Del Mar City Council
May 6, 2024

10. Effluent. Any liquid outflow from a Food Service Establishment that is discharged to the sewer facilities.

11. Equivalent Dwelling Unit means the unit of measure which is based on the flow characteristics of an average single-family residence in terms of sewage quantity and constituent quality.

12. Extension means an extension of an existing sewer main.

13. Fats, Oils, and Grease ("FOG") means any substance such as a vegetable or animal product that is used in, or is a by-product of, the cooking or food preparation process, and that turns or may turn viscous or solidifies or may solidify with a change in temperature or due to other conditions.

Discharges of FOG to the sewer system from a Food Service Establishment constitute the discharge of industrial waste.

14. FOG Control Program means the FOG control program required by and developed pursuant to SWRCB Order No. 2006-0003-DWQ, Section (D)(13)(vii) and by the RWQCB directive R9-2007- 0005.

15. FOG Control Program Administrator means the individual designated by the City Manager to administer the FOG Control Program. Except as otherwise set forth in this Chapter, the FOG Control Program Administrator is responsible for all determinations of compliance with the FOG control program.

16. Food Service Establishment means facilities defined in California Uniform Retail Food Facilities Law (CURFFL), California Health and Safety Code Section 113785, and any commercial entity discharging directly or indirectly to the City's sewer system, operating in a permanently constructed structure such as a room, building, or place, or portion thereof, maintained, used, or operated for the purpose of storing, preparing, serving, manufacturing, packaging, or otherwise handling food for sale to other entities, or for consumption by the public, its members or employees, and which has any process or device that uses or produces FOG, or grease vapors, steam, fumes, smoke or odors that are required to be removed by a Type I or Type II hood.

17. Food Grinder means any device installed for the purpose of grinding food waste or food preparation by-products for disposal to the sewer system.

18. General Business/Institutional shall mean all businesses, offices, governmental agency offices and any other similar user not otherwise included in another category and with a combined sewer strength of less than or equal to a Single-Family Residence.

19. Grab Sample. A sample taken from a waste stream on a one-time basis without regard to the flow in the waste stream and without consideration of time.

20. Gravity Grease Interceptor means a multi-compartment device that is constructed in different sizes and is generally required to be located, according to the California Plumbing Code, underground between a Food Service Establishment and the connection to the sewer system.

These devices primarily use gravity to separate FOG from the wastewater as it moves from one compartment to the next. These devices must be cleaned, maintained, and have the FOG removed and disposed of in a proper manner on regular intervals to be effective.

21. Grease means any material which is extractable from an acidified sample of a waste by hexane or other designated solvent and as determined by the appropriate procedure in "Standard Methods" (includes fats and oils).

22. Grease Control Device means any gravity grease interceptor, hydromechanical grease interceptor or other mechanism, device, or process, which attaches to, or is applied to, wastewater plumbing fixtures and lines, the purpose of which is to trap, collect or treat FOG prior to discharge into the 23 May 6, 2024 Item 11

EXHIBIT C
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

sewer system. "Grease control device" may also include any other proven method to reduce FOG subject to the approval of the City.

23. Hotel/Motel means all living units of a transient nature including hotel and motel rental room units, and also living units of a permanent nature which do not contain any kitchen facilities.

Excluded from the category are Major Full Service Hotels.

24. Hot Spots means areas in sewer lines that have experienced sanitary sewer overflows or that must be cleaned or maintained frequently to avoid blockages of the sewer system.

25. Hydromechanical Grease Interceptor means a grease control device that is used to serve individual fixtures and have limited effect and should only be used in those cases where the use of a gravity grease interceptor or other grease control device is determined to be impossible or impracticable. Formerly referred to as a grease trap.

26. Industrial Wastewater means all water-carried wastes and wastewater of the community, excluding domestic wastewater and uncontaminated water. Includes all waste-water from any producing, manufacturing, processing, institutional, commercial or agricultural source.

27. Inflow means surface, storm water or urban runoff which enters the sewer system. Inflow may, in certain circumstances, cause a rapid increase in wastewater flows.

28. Infiltration means water entering the sewer system from the ground through such means as defective pipes, pipe joints, connections, or manhole walls.

29. Inspector means a person authorized by the City Manager to inspect any existing or proposed wastewater or waste generation, conveyance, processing and/or disposal facilities.

30. Interceptor means a hydromechanical or gravity grease interceptor.

31. Interference means any discharge which, alone or in conjunction with discharges from other sources, inhibits or disrupts the City's sewer system, collection processes or operations; or is a cause of violation of Chapter 22 of the City of Del Mar Municipal Code.

32. Limited Food Preparation Establishment means an establishment engaged only in reheating, hot holding or assembly of ready-to-eat (precooked and prepackaged) food products from which establishment there is only a de minimus discharge of FOG to the sewer system. A limited food service preparation establishment is not considered a Food Service Establishment under this Chapter. A limited food preparation establishment does not include any preparation that changes the form, flavor or consistency of food. Any person who contends that he/she/it meets the definition of a limited food preparation establishment shall have the burden to establish that he/she/it meets the criteria set forth in this definition.

33. Main means an existing sewer main in the sanitary sewer system of the City.

34. Major Full Service Hotel shall mean a full service facility having rooms, restaurant(s) and/or bars serving food, and/or providing room service from an onsite kitchen.

35. Manifest means that receipt to be retained by the generator of wastes for disposing of recyclable wastes or other liquid or solid wastes as required by the City or a regulatory agency.

36. New Construction means any structure planned or under construction for which a sewer connection permit has not been issued.

37. Person means any individual, partnership, co-partnership, firm, company, corporation, association, joint stock company, trust, estate, governmental entity or any other legal entity, or their legal representatives, agents, or assigns. The masculine gender shall include the feminine, the singular shall include the plural where indicated by the context. 24 May 6, 2024 Item 11

EXHIBIT C
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

38. Pretreatment or Treatment means the reduction of the amount of pollutants, the elimination of pollutants, or the alteration of the nature of pollutant properties in wastewater to a less harmful state prior to or in lieu of discharging or otherwise introducing to the sewer system.

39. Regulatory Agencies means regulatory Agencies shall mean those agencies having regulatory jurisdiction over environmental quality matters, including, but not limited to:
a. United States Environmental Protection Agency, Region IX, San Francisco and Washington, DC (EPA).
b. California State Water Resources Control Board (SWRCB). c. California Regional Water Quality Control Board, San Diego Region (RWQCB). d. Air Pollution Control District County of San Diego, Air Quality Management District (AQMD).
e. California Department of Health Services (DOHS).
f. San Diego County Department of Environmental Health (DEH).

40. Remodeling means a physical or operational change (a) causing an increase in the amount of FOG discharged to the sewer system by a Food Service Establishment which amount, alone or in conjunction with other FOG discharges, causes or creates a potential for an SSO to occur; or (b) exceeding a cost of $50,000.00 to a Food Service Establishment, requiring a building permit, and involving any one or combination of the following: (1) under slab plumbing in the food processing area, (2) a 30 percent increase in the net public seating area, (3) a 30 percent increase in the size of the kitchen area, or (4) any change in the size or type of food preparation equipment.

41. Residential shall refer to all living or dwelling units (as defined by the Uniform Building Code) of a permanent, rather than transient nature, including single-family residences, apartments, manufactured homes, townhouses and condominiums.

42. Restaurant shall mean all establishments whose principal activity involves on-premise service of meals and food, including coffee shops and cafes. Also included in this category are bakeries whose principal activity involves the production of baked goods onsite.

43. Sample Point means a location approved by the City, from which industrial wastewater can be collected that is representative in content and consistency of the entire flow of industrial wastewater being discharged to the sewer system.

44. Sampling Facilities means structure(s) provided at the user's expense for the City or user to measure and record wastewater constituent mass concentrations, collect a representative sample, or provide access to plug or terminate the discharge to the sewer system.

45. Sewage means wastewater.

46. Sewer Connection or lateral means the service pipes extending from the private property line to the public sewer main in a public street, alley or easement.

47. Sewer System means the sewer system of the City, as acquired by the City from the Del Mar Utilities, together with any additions thereto.

48. Shopping Center shall be defined as more than one commercial unit connected to the same water meter where at least one business exists whose principal activity falls into the restaurant category. Also included in this category are any businesses defined as a Take-Out-Food Business.

49. Sludge means any solid, semi-solid or liquid decant, subnate or supernate from a manufacturing process, utility service, or pretreatment facility.
25 May 6, 2024 Item 11

EXHIBIT C
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

50. Supermarket shall mean all businesses whose principal activity involves retail sale of groceries and which have onsite waste grinders attached to the sanitary sewer system.

51. Take-Out-Food Business shall be defined as all drive-ins, sandwich shops, fast food outlets and similar businesses whose principal activity involves food services but which do not provide onpremises eating facilities or which provide only disposable eating implements (paper plates, plastic utensils, etc.)

52. Twenty-five percent (25%) Rule. Requirement for gravity grease interceptors to be maintained such that the combined FOG and solids accumulation does not exceed 25 percent of the design hydraulic depth of the gravity grease interceptor. This is to ensure that the minimum hydraulic retention time and required available hydraulic volume is maintained to effectively intercept and retain FOG prior to entry into the public sewer system.

53. User means any person who discharges or causes a discharge of wastewater or waste directly or indirectly to sewer facilities. "User" shall mean the same as Discharger.

54. Waste means sewage and any and all other waste substances, liquid, solid, gaseous or radioactive, associated with human habitation or of human or animal nature, including such wastes placed within containers of whatever nature prior to and for the purpose of disposal.

55. Wastewater means the liquid and water-carried industrial or domestic wastes from dwellings, commercial buildings, industrial facilities, and institutions, whether treated or untreated, which is contributed into or permitted to enter the sewer system.

56. Waste Minimization Practices means plans or programs intended to reduce or eliminate discharges to the sewer system or to conserve water, including, but not limited to, product substitutions, housekeeping practices, inventory control, employee education, and other steps as necessary to minimize waste or wastewater produced.

57. Wastehauler means any person carrying on or engaging in vehicular transport of waste as part of, or incidental to, any business for that purpose.

58. Wastewater means the liquid and water-carried industrial or domestic wastes from dwellings, commercial buildings, industrial facilities, and institutions, whether treated or untreated, which is contributed into or permitted to enter the sewer system.

59. Wastewater Constituents and Characteristics means the individual chemical, physical and bacteriological parameters, including volume and flow rate, and such other parameters that serve to define, classify or measure the quality and quantity of wastewater.

D. Words used in these regulations in the singular may include the plural and the plural the singular. Use of masculine shall mean feminine and use of feminine shall mean masculine. Shall is mandatory; may is permissive or discretionary.
(Ord. No. 106, § 1; Ord. No. 488; Ord. No. 472; Ord. No. 655; Ord. No. 828; Ord. No. 831)

22.04.020 Service and Connection Charges.

A. The sewer service and connection charges for each residential, commercial or other persons using the municipal sanitary sewer system of the City shall be:

1. Bimonthly Service Charge.

Single Family: The bimonthly wastewater (sewer) service for single family is equal to the charge for a ⅝" meter of $127.10, regardless of size, beginning January 1, 2024; $141.60 beginning July 1, 2024; 26 May 6, 2024 Item 11

EXHIBIT C
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

$144.43 beginning July 1, 2025; $147.32 beginning July 1, 2026; $150.27 beginning July 1, 2027; and $153.28 beginning July 1, 2028.

Multi-Family, Commercial, Institutional: The sewer service for each multi-family, commercial or institutional service using the municipal sanitary system of the City shall be:

Bimonthly Service Charge Effective:

Meter Size 7/1/24 7/1/25 7/1/26 7/1/27 7/1/28
⅝" $141.60 $144.43 $147.32 $150.27 $153.28
¾" $212.40 $216.65 $220.98 $225.40 $229.91
1" $354.00 $361.08 $368.30 $375.67 $383.18
1 ½" $708.00 $722.16 $736.60 $751.33 $766.36
2" $1,132.80 $1,155.4 $1,178.57 $1,202.14 $1,226.18
3" $2,265.60 $2,310.91 $2,357.13 $2,404.27 $2,452.36
Fairgrounds $53,045.02 $54,105.92 $55,188.04 $56,291.80 $57,417.64

2. Bimonthly Commodity/Volume Charge. For single family residential users the bimonthly commodity/volume charge will be based on winter water usage subject to the limitations of the sewer cap which is set annually each July 1. The sewer cap will be derived using 100 percent of the water usage for the lowest billing period (two months) during the wet winter months, October through April.

If that calculation yields a number less than eight units, the cap will be set at eight units.

Each billing period the single-family residential customer sewer commodity charge will be calculated by using 100 percent of the water used during that billing period by the single family residential commodity rate in effect. If the 100 percent calculation yields a water usage amount that exceeds the individual customer's cap, the customer will be billed for the cap amount. The cap will not apply in calculating the commodity charge for residential customers who have installed sub-meters or irrigation meters where household use without irrigation can be calculated.

Bimonthly Commodity Rate/Volume Charge (cost per unit based on winter water use) Effective:
7/1/24 7/1/25 7/1/26 7/1/27 7/1/28
Single-Family
Residential
$9.44 $9.63 $9.82 $10.02 $10.22
General/Multi-Family $9.44 $9.63 $9.82 $10.02 $10.22
Fairgrounds:* (*100%
of metered use)
$9.44 $9.63 $9.82 $10.02 $10.22
* The sewer commodity rate for the Fairgrounds is subject to change pending results of required annual strength testing. If strength measurements increase, the commodity rate will increase accordingly. Reductions in strength measurements will result in a commensurate decrease in the commodity rate.
27 May 6, 2024 Item 11

EXHIBIT C
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

3. Pass Through Fees and Charges for Wastewater Treatment and Transportation. All City of San Diego fees and charges for the treatment and transportation of Del Mar's wastewater shall be passed through to Del Mar sewer utility customers.

