MG million gallons
MGD million gallons per day
PAYGo Refers to a method of paying for capital projects on a pay-as-you-go basis, rather than through long-term debt issuance.

Base charge Refers to the City’s fixed bi-monthly charge per account based on the size of the service or meter.

SFPUC San Francisco Public Utilities Commission
SFR single-family residential
Quantity charge Refers to the City’s charge per HCF, which varies depending on the amount of water use during the billing period.

ACKNOWLEDGEMENTS

City Council
Raymond A. Buenaventura, Mayor
Juslyn C. Manalo, Vice Mayor, Water Committee Member
Dr. Rod Daus-Magbual, Councilmember, Water Committee Member Glenn R. Sylvester, Councilmember
Pamela DiGiovanni, Councilmember

City Staff
Thomas Piccolotti, City Manager
Joshua Cosgrove, Director of Water and Wastewater Resources Tim Nevin, Director of Finance and Administrative Services Anthony Tofiga, Senior Management Analyst
Gregory Krauss, Chief of Operations Water and Wastewater Resources Kaila DeFries, Management Analyst

City of Daly City Water Rate Study
Table of Contents

HF&H Consultants, LLC Page iv May 26, 2023
HF&H Consultants, LLC
John Farnkopf, Senior Vice President
Geoff Michalczyk, Senior Associate

LIMITATIONS

This document was prepared solely for City of Daly City in accordance with the contract between the City and HF&H and is not in intended for use by any other party for any other purpose. In preparing this study, we relied on information and instructions f rom the City, which we consider accurate and reliable and did not independently verify.

Rounding differences caused by stored values in electronic models may exist.

This document represents our understanding of relevant laws, regulations, and court decisions but should not be relied upon as legal advice. Questions concerning the interpretation of legal authorities referenced in this document should be referred to a qualified attorney.

CITY OF DALY CITY

WATER RATE STUDY

City of Daly City Water Rate Study

1. Executive Summary

HF&H Consultants, LLC Page 3 May 26, 2023

1. EXECUTIVE SUMMARY

STUDY BACKGROUND AND OBJECTIVES
In 2018, HF&H Consultants, LLC (HF&H) completed the City’s most recent water rate study, which set rates for a five-year period from FY 2018-19 through FY 2022-23. HF&H recommended a 6.5% overall rate revenue increase in FY 2018-19 followed by a series of

9.5% revenue increases effective each July 1.

The rate increases were necessary due to increases in the cost of purchased water from the SFPUC, the need to build reserves that had been de pleted due to revenue shortfalls in response to water conservation by customers , and increased capital improvement projects including addressing deferred maintenance.

Additionally, HF&H recommended increasing the number of quantity charge tiers from two t o three and adjusting the breakpoints to match the demand patterns of City customers.

The objectives of this study were the following:

1. Update the ten-year financial plan. Ensure revenue from future rates is able to continue covering costs without depleting reserves and maintaining necessary debt service coverage requirements.

2. Revisit cost-of-service and rate design. Revisit the allocations of the City’s costs to verify that the rates are based on cost-of-service rate-making principles.

3. Implement rates. Assist the City in implementing the updated rates through the Proposition 218 process.

FINDINGS AND RECOMMMENDATIONS
In preparing this water rate study, the following findings were made.

1. Operating costs. Operating and Maintenance (O&M) expenses within the City’s control such as for personnel are increasing generally at the rate of inflation.

2. Capital costs. The City’s five-year capital improvement plan assumes $39 million in pay-as-you-go (PAYGo) capital projects and the possible issua nce of a $40 million bond to fund the Citrus Pump Station.

3. Cost of purchased water. The City is reliant on the San Francisco Public Utilities Commission (SFPUC) for its potable water supply. The cost of water, $ 5.30 per

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Hundred Cubic Foot (HCF) , is projected by the SFPUC to remain constant throughout the planning period (through FY 2027-28).

4. Projected rate revenue increases . Figure 1 -1 shows the projected annual rate revenue increases needed to maintain the City’s c ash reserve balance above its target balance. Both the bi-monthly base charge and quantity charge (charge per HCF of water use) will increase 4.0% each July 1 through FY 2027-28. This applies to all customer classes, meter sizes, and tiered rates.

Figure 1-1. Proposed Rate Revenue Increases

5. Figure 1-2 and Figure 1-3 show the proposed rates with the rate increases in Figure 1-1. These rates apply the revenue increases in Figure 1-1 across the board to the current rates in FY 2022-23.

Figure 1-2. Proposed Bi-monthly Base Charge Rates

Fiscal Year
Effective
Date
Revenue
Adjustment
FY 2023-24 7/1/2023 4.0%
FY 2024-25 7/1/2024 4.0%
FY 2025-26 7/1/2025 4.0%
FY 2026-27 7/1/2026 4.0%
FY 2027-28 7/1/2027 4.0%
Meter Size Current Charge FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 % Increase 4.0% 4.0% 4.0% 4.0% 4.0%
effective date 7/1/2023 7/1/2024 7/1/2025 7/1/2026 7/1/2027 5/8" Meter $54.41 $56.59 $58.85 $61.20 $63.65 $66.20
3/4" Meter $54.41 $56.59 $58.85 $61.20 $63.65 $66.20
1" Meter $82.94 $86.26 $89.71 $93.30 $97.03 $100.91

1.5" Meter $148.91 $154.87 $161.06 $167.50 $174.20 $181.17 2" Meter $230.66 $239.89 $249.48 $259.46 $269.84 $280.63 3" Meter $493.77 $513.52 $534.06 $555.42 $577.64 $600.75 4" Meter $848.66 $882.61 $917.91 $954.63 $992.81 $1,032.52 6" Meter $1,735.88 $1,805.32 $1,877.53 $1,952.63 $2,030.73 $2,111.96 8" Meter $3,278.89 $3,410.05 $3,546.45 $3,688.31 $3,835.84 $3,989.27 10" Meter $5,207.64 $5,415.95 $5,632.58 $5,857.89 $6,092.20 $6,335.89 12" Meter $6,866.36 $7,141.01 $7,426.65 $7,723.72 $8,032.67 $8,353.98

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Figure 1-3. Proposed Quantity Charge Rates Per HCF

6. Reserve Fund Balance. Figure 1-4 shows the projected fund reserve balance with the proposed rate increases in Figure 1-1. The City’s fund balance (solid green line) will be above the target balance (solid blue line), which covers the operating and capital requirements. The combination of the revenue increases plus the use of reserves is projected to provide the required funding for the next five years.

Figure 1-4. Year End Projected Reserve Fund Balances

7. Debt and debt coverage ratio. The City currently pays approximately $650,000 in annual debt service on a refunding bond that was issued in 2013. The last payment will be made in FY 2023-24. The City is considering issuing additional debt in FY 2026-27 to pay for a $40 million pump station that will result in annual debt service of $2.3 million.

Tier Current Rate FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 % Increase 4.0% 4.0% 4.0% 4.0% 4.0%
effective date 7/1/2023 7/1/2024 7/1/2025 7/1/2026 7/1/2027 Tier 1 - 0-13 HCF $6.83 $7.10 $7.39 $7.68 $7.99 $8.31
Tier 2 - 14-26 HCF $9.04 $9.40 $9.78 $10.17 $10.58 $11.00 Tier 3 - 27+ HCF $12.48 $12.98 $13.50 $14.04 $14.60 $15.18

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With the recommended revenue increases, the City’s debt coverage ratio1 is higher than the required 1.20 throughout the planning period despite the introduction of additional debt service. Figure 1-5 shows the projected debt coverage ratio.

Figure 1-5. Debt Coverage Ratio

8. Cost-of-Service and Rate Design. A comprehensive cost -of-service study was performed by HF&H in 2018. Based on that study, rates were restructured so that they were based on the prevailing cost of service. Since that time, there have been minor changes that are not significant enough to warrant adjustments at this time.

Over the next five years, further minor changes can be expected. When the next rate update is conducted, it would be appropriate to evaluate the cost of service to determine if the cumulative changes in customer demands are sufficient to justify making cost-of-service adjustments to the rate structure. It is not unusual in a built-out city to see only slight changes in the cost of service.

9. Pass-through adjustments to volumetric rates . The cost of SFPUC water is the single largest component of the City’s revenue requirements. Because the City has no control over the SFPUC’s wholesale water rate, this cost is simply passed through to the City’s customers. The SFPUC provides projections of its future wholesale water rat es, which are built into the rate projections in this study and are projected to be $5.30 per HCF through the planning period.

The SFPUC updates its projections each year as part of the rate -making process legally prescribed in the wholesale Water Supply Agreement. California Government Code Section 53756 authorizes water suppliers to adjust their rates in response to changes in pass -through costs. It is r ecommended that the City incorporate annual pass-through adjustments in its rates.

IMPLEMENTATION
After increasing rates effective J uly 1, 2023, the City should monitor its rates annually before implementing subsequent rate increases. Several factors influence the accuracy of

1 Debt service coverage is the amount of rate revenue available to pay debt service after operating expenses have been paid. The minimum required revenue coverage is 1.20 times the amount of annual debt service after operating expenses have been paid from rate revenue.

Fiscal Year
Effective
Date
Revenue
Adjustment
Debt Coverage
Ratio
FY 2023-24 7/1/2023 4.0% 8.21
FY 2024-25 7/1/2024 4.0% N/A
FY 2025-26 7/1/2025 4.0% N/A
FY 2026-27 7/1/2026 4.0% 3.13
FY 2027-28 7/1/2027 4.0% 3.42

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the projections. For example, the cost of SFPUC water is subject to annual adjustment by the SFPUC. In addition, customer demand is subject to water supply availability, which cannot be precisely projected.

Each year the City should determine how much, if any, pass -through adjustment is required as soon as the SFPUC submits its updated wholesale rates, which is typically in April or May of each year.

City of Daly City Water Rate Study

2. Introduction

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2. INTRODUCTION
In 2018, HF&H performed a comprehensive cost-of-service rate study , recommending implementation of proposed rates each year. In 2023, the City requested HF&H to update its water rates . The purpose of this report is to document the analysis and summarize our assumptions, findings, and recommendations.

The report is organized to explain the how the revenue requirements are determined over the next five years. As part of the documentation, this report includes a copy of the spreadsheet model that was used to derive rates.

STUDY PURPOSE
The purpose of this study is to update the 2018
cost-of-service analysis to develop proposed rates
for FY 2023 -24 through FY 2027 -28. In 2018, the
cost-of-service analysis determined how much
revenue should be generated by each component
of the rate structures so that rate payers are
charged for their proportionate shares of the cost
of providing service. The cost-of-service analysis
is tailored specifically to the City’s customers.

In the current rate update, analysis of recent
customer demand patterns confirmed that there
have not been significant changes in the cost of
service since 2018. As a result, no adjustment in
the rate structure is needed because it continues
to reflect the proportionate use of customers.

STUDY PROCESS
The rate study was conducted following industry
standards and practices promulgated by the
American Water Works Association 2 A
comprehensive rate study involves the four steps
shown in the adjacent diagram.

2 Principles of Water Rates, Fees, and Charges. American Water Works Association Manual M1. Seventh edition.

REVENUE REQUIREMENT

PROJECTIONS
Determines how much rate revenue is
needed

RATE STRUCTURE DESIGN
Calculates fixed charge rates per account
and variable charge rates for metered
water use

COST-OF-SERVICE ALLOCATIONS
Allocates revenue requirements to
charges and to customer categories

CUSTOMER BILL ANALYSIS
Evaluates impacts of proposed rates on
customer bills for low, average, and high
use

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Revenue requirements were projected for a five-year planning period based on operations, maintenance, capital expenses, and contributions to reserves. The cost -of- service analysis allocate d the projected expenses among the customer classes in proportion to their use of the systems. Rates were then designed so that rate payers are charged equitably. The impact on customers is then determined by comparing bills under the proposed rates with bills under the current rates.

REPORT ORGANIZATION
This report describes each of the four rate -making steps for the City’s water rates . A glossary of technical terms and acronyms is provided following the Table of Contents.

An appendix contains a copy of portions of the rate model that are not included in the body of the report text as tables and figures.

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3. Revenue Requirement Projections

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3. REVENUE REQUIREMENT PROJECTIONS
Revenue requirements for each fiscal year were then projected over a ten-year planning period through FY 2032-33. This report presents the analysis through FY 2027-28, which is the maximum period over which rates can be adopted . The rates that are developed for the next five years were derived within the overall ten -year planning horizon , anticipating conditions beyond the first five years. Adjustments in rate revenue were determined to cover expenses and maintain target operating and capital cash reserves.

ASSUMPTIONS
Expense projections combined with contributions to reserves constitute the revenue requirements. The assumptions shown in Figure 3-1 were used to project expenses through FY 20 27-28. These assumptions were reviewed with City staff to maintain consistency with the City’s financial planning assumptions used in budgeting.

Figure 3-1. Modeling Assumptions

EXPENDITURE PROJECTIONS
The City’s FY 2022-23 budget served as the basis for d etermining the revenue requirement. The operating and maintenance expenses were projected through FY 2032- 33 using appropriate escalation factors. Capital expenses were projected based on the City’s current capital improvement program. The resulting expenditure projections are shown in Figure 3-2 as stacked bars. Additionally, t he revenue from current rates is shown as a dashed black line and the revenue from projected rates is shown as a solid black line. The components of the revenue requirements are as follows.

Water Supply
The San Francisco Public Utilities Commission (SFPUC) provides the majority of the City’s water at rates set by the SFPUC. The cost of SFPUC water depends on the SFPUC’s rates (which are set by the SFPUC and are out of the City’s control) and the amount of water purchased.

Assumptions FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 General Inflation Per Budget 5.50% 3.00% 3.00% 3.00% 3.00% Salaries and Wages Per Budget 4.00% 4.00% 4.00% 4.00% 4.00% Benefits Per Budget 4.00% 4.00% 4.00% 4.00% 4.00%
Construction Cost Inflation 3.23% 3.23% 3.23% 3.23% 3.23% 3.23% Utilities Per Budget 7.00% 7.00% 7.00% 7.00% 7.00%
% Increase in Revenue due to Growth Per Budget 0.00% 0.00% 0.00% 0.00% 0.00% Interest on Fund Balance 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% CIP Completion Factor 100% 100% 100% 100% 100% 100%
SFPUC Cost of Purchased Water $4.75 $5.30 $5.30 $5.30 $5.30 $5.30 SFPUC Cost of Purchased Water % 11.6% 0.0% 0.0% 0.0% 0.0%

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Projections of future water purchase expenses relied on SFPUC rates and future demand.

SFPUC rates are currently projected to be $5.30 per HCF effective every July 1 through FY 2027-28.

Figure 3-2. Revenue Requirement Projections

We note that the cost of SFPUC water that is used to set the proposed rates in this study is based on the SFPUC’s projections. Going forward, t he SFPUC may adopt different rates as conditions evolve. We recommend making pass-through adjustments to account for the variance between the cost of SFPUC water in this report and the wholesale rates that are eventually adopted by the SFPUC (see further discussion in Section 5).

Operating and Other Expenses
O&M and other expenses are projected to gradually increase during the projection period. These expenses are within the City’s direct control and have been held to low annual increases. Collectively, these expenses comprise Salaries & Benefits, Operations, and Overhead/Interfund Transfers.

Expenditure FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 Water Supply $10,304,163 $11,276,630 $11,276,630 $11,276,630 $11,276,630 $11,276,630 Salaries & Benefits $5,062,538 $5,265,040 $5,475,641 $5,694,667 $5,922,454 $6,159,352 Debt Service $650,300 $652,800 $0 $0 $2,313,204 $2,313,204 Operations $4,435,382 $4,647,738 $4,862,273 $5,087,531 $5,324,097 $5,572,588 Overhead/Interfund Transfers $3,627,155 $3,772,241 $3,923,131 $4,080,056 $4,243,258 $4,412,989 Contribution to Reserves $4,822,447 $4,443,615 $5,722,712 $6,371,918 $4,731,592 $5,428,922 Non-Operating Revenues ($448,430) ($466,367) ($485,022) ($504,423) ($524,600) ($545,584) Total Revenue Requirement $28,453,555 $29,591,698 $30,775,365 $32,006,380 $33,286,635 $34,618,101 ($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 Water Supply Salaries & Benefits Operations
Overhead/Interfund Transfers Debt Service Contribution to Reserves Non-Operating Revenues Revenue at Current Rates Revenue at Projected Rates

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Debt Service
The City’s existing debt service includes approximately $650,000 in annual payments for the 2013 Refunding Bond. The last year of payments for this bond is FY 2023-24. The City is considering issuing additional debt in FY 2026-27 to pay for a $40 million pump station.

The analysis assumed a 30 -year term and 4.0% interest rate. This equa ls approximately $2.3 million in annual debt service.

Contribution to Reserves
The City’s capital plan through FY 2027 -28 assumes $ 39 million in pay-as-you-go (PAYGo) capital projects. These projects are funded from reserves rather than debt.

Figure 3-3 lists the capital projects with their costs expressed in current year dollars. The Engineering News Record Construction Cost Index (ENR CCI) was used to escalate costs to future year do llars. The annual amount included in the revenue requirement as Contribution to Reserves is the five-year running average of the projected PAYGo capital projects.

Figure 3-3. Capital Improvement Plan

Figure 3-4 lists these projects and corresponding costs by functional category. These costs are summarized in current year dollars. The single largest category is the storage infrastructure, which consists of reservoirs that are needed to balance pressure within the City’s hilly topography and to provide for emergencies. Another large infrastructure category is production, which consists of the City’s well system. The City’s well produce high-quality water that supplements water from the SFPUC at a lower cost. The City’s extensive system of distribution pipelines is in constant need of repair and replacement, Project FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 6-Year Project Costs
FY 2023 through FY 2028
Citrus Pump Station Generator Replacement $200,000 $2,000,000 $2,200,000 Citrus Pump Station Replacement (Design) $2,000,000 $2,000,000 Equipment - Vehicles $40,000 $50,000 $50,000 $140,000
Hydropneumatic Tank Replacements $100,000 $50,000 $50,000 $200,000 New Well at Reservoir 5B on Margate $500,000 $500,000 $2,000,000 $2,000,000 $5,000,000 Plant Improvements $250,000 $300,000 $300,000 $300,000 $300,000 $300,000 $1,750,000 Pointe Pacific Generator Replacement $75,000 $500,000 $575,000 Reservoir 3 Rehabilitation $500,000 $1,500,000 $2,000,000 Reservoir 5B Structural Rehabilitation $150,000 $2,000,000 $2,150,000 Reservoir 7 Replacement $250,000 $5,000,000 $5,250,000
Reservoir Fencing $100,000 $100,000 $100,000 $300,000
SCADA Systems Upgrades $250,000 $100,000 $100,000 $450,000 Street Resurfacing Water Mains $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $600,000 Vale Well Replacement $600,000 $3,000,000 $3,600,000
Water Facility Master Plan $250,000 $250,000
Pressure Reducing Valve Replacements $100,000 $100,000 $100,000 $300,000 Reservoir 8 Rehabilitation $350,000 $150,000 $450,000 $950,000 Well Rehabilitation $250,000 $150,000 $150,000 $550,000 Westlake Electrical Upgrade $200,000 $200,000
Water Main Improvements $3,000,000 $500,000 $1,500,000 $500,000 $1,000,000 $1,000,000 $7,500,000 Future PAYGO CIP $1,500,000 $1,500,000 $3,000,000
Water Enterprise CIP $5,065,000 $7,700,000 $6,400,000 $8,000,000 $7,400,000 $4,400,000 $38,965,000 Construction Cost Index 0.00% 3.23% 6.56% 10.01% 13.56% 17.23% Total PAYGo CIP $5,065,000 $7,948,733 $6,820,156 $8,800,585 $8,403,505 $5,158,086 $42,196,065

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which is characteristic of all California water supply systems of the age of the City’s pipelines.

Figure 3-4. Capital Projects By Function

REVENUE PROJECTIONS
Revenue increases were derived to cover the City’s costs and to maintain its reserves.

Rate Revenues
Figure 3-5 summarizes the projected revenue from current and projected rates. The revenue from current rates remains constant because it is assumed that growth will be flat. The 4.0% annual revenue increases are recommended in conjunction with the use of reserves to cover future costs.

Figure 3-5. Current and Projected Rate Revenues

Category
Project Costs
through FY 2027-28 % of Total
PAYGo
Storage $10,850,000 24.9%
Production $9,150,000 21.0%
Pipelines $8,400,000 19.3%
Pumping $4,200,000 9.6%
Other $3,900,000 8.9%
Treatment $2,325,000 5.3%
Vehicles $140,000 0.3%
Total $38,965,000 89.4%
Debt Funded
Treatment/Production $4,626,408 10.6%
Total CIP $43,591,408 100.0%
FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28
Rate Revenue at Current Rates $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 Increase in Rate Revenue 4.0% 4.0% 4.0% 4.0% 4.0%
Revenue from Rate Increases
FY 2022-23 (eff. Jul. 1, 2022) $0 $0 $0 $0 $0
FY 2023-24 (eff. Jul. 1, 2023) $1,138,142 $1,138,142 $1,138,142 $1,138,142 $1,138,142 FY 2024-25 (eff. Jul. 1, 2024) $1,183,668 $1,183,668 $1,183,668 $1,183,668 FY 2025-26 (eff. Jul. 1, 2025) $1,231,015 $1,231,015 $1,231,015 FY 2026-27 (eff. Jul. 1, 2026) $1,280,255 $1,280,255
FY 2027-28 (eff. Jul. 1, 2027) $1,331,465
Total Revenue from Rate Increases $1,138,142 $2,321,810 $3,552,825 $4,833,080 $6,164,545 Total Current Rate Revenue $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 Total Projected Rate Revenue $29,591,698 $30,775,365 $32,006,380 $33,286,635 $34,618,101

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Non-Operating Revenues
The City receives non-operating revenues from three sources:

Miscellaneous Revenues. Revenues from payments from late fees, rental income, and other miscellaneous services. The annual amount of these revenues was budgeted at $448,430 and is projected to increase at rate of inflation for the planning period.