4. Fats, Oils, and Grease Program Non-Compliance Bimonthly Service Surcharge and Volume Charge.

Restaurants not compliant with the City's Fats, Oils, and Grease Program as identified in this Chapter

22.04 and Chapter 22.08 of the Del Mar Municipal Code may be assessed an additional FOG Program Non-Compliance Surcharge in addition to the monthly service charges identified above. The FOG Program Non-Compliance Surcharge shall be assessed on a bimonthly basis as a fixed additional bimonthly service charge as follows:
7/1/19 1/1/20 1/1/21 1/1/22 1/1/23 1/1/24
$82.11 $86.22 $90.53 $95.05 $99.81 $104.80
An additional volume charge will also apply to 90 percent of water usage as follows:
7/1/19 1/1/20 1/1/21 1/1/22 1/1/23 1/1/24
$12.42 $13.01 $13.66 $14.34 $15.06 $15.81

5. Sub Meters. If the property owner determines that it is in his/her best interest, a sub meter may be used to establish the wastewater units of return to sewer for the residential customer. a. Readings obtained from sub meters installed for the purpose of measuring exclusively indoor water use in hundred cubic feet (HCF) may be used by the City for the purpose of calculating the sewer commodity charge if the following conditions are met:
(1) An application requesting that the water readings from a sub meter be considered in determining the sewer commodity charge must be completed by the customer prior to the installation of a new sub meter. The application must, as a minimum, grant the City reasonable access to the property to read the sub meter on a periodic basis. (2) The use of the sub meter must be pre-approved by the Public Works Director. (3) The sub meter must be connected to a water line exclusively used for indoor water use, and shall read in units of water (HCF). The applicant agrees to City inspection and verification of indoor use.
(4) The sub meter must be registered, inspected and certified by the County Department of Agriculture, Weights, and Measures before its installation and every four years thereafter. (5) A monthly service charge will be imposed for the meter reading during which the usage is recorded. That charge shall be 50 percent of the monthly water service charge for a ⅝" water meter.
b. It shall be the responsibility of the property owner to obtain and install, at the property owner's expense, the sub meter subject to the requirements of this section. c. A penalty, requiring removal of the sub meter for a period of five years, will be imposed by the City for any sub meter found to be tampered with, adjusted, or improperly installed to produce false readings. It shall be the responsibility of the property owner to pay for the removal of the sub meter.
28 May 6, 2024 Item 11

EXHIBIT C
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

B. Connection and Installation Fees. The connection fee for a new connection needing to acquire capacity in the sewer system for the first time or upsizing an existing connection will be set as follows:

Meter
Size
1/1/15
⅝" $6,443.54
¾" $9,665.31
1" $16,108.84
1½" $32,217.69
2" $51,548.30
3" $103,096.61
Existing customers upsizing their water meter will be given a credit commensurate with the connection fee for the current meter.

C. Sewer Installation Fee. The owner or applicant for a connection to the City sewer system shall pay to the City an amount equal to the cost for labor and materials of the installation. (Ord. No. 561; Ord. No. 651; Ord. No. 655; Ord. No. 665; Ord. No. 688; Ord. No. 699; Ord. No. 714; Ord. No. 731; Ord. No. 769; Ord. No. 828; Ord. No. 903; Ord. No 948 , § 2, Exh. C, 6-3-2019)

22.04.030 Same—Billing and Payment.

All sewer service charges imposed under the provisions of this Chapter shall be due and payable at the times and in the manner provided for the payment of water bills. Such sewer service charges shall be billed to the owner or occupant of the premises on the same bill on which the water is billed to such owner or occupant, and shall be subject to the same penalties for delinquency. Such combined bill for water consumed and for sewer service charge shall be paid in its entirety and may not be severed for the separate payment of either portion thereof.

Where the premises consume water from a source other than the City water system, the sewer service charge shall be billed to the owner or occupant of the premises in a separate bill. The sewer service charge may be collected by suit in any court of competent jurisdiction or any other manner. (Ord. No. 106, § 20; Ord. No. 301, § 3)

22.04.040 Suspension of Sewer Service.

When deemed necessary by the Director of Public Works for the preservation of public health or safety or for the protection of public or private property, he may suspend sewer service to any person or persons using the sewer system in a manner or way to endanger the public health or safety of public or private property. In suspending service, he may sever all pertinent connections to the public sewer. If such endangerment shall be imminent, then the Director may act immediately to suspend sewer service coincident with notice or warning to such person.
(Ord. No. 106, § 16)
29 May 6, 2024 Item 11
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

22.04.050 Right of Inspection.

The officers, employees or inspectors of the Water Utilities Department shall have the right to enter upon the premises of any person at reasonable hours to inspect or determine if this Chapter is being violated.

22.04.060 City Manager to Enforce Chapter Provisions.

The City Manager is hereby charged with the duty of enforcing this Chapter.

22.04.070 Negotiations with Applications.

The City Manager is authorized to carry on any preliminary negotiations or investigation with any person seeking the use of the sewage facilities of the City.

22.04.080 Application of Revenues.

Except as provided in Chapter 22.12, revenues derived under the provisions of this Chapter shall be used only for the acquisition, construction, reconstruction, maintenance and operation of the sanitary sewer system, and any surplus thereof shall be applied to the retirement of the bonded indebtedness now outstanding on the sanitary sewer system of the City. Such revenue shall not be used for the acquisition or construction of new local street sewers or laterals as distinguished from main trunk, interceptor and outfall sewers.

22.04.090 Notice to be Given when Premises are Vacated in Order for Water to be Cut Off.

In case a house or place of business becomes vacant, the regular minimum sewer service charge shall be charged and collected from the owner thereof, whether sanitary service is used or not, until the day upon which the office of the department is notified in writing of the fact that the property is unoccupied, and is requested to shut off water and sanitary service.

22.04.100 Unlawful to Permit Surface Drainage to Enter System.

No person shall allow, or permit to be allowed, whether knowingly or not, any surface or storm water runoff to enter into any portion of the City sewerage system through either sewer mains, laterals, manholes or any other location in the system.

22.04.110 Wastewater Utility Rates During Demand Management/Drought Conditions.

Wastewater customers are billed for sewer service based on their water usage. During drought periods, water usage will decline and threaten the fiscal stability of the wastewater utility. Therefore, during drought periods, wastewater charges will be calculated based on the assumption that sewer usage is the same as the commensurate month from the last non-drought fiscal year. Drought sewer charges will be lifted after one full year of non-drought consumption records can be established.

A. Residential. Sewer discharges will be estimated based on the assumed sewage usage during the last non-drought year.

B. Commercial. Sewer discharges will be estimated based on 90 percent of the water usage during the last non-drought year. A user may petition to have their sewer discharge (water usage) assumption lowered if their annual water demand drops below their non-drought water demands by a level below the drought reduction levels plus an additional 20 percent. As a user can meet the previously defined 30 May 6, 2024 Item 11
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

criteria, their sewage discharge assumptions will be lowered to the current water demands, adding back any water savings required under the drought requirements. As an example, if the drought reductions are 20 percent, and the user drops their water consumption by 45 percent, then the resulting sewer will be calculated based on 120 percent of the current water consumption.

C. Fairgrounds. Sewer commodity charges during drought conditions will be calculated based on the greater of:
(1) The rolling average of the same bi-monthly period from the last three fiscal years, or (2) The actual metered sewage.
(Ord. No. 828; Ord. No 948 , § 2, Exh. C, 6-3-2019)
31 May 6, 2024 Item 11
No�ce of Public Hearing
Regarding Proposed Water and
Wastewater Rates
Monday, May 6, 2024
City Council Mee�ng Begins at 4:30 p.m.

Del Mar Civic Center—Town Hall
1050 Camino del Mar, Del Mar, CA 92014
On Monday, May 6, 2024, the Del Mar City Council will hold a Public Hearing regarding proposed water and wastewater
rates and to consider all wri�en protests against the proposed rate increases. The new rates, if adopted, will take effect on or a�er July 1, 2024. Interested par�es are invited to a�end.

Why are you receiving this notice?
The City of Del Mar is mailing this no�ce to you because you are a water and/or wastewater customer directly responsible for payment of water and/or wastewater service fees, or are the owner of record for a property that receives water or wastewater service. This no�ce describes proposed changes to the rates for water and wastewater service, and provides no�ce of the upcoming public hearing at which these
proposed changes will be considered by the Del Mar City Council.

Costs for Water and Wastewater
Del Mar provides water and wastewater service to
approximately 1,900 customers. The City of Del Mar is also responsible for preven�ng urban runoff and pollu�on to
nearby lagoons and the Pacific Ocean.

Rates and charges for these services, billed bi-monthly (every two months), are the primary source of funding to operate the water and wastewater systems. Costs include system
opera�ons, capital projects, administra�on, debt service, and costs related to responsible long-term opera�onal or financial management, such as maintaining adequate fund reserves and con�ngency planning.

Del Mar’s rates consist of two parts: the service charge and volume charge. The “service charge” is a fixed bi-monthly amount based on meter size to recover fixed costs, which do not vary with the volume of water used by a customer for items such as infrastructure maintenance, meter reading, customer billing, and debt service. The “volume charge” is a commodity rate to recover costs that vary based on how much water is used or how much wastewater is generated.

Reasons for Rate Increases
Costs to provide water and wastewater rise annually. Since 2019, the City’s cost to buy imported water has increased by 24%. Rising costs for energy and infrastructure construc�on and maintenance, as well as the cost for personnel to operate Safe ● Reliable ● Cost Effec�ve
the systems impact the cost to provide these services in a safe and reliable manner. Over the next five years, the City of Del Mar will spend nearly $2.5 million on capital infrastructure rehabilita�on projects for the water and wastewater systems.

Cost-Effective Services
Del Mar con�nuously seeks ways to make these u�li�es
more cost efficient. An example is the partnership in
recent years with the San Elijo Wastewater Joint Powers Authority (located in Cardiff) and the City of Solana Beach for wastewater treatment services, which results in longterm less expensive wastewater treatment. 32 May 6, 2024 Item 11
Wastewater
· Del Mar produces about 140 million gallons of
wastewater each year.
· Del Mar’s wastewater is treated primarily by the
San Elijo Joint Powers Authority (SEJPA) and a
small amount by the City of San Diego.
· The cost to provide wastewater service in Del Mar
is about $4.8 million per year.
· 26% of the costs are pass-thru costs for treatment
and transporta�on, which Del Mar has limited
ability to control.
· Over the next five years, Del Mar plans to spend
approximately $2,500,00 on wastewater
infrastructure projects, such as root management
and pipeline
rehabilita�on.
· Wastewater costs
include major
pipeline repairs and
system upgrades.

Current July 2024
Fixed Charge - 5/8” Meter $127.10 $141.60
Variable based on
17 units bi-monthly
($8.98/unit)
$152.66
($9.44/unit)
$160.48
Total Bi-monthly $279.76 $302.08
Bi-monthly Change $22.32
Water Sample Customer Rate Change
Sample single-family residen�al household water use, based on 5/8” meter and 17 units bi-monthly (every two months) water use .

Distribu�on of Costs (Based on 2024)
21st Street Sewer Pump Station
Proposed Wastewater Rates
Proposed Bi-Monthly (every 2 months) Fixed Service Proposed Rates Current Rates 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 Rate Increase: varies 2% 2% 2% 2%
Single-Family Residen�al $ 127.10 $ 141.60 $ 144.43 $ 147.32 $ 150.27 $ 153.28 Meter Size
5/8" $ 127.10 $ 141.60 $ 144.43 $ 147.32 $ 150.27 $ 153.28 3/4" $ 190.66 $ 212.40 $ 216.65 $ 220.98 $ 225.40 $ 229.91 1" $ 317.74 $ 354.00 $ 361.08 $ 368.30 $ 375.67 $ 383.18 1 1/2" $ 635.48 $ 708.00 $ 722.16 $ 736.60 $ 751.33 $ 766.36 2" $ 1,016.76 $ 1,132.80 $ 1,155.46 $ 1,178.57 $ 1,202.14 $ 1,226.18 3" $ 2,033.52 $ 2,265.60 $ 2,310.91 $ 2,357.13 $ 2,404.27 $ 2,452.36 Fairgrounds $ 55,024.00 $ 53,045.02 $ 54,105.92 $ 55,188.04 $ 56,291.80 $ 57,417.64 Proposed Bi-Monthly (every 2 months) Volumetric Rates
Rate Increase: varies 2% 2% 2% 2%
Single Family Residen�al $ 8.98 $ 9.44 $ 9.63 $ 9.82 $ 10.02 $ 10.22 Mul�-Family Residen�al $ 8.98 $ 9.44 $ 9.63 $ 9.82 $ 10.02 $ 10.22 Commercial $ 8.98 $ 9.44 $ 9.63 $ 9.82 $ 10.02 $ 10.22
Ins�tu�onal $ 8.98
Hotels/Motels without Restaurants $ 8.84
Hotels/Motels with Restaurants $ 12.73
Restaurants $ 15.06
Shopping Centers $ 10.45
Fairgrounds $ 10.27 $ 11.49 $ 11.72 $ 11.95 $ 12.19 $ 12.43 33 May 6, 2024 Item 11
Water
· Del Mar imports nearly 100% of its water through the San Diego County Water Authority and contracts with the City of San Diego for water treatment and transporta�on to Del
Mar. Recycled water is purchased from the San Elijo Joint Powers Authority for irriga�on.
· The cost to provide water service in Del Mar is about $5.1 million per year. More than half of the City’s costs are passthru costs, which the City cannot control. · Water use in Del Mar is down by 7% since 2019. Though the City purchases less water, fixed costs for the water system (such as maintaining pipes, pumps, and storage reservoirs and customer service) are spread across less water use, which impacts rates.
· Over the next five years,
Del Mar an�cipates
spending approximately
$2,300,000 on water
projects, such as replacing
pipes, valves and fire flow
improvements.
· Revenues must increase 3%
in year one, and 2% per
year therea�er, to cover
water system costs.

Current July 2024
Fixed Charge - 5/8” Meter $88.04 $88.70
Variable based on
22 units bi-monthly
($6.22/unit)
$136.84
($6.26/unit)
$137.72
Total Bi-monthly $224.88 $226.42
Bi-monthly Change $1.54
Sample Customer Rate Change
Sample single-family residen�al household water use, based on 5/8” meter and 17 units bi-monthly (every two months) water use.

Distribu�on of Costs (Based on 2024)
Proposed Water Rates
Much of Del Mar’s water supply
is imported from hundreds of
miles away.

Bi-Monthly Fixed Service Charges Proposed Rates
(every 2 months) Current Rates 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 Rate Increase: varies 2% 2% 2% 2%
Meter Size
5/8" $ 88.04 $ 88.70 $ 90.47 $ 92.28 $ 94.13 $ 96.01
3/4" $ 132.06 $ 129.41 $ 132.00 $ 134.64 $ 137.33 $ 140.08 1" $ 220.08 $ 210.81 $ 215.03 $ 219.33 $ 223.72 $ 228.19 1 1/2" $ 440.16 $ 414.33 $ 422.62 $ 431.07 $ 439.69 $ 448.48 2" $ 704.24 $ 658.55 $ 671.72 $ 685.15 $ 698.85 $ 712.83 3" $ 1,408.46 $ 1,309.82 $ 1,336.02 $ 1,362.74 $ 1,389.99 $ 1,417.79 4" $ 2,200.72 $ 2,042.49 $ 2,083.34 $ 2,125.01 $ 2,167.51 $ 2,210.86 Fairgrounds $ 67,968.00 $ 76,298.59 $ 77,824.56 $ 79,381.05 $ 80,968.67 $ 82,588.04 Bi-Monthly Fixed Commodity Charges Proposed Rates ($/hcf) (every 2 months) Current Rates 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 Rate Increase: varies 2% 2% 2% 2%
Single Family Residen�al Single Family Residen�al
Tier 1 (0-20 hcf) $ 6.22 Tier 1 (0-22 hcf) $ 6.26 $ 6.39 $ 6.52 $ 6.65 $ 6.78 Tier 2 (21+ hcf) $ 7.47 Tier 2 (21+ hcf) $ 7.37 $ 7.52 $ 7.67 $ 7.82 $ 7.98 Mul�-Family Residen�al $ 6.41 Mul�-Family Residen�al $ 6.81 $ 6.95 $ 7.09 $ 7.23 $ 7.37 Commercial/Ins�tu�onal $ 6.52 Commercial/Ins�tu�onal $ 6.80 $ 6.94 $ 7.08 $ 7.22 $ 7.36 Irriga�on $ 6.96 Irriga�on $ 7.11 $ 7.25 $ 7.40 $ 7.55 $ 7.70 Fairgrounds $ 6.52 Fairgrounds $ 8.08 $ 8.24 $ 8.40 $ 8.57 $ 8.74 34 May 6, 2024 Item 11
City of Del Mar
1050 Camino del Mar
Del Mar, CA 92014

HOW TO PROTEST PROPOSED RATES
An owner or tenant of property receiving City water and wastewater service may protest the proposed increased service charges by submi�ng a wri�en protest by mail or in person to the City Clerk, 1050 Camino del Mar, Del Mar, CA 92014. Wri�en protests must indicate opposi�on to the proposed rate increases. Wri�en protests must be received (not postmarked) by the City Clerk before or during the public hearing date of May 6, 2024. The protest must be signed by property owner(s) or tenant(s) and must include the assessor’s parcel number(s) or street address(es) of all property(ies) served. Only one protest may be filed per parcel. Because an original signature is required, protests submi�ed by email, facsimile, or other electronic means will not be accepted. Oral protests will not be accepted.

If a majority of the affected customers do not file wri�en protests of the proposed rate changes, the Council will then consider and may adopt the rate changes described in this no�ce. If a majority of affected customers file wri�en protests, the City Council will not adopt the proposed rate adjustments and the City will reconsider the rate structure and rates. Pursuant to Government Code Sec�on 53759, there is a 120-day statute of limita�ons for any judicial ac�on or proceeding challenging any new, increased, or extended water and sewer fee or charge. Cost data regarding the proposed increased charges is available for review during business hours at the City Clerk’s Office, City Hall, 1050 Camino del Mar, Del Mar. For ques�ons, call (858) 755-9313. Addi�onal informa�on about the proposed increases may be found online at:
www.delmar.ca.us/U�lity-Rates
Demand Management Rates
Del Mar’s water rate structure includes demand management rates which can be implemented by the City Council in response to a water shortage. These demand management rates cover increased costs for water and encourage conserva�on. Proposed rate increases only apply to the commodity rates. For example: During a Stage 2 reduc�on, Single Family FY 2024-25 rates would increase 2.8%: $6.26 * (1+ 0.028) = $6.44 per HCF for water use in the first �er and $7.37* (1+ 0.028) = $7.58 per HCF for water use in the second �er.

Maximum Drought Rate Factors by Water Conservation Stage Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6
Shortage Up to Shortage Up to Shortage Up to Shortage Up to Shortage Up to Shortage Up to Customer Class (10% Reduc�on) (20% Reduc�on) (30% Reduc�on) (40% Reduc�on) (50% Reduc�on) (56% Reduc�on) Single Family 1.013 1.028 1.047 1.069 1.098 1.114
Mul�-Family 1.015 1.034 1.058 1.088 1.128 1.157
Commercial 1.013 1.029 1.048 1.071 1.100 1.117
Irriga�on* 1.032 1.080 1.163 1.336 1.944 N/A
Fairgrounds 1.026 1.062 1.116 1.207 1.393 1.738
* "N/A" due to assumption of irrigation use being suspended at Stage 6.

PRESORTED STD.

U.S. POSTAGE
PAID

SAN DIEGO, CA
PERMIT # 2094
35 May 6, 2024 Item 11
City of Del Mar
Agenda Report
________________________________________________________________________________________________________ City Council Action:

TO: Honorable Mayor and City Council Members
FROM: Joe Bride, Public Works Director
Monica Molina, Finance Manager/Treasurer
Via Ashley Jones, City Manager
DATE: February 20, 2024
SUBJECT: Overview of Water and Wastewater Rate Study and Proposed Rate Schedule and Recommendation to Initiate the 218 Public Noticing Process REQUESTED ACTION/RECOMMENDATION:

Staff recommends that the City Council receive a presentation from City staff and HF&H Consultants and direct staff to proceed with the required Proposition 218 public noticing process for recommended water and wastewater rates effective July 1, 2024.

DISCUSSION/ANALYSIS:

The City of Del Mar maintains separate Water and Wastewater Enterprise Funds, each with its own rate stabilization, operating, capital and pension reserves. The City’s water and wastewater utilities are funded from water and wastewater rates and fees are charged to the City’s customers based on their use of the respective utility services. The rate structures of both the water and wastewater rates consist of a fixed service charge and a variable, flow-based, charge for which customers are billed bi-monthly.

Proposition 218 requires utility agencies to forecast future expenditures over the rate study period and set the appropriate rates to generate an equal amount of revenues. Typical fund expenditures are estimated based on historical costs, including operations and maintenance, capital improvements, capital equipment replacement, emergencies, and reserve funding. Additional factors include recent and actual water consumption patterns (by customer-type, meter size, and the associated impact on water and wastewater revenues) and inflation forecasts.

The City of Del Mar does not have a direct connection to a water supply or own a potable water filtration plant, therefore water system external expenditures include the costs for buying raw water from the San Diego County Water Authority (SDCWA), and the costs of contracting with the City of San Diego to treat the raw water to potable drinking water quality standards and transport the water to Del Mar. Also, Del Mar does not own a wastewater treatment facility, therefore wastewater system expenditures include contracting with both the San Elijo Wastewater Joint Powers Authority (JPA) and the City of San Diego Metropolitan Wastewater System (Metro) for wastewater treatment services and the City of San Diego and Solana Beach for wastewater transportation services.

Internal expenditures include Capital Projects and Operation and Maintenance (O&M) expenditures. O&M expenditures for the water and wastewater enterprises include fuel, salaries, 36 May 6, 2024 Item 11
City Council Agenda Report
Water and Wastewater Rate Study and Proposed Rate Schedule February 20, 2024

benefits, analytical sampling/analysis, materials, supplies, insurance, vehicle maintenance, utilities and administrative expenses.

The Public Works Department oversees Capital Improvement Programs for the Water and Wastewater Systems to meet the City’s critical water and wastewater demands (ensuring functioning reliable water and wastewater infrastructure) as well as achieving regulatory health and safety requirements. Specific projects are prioritized and scheduled based on risk analysis, life cycle expectations, and input from system operators and residential feedback. Project cost estimates are developed based on unit costs of similar projects and forecasted escalation rates.

Both programs are designed to only invest funding in the City’s most critical needs and non-critical projects are deferred to provide funding for the critical projects.

The wastewater fund is also subject to debt service expenses. The 21st Street pump station was funded through a state revolving loan program. Annual payments of $344,017, which began on August 1, 2013, are to be paid through August 2032 at an interest rate of 2.9% per annum. In addition, the City entered into a finance agreement in June 2015 with the California Infrastructure and Economic Development Bank (iBank) for the replacement of a sewage pipeline. Annual payments of approximately $218,000, which began on August 1, 2016, are to be paid through August 2035 at an interest rate of 2.17% annum.

In 2019, the City adopted a five-year rate schedule for water and wastewater rates for Fiscal Years (FYs) 2019-2020 through 2023-2024. The City is in the fifth year of the five-year rate schedule. The current rate period ends on July 1, 2024. The current rate schedule has produced sufficient revenues to cover overall expenses, however, unforeseen high inflation rates have increased external costs higher than expected. For example, potable water supply and treatment costs from the San Diego County Water Authority and City of San Diego have increased 27% since 2019, whereas the prior rate study only assumed an increase of approximately 16.2 %.

Other expenses that have been subject to higher-than-expected inflation are equipment, supplies, fuel, and vehicle repairs/replacements.

The City has compensated for these unexpected external cost increases by implementing internal cost savings measures such as utilizing streamlined meter reading software to increase efficiencies and reduce labor costs and maximizing wastewater pump efficiencies and lower energy usage. Also, the City has reduced Capital Improvement Project costs by bundling water and wastewater projects into larger bid packages which has resulted in lower mobilization and unit costs.

The current rates are not set to generate sufficient revenue needed to cover anticipated future increases in fixed and variable costs associated with the City’s water and wastewater systems. In order to collect sufficient revenue for covering the cost of these utility services, a rate adjustment is required. In May 2023, the City of Del Mar administered a Request for Qualification (RFQ) process and awarded a professional services agreement to HF&H Consultants, LLC (HF&H) for Water and Wastewater Utility Rate Studies. Attachment A details the analysis to perform a costof-service study and set proposed water and wastewater rates for FYs 2024-2025 through FY 2028-2029. The information was presented to the Finance Committee on January 23, 2024, and the feedback provided by the Committee was incorporated into the presentation. 37 May 6, 2024 Item 11
City Council Agenda Report
Water and Wastewater Rate Study and Proposed Rate Schedule February 20, 2024

Next Steps
Following the introduction of the proposed five-year rates and the cost of service study to the City Council on February 20, 2024, the next step will be to send a notice with the proposed rates to all property owners and utility customers 45-days in advance of a public hearing that will be scheduled for May 6, 2024, in accordance with the process set forth by Proposition 218. The purpose of the public hearing on May 6, 2024, will be for the City Council to adopt the proposed rates by ordinance, unless there is a majority protest (in writing). A second reading will be scheduled for May 20, 2024, and the new rates would take effect on July 1, 2024.

FISCAL IMPACT:

There is no fiscal action to be taken by the City Council related to this agenda item. In order to collect sufficient revenue to cover the cost of providing water and wastewater service, it is necessary for a rate adjustment to take effect July 1, 2024, and on July 1 of the subsequent four years. The proposed five-year rate adjustments allow the Water and Wastewater Fund to balance its annual operating budget while building-up available funds for future capital costs and stabilizing rates for customers. Approval of this item does not require a budget adjustment to the Fiscal Year 2023-24 Operating and Capital Budget.

ENVIRONMENTAL IMPACT:

The action being considered is exempt from the California Environmental Quality Act (CEQA) because it is not a “project” per Section 15378(b)(5) of CEQA Guidelines. The action involves an organizational or administrative activity of government that will not result in the direct or indirect physical change in the environment.

ATTACHMENTS:

Attachment A – Water and Wastewater Rate Cost of Service Study – HF&H Consultants 38 May 6, 2024 Item 11
Final Report – March 8, 2024
Revised April 12, 2024

CITY OF DEL MAR
Water and Wastewater Rate
Cost-of-Service Study
39 May 6, 2024 Item 11
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CITY OF DEL MAR
1050 Camino Del Mar
Del Mar, CA 92014

WATER AND WASTEWATER RATE COST-OF-SERVICE
STUDY
Revised April 12, 2024

HF&H CONSULTANTS, LLC
590 Ygnacio Valley Rd, Suite 105
Walnut Creek, CA 94596
© HF&H CONSULTANTS, LLC All rights reserved.
41 May 6, 2024 Item 11
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Managing Tomorrow’s Resources Today
590 Ygnacio Valley Road, Suite 105 Northern California
Walnut Creek, California 94596 www.hfh-consultants.com
Telephone: 925/977-6950
April 12, 2024
Joe Bride
Public Works Director, City Engineer
City of Del Mar
1050 Camino Del Mar
Del Mar, CA 92014
Subject: Water and Wastewater Rate Cost-of-Service Study – Final Report Dear Joe Bride:

HF&H is pleased to submit this cost-of-service report to the City of Del Mar (City). The report summarizes the analysis that was conducted to develop the recommended water and wastewater rates for FY 2024- 25 through FY 2028-29. The rates proposed in this report reflect the current and projected cost of providing water and wastewater service for the next five years.

We greatly appreciate your assistance in developing the cost-of-service analysis.

Please note this report was revised April 2024 to revise calculation errors in Figure I-5 and Figure V-14, which provided sample FY 2024-25 water rates adjusted for each of the six stages of water shortages, corresponding to the drought factors proposed. The calculation errors have no effect on the Notice of Public Hearing mailed in advance of the Public Hearing scheduled for May 6, 2024 to adopt new water and wastewater rates. This is because the notice includes the drought rate factors to be approved and potentially applied to any then-current commodity rates, rather than the adjusted commodity ratesthemselves. The revised calculations do not change the recommended rates and charges included within this report or within the Notice of Public Hearing.

Sincerely,

HF&H CONSULTANTS, LLC
Rick Simonson
Senior Vice President
43 May 6, 2024 Item 11
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City of Del Mar Water and Wastewater Rate Cost-of-Service Study Final Report Revised April 12, 2024 Table of Contents
HF&H Consultants, LLC Page i April 12, 2024

TABLE OF CONTENTS
I. EXECUTIVE SUMMARY.............................................................................................3 Study Objectives........................................................................................................... 3 Findings and Recommendations..................................................................................... 3 II. INTRODUCTION ...................................................................................................12 Study Purpose.............................................................................................................13 Study Process..............................................................................................................13 Report Organization.....................................................................................................14 III. WATER REVENUE REQUIREMENTS.....................................................................15 Revenue Requirement Assumptions and Projections .......................................................15 O&M Expenses.......................................................................................................16 Raw Water Purchases .............................................................................................16 Water Treatment Expenses .....................................................................................16 Capital Project Costs...............................................................................................17 Reserves.....................................................................................................................17 Operating Reserve..................................................................................................18 Self-Insurance Reserve ...........................................................................................18 Pension Reserve.....................................................................................................18 Capital Reserve ......................................................................................................18 Equipment Replacement Reserve.............................................................................18 Rate Stabilization Fund ...........................................................................................18 Revenue Increases ......................................................................................................18 Reserve Fund Balance..................................................................................................19 IV. WATER RATE COST OF SERVICE ANALYSIS.........................................................21 Methodology ...............................................................................................................21 Customer Classes ........................................................................................................22 Cost-of-Service Allocations ...........................................................................................22 Fairgrounds Allocation Factors .................................................................................23 Staff Allocation .......................................................................................................23 Hydraulic Capacity..................................................................................................23 Distribution System Sizing ......................................................................................24 Total Water Use......................................................................................................24 Operations & Maintenance Composite ...................................................................25 Results of Initial Allocation ......................................................................................25 Demand Service Allocation Factors...........................................................................25 Average (Base) Day demand..................................................................................25 Maximum Day demand...........................................................................................25 Maximum Hour demand .........................................................................................26 Load Factors ..........................................................................................................26 Cost-of-Service Allocations and Allocation Factors .....................................................27 V. WATER RATE DESIGN ...........................................................................................32 Current Rates..............................................................................................................32 45 May 6, 2024 Item 11
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Current Service Charges..........................................................................................32 Current Commodity Charges....................................................................................32 Service Charge Design .................................................................................................33 Water Use Charge Design.............................................................................................35 Single Family Residential Commodity Charges...........................................................36 Uniform Commodity Charges...................................................................................37 Commodity Charges Summary.................................................................................37 Drought Rate Factors..............................................................................................38 Analysis..................................................................................................................39 Implementation.......................................................................................................43 VI. COMPARISON TO WATER AGENCIES...................................................................45 Neighboring Agency Comparison .............................................................................45 VII. WASTEWATER REVENUE REQUIREMENTS ........................................................46 Operating & Maintenance (O&M) Expenses...............................................................46 Wastewater Transportation Expenses.......................................................................46 Wastewater Treatment Expenses.............................................................................47 Debt Service ..........................................................................................................47 Capital Project Costs...............................................................................................48 Reserve Contributions.............................................................................................48 Reserves.....................................................................................................................48 Operating Reserve..................................................................................................49 Self-Insurance Reserve ...........................................................................................49 Pension Reserve.....................................................................................................49 Debt Service Reserve..............................................................................................49 Capital Reserve ......................................................................................................49 Equipment Replacement Reserve.............................................................................49 Rate Stabilization Fund ...........................................................................................49 Revenue Increases ......................................................................................................50 Debt Service Coverage.................................................................................................50 Reserve Fund Balance..................................................................................................51 VIII. WASTEWATER RATE ........................................................................................53 COST OF SERVICE ANALYSIS ....................................................................................53 Methodology ...............................................................................................................53 Customer Classes ........................................................................................................53 Volumetric Rates Modifications......................................................................................53 Cost-of-Service Allocations ...........................................................................................54 Fairgrounds Allocation Factors .................................................................................55 Staff Allocation .......................................................................................................55 Hydraulic Capacity..................................................................................................55 Collection System Sizing ........................................................................................56 Wastewater Flow....................................................................................................56 Operations & Maintenance Composite ...................................................................57 Results of Initial Allocation ......................................................................................57 Cost-of-Service Allocations and Allocation Factors .....................................................57 Units of Service......................................................................................................59 Unit Costs of Service...............................................................................................60 46 May 6, 2024 Item 11
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HF&H Consultants, LLC Page iii April 12, 2024
IX. WASTEWATER RATE DESIGN ..............................................................................62 Current Rates..............................................................................................................62 Current Service Charges..........................................................................................62 Current Volumetric Rates ........................................................................................62 Service Charge Design .................................................................................................63 Volumetric Rates Design...............................................................................................64 X. COMPARISON TO WASTEWATER AGENCIES.........................................................65 Neighboring Agency Comparison...................................................................................65 XI. COMBINED UTILITY BILL IMPACTS ....................................................................66