Connection Fee Revenues . The City has budget ed $35,000 in connection fee revenue , which will r emain constant throughout the planning period. Connection fees are one - time fees paid by new development to connect to the water system.

Interest Revenues. The City receives revenues from the cash balance held in the form of interest earnings. It is assumed that the City receives a 1.0% return on its reserves.

RESERVE FUNDS
Reserves are required to stabilize rates and to provide for contingencies. Reserves can be drawn on in years when the City experiences above average costs and augmented during years when costs are below average. The City’s reserves are used for operating and capital purposes. Each of these purposes has its own requirements that lead to a minimum and a target balance. Rates must be set so that the fund balance does not drop below the target balance for the Operating Reserve.

Operating Reserve
The operating component of the reserves provides working capital for month -to-month O&M expenditures. With sufficient working capital, the City can operate without cash flow constraints. The City’s reserve policy is three months of operating expenses . This equals 1.5 times the bi-monthly bill frequency, which is the equivalent of one -quarter of one year’s O&M expenditures. The City’s reserves should never drop below this minimum balance. The operating reserve target is represented by the red line in Figure 3-7.

Capital Reserve
The capital component of the reserves provides working capital for the City’s PAYGo capital improvement pro jects. The fund balance needs to be sufficient to at least pay contractors without delays caused by cash flow limitations. The fund balance can be larger so that the City can fund larger construction projects on a pay -as-you-go basis, thereby eliminating financing costs. The City’s reserve policy for the capital reserve is one year of average annual PAYGo capital expenses.

Reserve Target
The total target reserve for the City is the sum of the operating reserve component and the capital reserve component. The target balance is represented by the blue line in Figure 3-6.

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3. Revenue Requirement Projections

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Projected Fund Balance
The projected fund balance over the planning period is graphed in Figure 3-6. The solid green line represents the fund balance with the proposed annual revenue increases. The dashed green line shows the fund balance without revenue increases. Without revenue increases, the fund balance would drop because current revenues are unable t o support the projected O&M and capital expenses with the fund balance being nearly negative at the end of the planning period.

The proposed 4.0% annual rate increases draw down the reserves over the planning period by approximately $9 million while keeping the fund balance safely above the target balance. Covering the projected expenditures through a combination of revenue increases and reserves leaves the fund balance at a level that still p rovides the City flexibility in funding future capital projects such as the $40 million pump station in FY 2026-27.

Figure 3-6. Projected Cash Reserve Balance at Year End

FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 Beginning Fund Balance $28,528,865 $28,605,563 $25,404,151 $24,594,330 $22,440,245 $19,013,568 PAYGo Capital ($5,065,000) ($7,948,733) ($6,820,156) ($8,800,585) ($8,403,505) ($5,158,086) Contribution to Reserves $4,822,447 $4,443,615 $5,722,712 $6,371,918 $4,731,592 $5,428,922 Interest $284,251 $268,705 $252,623 $239,582 $210,236 $191,665 Connection Fees $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 Ending Fund Balance $28,605,563 $25,404,151 $24,594,330 $22,440,245 $19,013,568 $19,511,069 $0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 Rate Adj. 4.0% 4.0% 4.0% 4.0% 4.0%
Projectecd Fund Balances (in Millions)
Total Cash Balance with Increase Total Cash Balance without Increase Reserve Target (25% O&M + 1-Year CIP) Operating Reserve Target (25% O&M)

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4. COST-OF-SERVICE ANALYSIS
A cost-of-service (COS) analysis determines the unit cost of the services provided to the City’s water customers. Each customer class is charged the same unit cost for its share of the services that it requires. In this way, the total revenue requirement is proportioned between the base and quantity charges. The 2018 rate study prepared by HF&H included a comprehensive cost -of-service analysis that resulted in adjusting the rate structure in 2018.

Once the rates were realigned in 2018 with the cost of service, the adopted annual revenue increases were applied in equal percentage amounts across the board to all base and quantity charges. The results of the cost-of-service analysis were reviewed in the current rate study to see if any material changes had transpired since 2018. Slight changes were observed that were not great enough to warrant further adjustments to either the base or quantity charges.

Hence, the revenue increase s proposed in the current rate study will continue to be applied across the board to all charges. Although no realignment of the cost of service is necessary, the following discussion is provided to document th e analysis in 2018. Since 2018, subsequent rates were derived by increasing each year’s rates across the board by the revenue increase percentage. By doing so, the cost-of-service proportions established in 2018 were maintained.

METHODOLOGY
This methodology used in deriving the City’s cost of service is consistent with industry standards promulgated by the American Water Works Association3 and referred to as the “base/extra capacity method.” This methodology apportions costs to the services that are provided to customers.

The City provides demand services and customer services to water customers. Demand services include the costs related to meeting average and peak levels of demand. Costs allocated to the demand services ar e recovered through quantity charges. Customer services include the costs related to customer accounts and the infrastructure capacity that customers require. Costs allocated to customer services are recovered through the base charges.

The analytical procedure contains the following steps:

3 Principles of Water Rates, Fees, and Charges. Manual M1. American Water Works Association. Seventh edition.

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1. Cost classification - Costs in th e revenue requirement were classified into the service categories related to providing for customer demands and for customer service.

2. Cost allocation - The classified co sts in step 1 were allocated to the functions associated with each service. For demand services, the functions are levels of service that comprise base day, average day, maximum day, and maximum hour demands. For customer services, the functions are cust omer accounts and customer capacity.

The classifications of major costs are summarized as follows:

Demand services
• Base day – non-seasonal daily demand based on winter water use. • Average day – average daily demand utilizing base supply plus a small port ion for peaking beyond winter water use levels.
• Maximum day – peaking on the maximum day: peak supply, transmission mains to distribution storage, booster pumps.
• Maximum hour – peak hour on the maximum day : a portion of d istribution storage, distribution mains to customers, hydrants, conservation programs.

Customer services
• Accounts: meter reading, billing, accounting, customer service, fire services. • Capacity: a portion of d istribution storage, distribution mains to customers, hydrants, conservation programs.

Composite services
• Indirect allocations for costs that are not directly related to either the demand or customer service functions: reserves transfers, debt service.

Working with City staff in 2018, the individual line items in the revenue requirements were classified into either the demand or customer service categories. Certain costs, however, were not directly related to either demand or customer services. Such costs are considered to be compos ite in function and were allocated based on a composite of the direct allocations to the demand and customer service categories.

ALLOCATION FACTORS
Within the demand service function, allocations were made to each level of service ranging from base day demand to the highest level of peak demand during the peak hour of the peak day. With these allocations, rates can be designed to proportionately charge customers based on their demands.

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Figure 4-1 summarizes the FY 2016-17 flows by customer class for eac h of the service levels and the corresponding load factors. The flows were derived from recent customer billing data, which represents actual customer demand patterns and not deemed water budgets. Since FY 2016-17, customer billing data shows only a slight difference with FY 2016-17 flows, a difference that is not sufficient to justify revising the cost -of-service analysis. The majority of the City’s services are related to meeting customer demands that can vary from low, base demands with very little se asonal fluctuation for irrigation or tourism to high demands that mostly are due to irrigation.

Figure 4-1. Estimated Demands and Load Factors By Service Level (FY 2016-17)

The service levels are defined as follows:

1. Base Day ( Non-Seasonal) – The average winter demand (6,614 HCF) when seasonal peaking is minimal based on customer billing data for FY 2016-17. The base day demand was derived for each customer class from the City’s customer billing data for FY 2016 -17, using the l owest two -month period of metered consumption.

2. Average Day – The flow on the average day (6,827 HCF) is 1.03 times the base day system-wide flow (6,614 HCF). The fact that average day demand is only slightly greater than base non-seasonal day demand indicates that average daily peaking is nearly nonexistent, which is consistent with the climatic (i.e., cool coastal) and land use (i.e., very small residential la ndscapes) characteristics prevalent in the City.

3. Maximum Day – The flow on the maximum day of the year is based on City data, which indicates that maximum day flow (13,653 HCF) is 2.06 times the base winter flow. The maximum day flow is 2.00 times the average day flow.

4. Maximum Hour – The maximum hourly flow is estimated to be two times the maximum day flow based on engineering design criteria used for sizing infrastructure. The value must be estimated for lack of data. The maximum hour is therefore 4.13 times the base winter demand.

Service levels need to increase to accommodate increasing levels of peak demands, which include irrigation, tourism, and other seasonal water uses. Providing for higher service levels requires larger infrastructure. In a cost -of-service analysis, the cost of the infrastructure is allocated to the corresponding level of service. This means that the cost increment associated with the larger infrastructure needed to meet higher levels of Base Non- Average Maximum Maximum
Seasonal Day Day Day Hour
Flow (HCF/Day) 6,614 6,827 13,653 27,307 Ratio of Flows to Average Day 0.97 1.00 2.00 4.00 Ratio of Flows to Base Non-Seasonal Day 1.00 1.03 2.06 4.13

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service is allocated to the corresponding higher category. The allocation factors are summarized in Figure 4-2.

The allocation factors are calculated using load factors from Figure 4-1. The load factors represent how much higher average day, maximum day, and maximum hour flows are compared with the minimal flows. The load factors indicate how much additional capacity is required to supply higher levels of service.

Figure 4-2 also shows the “breakpoints,” which represent the boundary between each level of service. Note that the breakpoints for base day (12 HCF) and average day (13 HCF) are almost equal.

Figure 4-2. Base/Extra Capacity Allocation Factors (FY 2016-17)

Note: factors shown are rounded, percentages reflect actual ratios of non -rounded figures.

Figure 4-3 summarizes the City’s major operating and capital expenses according to the services they provide. The expenses are listed in order from their source at the SFPUC master meter to the City through the transmission pipelines, pumps, storage tanks, and distribution mains to the customer meters. The expenses are classified based on the associated service level and the corresponding allocation factors are shown.