TABLE OF FIGURES
Figure I-1. Water Enterprise Reserve Fund Balance.............................................................. 4 Figure I-2. Cost-of-Service Water Rates Revenue Summary .................................................. 5 Figure I-3. Current and Proposed Service Charge Rates........................................................ 5 Figure I-4. Current and Proposed Commodity Charge Rates.................................................. 6 Figure I-5. Sample Rates With Drought Rate Factors – FY 2024-25 Rates .............................. 7 Figure I-6. Wastewater Enterprise Reserve Fund Balance ..................................................... 8 Figure I-7. Cost-of-Service Wastewater Rates Revenue Summary.......................................... 9 Figure I-8. Current and Proposed Service Charge Rates........................................................ 9 Figure I-9. Current and Proposed Volumetric Rates .............................................................10 Figure III-1. Projection Assumptions..................................................................................15 Figure III-2. Total Annual Projected Revenue Requirement for Water Enterprise ...................16 Figure III-3. Water Enterprise Five-Year Capital Improvement Plan ......................................17 Figure III-4. Rate Increase Calculations .............................................................................19 Figure III-5. Projected Year-End Fund Balance ...................................................................20 Figure IV-1. Allocation of FY 2024-25 Revenue Requirement to Fairgrounds..........................23 Figure IV-2. Fairgrounds Allocation Factors ........................................................................23 Figure IV-3. Capacity Calculations of City’s Water Meters.....................................................24 Figure IV-4. Water Use Analysis ........................................................................................24 Figure IV-5. Service Level Demands and Load Factors.........................................................26 Figure IV-6. Demand Service Levels...................................................................................27 Figure IV-7. Cost-of-Service Allocation Factors....................................................................28 Figure IV-8. Fairgrounds Cost-of-Service Allocations............................................................28 Figure IV-9. City Customers Cost-of-Service Allocations .......................................................29 Figure IV-10. Customer Class Cost-of-Service Allocations for Demand Service Levels .............30 Figure IV-11. Cost-of-Service Revenue Summary ................................................................31 Figure V-1. Current Service Charges ..................................................................................32 Figure V-2. Current Commodity Charges ............................................................................33 Figure V-3. Service Charge Units of Service ........................................................................34 Figure V-4. Service Charge Unit Costs................................................................................34 Figure V-5. Proposed Bi-Monthly Service Charge Rates – FY 2024-25 ...................................35 Figure V-6. Current and Proposed Service Charge Rates......................................................35 Figure V-7. Breakpoint Locations – Single Family Residential................................................36 Figure V-8. Calculation of Proposed Commodity Charge Rates – Single Family Residential ......37 Figure V-9. Calculation of Commercial/Multi Family Uniform Commodity Charges...................37 47 May 6, 2024 Item 11
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Figure V-10. Current and Proposed Commodity Charges......................................................38 Figure V-11. WSCP Required Water Use Reductions by Class ...............................................39 Figure V-12A. Calculation of 10-30% Shortage Reductions by Stage and Customer Class .......40 Figure V-12B. Calculation of 40-56% Shortage Reductions by Stage and Customer Class .......41 Figure V-13. Drought Rate Factors by WSCP-Defined Shortage Stage ...................................42 Figure V-14. Sample Rates With Drought Rate Factors – FY 2024-25 Rates...........................43 Figure VI-1. Neighboring Agency Water Bi-Monthly Bill Comparison......................................45 Figure VII-1. Key Modeling Assumptions ............................................................................46 Figure VII-2. Total Annual Projected Revenue Requirements for Wastewater Enterprise.........47 Figure VII-3. Wastewater Five-Year Capital Improvement Plan.............................................48 Figure VII-4. Rate Increase Calculations.............................................................................50 Figure VII-5. City Debt Coverage Ratio Calculations (with rate adjustments).........................50 Figure VII-6. Projected Year-End Fund Balance...................................................................52 Figure VIII-1. Allocation of FY 2024-25 Revenue Requirement to Fairgrounds .......................55 Figure VIII-2. Fairgrounds Allocation Factors ......................................................................55 Figure VIII-3. Capacity Calculations for City Wastewater Service ..........................................56 Figure VIII-4. Wastewater Flow Analysis ............................................................................56 Figure VIII-5. Cost-of-Service Allocation Factors .................................................................57 Figure VIII-6. Fairgrounds Cost-of-Service Allocations .........................................................58 Figure VIII-7. City Customers Cost-of-Service Allocations ....................................................59 Figure VIII-8. Wastewater Flow Analysis ............................................................................60 Figure VIII-9. Summary of Units of Service by Customer Class.............................................60 Figure VIII-10. Unit Costs of Service (City)..........................................................................60 Figure VIII-11. Cost-of-Service Revenue Summary..............................................................61 Figure IX-1. Current Service Charges .................................................................................62 Figure IX-2. Current Volumetric Rates................................................................................63 Figure IX-3. Proposed City Customers Bi-Monthly Service Charge Rates – FY 2024-25............63 Figure IX-4. Current and Proposed Service Charge Rates.....................................................64 Figure IX-5. Current and Proposed Volumetric Rates ...........................................................64 Figure X-1. Neighboring Agency Wastewater Bi-Monthly Bill Comparison...............................65 Figure XI-1. Single Family Residential Bill Comparison .........................................................66 Figure XI-2. Multi-Family Residential Bill Comparison...........................................................67 Figure XI-3. Commercial/Institutional Customer Bill Comparison...........................................67 Figure XI-4. Hotels with Restaurant Customer Bill Comparison .............................................68 Figure XI-5. Restaurant Customer Bill Comparison ..............................................................68 Figure XI-6. Fairgrounds Customer Bill Comparison.............................................................69 Figure XI-7. Annual Single-Family Residential Customer Combined Bill Adjustments...............69 Figure XI-8. Annual Multi-Family Residential Customer Combined Bill Adjustments ................70 Figure XI-9. Annual Commercial Customer Combined Bill Adjustments..................................70

GLOSSARY
AMI - advanced metering infrastructure.

AWWA – American Water Works Association.

Breakpoint – The volume of water per billing period separating tiers in tiered rate structures.

City – City of Del Mar and/or the City’s Water or Wastewater Enterprise 48 May 6, 2024 Item 11
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CCF – Hundred cubic feet (see HCF below).

CIP - Capital Improvement Program.

Commodity Charges – The product of rates per unit of metered water use multiplied by a customers metered water use during the billing period.

CY – Calendar Year.

Drought Rate Factors – Factors applied to Commodity charges to stabilize revenue to meet the City’s water revenue requirement during periods of conservation when there are significant reductions in water usage, and hence in water revenues.

EMU – Equivalent Meter Unit.

Fairgrounds – 22nd Agricultural Association Fairgrounds in Del Mar. This is the largest water and wastewater customer served by the City of Del Mar.

FY - Fiscal Year.

Flat rates - Fixed charges per account that do not vary based on metered water use. Flat rates are found in unmetered water systems and in wastewater rates. Flat rates are not uniform rates (see below).

GPD - Gallons Per Day.

HCF - Hundred cubic feet of metered water; 748 gallons; a cube of water 4.6 feet on edge. One HCF per month is about 25 gallons per day.

Meter charges - One-time charges for the purchase of a meter. Meter charges are not Service Charges (see below).

Multi-Family Residential – Refers to the current Multi Family Residential customer class. Includes all multi-family customer accounts, including those receiving irrigation from the same potable meter.

O&M - Operating and Maintenance, in reference to the costs of running facilities.

PAYGo - Pay-As-You-Go, in reference to funding capital improvements from cash rather than from borrowed sources such as bonds or loans.

SDCWA – San Diego County Water Authority.

SEJPA – San Elijo Joint Powers Authority.

Service Charges – Fixed charges paid by City customers per meter size, regardless of the amount of water used. The charge is proportionate to the capacity of the customer’s service.

Study Period – Five-year planning period analyzed in this study, which includesfiscal year 2024-25 to fiscal year 2028-29.

Uniform rates - Constant charges per unit of water use that do not change depending on the amount used. Uniform rates are not flat rates (see above).

Volumetric Rates – The rates assessed per unit of metered water use during the billing period to determine the volumetric portion of a wastewater bill.

WSCP – Water Shortage Contingency Plan.
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ACKNOWLEDGEMENTS
City Council
Dave Druker, Mayor
Terry Gaasterland, Deputy Mayor
Tracy Martinez, Councilmember
Dan Quirk, Councilmember
Dwight Worden, Councilmember
City Staff
Public Works Services
Ashley Jones, City Manager
Joe Bride, Public Works Director, City Engineer
Monica Molina, Finance Manager, Treasurer
HF&H Consultants, LLC
Rick Simonson, Senior Vice President
Gabe Sasser, PE, Project Manager

LIMITATIONS
This document was prepared solely for the City of Del Mar in accordance with the contract between the City and HF&H and is not intended for use by any other party for any other purpose.

In preparing this study, we relied on information from the City, which we consider accurate and reliable.

Our analysis is based on the best available information at the time of the study.

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. 50 May 6, 2024 Item 11

WATER AND WASTEWATER RATE

COST-OF-SERVICE STUDY
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City of Del Mar Water and Wastewater Rate Cost-of-Service Study Final Report Revised April 12, 2024 I. Executive Summary HF&H Consultants, LLC Page 3 April 12, 2024
I. EXECUTIVE SUMMARY
This study documents the process by which the City’s water and wastewater rates were analyzed to ensure that rates continue to meet the cost of service. This report describes how the revenue requirement (expenses) is apportioned between customer classes receiving water and wastewater service, the appropriate changes in the respective classes’ rates to cover their costs, and the proposed water and wastewater rate designs that are appropriate to ensure that customers continue paying their proportionate share.

The Executive Summary presents the findings and recommendations in this report.

STUDY OBJECTIVES
The City undertook this rate study to meet the following key objectives.

1. Provide revenue sufficiency and financial stability - Ensure revenues from future water and wastewater rates continue covering costs without depleting reserves and maintaining necessary debt service coverage requirements. Revenue requirement projections (i.e., expenses) are increasing with expanded capital program expenses to upgrade aging infrastructure.

2. Maintain adequate reserves to meet City policies – Confirm future rates will continue to generate revenues that will keep the City’s reserve balance in line with its target threshold to have sufficient reserves on hand for operational cash flow, debt service payments, unplanned emergencies, retirement funding liability, and capital project funding.

3. Rate payer equity - Revisit allocation of City’s costs to verify each customer class pays their proportionate share of expenses for each utility. Each customer within each customer class must pay their proportionate share of expenses via volumetric and service capacity charges.

FINDINGS AND RECOMMENDATIONS
The following discussion summarizes HF&H’s findings and recommendations for both the Water and Wastewater Enterprises.

1. Water rate revenue increases are necessary. Recent historically high, nationwide inflation rates, as well as increases to water treatment and water supply expenses, as well as funding for capital improvement projects are driving the need to increase water rates beginning FY 2024-25. Water treatment and water supply expenses together comprise more than 50% of the City’s water expenses and these costs are set by third-party agencies. A revenue increase of 3% in FY 2024-25 and 2% annual increases each fiscal year FY 2025-26 through FY 2028-29 are recommended. Refer to Section III for further details.

2. The City will continue to meet all Water Enterprise reserve targets with recommended revenue increases. Increasing water rate revenues will allow the City to continue to maintain sufficient reserves to meet all adopted operating and capital reserve targets. Beyond FY 2028-29, the City will be required to use more reserves in combination with larger revenue increases, if cost projections hold.

Cost increases should be monitored to ensure modeled rate increases are sufficient. The City should 53 May 6, 2024 Item 11
City of Del Mar Water and Wastewater Rate Cost-of-Service Study Final Report Revised April 12, 2024 I. Executive Summary HF&H Consultants, LLC Page 4 April 12, 2024
re-analyze rates within five years to ensure rates are providing enough support so that reserves continue to meet the target threshold. See Figure I-1 for reference and refer to Section III for further information.

Figure I-1. Water Enterprise Reserve Fund Balance

3. Water rates are recommended for realignment to the cost of service. The cost-of-service analysis of the FY 2024-25 revenue requirement indicates adjustments are required to realign water rates to reflect the proportional benefits each customer class receives. With the recommended adjustments, rate revenues for each customer class would adjust based on Figure I-2.

Based on the cost-of-service analysis, overall revenue from Commodity Charges would increase by

4.8% and revenue from Service Charges would increase by 0.6%. The Fairgrounds received a larger cost allocation than during the previous study, as their proportionate share grew from 14.9% to 17.6%.

The increase can be attributed to an increased share of the raw water supply costs allocated to the Fairgrounds based on recent water demand patterns. This expense is the largest expense category in the cost allocation exercise. The Fairgrounds share of the revenue requirement to be recovered through the FY 2024-25 rates will be $850,661 (17.6%) and the remaining City customer’s share will be $3,978,871 (82.4%). Refer to Section IV.
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Figure I-2. Cost-of-Service Water Rates Revenue Summary

4. Updated Fixed Service Charges are recommended. Figure I-3 shows the current and cost-of-service Fixed Service Charges during the period of FY 2024-25 through FY 2028-29. The customers with a 5/8” meter will see a 0.7% increase, while customers served by meters ranging between ¾” to 4” will see a decrease. The Fairgrounds will see a 12.3% increase to their existing Fixed Service Charge. Refer to Section V.

Figure I-3. Current and Proposed Service Charge Rates
Proposed Rates
Bi-Monthly Current FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Fixed Service Charges Rates eff. 7/1/2024 eff. 7/1/2025 eff. 7/1/2026 eff. 7/1/2027 eff. 7/1/2028 rate increase: varies 2% 2% 2% 2%
Meter Size
5/8" $88.04 $88.70 $90.47 $92.28 $94.13 $96.01
3/4" $132.06 $129.41 $132.00 $134.64 $137.33 $140.08
1" $220.08 $210.81 $215.03 $219.33 $223.72 $228.19
1 1 /2" $440.16 $414.33 $422.62 $431.07 $439.69 $448.48 2" $704.24 $658.55 $671.72 $685.15 $698.85 $712.83
3" $1,408.46 $1,309.82 $1,336.02 $1,362.74 $1,389.99 $1,417.79 4" $2,200.72 $2,042.49 $2,083.34 $2,125.01 $2,167.51 $2,210.86 Fairgrounds $67,968.00 $76,298.59 $77,824.56 $79,381.05 $80,968.67 $82,588.04 55 May 6, 2024 Item 11
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5. Updated Commodity Charges are recommended. Figure I-4 shows the current and cost-of-service Commodity Charges during the period of FY 2024-25 through FY 2028-29. Single Family Residential tiers were adjusted to reflect updated patterns of demand. As a result, the Tier 1 breakpoint would increase from 20 to 22 HCF. All Commercial, Multi-Family, Irrigation customers and the Fairgrounds will see increased rates. Refer to Section V.

Figure I-4. Current and Proposed Commodity Charge Rates

6. Drought Rate Factors are recommended to replace Demand Management. In place of the City’s current practice of assessing a surcharge to Service Charges and Commodity Charges during times of drought when water use, and therefore revenues, decrease, HF&H recommends a set of drought rate factors that would be applied solely to the Commodity Charges to cover fixed costs when water shortage reduces water demand and water sales decrease in response. The factors would be implemented during declared water shortage stages in accordance with the City’s Water Shortage Contingency Plan (WSCP), state mandated reductions in the level of potable water usage, or other natural disaster or event that results in a water shortage and an unforeseen drop in water demand that requires reductions in water use. Figure I-5 shows the Drought Rate Factors that would be applied to the proposed FY 2024-25 rates that would normally be in effect absent declared shortages. Refer to Section V.

Proposed Rates ($/hcf)
Bi-Monthly Current Bi-Monthly FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Commodity Charges Rates Commodity Charges eff. 7/1/2024 eff. 7/1/2025 eff. 7/1/2026 eff. 7/1/2027 eff. 7/1/2028 ($/hcf) rate increase: varies 2% 2% 2% 3%
Single Family Residential Single Family Resid.

Tier 1 (0-20 hcf) $6.22 Tier 1 (0-22 hcf) $6.26 $6.39 $6.52 $6.65 $6.78 Tier 2 (21+ hcf) $7.47 Tier 2 ( 23+ hcf) $7.37 $7.52 $7.67 $7.82 $7.98 Multi-Family Residential $6.41 Multi-Family Resid. $6.81 $6.95 $7.09 $7.23 $7.37 Commercial/Insitutional $6.52 Commercial/Instit. $6.80 $6.94 $7.08 $7.22 $7.36 Irrigation $6.96 Irrigation $7.11 $7.25 $7.40 $7.55 $7.70 Fairgrounds $6.52 Fairgrounds $8.08 $8.24 $8.40 $8.57 $8.74 56 May 6, 2024 Item 11
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Figure I-5. Sample Rates With Drought Rate Factors – FY 2024-25 Rates

7. Wastewater rate revenue increases are necessary. Recent historically, high nationwide inflation rates, as well as increases to wastewater treatment and conveyance expenses, as well as funding for capital improvement projects are driving the need to increase wastewater rates beginning FY 2024-

25. Water treatment and water supply expenses together comprise more than 26% of the City’s wastewater expenses and these costs are set by third-party agencies. A revenue increase of 4% in FY 2024-25 and 2% annual increases in each fiscal year for FY 2025-26 through FY 2028-29, are recommended. Refer to Section VII for further details.

8. The City will continue to meet all Wastewater Enterprise reserve targets with recommended revenue increases. Increasing water rate revenues will allow the City to continue to maintain sufficient reserves to meet all adopted operating and capital reserve targets. Beyond FY 2028-29, the City will be required to use more reserves in combination with larger revenue increases, if cost projections hold. Cost increases should be monitored to ensure modeled rate increases are sufficient. The City should re-analyze rates within five years to ensure rates are providing enough support so that reserves continue to meet the target threshold. See Figure I-6 for reference and refer to Section VII for further information.

Water Emergency Shortage Stage Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 Single Family Drought Rate Factors 1.013 1.028 1.047 1.069 1.098 1.114 Multi-Family Drought Rate Factors 1.015 1.034 1.058 1.088 1.128 1.157 Commercial Drought Rate Factors 1.013 1.029 1.048 1.071 1.100 1.117 Irrigation Drought Rate Factors 1.032 1.080 1.163 1.336 1.944 N/A Fairgrounds Drought Rate Factors 1.026 1.062 1.116 1.207 1.393 1.738 Sample FY 2024-25 Rates Sample Rates with Drought Rate Factors Applicable to % Reductions Single Family Residential
Tier 1 (0-22 hcf) $6.26 $6.34 $6.44 $6.55 $6.69 $6.87 $6.97 Tier 2 ( 23+ hcf) $7.37 $7.47 $7.58 $7.72 $7.88 $8.09 $8.21 Multi-Family Residential $6.81 $6.91 $7.04 $7.20 $7.41 $7.68 $7.88 Commercial/Institutional $6.80 $6.89 $6.99 $7.12 $7.28 $7.48 $7.59 Irrigation $7.11 $7.33 $7.68 $8.27 $9.50 $13.82 N/A
Fairgrounds $8.08 $8.29 $8.58 $9.02 $9.75 $11.26 $14.05 57 May 6, 2024 Item 11
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Figure I-6. Wastewater Enterprise Reserve Fund Balance

9. Wastewater rates are recommended for realignment to the cost of service. The cost-of-service analysis of the FY 2024-25 revenue requirement indicates adjustments are required to realign wastewater rates to reflect the proportional benefits each customer class receives. With the recommended adjustments, rate revenues for each customer class would adjust based on Figure I-7.

Based on the cost-of-service analysis, overall revenue from Volumetric Rates would decrease by 0.3% and revenue from Service Charges would increase by 8.9%. The Fairgrounds allocation has decreased since the previous cost-of-service study, which yielded an overall allocation of 17.25%. The decrease can be attributed to a reduced proportionate share of flow-related costs allocated to the Fairgrounds.

Because of the Fairgrounds reduced volumetric share of contributed wastewater relative to all other City customers. Fairgrounds flow rebounded in 2023, but the proportionate share of flows they send to SEJPA has not returned to pre-pandemic levels yet. The Fairgrounds share of the revenue requirement to be recovered through the FY 2024-25 rates will be $670,430 (15.1%) and the remaining City customer’s share will be $3,784,186 (84.9%). Refer to Section VIII. 58 May 6, 2024 Item 11
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Figure I-7. Cost-of-Service Wastewater Rates Revenue Summary

10. Update Service Charges are recommended. Figure I-8 shows the current and cost-of-service Service Charges during the period of FY 2024-25 through FY 2028-29. All City customers, aside from the Fairgrounds, will see an increased Service Charge. The Fairgrounds will see a 3.6% decrease to their existing Service Charge. Refer to Section IX.

Figure I-8. Current and Proposed Service Charge Rates

11. The Volumetric Rates may be simplified. The City’s wastewater treatment and conveyance charges do not vary based on wastewater strength. Therefore, there is no longer a nexus to charge high Proposed Rates
Bi-Monthly Current FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Fixed Service Charges Rates eff. 7/1/2024 eff. 7/1/2025 eff. 7/1/2026 eff. 7/1/2027 eff. 7/1/2028 rate increase: varies 2% 2% 2% 2%
Single-Family Residential (per DU) $127.10 $141.60 $144.43 $147.32 $150.27 $153.28 Meter Size
5/8" $127.10 $141.60 $144.43 $147.32 $150.27 $153.28
3/4" $190.66 $212.40 $216.65 $220.98 $225.40 $229.91
1" $317.74 $354.00 $361.08 $368.30 $375.67 $383.18

1.5" $635.48 $708.00 $722.16 $736.60 $751.33 $766.36
2" $1,016.76 $1,132.80 $1,155.46 $1,178.57 $1,202.14 $1,226.18 3" $2,033.52 $2,265.60 $2,310.91 $2,357.13 $2,404.27 $2,452.36 Fairgrounds $55,024.00 $53,045.02 $54,105.92 $55,188.04 $56,291.80 $57,417.64 59 May 6, 2024 Item 11
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strength customers a higher volumetric rate than other commercial customers. As a result, the recommendation will reduce the number of volumetric rates from six to two. Refer to Section VIII for further explanation.

12. Updated Volumetric Rates are recommended. Figure I-9 shows the current and cost-of-service Volumetric Rates during the period of FY 2024-25 through FY 2028-29. All Commercial, Multi-Family, and Single-Family Residential customers will be assessed the same rate for billed wastewater flows. This change results in significant decreases to the rates assigned to Hotels with Restaurants, Restaurants, and Shopping Center customers. The Fairgrounds will continue to pay a separate rate. Refer to Section IX.

Figure I-9. Current and Proposed Volumetric Rates

13. Combined water and wastewater bill increases will vary by customer type and level of water use.

Sample bi-monthly bill comparisons, for FY 2024-25, are provided in Section XI. Using 2022 as a test year, bills at current rates (which reflects rates implemented on January 1, 2024) were compared to bills under the proposed rates, effective July 1, 2024, to determine the level of adjustment customers could pay annually for water and wastewater service.

Residential bill impacts vary. 75% of single family households will see an increase of at least 3% in their combined water and wastewater payments, based on the rate shown in the figure above, with the largest annual increase being 7% for the year. For the customers facing larger increases, these adjustments are attributable to the increased fixed service charge for wastewater service. Multi-family accounts can expect an annual increase between 4-7% for the year.

Commercial customer bills demonstrate the highest order of variability due to the adjustment in wastewater rates. Previously, customers charged more to account for their wastewater strength will see a significant decrease. Accounts connected to shopping centers, restaurants, and hotels with a restaurant (or providing food service) will see the largest decrease in their combined utility bills, with some seeing a decrease of as much as 22%. There are 19.2% of Commercial customers that would see a decrease. While these customers will likely see lower utility bills, the majority of customers (80.8%) Proposed Rates
Bi-Monthly Current Revised FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Volumetric Rates Rates Customers eff. 7/1/2024 eff. 7/1/2025 eff. 7/1/2026 eff. 7/1/2027 eff. 7/1/2028 rate increase: varies 2% 2% 2% 2%
Single Family Residential $8.98
Single
Family
Residential $9.44 $9.63 $9.82 $10.02 $10.22
Multi-Family Residential $8.98
MultiFamily
Residential $9.44 $9.63 $9.82 $10.02 $10.22
Commercial $8.98 Commercial $9.44 $9.63 $9.82 $10.02 $10.22 Institutional $8.98
Hotels/Motels w/o Restaurants $8.84
Hotels/Motels w/ Restaurants $12.73
Restaurants $15.06
Shopping Centers $10.45
Fairgrounds $10.27 Fairgrounds $11.49 $11.72 $11.95 $12.19 $12.43 60 May 6, 2024 Item 11
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can expect an increase of up to 7% of their annual utility bills for water and wastewater services. The increases capture the increases to fixed service charges for all wastewater customers and the increases to volumetric rates for customers previously categorized as Commercial or Institutional. The increases in bills reflect the higher Commodity Charges proposed, as well.

Refer to Section XI for further analysis.
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II. INTRODUCTION
The City provides water service to its residential and commercial accounts, including 1,433 Single Family Residential meters, 183 Multi-Family Residential meters, 139 Irrigation meters, 114 combined Commercial and City meters, and the 22nd Agricultural Association Fairgrounds (Fairgrounds). As a member of San Diego County Water Authority (SDCWA), the City receives raw water that is then treated by the City of San Diego for potable use.

The City provides wastewater collection service to a population of 3,830, including 1,395 Single Family Residential accounts, 184 Multi-Family accounts, 11 non-residential (e.g. Commercial, Institutional, and City) accounts, and the Fairgrounds. Most City wastewater is conveyed through the City’s network and is transported via a force main operated by Solana Beach for treatment overseen by San Elijo Joint Powers Authority (SEJPA). Occasionally, a small portion of wastewater is conveyed to the San Diego Metro System for treatment, when necessary (during operation challenges or system maintenance).

Separate enterprise funds are maintained for the wastewater and water programs provided by the City’s Public Works Department. As such, each enterprise fund maintains its own rate stabilization, operating, capital, equipment, debt service, self-insurance, and pension reserves.

The water rates in this study were developed using rate-making principles set forth by the American Water Works Association (AWWA) in Principles of Water Rates, Fees and Charges (M1 Manual). This Manual’s cost-of-service principles endeavor to distribute costs to customer classes (also referred to as classes) and to individual customers in proportion to customers impacts on the water system. Pursuant to the M1 Manual, rate studies generally contain three elements: (1) a revenue requirements analysis, which determines how much revenue is needed from rates to recover a utility’s projected costs; (2) a cost-of-service analysis, which allocates the revenue requirements to the rate components;1 and (3) a rate design analysis, which determines any modifications that are required to align the rate structure with the cost of service.

Similarly, the wastewater rates in this study were developed using rate-making principles in compliance with Proposition 218. Therefore, the wastewater rate analysis employs the same three elements as the water rate analysis: (1) a revenue requirements analysis; (2) a cost-of-service analysis; and (3) a rate design analysis.

Rate studies always include a revenue requirements analysis. A cost-of-service analysis is typically only conducted periodically. It is recommended that a cost-of-service analysis be conducted at least every five years to account for any material differences in the costs of providing service and in the water usage among customer classes, which will affect their respective shares of the cost of service. The City last conducted a cost-of-service study in 2019 for each of the respective utilities. 1 The cost-of-service analysis in the current study tailors the base/extra capacity method to account for unique conditions, circumstances, and factors related to the City’s cost of providing water service, which the M1 Manual does not specifically address. The adjustments to the M1 base/extra capacity method of allocating costs are described in more detail in Chapter IV.
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The City hired HF&H Consultants (HF&H) to conduct a cost-of-service study to set water and wastewater rates for FY 2024-25 through FY 2028-29 (Study Period). Since the previous study, changes in usage patterns among customer classes has occurred, which affects the factors that are used to allocate costs. The costs to which the allocation factors are applied also changed. Hence, there will be differences between the previous and current cost-of-service analyses. Adjustments are made to reflect the differences and rates are set accordingly.