Base Non- Average Maximum Maximum
Seasonal Day Day Day Hour
Flow (HCF/Day) 6,614 6,827 13,653 27,307 Ratio of Flows to Base Non-Seasonal Day 1.00 1.03 2.06 4.13 Base (Non-seasonal Avg) 100.00% 0.00% 0.00% 0.00% 100.00% Avg Day 96.88% 3.12% 0.00% 0.00% 100.00%
Max Day 48.44% 1.56% 50.00% 0.00% 100.00%
Max Hour 24.22% 0.78% 25.00% 50.00% 100.00%
Flow Per Account - HCF bimonthly 396,836 409,598 819,196 1,638,391 Accounts or DUs 32,003 32,003 32,003 32,003 Breakpoint - HCF bimonthly per DU 12 13 26 51 32,003

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Figure 4-3. Services Provided By City Facilities

Note that the allocations to the average day service function are very low, which, as previously noted, is due to how little average peaking occurs in the City. The difference between base day and average day peaking was so slight that there was no justification for maintaining both categories in designing the quantity charge tier structure. As a result, the base day category was merged into the average day category.

FY 2017-18 COST OF SERVICE
In completing the cost -of-service analysis, the allocation factors were applied to the FY 2017-18 revenue requirement as shown in Figure 4-4. The sum of the costs allocated to the four demand service levels (i.e., base day through maximum hour) equaled $14,174,602 or approximately 69% of the total $20,445,584 revenue requirement. The costs associated with the demand service levels are recovered through the quantity charge rates; the remaining 31% of the costs are recovered through the base charge rates. In other words, about two-thirds of the costs are recovered from the quantity charge rates, which will vary from billing period to billing period. The remaining one-third is based on base charge rates that are fixed.

This relationship between the revenue recovered from quantity and base charge rates is considered balanced in the industry. Considering that at least two -thirds of the City’s costs are fixed, about half of that cost is recovered from the fi xed charges and the remaining half is recovered from the portion of customer demand that does not vary by season.

Average Day Maximum Day Maximum Hour
(4.95 mgd or (5.11 mgd or (10.21 mgd or (20.43 mgd or Customer 6,614 hcf) 6,827 hcf) 13,653 hcf) 27,307 hcf) Service Total Source of Supply
SFPUC service charge 100% 100%
SFPUC purchased water 97% 3% 100%
BAWSCA debt service 100% 100%
Transmission pipelines
12" diameter and larger 48% 2% 50% 100%
Pump stations 48% 2% 50% 100%
Purification/water quality 48% 2% 50% 100%
Potable water storage tanks 24% 1% 25% 50% 100%
Distribution pipelines
Under 12" diameter 24% 1% 25% 50% 100%
Customer service
Admin, Metering & Billing 100% 100%
Expenses
Demand Service Levels
Non-Peaking
Base
Peaking
Operating and Capital

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Figure 4-4. Cost-of-Service Allocations (FY 2017-18)

Base Charges
The base charge rates were derived to generate the $6,270,982 allocated to the customer service category. The base charge rates that became effective in FY 2017 -18 were subsequently increased each year across the board by the adopted revenue increases through FY 2022-13. In the next section, the rates proposed in the current study build on the FY 2022-13 rates.

FY 2018-19 Allocation Non-seasonal Average Maximum Maximum Customer Budget Factor Average Day Day Hour Service
O&M Expenses
Operations
Salaries & Benefits $978,946 Average Day $948,446 $30,500 $0 $0 $0 SFPUC Purchased Water
Quantity Charge $10,801,432 Average Day $10,464,902 $336,529 $0 $0 $0 Service Charge $184,392 Customer $0 $0 $0 $0 $184,392
Groundwater Pumping Utilities $0 Max Day $0 $0 $0 $0 $0 Supplies & Equipment $842,566 Average Day $816,315 $26,251 $0 $0 $0 Fees $1,545 Average Day $1,497 $48 $0 $0 $0
Distribution
Salaries & Benefits $1,622,617 Max Day $786,032 $25,277 $811,309 $0 $0 Utilities - Pump stations $1,062,004 Max Hour $257,229 $8,272 $265,501 $531,002 $0 Supplies & Equipment $916,559 Max Hour $222,001 $7,139 $229,140 $458,279 $0 Fees $0 Average Day $0 $0 $0 $0 $0
Admin (Utility Billing)
Salaries & Benefits $893,686 Customer $0 $0 $0 $0 $893,686 Internal Transfers/Overhead $2,681,247 Customer $0 $0 $0 $0 $2,681,247 Utilities $0 Customer $0 $0 $0 $0 $0
Supplies & Equipment $619,114 Customer $0 $0 $0 $0 $619,114 Fees $0 Customer $0 $0 $0 $0 $0
Subtotal - O&M Expenses $20,604,108 $13,496,422 $434,017 $1,305,949 $989,282 $4,378,438 100.0% O&M Composite 65.5% 2.1% 6.3% 4.8% 21.3%
Capital Expenses
BAWSCA D/S $591,864 Customer $0 $0 $0 $0 $591,864
PAYGo Projects $1,903,960 CIP Composite $127,894 $4,113 $132,007 $264,013 $1,375,934 Debt Service $647,800 Customer $0 $0 $0 $0 $647,800
Subtotal - Capital Expenses $3,143,624 $127,894 $4,113 $132,007 $264,013 $2,615,598 100.0% Cap Composite 4.1% 0.1% 4.2% 8.4% 83.2%
Subtotal - O&M and Capital $23,747,732 $13,624,316 $438,129 $1,437,956 $1,253,295 $6,994,036 100.0% Exp Composite 57.4% 1.8% 6.1% 5.3% 29.5%
Non-Operating Revenue
Contribution from Reserves - Srvc Chrg ($27,094) Customer $0 $0 $0 $0 ($27,094) Contribution from Reserves - Qty Chrg ($2,320,318) O&M Composite ($1,519,890) ($48,876) ($147,069) ($111,407) ($493,075) 3510 - INVESTMENT EARNINGS ($52,962) O&M Composite ($34,692) ($1,116) ($3,357) ($2,543) ($11,255) 3511 - OTHER INTEREST $0 O&M Composite $0 $0 $0 $0 $0
3515 - UNREALIZED GAIN(LOSS)ON INVEST $0 O&M Composite $0 $0 $0 $0 $0 3749 - LATE PAYMENT FEE ($133,900) O&M Composite ($87,709) ($2,821) ($8,487) ($6,429) ($28,454) 3815 - CLAIMS/SETTLEMENTS $0 O&M Composite $0 $0 $0 $0 $0 3852 - WORKERS COMP - SELF INSURANCE $0 O&M Composite $0 $0 $0 $0 $0 3860 - MISCELLANEOUS REVENUE ($10,506) O&M Composite ($6,882) ($221) ($666) ($504) ($2,233) 3912 - BILLING SERVICE CHARGE ($85,547) O&M Composite ($56,036) ($1,802) ($5,422) ($4,107) ($18,179) 3915 - BAD DEBT RECOVERIES ($12,360) O&M Composite ($8,096) ($260) ($783) ($593) ($2,627) 3916 - TURN OFF CHARGES ($49,440) O&M Composite ($32,385) ($1,041) ($3,134) ($2,374) ($10,506) 3921 - CONNECTION CHARGES ($6,180) O&M Composite ($4,048) ($130) ($392) ($297) ($1,313) 3963 - IF FM 01-031-031 ($603,842) O&M Composite ($395,538) ($12,720) ($38,273) ($28,993) ($128,318) ($3,302,148) ($2,145,277) ($68,988) ($207,583) ($157,248) ($723,053) Net Revenue Requirement $20,445,584 $11,479,039 $369,142 $1,230,373 $1,096,047 $6,270,982 TRUE $14,174,602 $6,270,982
Volumetric Service

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Quantity Charges
The quantity charge rates were derived to generate the $ 14,174,602 allocated to the demand service categories. The derivation is shown in Figure 4-5. In the rate structure, the levels of demand services are referred to as “tier s” that correspond to average day (the combination of base day and average day), maximum day, and maximum hour.

Figure 4-5. Quantity Charges (FY 2017-18)

The tier structure shows the sizes of each tier based on the breakpoints between each level of service, which, again, are based on actual customer billing data and not on deemed water budgets. The volume of water in each tier represents the demand within the tier.

The revenue requirement allocated to each tier represents the cost of providing the corresponding level of service. The rate increment is the quotient of the revenue requirement for the tier divided by the amount of water receiving the level of service. For Tier 1, all of the water receives average day service. Working progressively, Tier 2’s Tier 1 Tier 2 Tier 3 Total
Demand Condition Average Day Maximum Day Maximum Hour
Tier Structure
Volume per tier (HCF) 0-13 14-26 Over 26 Total
HCF by Tier 1,696,951 338,499 459,507 2,494,957 Revenue Requirement by Tier
O&M incl. SFPUC and other $11,716,175 $1,098,367 $832,034 $13,646,575 HCF in Tiers 2,494,957 798,006 459,507 O&M Cost Increment $4.70 $1.38 $1.81
Capital $132,007 $132,007 $264,013 $528,026
HCF in Tiers 2,494,957 798,006 459,507 Capital Cost Increment $0.05 $0.17 $0.57
$11,848,181 $1,230,373 $1,096,047 $14,174,602
Rate Increments
Base/Avg Day
O&M incl. SFPUC and other $4.70 $4.70 $4.70
Capital $0.05 $0.05 $0.05
Maximum Day
O&M incl. SFPUC and other $1.38 $1.38
Capital $0.17 $0.17
Maximum Hour
O&M incl. SFPUC and other $1.81
Capital $0.57
Total Rate per Tier $4.75 $6.29 $8.68

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incremental cost is the quotient of the maximum day revenue requirement divided by all of the water that exceeds the average day service. Similarly, the Tier 3 incremental cost is the quotient of the cost of maximum day service divided by flow that receives this service. These rate increments are shown for the operating and capital components and in total.

The incremental costs cumulate through the tiers. Demand that does not exceed Tier 1 only pays the Tier 1 rate increment. As demand progresses into Tiers 2 and 3, the rate increments cumulate. The quantity charge rates shown in Figure 4-5 became effective in FY 2017-18. Since then, they were increased each year across the board by the adopted revenue increases through FY 2022 -13. In the next section, the rates proposed in the current study build on the FY 2022-13 rates.

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5. RATE DESIGN
The City’s customers pay bi-monthly bills that are the sum of two charges: a base charge that is based on the size of the customer’s meter and a quantity charge for the volume of water metered during the billing period. Whereas base charges are fixed from bill to bill, quantity charges vary based on the metered usage in each billing period . This section discusses how the rates were adjusted to generate the required revenue.

CURRENT RATES
The current rates for the base charges are summarized in Table 5-1. The structure of these rates reflec ts the cost-of-service analysis conducted by HF&H in the 2018 rate study (whereby the derivation of the base and quantity charge rates for FY 2017 -18 are summarized in Figures 4-5 and 4-6).

Base Charge Rates
Adjustments were made to the FY 2016-17 base charge rates to ensure that they generated the required revenue for FY 2017 -18. Since FY 2017 -18, the base charge rates were increased across the board by the adopted annual revenue increases . The current rates for FY 2022-23 include the most recent 9.5% rate increase that became effective July 1, 2022.