The cost-of-service analysis proportionately allocates the revenue that is required from rates to the components of the rate structure and to the customer classes. Costs are classified corresponding to the function they serve. Each function’s costs are further allocated to each component of the rates in proportion to the level of service required by customers. The levels of service are related to volumes of peak and nonpeak demand, infrastructure capacity, and customer service. A cost-of-service analysis ensures that the rates yield charges that are proportional to the cost of providing service to each customer.

STUDY PURPOSE
The purpose of this study is to conduct a cost-of-service analysis that will determine rates that proportionally recover the cost of providing the City’s water service. Toward that end, the cost-of-service analysis determines how much revenue should be generated by each component of the rate structure so that rate payers within each customer class are charged for their proportionate share of the cost of providing service on a parcel basis. The cost-of-service analysis is tailored specifically to the City’s customer classes and the rate structures that are appropriate for each class.

STUDY PROCESS
In 2023, the City contracted with HF&H to perform a cost-of-service study to set water and wastewater rates for FY 2024-25 and FY 2028-29. A ten-year analysis provided support for long-term planning. The primary goal of this study is to ensure that rates continue to reflect the current cost of providing water and wastewater service, as required by Proposition 218.

A comprehensive rate study comprises three steps: 1) revenue requirement projections; 2) cost-of-service analysis; and 3) rate design. Revenue requirement projections identify how much revenue is needed from rates. The cost-of-service analysis determines how much of the revenue should come from the fixed and variable charges. This step also confirms the proportionate amount to be paid by each customer class.

The final step, rate design, establishes the structure of the fixed service charges and the variable volume charges for each customer class.

The water cost-of-service analysis was conducted following industry practices promulgated by the American Water Works Association.2 At the outset of the analysis, the types of customer classes were reviewed, as were the types of rate structures that are appropriate to the City’s customer classes.

The wastewater cost-of-service analysis was conducted following industry practices promulgated by the Water Environment Federation Manual of Practice No. 27, Financing and Charges for Wastewater Systems, 2004. At the initial stages of the project, HF&H reviewed the types of customer classes and the types of rate structures that are appropriate to the City’s customer classes. 2 Principles of Water Rates, Fees, and Charges. American Water Works Association Manual M1. 2017. 63 May 6, 2024 Item 11
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REPORT ORGANIZATION
The report includes both the water rates study and wastewater rates study. The report is bifurcated to cover the analysis associated with each study. Therefore, the report is divided into four initial sections addressing the water rate study: Water Revenue Requirements, Water Rate Cost of Service Analysis, Water Rate Design, and Comparison to Water Agencies. Next, there are four subsequent sections addressing the wastewater rate study: Wastewater Revenue Requirements, Wastewater Rate Cost of Service Analysis, Wastewater Rate Design, and Comparison to Wastewater Agencies. Finally, the closing section is the Combined Utility Bill Impacts, which looks at the overall impacts to customers when both water and wastewater rate adjustments are considered.

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III. WATER REVENUE REQUIREMENTS
The revenue requirements analysis starts by determining the FY 2024-25 revenue requirements based on the budgeted O&M and capital expenditures. Revenue requirements for each fiscal year are then projected over the Study Period. Revenue increases needed to cover the projected revenue requirements are then determined.

REVENUE REQUIREMENT ASSUMPTIONS AND PROJECTIONS
Expense projections become the revenue requirements. The City’s operating and capital budgets were relied on for FY 2024-25 expenses in the first-year revenue requirement. The operating and maintenance (O&M) expenses were projected over a ten-year period, through FY 2033-34, using appropriate escalation factors. Capital expenses were projected according to the City’s current capital improvement program (CIP). While a ten-year model was built, for brevity, Figure III-1 reflects the assumptions which were used to project revenue requirements through FY 2028-29 in order to set rates for the next five-year period.

All assumptions were reviewed with City staff. Purchased water cost increases reflect the projected average annual increase from 2024-2029, made by San Diego County Water Authority (SDCWA). HF&H worked with City staff to project expenses for additional years where approved budgets were not available.

Figure III-1. Projection Assumptions
The application of these projections to O&M and capital expenses are summarized graphically in Figure III-2 and are described below in more detail.

Assumptions FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 General inflation per Budget 3.0% 3.0% 3.0% 3.0% 3.0%
Salary/wage cost increases per Budget 5.0% 5.0% 5.0% 5.0% 5.0% Benefit cost increases per Budget 5.0% 5.0% 5.0% 5.0% 5.0% Utility cost increases per Budget 4.0% 4.0% 4.0% 4.0% 4.0% Purchased water cost increases per Budget 5.0% 5.0% 5.0% 5.0% 5.0% Interest of Reserve Balance 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Construction Cost Inflation per Budget 3.8% 3.4% 3.4% 3.4% 3.4% Growth in Residential Accounts 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Growth in Commercial Accounts 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Change in Water Use per Residential Customer 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Change in Water Use per Non-Residential Customer 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 65 May 6, 2024 Item 11
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Figure III-2. Total Annual Projected Revenue Requirement for Water Enterprise O&M Expenses
The City’s O&M expenses include salaries, benefits, materials, supplies, insurance, vehicle maintenance, utilities, and administrative expenses, and City administrative charges. Expense projections were calculated using assumptions reviewed with City staff. No additional headcount has been projected through the five-year rate setting period. Collectively, this category represents approximately 40% of the total revenue requirement. These O&M expenses are projected to increase annually by an average of 4% over the five-year period, averaging $2.0 million per fiscal year from FY 2024-25 through FY 2028-29. Individual expense line items present in both water and wastewater studies were escalated by the same factor for consistency.

Raw Water Purchases
Raw water costs, purchased from SDCWA, make up the largest portion of the annual revenue requirement. Based on SDCWA projections, raw water costs are assumed to increase by an average of 5% annually. This expense averages $2.1 million per fiscal year from FY 2024-25 through FY 2028-29. Increases to water purchase expenses have not accounted for any supplemental water demand due to new connections, as the City does not anticipate additional growth.

Water Treatment Expenses
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requirement and are projected to increase to keep pace with inflation through FY 2028-29. The average annual cost of treatments is estimated to be $490,000 during the period of study. When combined, raw water purchases and treatment and delivery expenses, costs controlled by external agencies, account for more than half of the overall expenses to be recovered through water rates.

Capital Project Costs
CIP expenditures projections average $465,551 annually during the five-year period. All projects have been assumed to be cash funded. Figure III-3 provides a detailed listing of the Water Enterprise five-year CIP. The City’s focus continues to be on addressing risk-based sections of its system through the Annual High Priority 1 Improvements program. Also, an Automated Meter Infrastructure (AMI) Study has been included to evaluate the feasibility of replacing the City’s existing, manually-read, meter infrastructure with AMI. The project costs exclude previously considered recycled water projects after discussions were held with staff (and with the Finance Committee in January 2024) in an effort to reduce potential rate increases. All project costs shown have been escalated using an assumed Construction Cost Index of 3.8% for FY 2024-25 and 3.4% thereafter based on historical changes in the Engineering News Record-Construction Cost Index.

Figure III-3. Water Enterprise Five-Year Capital Improvement Plan

RESERVES
The City uses its reserves to stabilize rates against annual fluctuations in capital expenditures, variances between projected and actual water demands, and unanticipated expenditures and other expenditure variances. In some years, there is surplus revenue that is available to replenish reserves. In other years, reserves are drawn down to cover the cost of service.

Reserves are required to stabilize rates and to provide for contingencies. Reserves can be drawn on in years when the City’s Water Enterprise Fund 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 optimum target balance. Rates must be set so that the fund balance achieves the target balance.

Capital Projects FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Total Annual High Priority 1 Improvements $352,000 $76,000 $176,000 $176,000 $176,000 $956,000 Citywide Pressure Upgrades $240,000 $0 $0 $0 $0 $240,000 Reservoir Rehabilitation Program $0 $210,000 $90,000 $0 $0 $300,000 Crest Reservoir Piping Upgrade $0 $0 $64,000 $156,000 $0 $220,000 High Zone Pressure Relief Stations $0 $0 $0 $0 $154,000 $154,000 Automated Meter Infrastructure Study $0 $50,000 $0 $0 $0 $50,000 Seismic Equipment Assessment $0 $0 $0 $0 $65,000 $65,000 Water Valve Replacements $25,000 $25,000 $25,000 $25,000 $25,000 $125,000 Total Capital Projects $617,000 $361,000 $355,000 $357,000 $420,000 $2,110,000 Construction Cost Index 1.038 1.073 1.109 1.146 1.185
Total Inflated CIP $640,179 $387,195 $393,601 $409,168 $497,610 $2,327,753 Average Annual PAYGo-Funded CIP $465,551
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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 approved reserve policy is 45 days of operating expenses The City’s Reserves should never drop below this minimum balance.

Self-Insurance Reserve
The City maintains a Self-Insurance Fund for the Water utility with a targeted minimum balance of $50,000. The purpose of the reserve is solely to pay out claims related to Water utility damage.

Pension Reserve
The City has a fully funded Pension Reserve to pay for the Water Enterprise’s share of staff costs. The targeted minimum balance is set to $200,000.

Capital Reserve
The capital improvement component of the reserves provides working capital for the City’s capital improvement program. 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 approved policy requires a reserve threshold of $350,000. This total is less than the five-year average of annual capital improvement expenses, $465,551. The City could contemplate increasing this reserve to account for rising construction costs.

Equipment Replacement Reserve
This reserve is maintained to fund capital outlay projects, such as the replacement or purchase of new vehicles, large maintenance items, machinery, and equipment. An approved policy reserve target of $200,000 is maintained. The reserve provides an emergency source of funding in the event of an unanticipated breakdown or failure.

Rate Stabilization Fund
The Rate Stabilization Fund provides funding which the City can draw upon prior to passing funding for unanticipated events onto its customers. For example, in the event of a water shortage, the City could utilize reserves from the Rate Stabilization Fund prior to enacting Demand Management Rates. The reserve helps to offset the financial burden ratepayers might experience when the City is required to raise rates. The current approved reserve target is set at $200,000.

REVENUE INCREASES
Rates are set to generate sufficient revenue to cover annual expenses. In addition, rates are set to maintain adequate reserves. Figure III-4 summarizes the projected revenue from current rates, annual revenue requirements, annual variances, and the rate increases necessary to cover the City’s costs. 68 May 6, 2024 Item 11
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Figure III-4. Rate Increase Calculations
Rate increases account for rate revenue and future revenue requirements. As shown in Figure III-4, the City’s reserves have been used to keep the revenue increases low (i.e., there are projected revenue shortfalls in FY 2026-27 through FY 2028-29 after accounting for the revenue increases, which will be covered by reserves). The revenue requirement (shown in greater detail in Figure III-2) increases due to increasing water supply costs and capital expenditures. The proposed revenue increases serve to decrease the projected shortfalls facing the City.

The rates are derived in Chapter V. With these rate increases, the City is able to pay for its annual O&M and capital expenses and maintain adequate reserves, as further discussed below.

RESERVE FUND BALANCE
Figure III-5 shows the annual fluctuations (solid green line) in the fund balance that are caused by the differences between the revenue requirement and revenue from rates with the rate increases; the dashed green line is the projected fund balance without rate increases. The revenue and rate increases in Figure III-4 were derived to balance increasing rates while maintaining a level of reserves that continues to meet the City’s reserve target (blue line) through FY 2028-29.

For purposes of rate setting, the following combined reserve target balances were established. The red line labeled, “Minimum Balance” represents the target balance for the Operating Reserve, Self-Insurance Reserve, and the Pension Reserve. The blue line labeled, “Total Target Reserve” is the sum of the Minimum Balance plus the Capital Reserve, Equipment Replacement Reserve, and Rate Stabilization reserve targets.

The ten-year projection in Figure III-5 demonstrates the use of reserves beyond FY 2028-29 as expense projections outpace revenue increases. Initially, revenue increases are kept between 2-3% annually through FY 2028-29. However, the cumulative growth of expenses, driven by 5% projected increases in water supply costs, overtakes revenue growth, requiring a greater share of reserves to support rate revenues. Consequently, reserves project to decline beginning in FY 2028-29, despite larger revenue increases.

The reserve fund balance projects to fall below the Target Reserve by FY 2033-34. The inflationary increases recommended in FY 2024-25 through FY 2028-29 serve as an “ounce of prevention” to possible, larger increases in the future. In contrast, the dashed green line, reflects that without revenue increases, FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29
Revenue from Current Rates $4,688,866 $4,688,866 $4,688,866 $4,688,866 $4,688,866 Revenue Requirement ($4,738,931) ($4,922,345) ($5,114,021) ($5,314,341) ($5,523,712) Non-Operating Revenue $74,000 $74,960 $75,949 $76,967 $78,016 Transfer to Reserves ($164,601) $0 $0 $0 $0
Net Revenue Requirement ($4,829,532) ($4,847,385) ($5,038,072) ($5,237,374) ($5,445,696) Revenue Surplus/(Shortfall) ($140,666) ($158,519) ($349,206) ($548,508) ($756,830) Proposed Revenue Increase 3.0% 2.0% 2.0% 2.0% 2.0%
Revenue at Proposed Rates $4,829,532 $4,926,123 $5,024,645 $5,125,138 $5,227,641 Revenue Surplus/(Shortfall) $0 $78,737 ($13,427) ($112,236) ($218,055) 69 May 6, 2024 Item 11
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the year-end fund balance of $2.8 million in FY 2022-23 is projected to drop below the City’s Minimum Reserve by FY 2028-29.

Figure III-5. Projected Year-End Fund Balance
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IV. WATER RATE COST OF SERVICE ANALYSIS

METHODOLOGY
The revenue requirement analysis establishes how much revenue is required from rates. The next step in the analysis is determining the cost of service. Cost-of-service analysis is used to derive rates that proportionally allocate the cost of service. The cost-of-service analysis performed in this study follows a procedure described by the AWWA, which is referred to as the “base/extra capacity method.” This method allocates the revenue requirements to the components of the rate structure.

A cost-of-service 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 Service Charges and the Commodity Charges.

This methodology is consistent with industry standards promulgated by the American Water Works Association and referred to as the “base/extra capacity method.” 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. Customer services include the costs related to customer accounts and the capacity that customers require.

The analytical procedure contains the following steps:

1. Cost classification - Costs in the FY 2024-25 revenue requirement are classified into the service categories related to providing for customer demands and for customer service. FY 2024-25 costs are used for the cost-of-service analysis because they are the most recent budget year.

2. Cost allocation - The classified costs are allocated to the functions associated with each service.

For demand services, the functions are levels of service that comprise average day, maximum day, and maximum hour demands. For customer services, the functions are customer 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 portion 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 distribution storage, distribution mains to customers, hydrants, conservation programs.