Figure 5-1. FY 2017-18 to FY 2022-23 Bi-monthly Base Charge Rates

Meter FY 2017-18 Rates
Size ($/bi-month) FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 % Increase 6.5% 9.5% 9.5% 9.5% 9.5%
effective date 1/1/2019 7/1/2019 7/1/2020 7/1/2021 7/1/2022 5/8" or 3/4" $35.53 $37.84 $41.44 $45.38 $49.69 $54.41
1" $54.17 $57.69 $63.17 $69.17 $75.74 $82.94
1 1/2" $97.25 $103.58 $113.42 $124.19 $135.99 $148.91
2" $150.65 $160.44 $175.68 $192.37 $210.65 $230.66
3" $322.49 $343.45 $376.08 $411.81 $450.93 $493.77
4" $554.28 $590.31 $646.38 $707.79 $775.03 $848.66
6" $1,133.74 $1,207.43 $1,322.14 $1,447.74 $1,585.28 $1,735.88 8" $2,141.51 $2,280.71 $2,497.38 $2,734.63 $2,994.42 $3,278.89 10" $3,401.22 $3,622.30 $3,966.42 $4,343.23 $4,755.84 $5,207.64 12" $4,484.57 $4,776.07 $5,229.79 $5,726.62 $6,270.65 $6,866.36 Adopted Rates

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Quantity Charge Rates
The current rates for the quantity charges are summarized in Figure 5-2. The structure of these rates also reflects the cost -of-service analysis conducted by HF&H in the 2018 rate study. At that time, adjustments were made to the number and size of tiers based on customer demand patterns. The number of tiers was increased from two to three tiers in response to the use of the same tier structure for all customers. The size of the tiers was derived by analyzing recent customer bills from which it was possible to correlate the tier size with the level of service provided. The current rates for quantity charge rates include the most recent 9.5% rate increase that became effective July 1, 2022.

Figure 5-2. FY 2017-18 to FY 2022-23 Bi-monthly Quantity Charge Rates

Note: applies to all customer classes

PROPOSED RATES
Base Charge Rates
The proposed base charge rates are summarized in Figure 5-3. The current rates for FY 2022-13 are increased across the board in subsequent years by the amount of the proposed annual revenue increase.

Tier Size $/hcf Tier Size (hcf) FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 % Increase varies 9.5% 9.5% 9.5% 9.5%
effective date 1/1/2019 7/1/2019 7/1/2020 7/1/2021 7/1/2022 1-14 HCF $3.91 0-13 HCF $4.75 $5.20 $5.69 $6.23 $6.83
15+ HCF $8.94 14-26 HCF $6.29 $6.89 $7.54 $8.26 $9.04
Over 26 HCF $8.68 $9.50 $10.40 $11.39 $12.47
FY 2017-18 Rates Adopted Quantity Charges

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Figure 5-3. Proposed Bi-monthly Base Charges Per Account

The bi-monthly base charges are payable whether or not any water is used during the billing period and irrespective of the amount of water used.

Quantity Charge Rates
The proposed quantity charge rates are summarized in Figure 5-4. The current rates for FY 2022 -13 are increased across the board in subsequent years by the amount of the proposed annual revenue increase.

Figure 5-4. Proposed Quantity Charge Rates

Pass-Through Adjustments To Quantity Charge Rates
The cost of SFPUC water is the single largest component of the City’s revenue requirements. Because the City has no control over the SFPUC’s wholesale water rate, this cost is simply passed through to the City’s customers. The SFPUC provides projections of its future wholesale water rates, which are built into the rate projections in this study. The SFPUC updates its projections each year as part of the rate -making process legally prescribed in the wholesale Water Supply Agreement. California Government Code Section 53756 authorizes water suppliers to adjust their water rates in Meter Size Current Charge FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 % Increase 4.0% 4.0% 4.0% 4.0% 4.0%
effective date 7/1/2023 7/1/2024 7/1/2025 7/1/2026 7/1/2027 5/8" Meter $54.41 $56.59 $58.85 $61.20 $63.65 $66.20
3/4" Meter $54.41 $56.59 $58.85 $61.20 $63.65 $66.20
1" Meter $82.94 $86.26 $89.71 $93.30 $97.03 $100.91

1.5" Meter $148.91 $154.87 $161.06 $167.50 $174.20 $181.17 2" Meter $230.66 $239.89 $249.48 $259.46 $269.84 $280.63 3" Meter $493.77 $513.52 $534.06 $555.42 $577.64 $600.75 4" Meter $848.66 $882.61 $917.91 $954.63 $992.81 $1,032.52 6" Meter $1,735.88 $1,805.32 $1,877.53 $1,952.63 $2,030.73 $2,111.96 8" Meter $3,278.89 $3,410.05 $3,546.45 $3,688.31 $3,835.84 $3,989.27 10" Meter $5,207.64 $5,415.95 $5,632.58 $5,857.89 $6,092.20 $6,335.89 12" Meter $6,866.36 $7,141.01 $7,426.65 $7,723.72 $8,032.67 $8,353.98 Tier Current Rate FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 % Increase 4.0% 4.0% 4.0% 4.0% 4.0%
effective date 7/1/2023 7/1/2024 7/1/2025 7/1/2026 7/1/2027 Tier 1 - 0-13 HCF $6.83 $7.10 $7.39 $7.68 $7.99 $8.31
Tier 2 - 14-26 HCF $9.04 $9.40 $9.78 $10.17 $10.58 $11.00 Tier 3 - 27+ HCF $12.48 $12.98 $13.50 $14.04 $14.60 $15.18

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response to changes in pass -through costs. We recommend that the City incorporate annual pass-through adjustments in its quantity charge rates.

Each year the City should dete rmine how much, if any, pass -through adjustment is required as soon as the SFPUC submits its updated wholesale rates, which is typically in April or May each year. The wholesale rate used for the projections in this study should be compared with the updat ed rate and the difference either added or subtracted from the City’s volumetric rates for residential and commercial customers. The wholesale rates per HCF used in this study4 are as follows:

July 1, 2023 – $5.30
July 1, 2024 – $5.30
July 1, 2025 – $5.30
July 1, 2026 - $5.30
July 1, 2027 - $5.30

For example, if the updated SFPUC rate for FY 2024-25 is $ 5.40, the $ 0.10 difference should be added to the City’s quantity charge rates. If the updated SFPUC rate is less than the foregoing rates, the difference should be subtracted from the City’s volumetric rates. In other words, the adjustment should be made in either direction.

4 Rates included in a presentation from the SFPUC to BAWSCA; Annual Meeting for Wholesale Customers and BAWSCA, February 16, 2023.

City of Daly City Water Rate Study

6. Customer Bill Impacts

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6. CUSTOMER BILL IMPACTS

CITY CUSTOMER BILLS
Table 6-1 summarizes the current and proposed bills for customers with a 5/8” service.

The bills are shown for a low use customer at 4 HCF, an average use customer at 12 HCF, and a high use customer at 24 HCF. The difference compares the proposed bills with the current bills.

Figure 6-1. Current and Proposed Bill Comparison (FY 2023-24)

BILL COMPARISON WITH NEIGHBORING AGENCIES
Figure 6-2 compares the average single family residential bill with the City’s current and proposed rates to its neighboring agencies. The comparison used a ¾” meter and 12 HCF.

Note that the rates for other agencies are based on currently available published sources.

Any proposed rate increases that have not yet been implemented are not shown.

Low User Average User High User
Meter Size 5/8" 3/4" 3/4"
Base Charge $54.41 $54.41 $54.41
Consumption (hcf) 4 12 24
Unit Charge $27.32 $81.96 $188.23
Total Monthly Bill $81.73 $136.37 $242.64
Low User Average User High User
Meter Size 5/8" 3/4" 3/4"
Base Charge $56.59 $56.59 $56.59
Consumption (hcf) 4 12 24
Unit Charge $28.41 $85.24 $195.76
Total Monthly Bill $85.00 $141.82 $252.35
Low User Average User High User
Dollar Increase $3.27 $5.45 $9.71
Percent Increase 4.0% 4.0% 4.0%
Current Rates
Proposed Rates
Difference

City of Daly City Water Rate Study

6. Customer Bill Impacts

HF&H Consultants, LLC Page 29 May 26, 2023
Figure 6-2. Comparison of Residential Bi-monthly with Other Agencies

Figure 6-2 shows the portion of the bill coming from the fixed charge . The City’s fixed charge for a ¾” meter is compara ble to most other agencies . Note also that the comparison is based on 12 HCF for all agencies. Although 12 HCF is the average for the City, it may not be for other agencies. Agencies with larger landscapes located in hotter climates have higher average water use and will therefore have higher average bills. For example, for 12 HCF water use, Hillsborough’s fixed charge is the majority of the bill.

However, a verage water use in Hillsborough is more tha n two times 12 HCF . Using Hillsborough’s higher average water use will show that its fixed charge as a percent of the total bill is comparable to many of the other agencies.

APPENDIX. RATE MODEL

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City of Daly City
Water Rate Study
1A. Summary

Fiscal Year: FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 Revenue Increases 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 0.0% 0.0% 0.0% 0.0% 0.0% Cumulative Increase 0.0% 4.0% 8.2% 12.5% 17.0% 21.7% 21.7% 21.7% 21.7% 21.7% 21.7% Debt Coverage 8.85 8.22 N/A N/A 3.14 3.43 3.03 2.62 2.19 1.73 1.27 CIP Spend Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% $0.0
$5.0
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$30.0
FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 Projectecd Fund Balances (in Millions)
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FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 Beginning Fund Balance $28,528,865 $28,605,563 $25,404,151 $24,594,330 $22,440,245 $19,013,568 PAYGo Capital ($5,065,000) ($7,948,733) ($6,820,156) ($8,800,585) ($8,403,505) ($5,158,086) Contribution to Reserves $4,822,447 $4,443,615 $5,722,712 $6,371,918 $4,731,592 $5,428,922 Interest $284,251 $268,705 $252,623 $239,582 $210,236 $191,665 Connection Fees $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 Ending Fund Balance $28,605,563 $25,404,151 $24,594,330 $22,440,245 $19,013,568 $19,511,069 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 Rate Adj. 4.0% 4.0% 4.0% 4.0% 4.0%
Projectecd Fund Balances (in Millions)
Total Cash Balance with Increase Total Cash Balance without Increase Reserve Target (25% O&M + 1-Year CIP) Operating Reserve Target (25% O&M) HF&H Consultants, LLC
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A B C D E F G H
City of Daly City
Water Rate Study
1B. General
Assumptions FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 a General Inflation Per Budget 5.50% 3.00% 3.00% 3.00% 3.00% b Salaries and Wages Per Budget 4.00% 4.00% 4.00% 4.00% 4.00% c Benefits Per Budget 4.00% 4.00% 4.00% 4.00% 4.00%
d Construction Cost Inflation 3.23% 3.23% 3.23% 3.23% 3.23% 3.23% e Utilities Per Budget 7.00% 7.00% 7.00% 7.00% 7.00%
f % Increase in Revenue due to Growth Per Budget 0.00% 0.00% 0.00% 0.00% 0.00% g Interest on Fund Balance 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% h CIP Completion Factor 100% 100% 100% 100% 100% 100%
i SFPUC Cost of Purchased Water $4.75 $5.30 $5.30 $5.30 $5.30 $5.30 j SFPUC Cost of Purchased Water % 11.6% 0.0% 0.0% 0.0% 0.0% HF&H Consultants, LLC
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1B. General

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City of Daly City
Water Rate Study
2A. Rev Req
Tbl. FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 O&M
4101 - SALARIES b $2,707,115 $2,815,399 $2,928,015 $3,045,136 $3,166,941 $3,293,619 $3,425,364 $3,562,378 $3,704,873 $3,853,068 $4,007,191 4102 - HOURLY WAGES b $119,159 $123,926 $128,883 $134,038 $139,400 $144,976 $150,775 $156,806 $163,078 $169,601 $176,385 4103 - OVERTIME b $109,150 $113,516 $118,057 $122,779 $127,690 $132,798 $138,110 $143,634 $149,379 $155,354 $161,569 4104 - PERS RETIREMENT c $503,336 $523,469 $544,408 $566,184 $588,831 $612,385 $636,880 $662,355 $688,850 $716,404 $745,060 4105 - GROUP INSURANCE c $522,618 $543,523 $565,263 $587,874 $611,389 $635,845 $661,278 $687,729 $715,239 $743,848 $773,602 4106 - WORKERS COMPENSATION c $245,430 $255,247 $265,457 $276,075 $287,118 $298,603 $310,547 $322,969 $335,887 $349,323 $363,296 4107 - MEDICARE c $39,253 $40,823 $42,456 $44,154 $45,921 $47,757 $49,668 $51,654 $53,721 $55,869 $58,104 4110 - SEPARATION PAY b $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4112 - STANDBY PAY b $29,994 $31,194 $32,442 $33,739 $35,089 $36,492 $37,952 $39,470 $41,049 $42,691 $44,398 4116 - INJURY LEAVE c $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
4118 - RETIREE HEALTH c $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4119 - SOCIAL SECURITY c $7,996 $8,316 $8,648 $8,994 $9,354 $9,728 $10,117 $10,522 $10,943 $11,380 $11,836 4120 - OTHER POST EMPLOYMENT BENEFITS c $81,000 $84,240 $87,610 $91,114 $94,759 $98,549 $102,491 $106,590 $110,854 $115,288 $119,900 4121 - VEHICLE REPLACEMENT CHARGE a $293,634 $309,784 $319,077 $328,650 $338,509 $348,664 $359,124 $369,898 $380,995 $392,425 $404,198 4125 - PENSION EXPENSE c $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4126 - UNFUNDED PERS CONTRIBUTION c $697,488 $725,388 $754,403 $784,579 $815,962 $848,601 $882,545 $917,847 $954,561 $992,743 $1,032,453 4208 - TELEPHONE SERVICE CHARGES a $9,481 $10,003 $10,303 $10,612 $10,930 $11,258 $11,596 $11,944 $12,302 $12,671 $13,051 4212 - COMMUNICATIONS a $26,275 $27,720 $28,552 $29,408 $30,291 $31,199 $32,135 $33,099 $34,092 $35,115 $36,168 4213 - UTILITIES e $1,000,000 $1,070,000 $1,144,900 $1,225,043 $1,310,796 $1,402,552 $1,500,730 $1,605,781 $1,718,186 $1,838,459 $1,967,151 4214 - WATER PURCHASES j $10,304,163 $11,276,630 $11,276,630 $11,276,630 $11,276,630 $11,276,630 $11,538,026 $11,807,264 $12,084,578 $12,370,213 $12,664,416 4215 - RENTS AND LEASES c $3,713 $3,862 $4,016 $4,177 $4,344 $4,517 $4,698 $4,886 $5,081 $5,285 $5,496 4216 - VEHICLE SERVICE CHARGES c $381,309 $396,561 $412,424 $428,921 $446,078 $463,921 $482,478 $501,777 $521,848 $542,722 $564,431 4217 - EQUIPMENT MAINTENANCE CONTRACT c $2,500 $2,600 $2,704 $2,812 $2,925 $3,042 $3,163 $3,290 $3,421 $3,558 $3,701 4219 - PROFESSIONAL SERVICES c $270,678 $281,505 $292,765 $304,476 $316,655 $329,321 $342,494 $356,194 $370,442 $385,259 $400,670 4220 - OTHER CONTRACTUAL SERVICES c $168,232 $174,962 $181,960 $189,238 $196,808 $204,680 $212,868 $221,382 $230,238 $239,447 $249,025 4223 - INFORMATION SERVICES CHARGES c $117,626 $122,331 $127,224 $132,313 $137,605 $143,110 $148,834 $154,787 $160,979 $167,418 $174,115 4224 - BLDG MAINTENANCE SVC CHARGES c $55,894 $58,129 $60,455 $62,873 $65,388 $68,003 $70,723 $73,552 $76,494 $79,554 $82,736 4226 - MAIL/MESSENGER SERVICE c $6,939 $7,216 $7,505 $7,805 $8,117 $8,442 $8,780 $9,131 $9,496 $9,876 $10,271 4227 - COPIER SERVICES c $362 $376 $391 $407 $423 $440 $458 $476 $495 $515 $536 4230 - OFFICE EXPENSE c $11,919 $12,396 $12,892 $13,407 $13,944 $14,501 $15,081 $15,685 $16,312 $16,964 $17,643 4231 - SAFETY GEAR c $21,862 $22,736 $23,646 $24,592 $25,575 $26,598 $27,662 $28,769 $29,920 $31,116 $32,361 4233 - POSTAGE c $13,163 $13,690 $14,237 $14,807 $15,399 $16,015 $16,655 $17,322 $18,015 $18,735 $19,484 4234 - SPECIAL DEPARTMENTAL c $254,358 $264,532 $275,114 $286,118 $297,563 $309,465 $321,844 $334,718 $348,106 $362,031 $376,512 4237 - CLOTHING c $18,222 $18,951 $19,709 $20,497 $21,317 $22,170 $23,057 $23,979 $24,938 $25,936 $26,973 4240 - WATER OPERATING SUPPLIES c $351,277 $365,328 $379,941 $395,139 $410,944 $427,382 $444,477 $462,256 $480,746 $499,976 $519,975 4241 - STREETS OPERATING SUPPLIES c $135,928 $141,365 $147,020 $152,901 $159,017 $165,377 $171,992 $178,872 $186,027 $193,468 $201,207 4244 - REPAIRS & MAINTENANCE c $2,575 $2,678 $2,785 $2,897 $3,012 $3,133 $3,258 $3,389 $3,524 $3,665 $3,812 4255 - SMALL EQUIPMENT c $9,847 $10,241 $10,651 $11,077 $11,520 $11,980 $12,460 $12,958 $13,476 $14,015 $14,576 4301 - GENERAL INSURANCE CHARGES c $422,673 $439,580 $457,163 $475,450 $494,468 $514,247 $534,817 $556,209 $578,458 $601,596 $625,660 4302 - MEMBERSHIPS & PUBLICATIONS c $1,210 $1,258 $1,309 $1,361 $1,416 $1,472 $1,531 $1,592 $1,656 $1,722 $1,791 4303 - TRAVEL & MEETINGS c $3,300 $3,432 $3,569 $3,712 $3,861 $4,015 $4,176 $4,343 $4,516 $4,697 $4,885 4304 - EDUCATION & TRAINING c $44,950 $46,748 $48,618 $50,563 $52,585 $54,689 $56,876 $59,151 $61,517 $63,978 $66,537 4330 - REGULATORY FEES & CHARGES c $194,083 $201,846 $209,920 $218,317 $227,050 $236,132 $245,577 $255,400 $265,616 $276,240 $287,290 4373 - FISCAL AGENT FEES c $1,591 $1,655 $1,721 $1,790 $1,861 $1,936 $2,013 $2,094 $2,177 $2,264 $2,355 4433 - BAD DEBTS c $90,000 $93,600 $97,344 $101,238 $105,287 $109,499 $113,879 $118,434 $123,171 $128,098 $133,222 4516 - IN-HOUSE SRV CHARGES DESIGN c $18,500 $19,240 $20,010 $20,810 $21,642 $22,508 $23,408 $24,345 $25,319 $26,331 $27,385 4523 - WATER RESERVOIRS c $325,484 $338,504 $352,044 $366,125 $380,770 $396,001 $411,841 $428,315 $445,448 $463,265 $481,796 4550 - TOOLS AND SHOP EQUIPMENT c $27,038 $28,119 $29,244 $30,414 $31,630 $32,895 $34,211 $35,580 $37,003 $38,483 $40,022 4564 - WATER METERS c $150,760 $156,790 $163,062 $169,585 $176,368 $183,423 $190,760 $198,390 $206,326 $214,579 $223,162 4651 - IF TO 01-031-031 c $519,855 $540,649 $562,275 $584,766 $608,157 $632,483 $657,782 $684,094 $711,457 $739,916 $769,512 4664 - IF TO 87-381-374 c $463,134 $481,660 $500,926 $520,963 $541,802 $563,474 $586,013 $609,453 $633,831 $659,185 $685,552 4665 - IF TO 87-383-373 c $1,090,361 $1,133,975 $1,179,334 $1,226,508 $1,275,568 $1,326,591 $1,379,654 $1,434,840 $1,492,234 $1,551,923 $1,614,000 4666 - IF TO 87-380-370 c $1,553,805 $1,615,957 $1,680,595 $1,747,819 $1,817,732 $1,890,441 $1,966,059 $2,044,701 $2,126,489 $2,211,549 $2,300,011 Total O&M $23,429,238 $24,961,649 $25,537,675 $26,138,884 $26,766,439 $27,421,558 $28,366,916 $29,350,303 $30,373,364 $31,437,821 $32,545,480 HF&H Consultants, LLC
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Series 2013 Refunding Bonds $650,300 $652,800 $0 $0 $0 $0 $0 $0 $0 $0 $0 Debt Service for Citrus Pump Station $0 $0 $0 $0 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 Total Debt Service $650,300 $652,800 $0 $0 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 Non-Operating Revenues
3328 - AMERICAN RESCUE PLAN c $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 3749 - LATE PAYMENT FEE c ($25,600) ($26,624) ($27,689) ($28,797) ($29,948) ($31,146) ($32,392) ($33,688) ($35,035) ($36,437) ($37,894) 3860 - MISCELLANEOUS REVENUE c ($53,500) ($55,640) ($57,866) ($60,180) ($62,587) ($65,091) ($67,695) ($70,402) ($73,218) ($76,147) ($79,193) 3912 - BILLING SERVICE CHARGE c $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 3915 - BAD DEBT RECOVERIES c ($12,000) ($12,480) ($12,979) ($13,498) ($14,038) ($14,600) ($15,184) ($15,791) ($16,423) ($17,080) ($17,763) 3916 - TURN OFF CHARGES c ($1,000) ($1,040) ($1,082) ($1,125) ($1,170) ($1,217) ($1,265) ($1,316) ($1,369) ($1,423) ($1,480) 3952 - IF FM 45-030-390 c ($114,580) ($119,163) ($123,930) ($128,887) ($134,042) ($139,404) ($144,980) ($150,779) ($156,811) ($163,083) ($169,606) 3510 - INVESTMENT EARNINGS c ($231,750) ($241,020) ($250,661) ($260,687) ($271,115) ($281,959) ($293,238) ($304,967) ($317,166) ($329,853) ($343,047) 3511 - OTHER INTEREST c $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 3520 - RENTAL INCOME c ($10,000) ($10,400) ($10,816) ($11,249) ($11,699) ($12,167) ($12,653) ($13,159) ($13,686) ($14,233) ($14,802) 3852 - WORKERS COMP - SELF INSURANCE c $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Non-Operating Revenue ($448,430) ($466,367) ($485,022) ($504,423) ($524,600) ($545,584) ($567,407) ($590,103) ($613,707) ($638,256) ($663,786) Other Transfers
Revenue Requirements ($2,585,148) ($2,982,598) ($815,647) $473,023 ($155,158) $1,450,739 $871,687 ($89,004) ($1,088,460) ($2,128,369) ($3,210,498) Capital Projects $7,407,596 $7,426,213 $6,538,360 $5,898,895 $4,886,750 $3,978,183 $3,633,700 $3,633,700 $3,633,700 $3,633,700 $3,633,700 Total Transfers $4,822,447 $4,443,615 $5,722,712 $6,371,918 $4,731,592 $5,428,922 $4,505,387 $3,544,697 $2,545,241 $1,505,331 $423,202 Total Revenue Requirement $28,453,555 $29,591,698 $30,775,365 $32,006,380 $33,286,635 $34,618,101 $34,618,101 $34,618,101 $34,618,101 $34,618,101 $34,618,101 Annual Change 4.0% 4.0% 4.0% 4.0% 4.0% 0.0% 0.0% 0.0% 0.0% 0.0% Cumulative Change 4.0% 8.2% 12.5% 17.0% 21.7% 21.7% 21.7% 21.7% 21.7% 21.7% HF&H Consultants, LLC
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City of Daly City
Water Rate Study
3A. Rev Increases
FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 Rate Revenue at Current Rates $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 Increase in Rate Revenue 4.0% 4.0% 4.0% 4.0% 4.0% 0.0% 0.0% 0.0% 0.0% 0.0% Revenue from Rate Increases
FY 2022-23 (eff. Jul. 1, 2022) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 FY 2023-24 (eff. Jul. 1, 2023) $1,138,142 $1,138,142 $1,138,142 $1,138,142 $1,138,142 $1,138,142 $1,138,142 $1,138,142 $1,138,142 $1,138,142 FY 2024-25 (eff. Jul. 1, 2024) $1,183,668 $1,183,668 $1,183,668 $1,183,668 $1,183,668 $1,183,668 $1,183,668 $1,183,668 $1,183,668 FY 2025-26 (eff. Jul. 1, 2025) $1,231,015 $1,231,015 $1,231,015 $1,231,015 $1,231,015 $1,231,015 $1,231,015 $1,231,015 FY 2026-27 (eff. Jul. 1, 2026) $1,280,255 $1,280,255 $1,280,255 $1,280,255 $1,280,255 $1,280,255 $1,280,255 FY 2027-28 (eff. Jul. 1, 2027) $1,331,465 $1,331,465 $1,331,465 $1,331,465 $1,331,465 $1,331,465 Total Revenue from Rate Increases $1,138,142 $2,321,810 $3,552,825 $4,833,080 $6,164,545 $6,164,545 $6,164,545 $6,164,545 $6,164,545 $6,164,545 Total Current Rate Revenue $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 $28,453,555 Total Projected Rate Revenue $29,591,698 $30,775,365 $32,006,380 $33,286,635 $34,618,101 $34,618,101 $34,618,101 $34,618,101 $34,618,101 $34,618,101 Revenue Requirement $29,591,698 $30,775,365 $32,006,380 $33,286,635 $34,618,101 $34,618,101 $34,618,101 $34,618,101 $34,618,101 $34,618,101 To/(From) operations after Rate Incr. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 HF&H Consultants, LLC
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Water Rate Study
3B. Revenue at Current Rates
FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 Meter Count
5/8" Meter 4,593 4,593 4,593 4,593 4,593 4,593 4,593 4,593 4,593 4,593 4,593 3/4" Meter 15,297 15,297 15,297 15,297 15,297 15,297 15,297 15,297 15,297 15,297 15,297 1" Meter 918 918 918 918 918 918 918 918 918 918 918