Customer services
• Accounts: meter reading, billing, accounting, customer service, fire services. • Capacity: a portion of distribution 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. 71 May 6, 2024 Item 11
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Working with City staff, the individual line items in the revenue requirements were classified into either the demand or customer service categories. Certain costs, however, are not directly related to either demand or customer services. Such costs are considered to be composite in function and are allocated based on a composite of the direct allocations to the demand and customer service categories.

CUSTOMER CLASSES
The cost-of-service analysis distributes the revenue requirements among customer classes in proportion to their service requirements. There is no industry standard that specifies which customer classes should be used. The law allows utilities to exercise discretion in determining the appropriate customer classes provided the rates yield charges that are proportional to the cost of providing service for each category.

As a result, the base/extra capacity method needs to be tailored to the customer classes.

The City currently has multiple customer classes: Single Family Residential, Multi-Family Residential, Commercial/Institutional, Irrigation, and Fairgrounds. These classes were last reviewed as part of the previous cost-of-service study in 2019. The segregation into separate customer classes stems from the typical pattern of usage by each class. For example, Single-Family Residential use produces periods of peak demands during summer months, for which the system must be designed to meet to address these customers indoor and outdoor water needs. No revisions to the number of types of customer classes are recommended at this time.

The Fairgrounds are the largest customer in terms of demand and service-related capacity placed on the City’s water system. Based on historical methodology, costs are allocated separately between the Fairgrounds and all other City customers. This methodology is further discussed below.

COST-OF-SERVICE ALLOCATIONS
A cost-of-service analysis is a process of determining how much services cost for each customer class. To provide waterservice, infrastructure must be constructed, operated, and maintained, which must be paid for from cash or debt. The type and size of infrastructure depends on how much service customers require. Water systems are designed to provide sufficient capacity to meet customer demands for service wherever, whenever, and for as long as demanded.

Although each customer places unique demands on the system, water system design is based on the maximum or peak demand for service placed on the system by all customers during the peak demand period.

The size of the infrastructure that is needed will depend on the maximum demand. Higher demands will require larger, more costly infrastructure as well as increased operating and O&M costs. The goal of a cost-of-service analysis is to allocate the cost of the capacity to meet the peak demand in proportion to how much of the capacity is required by each customer. The proportions correspond to the maximum amount of capacity provided by the infrastructure. This means that customers that place greater demands on the infrastructure – customers with greater service needs will be apportioned a greater share of the operating and capital costs of the infrastructure required to meet that demand. This reasoning drives the practice of allocating costs separately between the Fairgrounds and remaining City customers.

Figure IV-1 allocates the FY 2024-25 revenue requirement between the Fairgrounds and the City customers. Figure IV-2 summarizes the percentage allocations used in apportioning the revenue requirement between the Fairgrounds and the City customers. A discussion of the methodology behind the allocation of costs follows.
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Figure IV-1. Allocation of FY 2024-25 Revenue Requirement to Fairgrounds Figure IV-2. Fairgrounds Allocation Factors
Fairgrounds Allocation Factors
Staff Allocation
The City estimates roughly 26% of personnel staffing costs can be attributed to serving the Fairgrounds.

This allocation was used in the previous 2019 study and confirmed with City staff as part of the current analysis.

Hydraulic Capacity
The City’s water system provides water to 1,869 metered connections. Of these meters, the Fairgrounds receive water and requires available capacity for one – 8” meter and two -10” meters. Connections are converted to Equivalent Meter Units (EMUs) to apportion the revenue requirement costs for operations Fairgrounds
Rev. Req't Allocation Fairgrounds City
FY 2024-25 Factor Proportion Proportion
O&M Expenses
Administrative Personnel $341,657 Staff Allocation $90,334 $251,323 Operations Personnel $502,653 Staff Allocation $132,901 $369,751 O&M - Tools, Supplies, Insurance $306,100 Distribution Sizing $120,959 $185,141 O&M - Admin Expenses $542,960 Hydaulic Capacity $52,231 $490,729 O&M Variable $28,640 Distribution Sizing $11,317 $17,323 Contractual Services $161,850 Total Use $19,541 $142,309 Water Supply $1,902,040 Total Use $229,638 $1,672,402
Water Treatment $461,090 Staff Allocation $121,912 $339,178 Total Allocable O&M $4,246,990 $778,833 $3,468,157
Fairgrounds O&M Composite 18.3% 81.7%
Capital Outlay $26,390 Hydaulic Capacity $10,428 $15,962 Capital Expenses (PAYGo) $465,551 Hydaulic Capacity $44,785 $420,766 Subtotal - O&M and Capital $4,738,931 $834,046 $3,904,884 Non-Operating Revenue ($74,000) FG O&M Composite ($13,570) ($60,430) Transfers to/(from) Reserves $164,601 FG O&M Composite $30,185 $134,416 Total Revenue Requirement $4,829,532 $850,661 $3,978,871 % of Total 100.0% 17.6% 82.4%
Fairgrounds (FG) Allocation Factors Fairgrounds City Total Notes Staff Allocation 26.4% 73.6% 100.0% Historical City assumption Hydaulic Capacity 9.6% 90.4% 100.0% Percentage of Equivalent Meter Units Distribution Sizing 39.5% 60.5% 100.0% Historical City assumption Total Water Use 12.1% 87.9% 100.0% Percentage of avg. CY 2020-2022 recorded water use FG O&M Composite 18.3% 81.7% 100.0% Calculated in Figure 1 73 May 6, 2024 Item 11
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and maintenance (O&M) administrative expenses, water supply expenses, and capital improvement costs.

An EMU represents the number of 5/8-inch meters to which a larger meter is equivalent. For example, a 1-inch meter provides 2.50 times as much capacity as a 5/8” meter. The capacity multipliers are based on the meter data provided by the City of the manufacturer’s nominal capacity. The Fairgrounds make up 320 EMUs of the total 3,327 EMUs served by the system, as shown in Figure IV-3. This accounts for 9.6% of the overall hydraulic capacity.

Figure IV-3. Capacity Calculations of City’s Water Meters Distribution System Sizing
The City’s water distribution system sizing was calculated assuming 39.5% of the peak demand of the system was due to the Fairgrounds. The revenue requirement costs for O&M tools, supplies, and insurance, O&M variable costs (e.g. fuel and electricity), and capital outlay (e.g. machinery and vehicle replacement) were allocated, using the assumption Fairgrounds accounted for 39.5% of these overall costs. This allocation was used in the previous 2019 study and confirmed with City staff as part of the current analysis.

Total Water Use
The Fairgrounds average water use accounts for 12.1% of the overall water demand recorded for calendar years 2020-2022. Figure IV-4 summarizes the average annual consumption by water customers over the three-year period. This allocation was applied to raw water supply and contractual services expenses, which vary based on the level of water demanded.

Figure IV-4. Water Use Analysis
Applicable Total Capacity
Service Size Meters Multiplier EMUs
a c a * c
5/8" Meters 1,131 1.00 1,131
3/4" Meters 387 1.50 581
1" Meters 250 2.50 625

1.5" Meters 46 5.00 230
2" Meters 49 8.00 392
3" Meters 3 16.00 48
4" Meters 0 25.00 0
8" Meters 1 80.00 80
10" Meters 2 120.00 240
Total 1,869 Total EMUs 3,327
2020-2022 Average
Customer Class Annual Water Use (HCF)
Single Family 208,179
Multi Family 52,877
Non-Residential 93,244
Fairgrounds 48,649
Total Consumption 402,949
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Operations & Maintenance Composite
Non-operating revenue and transfers to reserves were allocated to the Fairgrounds and City customers based on each’s proportionate share of the total O&M costs, as derived in Figure IV-1.

Results of Initial Allocation
Fairgrounds was apportioned 17.6% of the overall revenue requirement. The Fairgrounds allocation has increased since the previous cost-of-service study, which yielded an overall allocation of 14.9%. The increase can be attributed to an increased share of the Fairgrounds share of the raw water supply costs.

This expense is the largest expense category in the cost allocation exercise and the Fairgrounds share increased from the previous study’s share of 10.9% to 12.1%. Thus, the Fairgrounds share of the revenue requirement to be recovered through the FY 2024-25 rates will be $850,661 (17.6%) and the remaining City customer’s share will be $3,978,871 (82.4%).

Demand Service Allocation Factors
A cost-of-service analysis categorizes costs between the demand and customer service functions. Within the demand service function, further allocations are made to varying levels of service ranging from base, non-seasonal, indoor demand, which are the least discretionary, to the highest level of seasonal peak demand for outdoor water use and irrigation during the peak hour of the peak day, which are the most discretionary. With these further allocations, rates can be designed for each customer class’s Water Use Charges.

The costs allocated to the customer service function are differentiated between those that are related to accounts and those that are related to capacity. Those two categories are used in deriving the Service Charges.

As described below, there are three levels of demand used for the demand service function cost-of-service analysis.

Average (Base) Day demand
Average Day demand is the average of calendar year (CY) 2020-2022 customer billing data. The City’s Average Day demand represents only 44% of the current peak demand.

Maximum Day demand
Maximum Day demand includes Average Day demand plus peak day demand in the irrigation season. The Maximum Day demand for each customer class relies on the maximum monthly demand averaged over the three year period of CY 2020-22. The monthly demand was prorated to a daily volume by dividing by the number of days in the subject month. If peaking did not exceed Maximum Day demand, the City’s facilities could be sized at 67% of current peak demands. 75 May 6, 2024 Item 11
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Maximum Hour demand
Maximum Hour demand represents the Maximum Hour demand on the Maximum Day. The City does not maintain data on its Maximum Hour demand. Hence, this value is estimated based on the State of California’s design requirements for new and existing source capacity.3 Facilities that are needed for Maximum Hour demands are sized at a minimum of 1.5 times Maximum Day Demand.

Allocation percentages were calculated for each demand service level using load factors derived from customer billing data for CY 2020-22 (Average and Maximum Day) and engineering design criteria (Maximum Hour). Load factors are the ratio of higher levels of demand to the Average Day demand. Figure IV5 summarizes the units of service and load factors for each of the service levels.

Load Factors
The load factors are the ratio of the flows for the peak service levels (i.e., Maximum Day, and Maximum Hour) compared to the Average Day, non-seasonal flow. The load factors represent how much higher Maximum Day and Maximum Hour flows are compared with Average Day demand.

Figure IV-5. Service Level Demands and Load Factors
Note: Daily totals are shown
The load factors indicate how much additional capacity is required to supply higher levels of service and serve as the source of the allocation percentages that are needed to allocate costs. They are derived in Figure IV-6. For example, the Maximum Day load factor for the system is 1.52. Of that total 1.52 load, 0.52 is in excess of Average Day demand and is related to the Maximum Day peak, which is 34% of the total 3 “If daily water usage data are available, identify the day with the highest usage during the past ten years to obtain Maximum Daily Demand (MDD); determine the average hourly flow during MDD and multiply by a peaking factor of at least 1.5 to obtain the [peak hour demand].” 22 CCR § 64554.

Average Maximum Maximum
Day Day Hour
Demand by Customer Category
Single Family Residential 570 713 1,070
Multi Family Residential 145 181 271
Commercial 116 142 213
Irrigation 139 252 378
Fairgrounds 133 388 581
Total 1,104 1,676 2,513
Ratio of Flows to Avg Day
Single Family Residential 1.00 1.25 1.88
Multi Family Residential 1.00 1.25 1.87
Commercial 1.00 1.22 1.84
Irrigation 1.00 1.81 2.71
Fairgrounds 1.00 2.91 4.36
Level of Service 1,104 1,676 2,513
Avg Day Demand 1,104 1,104 1,104
Ratio of Level of Service to Avg Day 1.00 1.52 2.28
Levels of Demand
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Maximum Day load (i.e., 0.52/1.52 = 34%). For purposes of allocating costs associated with meeting Average Day demands, 34% is allocated to the Maximum Day service and 66% is allocated to the Average Day service.

Figure IV-6. Demand Service Levels
Maximum Day demand includes Average Day, and Maximum Day components. And Maximum Hour demand has all three service levels of demand. While system capacity is essentially designed to meet peak demands, and peak users should assume cost responsibility for the capacity required to serve this peak demand, it is important to understand that the cost of facilities that are sized for peak demands is not borne by only customers that peak, all levels of demand utilize the facility.

Using distribution pipelines as an example, they are sized to meet Maximum Hour demands. Even though they are sized for the highest level of service, lower peak demands are also accommodated by these pipelines. Hence, the cost of the pipelines is not allocated 100% to the Maximum Hour service level. The cost is apportioned across the lower service levels, too. Thus, the costs of peaking are shared by all customers and not exclusively allocated to those who peak the most.

Cost-of-Service Allocations and Allocation Factors
The allocation factors in Figure IV-7 were used to apportion the Fairgrounds allocation of costs in Figure IV-8 and to apportion the City customers’ allocation of costs in Figure IV-9. Figure IV-7 includes the demand service level factors previously derived in Figure IV-6, in addition to Customer Service and Composite allocations. The Customer Service factors are either 100% customer account or 100% capacity allocations. The CIP Composite and O&M Composite allocations are based on the subtotals of the O&M and capital costs that were directly allocated to either the demand or customer service categories.

Load Average Maximum Maximum
Allocation Basis Factors Day Day Hour Totals
Average Day 1.00 1.00 1.00
Allocation % 100% 100%
Maximum Day 1.52 1.00 0.52 1.52
Allocation % 66% 34% 100%
Maximum Hour 2.28 1.00 0.52 0.76 2.28
Allocation % 44% 23% 33% 100%
Demand Service Levels
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Figure IV-7. Cost-of-Service Allocation Factors
Figure IV-8. Fairgrounds Cost-of-Service Allocations
Source: Fairgrounds revenue requirement from Figure IV-1.