1.5" Meter 440 440 440 440 440 440 440 440 440 440 440
2" Meter 391 391 391 391 391 391 391 391 391 391 391
3" Meter 35 35 35 35 35 35 35 35 35 35 35
4" Meter 18 18 18 18 18 18 18 18 18 18 18
6" Meter 8 8 8 8 8 8 8 8 8 8 8
8" Meter 0 0 0 0 0 0 0 0 0 0 0
10" Meter 5 5 5 5 5 5 5 5 5 5 5
12" Meter 0 0 0 0 0 0 0 0 0 0 0
Bi-Monthly Base Charge
5/8" Meter $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 3/4" Meter $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 $54.41 1" Meter $82.94 $82.94 $82.94 $82.94 $82.94 $82.94 $82.94 $82.94 $82.94 $82.94 $82.94

1.5" Meter $148.91 $148.91 $148.91 $148.91 $148.91 $148.91 $148.91 $148.91 $148.91 $148.91 $148.91 2" Meter $230.66 $230.66 $230.66 $230.66 $230.66 $230.66 $230.66 $230.66 $230.66 $230.66 $230.66 3" Meter $493.77 $493.77 $493.77 $493.77 $493.77 $493.77 $493.77 $493.77 $493.77 $493.77 $493.77 4" Meter $848.66 $848.66 $848.66 $848.66 $848.66 $848.66 $848.66 $848.66 $848.66 $848.66 $848.66 6" Meter $1,735.88 $1,735.88 $1,735.88 $1,735.88 $1,735.88 $1,735.88 $1,735.88 $1,735.88 $1,735.88 $1,735.88 $1,735.88 8" Meter $3,278.89 $3,278.89 $3,278.89 $3,278.89 $3,278.89 $3,278.89 $3,278.89 $3,278.89 $3,278.89 $3,278.89 $3,278.89 10" Meter $5,207.64 $5,207.64 $5,207.64 $5,207.64 $5,207.64 $5,207.64 $5,207.64 $5,207.64 $5,207.64 $5,207.64 $5,207.64 12" Meter $6,866.36 $6,866.36 $6,866.36 $6,866.36 $6,866.36 $6,866.36 $6,866.36 $6,866.36 $6,866.36 $6,866.36 $6,866.36 5/8" Meter $1,499,431 $1,499,431 $1,499,431 $1,499,431 $1,499,431 $1,499,431 $1,499,431 $1,499,431 $1,499,431 $1,499,431 $1,499,431 3/4" Meter $4,993,859 $4,993,859 $4,993,859 $4,993,859 $4,993,859 $4,993,859 $4,993,859 $4,993,859 $4,993,859 $4,993,859 $4,993,859 1" Meter $456,834 $456,834 $456,834 $456,834 $456,834 $456,834 $456,834 $456,834 $456,834 $456,834 $456,834

1.5" Meter $393,122 $393,122 $393,122 $393,122 $393,122 $393,122 $393,122 $393,122 $393,122 $393,122 $393,122 2" Meter $541,128 $541,128 $541,128 $541,128 $541,128 $541,128 $541,128 $541,128 $541,128 $541,128 $541,128 3" Meter $103,692 $103,692 $103,692 $103,692 $103,692 $103,692 $103,692 $103,692 $103,692 $103,692 $103,692 4" Meter $91,655 $91,655 $91,655 $91,655 $91,655 $91,655 $91,655 $91,655 $91,655 $91,655 $91,655 6" Meter $83,322 $83,322 $83,322 $83,322 $83,322 $83,322 $83,322 $83,322 $83,322 $83,322 $83,322 8" Meter $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
10" Meter $156,229 $156,229 $156,229 $156,229 $156,229 $156,229 $156,229 $156,229 $156,229 $156,229 $156,229 12" Meter $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Fixed Service Charges $8,319,272 $8,319,272 $8,319,272 $8,319,272 $8,319,272 $8,319,272 $8,319,272 $8,319,272 $8,319,272 $8,319,272 $8,319,272 Consumption Charges
3B. Revenue at Current Rates 7 of 12

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Tier 1 Usage 1,200,324 1,200,324 1,200,324 1,200,324 1,200,324 1,200,324 1,200,324 1,200,324 1,200,324 1,200,324 1,200,324 Tier 2 Usage 362,649 362,649 362,649 362,649 362,649 362,649 362,649 362,649 362,649 362,649 362,649 Tier 3 Usage 797,159 797,159 797,159 797,159 797,159 797,159 797,159 797,159 797,159 797,159 797,159 Tier 1 Rate $6.83 $6.83 $6.83 $6.83 $6.83 $6.83 $6.83 $6.83 $6.83 $6.83 $6.83 Tier 2 Rate $9.04 $9.04 $9.04 $9.04 $9.04 $9.04 $9.04 $9.04 $9.04 $9.04 $9.04 Tier 3 Rate $12.48 $12.48 $12.48 $12.48 $12.48 $12.48 $12.48 $12.48 $12.48 $12.48 $12.48 Tier 1 Revenue $8,198,213 $8,198,213 $8,198,213 $8,198,213 $8,198,213 $8,198,213 $8,198,213 $8,198,213 $8,198,213 $8,198,213 $8,198,213 Tier 2 Revenue $3,278,344 $3,278,344 $3,278,344 $3,278,344 $3,278,344 $3,278,344 $3,278,344 $3,278,344 $3,278,344 $3,278,344 $3,278,344 Tier 3 Revenue $9,948,540 $9,948,540 $9,948,540 $9,948,540 $9,948,540 $9,948,540 $9,948,540 $9,948,540 $9,948,540 $9,948,540 $9,948,540 Total Single Family Consumption Rev $21,425,097 $21,425,097 $21,425,097 $21,425,097 $21,425,097 $21,425,097 $21,425,097 $21,425,097 $21,425,097 $21,425,097 $21,425,097 Total Revenue $29,744,369 $29,744,369 $29,744,369 $29,744,369 $29,744,369 $29,744,369 $29,744,369 $29,744,369 $29,744,369 $29,744,369 $29,744,369 3B. Revenue at Current Rates 8 of 12

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41 A B C D E F G H I J K L M
City of Daly City
Water Rate Study

4. Reserves
Rate Adj. Rate Adj. 4.0% 4.0% 4.0% 4.0% 4.0% 0.0% 0.0% 0.0% 0.0% 0.0% FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 Operations
Beginning Balance $5,528,865 $2,986,079 $18,430 ($797,218) ($324,194) ($479,353) $973,847 $1,859,630 $1,788,778 $712,764 ($1,415,605) Surplus/Deficit $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Revenue Requirement ($2,585,148) ($2,982,598) ($815,647) $473,023 ($155,158) $1,450,739 $871,687 ($89,004) ($1,088,460) ($2,128,369) ($3,210,498) Loan to Wastewater $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
To Capital Reserves
Fund Subtotal $2,943,717 $3,482 ($797,218) ($324,194) ($479,353) $971,387 $1,845,533 $1,770,627 $700,318 ($1,415,605) ($4,626,103) Estimated Interest Earnings $42,363 $14,948 $0 $0 $0 $2,460 $14,097 $18,151 $12,445 $0 $0 Ending Balance $5,528,865 $2,986,079 $18,430 ($797,218) ($324,194) ($479,353) $973,847 $1,859,630 $1,788,778 $712,764 ($1,415,605) ($4,626,103) Target Balance $5,857,310 $6,240,412 $6,384,419 $6,534,721 $6,691,610 $6,855,390 $7,091,729 $7,337,576 $7,593,341 $7,859,455 $8,136,370 Capital
Beginning Balance $23,000,000 $25,619,484 $25,385,721 $25,391,547 $22,764,440 $19,492,921 $18,537,222 $18,882,625 $19,117,548 $19,237,208 $19,236,651 Connection Fee Revenue $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 Net Cash Funded CIP ($5,065,000) ($7,948,733) ($6,820,156) ($8,800,585) ($8,403,505) ($5,158,086) ($3,509,466) ($3,622,833) ($3,739,861) ($3,860,670) ($3,435,673) From Revenue Requirements $7,407,596 $7,426,213 $6,538,360 $5,898,895 $4,886,750 $3,978,183 $3,633,700 $3,633,700 $3,633,700 $3,633,700 $3,633,700 From Operating Reserves $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Fund Subtotal $25,377,596 $25,131,964 $25,138,924 $22,524,858 $19,282,685 $18,348,018 $18,696,456 $18,928,493 $19,046,388 $19,045,239 $19,469,678 Estimated Interest Earnings $241,888 $253,757 $252,623 $239,582 $210,236 $189,205 $186,168 $189,056 $190,820 $191,412 $193,532 Ending Balance $23,000,000 $25,619,484 $25,385,721 $25,391,547 $22,764,440 $19,492,921 $18,537,222 $18,882,625 $19,117,548 $19,237,208 $19,236,651 $19,663,210 Target Balance $7,407,596 $7,426,213 $6,538,360 $5,898,895 $4,886,750 $3,978,183 $3,633,700 $3,633,700 $3,633,700 $3,633,700 $3,633,700 For Chart Only
Operations (without rate increases)
Beginning Balance $5,528,865 $2,986,079 ($1,125,403) ($4,262,861) ($7,342,662) ($12,330,900) ($17,044,706) ($22,337,565) ($28,591,114) ($35,844,119) ($44,137,034) Surplus/Deficit $0 ($1,138,142) ($2,321,810) ($3,552,825) ($4,833,080) ($6,164,545) ($6,164,545) ($6,164,545) ($6,164,545) ($6,164,545) ($6,164,545) Revenue Requirement ($2,585,148) ($2,982,598) ($815,647) $473,023 ($155,158) $1,450,739 $871,687 ($89,004) ($1,088,460) ($2,128,369) ($3,210,498) Loan to Wastewater $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Capital Asset Fund $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Fund Subtotal $2,943,717 ($1,134,660) ($4,262,861) ($7,342,662) ($12,330,900) ($17,044,706) ($22,337,565) ($28,591,114) ($35,844,119) ($44,137,034) ($53,512,077) Estimated Interest Earnings $42,363 $9,257 $0 $0 $0 $0 $0 $0 $0 $0 $0 Ending Balance $5,528,865 $2,986,079 ($1,125,403) ($4,262,861) ($7,342,662) ($12,330,900) ($17,044,706) ($22,337,565) ($28,591,114) ($35,844,119) ($44,137,034) ($53,512,077) FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 Total Cash Balance without Increase $28,528,865 $28,605,563 $24,260,318 $21,128,687 $15,421,778 $7,162,020 $1,492,516 ($3,454,940) ($9,473,566) ($16,606,912) ($24,900,383) ($33,848,867) Total Cash Balance with Increase $28,528,865 $28,605,563 $25,404,151 $24,594,330 $22,440,245 $19,013,568 $19,511,069 $20,742,255 $20,906,326 $19,949,971 $17,821,045 $15,037,106 Reserve Target (25% O&M + 1-Year CIP) $13,264,905 $13,264,905 $13,666,625 $12,922,778 $12,433,616 $11,578,360 $10,833,573 $10,725,430 $10,971,276 $11,227,041 $11,493,156 $11,770,071 Operating Reserve Target (25% O&M) 5857309.506 $5,857,310 $6,240,412 $6,384,419 $6,534,721 $6,691,610 $6,855,390 $7,091,729 $7,337,576 $7,593,341 $7,859,455 $8,136,370 HF&H Consultants, LLC
5/30/2023 4:55 PM
Daly City Water Rate Model 7Mar2023.xlsx

4. Reserves

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A B C D E F G O
City of Daly City
Water Rate Study

5. CIP
Project FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 6-Year Project Costs
FY 2023 through FY 2028
Beginning Fund Balance $23,000,000 $25,619,484 $25,385,721 $25,391,547 $22,764,440 $19,492,921 Citrus Pump Station Generator Replacement $200,000 $2,000,000 $2,200,000 Citrus Pump Station Replacement (Design) $2,000,000 $2,000,000 Equipment - Vehicles $40,000 $50,000 $50,000 $140,000
Hydropneumatic Tank Replacements $100,000 $50,000 $50,000 $200,000 New Well at Reservoir 5B on Margate $500,000 $500,000 $2,000,000 $2,000,000 $5,000,000 Plant Improvements $250,000 $300,000 $300,000 $300,000 $300,000 $300,000 $1,750,000 Pointe Pacific Generator Replacement $75,000 $500,000 $575,000 Reservoir 3 Rehabilitation $500,000 $1,500,000 $2,000,000 Reservoir 5B Structural Rehabilitation $150,000 $2,000,000 $2,150,000 Reservoir 7 Replacement $250,000 $5,000,000 $5,250,000
Reservoir Fencing $100,000 $100,000 $100,000 $300,000
SCADA Systems Upgrades $250,000 $100,000 $100,000 $450,000 Street Resurfacing Water Mains $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $600,000 Vale Well Replacement $600,000 $3,000,000 $3,600,000
Water Facility Master Plan $250,000 $250,000
Pressure Reducing Valve Replacements $100,000 $100,000 $100,000 $300,000 Reservoir 8 Rehabilitation $350,000 $150,000 $450,000 $950,000 Well Rehabilitation $250,000 $150,000 $150,000 $550,000 Westlake Electrical Upgrade $200,000 $200,000
Water Main Improvements $3,000,000 $500,000 $1,500,000 $500,000 $1,000,000 $1,000,000 $7,500,000 Future PAYGO CIP $1,500,000 $1,500,000 $3,000,000
Water Enterprise CIP $5,065,000 $7,700,000 $6,400,000 $8,000,000 $7,400,000 $4,400,000 $38,965,000 Construction Cost Index 0.00% 3.23% 6.56% 10.01% 13.56% 17.23% Total PAYGo CIP $5,065,000 $7,948,733 $6,820,156 $8,800,585 $8,403,505 $5,158,086 $42,196,065 Contribution from Revenue Requirements $7,407,596 $7,426,213 $6,538,360 $5,898,895 $4,886,750 $3,978,183 Connection Fee Revenue $35,000 $35,000 $35,000 $35,000 $35,000 $35,000 Interest Revenue $241,888 $253,757 $252,623 $239,582 $210,236 $189,205 Ending Fund Balance $25,619,484 $25,385,721 $25,391,547 $22,764,440 $19,492,921 $18,537,222 HF&H Consultants, LLC
5/30/2023 4:55 PM
Daly City Water Rate Model 7Mar2023.xlsx

5. CIP

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City of Daly City
Water Rate Study

6. Debt Service
FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 Series 2013 Refunding Bonds
Principal $625,000 $640,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Interest $25,300 $12,800 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total $650,300 $652,800 $0 $0 $0 $0 $0 $0 $0 $0 $0
Future Debt for Citrus Pump Station $0 $0 $0 $0 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 Amount - includes 3% issuance $40,000,000
Interest Rate 4.0%
Years 30
Debt Coverage Calculation
Funds Available for Debt Service
Rate Revenue $28,453,555 $29,591,698 $30,775,365 $32,006,380 $33,286,635 $34,618,101 $34,618,101 $34,618,101 $34,618,101 $34,618,101 $34,618,101 Non-Operating Income $448,430 $466,367 $485,022 $504,423 $524,600 $545,584 $567,407 $590,103 $613,707 $638,256 $663,786 Interest Income $284,251 $268,705 $252,623 $239,582 $210,236 $191,665 $200,265 $207,207 $203,265 $191,412 $193,532 Total Funds Available $29,186,236 $30,326,770 $31,513,011 $32,750,385 $34,021,471 $35,355,349 $35,385,773 $35,415,411 $35,435,073 $35,447,769 $35,475,418 O&M $23,429,238 $24,961,649 $25,537,675 $26,138,884 $26,766,439 $27,421,558 $28,366,916 $29,350,303 $30,373,364 $31,437,821 $32,545,480 Net Revenue $5,756,998 $5,365,120 $5,975,336 $6,611,500 $7,255,031 $7,933,791 $7,018,856 $6,065,108 $5,061,710 $4,009,948 $2,929,938 Debt Service $650,300 $652,800 $0 $0 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 $2,313,204 Debt Coverage Ratio 8.85 8.22 N/A N/A 3.14 3.43 3.03 2.62 2.19 1.73 1.27 HF&H Consultants, LLC
5/30/2023 4:55 PM
Daly City Water Rate Model 7Mar2023.xlsx

6. Debt Service