Average Maximum Maximum
System-Wide Cost Allocation Factors Day Day Hour Accounts Capacity Total Demand Services
Base Day 100.0% 0.0% 0.0% 0.0% 0.0% 100.0%
Max Day 65.9% 34.1% 0.0% 0.0% 0.0% 100.0%
Max Hour 43.9% 22.7% 33.3% 0.0% 0.0% 100.0%
Customer Services
Capacity 0.0% 0.0% 0.0% 0.0% 100.0% 100.0%
Accounts 0.0% 0.0% 0.0% 100.0% 0.0% 100.0%
Composite Allocations
City O&M Composite 54.7% 3.3% 0.0% 0.0% 42.0% 100.0%
CIP Composite 43.2% 19.0% 13.3% 19.4% 5.1% 100.0%
FG O&M Composite 39.8% 5.3% 0.0% 0.0% 54.9% 100.0%
Demand Services Customer Services
Fairgrounds Commodity Charge
Rev. Req't Allocation Average Maximum Maximum
FY 2024-25 Factor Day Day Hour Accounts Capacity
O&M Expenses
Administrative Personnel $90,334 Capacity $0 $0 $0 $0 $90,334 Operations Personnel $132,901 Capacity $0 $0 $0 $0 $132,901 O&M - Tools, Supplies, Insurance $120,959 Capacity $0 $0 $0 $0 $120,959 O&M - Admin Expenses $52,231 Capacity $0 $0 $0 $0 $52,231 O&M Variable $11,317 Capacity $0 $0 $0 $0 $11,317
Contractual Services $19,541 Capacity $0 $0 $0 $0 $19,541 Water Supply $229,638 Base Day $229,638 $0 $0 $0 $0
Water Treatment $121,912 Max Day $80,323 $41,590 $0 $0 $0 Total Allocable O&M $778,833 $309,960 $41,590 $0 $0 $427,284 Fairgrounds O&M Composite FG O&M Composite 39.8% 5.3% 0.0% 0.0% 54.9% Capital Outlay $10,428 Capacity $0 $0 $0 $0 $10,428
Capital Expenses (PAYGo) $44,785 CIP Composite $19,357 $8,493 $5,970 $8,691 $2,273 Subtotal - O&M and Capital $834,046 $329,318 $50,082 $5,970 $8,691 $439,985 Expense Composite 39.5% 6.0% 0.7% 1.0% 52.8%
Non-Operating Revenue ($13,570) FG O&M Composite ($5,401) ($725) $0 $0 ($7,445) Transfers to/(from) Reserves $30,185 FG O&M Composite $12,013 $1,612 $0 $0 $16,560 Total Revenue Requirement $850,661 $335,930 $50,970 $5,970 $8,691 $449,100 $392,870 $8,691 $449,100
% of total revenue requirement 46.2% 53.8%
Voluemtric Charge COS Service Charge COS
Service Charge
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Figure IV-9. City Customers Cost-of-Service Allocations Source: City customers revenue requirement from Figure IV-1.

The expenses that are allocated to the Demand Service Levels are recovered from the City’s Commodity Charges. Further, the allocations to individual customer classes are proportioned in Figure IV-10 to each customer class’s water demand levels in each category of service. For example, the Single Family Residential class is allocated 58.76% of the Average Day costs based on its share of 58.76% of the Average Day flow (570 HCF of the total flow of 971 HCF).

City Commodity Charge
Rev. Req't Allocation Average Maximum Maximum
FY 2024-25 Factor Day Day Hour Accounts Capacity
O&M Expenses
Administrative Personnel $251,323 Capacity $0 $0 $0 $0 $251,323 Operations Personnel $369,751 Capacity $0 $0 $0 $0 $369,751 O&M - Tools, Supplies, Insurance $185,141 Capacity $0 $0 $0 $0 $185,141 O&M - Admin Expenses $490,729 Capacity $0 $0 $0 $0 $490,729 O&M Variable $17,323 Capacity $0 $0 $0 $0 $17,323
Contractual Services $142,309 Capacity $0 $0 $0 $0 $142,309 Water Supply $1,672,402 Base Day $1,672,402 $0 $0 $0 $0 Water Treatment $339,178 Max Day $223,470 $115,708 $0 $0 $0 Total Allocable O&M $3,468,157 $1,895,872 $115,708 $0 $0 $1,456,576 City O&M Composite 54.7% 3.3% 0.0% 0.0% 42.0%
Capital Outlay $15,962 Capacity $0 $0 $0 $0 $15,962
Capital Expenses (PAYGo) $420,766 CIP Composite $181,868 $79,794 $56,091 $81,659 $21,354 Subtotal - O&M and Capital $3,904,884 $2,077,740 $195,502 $56,091 $81,659 $1,493,892 Expense Composite 53.2% 5.0% 1.4% 2.1% 38.3%
Non-Operating Revenue ($60,430)City O&M Composite ($33,034) ($2,016) $0 $0 ($25,380) Transfers to/(from) Reserves $134,416 Base Day $134,416 $0 $0 $0 $0 Total Revenue Requirement $3,978,871 $2,179,122 $193,486 $56,091 $81,659 $1,468,513

0.0% $2,428,699 $81,659 $1,468,513
% of total revenue requirement 61.0% 39.0%
Voluemtric Charge COS Service Charge COS
Service Charge
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Figure IV-10. Customer Class Cost-of-Service Allocations for Demand Service Levels Figure IV-11 summarizes the small shift in the Service Charge revenues to the Commodity Charge revenues to align with the cost-of-service. The exercise performed indicates the proportion of Service Charge revenues will decrease from 43% to 42% of total rate revenues, while the share of Commodity Charge revenues will increase from 56% to 57%.

Rates need to be designed to generate each class’s share of the revenue requirement related to volumetric charges. The next section provides the recommended modifications to the Service Charge and Commodity Charges needed to meet the cost of service.

City Average Max Max
Consumption Charge Cost of Service Day Day Hour Total
Revenue Requirement Categories
O&M Expenses $1,895,872 $115,708 $0 $2,011,580
Capital Outlay $0 $0 $0 $0
Capital Expenses (PayGo) $181,868 $79,794 $56,091 $317,753 Non-Operating Revenue ($33,034) ($2,016) $0 ($35,050)
Transfers to/(from) Reserves $134,416 $0 $0 $134,416
Total Consumption Charge COS $2,179,122 $193,486 $56,091 $2,428,699 Units of Service (hcf)
Single Family Residential 570 713 1,070
Multi Family Residential 145 181 271
Commercial 116 142 213
Irrigation 139 252 378
971 1,288 1,932
Proportional Allocation Factors
Single Family Residential 58.76% 55.36% 55.36%
Multi Family Residential 14.92% 14.03% 14.03%
Commercial 11.95% 11.02% 11.02%
Irrigation 14.36% 19.59% 19.59%
100.00% 100.00% 100.00%
Revenue Requirement Allocations
Single Family Residential $1,280,520 $107,114 $31,052 $1,418,687 Multi Family Residential $325,220 $27,147 $7,870 $360,237 Commercial $260,398 $21,329 $6,183 $287,910
Irrigation $312,984 $37,895 $10,986 $361,865
$2,179,122 $193,486 $56,091 $2,428,699
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Figure IV-11. Cost-of-Service Revenue Summary
Note: FY 2023-24 revenues assume 12 months of rates implemented on January 1, 2024.

Components of Rate Structure
Single-Family Residential
Commodity Revenue $1,373,266 58% $1,418,687 59% $45,421 3.3% Service Charge Revenue $1,010,762 42% $997,352 41% ($13,411) -1.3% Subtotal - SFR $2,384,028 100% $2,416,039 100% $32,010 1.3% Multi-Family Residential
Commodity Revenue $325,737 58% $360,237 61% $34,500 10.6% Service Charge Revenue $240,067 42% $230,007 39% ($10,060) -4.2% Subtotal - MFR $565,804 100% $590,244 100% $24,439 4.3% Commercial
Commodity Revenue $298,277 63% $287,910 63% ($10,367) -3.5% Service Charge Revenue $178,794 37% $170,196 37% ($8,598) -4.8% Subtotal - Commercial $477,071 100% $458,107 100% ($18,965) -4.0% Irrigation
Commodity Revenue $355,844 69% $361,865 70% $6,021 1.7% Service Charge Revenue $158,462 31% $152,617 30% ($5,845) -3.7% Subtotal - Irrigation $514,306 100% $514,482 100% $176 0.0% Fairgrounds
Commodity Revenue $339,848 45% $392,870 46% $53,021 15.6% Service Charge Revenue $407,808 55% $457,792 54% $49,984 12.3% Subtotal - Fairgrounds $747,656 100% $850,661 100% $103,005 13.8% Total
Commodity Revenue $2,692,972 57% $2,821,569 58% $128,596 4.8% Service Charge Revenue $1,995,894 43% $2,007,963 42% $12,070 0.6% Total $4,688,866 100% $4,829,532 100% $140,666 3.0%
Revenue at Cost of Service Difference
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V. WATER RATE DESIGN
The City has historically charged water customers the combination of a fixed Service Charge and a variable Commodity Charge based on metered water use. As previously discussed, this is a common set of charges that is prevalent throughout the water industry. This chapter explains the derivation of the Commodity and Service Charge rates that reflect the projected cost of service.

CURRENT RATES
The City’s current water rate structure is composed of two components: Service Charges and Commodity Charges.

Current Service Charges
The Service Charges are fixed rates that are charged on a fixed rate graduated in proportion to the capacity of the service provided for all customers. All customers are billed on a bi-monthly basis. Figures V-1 summarizes the current Service Charges, which were last increased on January 1, 2024.

Figure V-1. Current Service Charges
Current Commodity Charges
The Commodity Charges are the product of rates per unit of metered water use multiplied times the metered water use during the bi-monthly billing period. Water is metered in “units” of HCF of metered water use, whereby one unit or HCF equals 748 gallons. Commodity Charges are charged to five distinct customer classes, Single Family Residential, Multi-Family Residential, Commercial/Institutional, Irrigation, and Fairgrounds customers.

For Single Family Residential customers, the Commodity Charges consist of two tiers that charge higher rates as the level of consumption increases. For all other customers, the Commodity Charge is a uniform rate per HCF of metered water use. Figure V-2 reflects all current Commodity Charge rates.

Bi-Monthly Current
Fixed Service Charges Rates
Meter Size
5/8" $88.04
3/4" $132.06
1" $220.08
1 1 /2" $440.16
2" $704.24
3" $1,408.46
4" $2,200.72
Fairgrounds $67,968.00
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All components of the rate structure were reviewed, including the composition of the customer classes, the structures of the Service Charges, Commodity Charges, and Demand Management Rates.

Figure V-2. Current Commodity Charges

SERVICE CHARGE DESIGN
Service Charges are fixed rates that are billed each billing period to recover the cost of the service functions. The cost-of-service analysis determined how much of the revenue requirement is attributable to the customer service function. The function has two components – customer services (accounts) and customer capacity – each of which is itemized in the cost-of-service analyses in Figure IV-8 and Figure IV-9.

Costs attributable to customer services are allocated to customers in proportion to the number of meters.

Costs attributable to customer capacity are allocated to customers in proportion to the capacity of their services. The sum of the two components equals the Service Charge rate per connection.

Figure V-3 lists the units of service corresponding to each of the cost components. Capacity costs associated with the distribution system are apportioned among the connections in proportion to the capacity associated with each connection. Connections are converted to Equivalent Meter Units (EMU’s) to apportion the customer capacity cost component. An EMU represents the number of 5/8-inch meters to which a larger meter is equivalent. For example, a 1-inch meter provides 2.50 times as much capacity as a 5/8- inch meter. The capacity multipliers are based on the meter data provided by the City of the manufacturer’s nominal capacity. There are 3,327 total EMUs. In effect, the 1,869 services of assorted sizes have the equivalent capacity as 3,327 5/8-inch meters. Specifically, there are 1,866 meters providing 3,007 total EMUs of capacity for City customers, excluding the Fairgrounds.

Current
Bi-Monthly Rates
Commodity Charges ($/HCF)
Single Family Residential
Tier 1 (0-20 hcf) $6.22
Tier 2 (21+ hcf) $7.47
Multi-Family Residential $6.41
Commercial/Insitutional $6.52
Irrigation $6.96
Fairgrounds $6.52
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Figure V-3. Service Charge Units of Service
Note: Capacity multiplier assumes 5/8” meter = 1 EMU = 20 gallons per minute.

Figure V-4 derives the unit costs for the customer service and customer capacity cost componentsfor City customers. Each service is allocated $7.29 per bi-monthly period for the customer service cost component. That amount represents the costs the City incurs to maintain each meter regardless of the capacity of the service (e.g., customer billing, administration overhead). Each service is also allocated $81.41 per bi-monthly period per EMU. That amount represents a portion of the cost of providing distribution system capacity for each account, and increases based on the capacity of the meter.

Figure V-4. Service Charge Unit Costs
Figure V-5 combines the customer service and capacity components into a single Service Charge for each size service and compares proposed rates to the current rates.

Applicable Total Capacity
Service Size Meters Multiplier EMUs
a c a * c
5/8" Meters 1,131 1.00 1,131
3/4" Meters 387 1.50 581
1" Meters 250 2.50 625

1.5" Meters 46 5.00 230
2" Meters 49 8.00 392
3" Meters 3 16.00 48
4" Meters 0 25.00 0
City Total 1,866 City Total EMUs 3,007
8" Meters 1 80.00 80
10" Meters 2 120.00 240
Grand Total 1,869 Total EMUs 3,327
FY 2024-25 Customer Customer
City Service Capacity
Service Expenses Component Component
Cost Allocation $81,659 $1,468,513
Units of Service 1,866 3,007
Meters EMUs
Annual Unit Cost $43.76 $488.45
Bi-Monthly Unit Cost $7.29 $81.41
per Meter per EMU
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Figure V-5. Proposed Bi-Monthly Service Charge Rates – FY 2024-25 Note: Rounding differences caused by stored values in electronic models may exist.

With the proposed rates, all meter sizes would see an increase. The increase in rates reflects the 3.2% increase to service charge revenues to be collected from Single-Family Residential, Multi-Family Residential, Commercial, and Irrigation customers, shown in Figure IV-11. The proposed rates reflect a change from the previous methodology by which Service Charges were calculated only based on the capacity ratio of each meter. In contrast, the proposed rates include a service component assessed equally to all City customers, regardless of meter size to recover service-related costs and a capacity component to recover capacity-related costs.

Figure V-6 shows the proposed five-year schedule of Service Charge rates. The Fairgrounds Service Charge for FY 2024-25 is result of dividing the Service Charge cost allocation in Figure IV-8, $457,792, into equal bi-monthly increments to generate the charge shown below.

Figure V-6. Current and Proposed Service Charge Rates

WATER USE CHARGE DESIGN
As previously discussed, the City’s Commodity Charges are different for its customer classes. Single Family Commodity charges are tiered, which is appropriate because of the variation in demands within a comparatively homogenous class of customers. The tiered rate structure corresponds to levels of service that range from low, essential needs to high, discretionary needs. The rate for each tier is set to reflect the Service Capacity Component COS Total
Service Component Capacity Capacity Service Charges Current $ Size ($/bi-mo.) $/EMU Multiplier Total ($/bi-mo.) Charge Difference a b c d = b * c e = a + d f g = e - f
5/8" Meters $7.29 $81.41 1.00 $81.41 $88.70 $88.04 $0.66 3/4" Meters $7.29 $81.41 1.50 $122.11 $129.41 $132.06 ($2.65) 1" Meters $7.29 $81.41 2.50 $203.52 $210.81 $220.08 ($9.27) 1 1 /2" Meters $7.29 $81.41 5.00 $407.04 $414.33 $440.16 ($25.83) 2" Meters $7.29 $81.41 8.00 $651.26 $658.55 $704.24 ($45.69) 3" Meters $7.29 $81.41 16.00 $1,302.52 $1,309.82 $1,408.46 ($98.64) 4" Meters $7.29 $81.41 25.00 $2,035.19 $2,042.49 $2,200.72 ($158.23) Proposed Rates
Bi-Monthly Current FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Fixed Service Charges Rates eff. 7/1/2024 eff. 7/1/2025 eff. 7/1/2026 eff. 7/1/2027 eff. 7/1/2028 rate increase: varies 2% 2% 2% 2%
Meter Size
5/8" $88.04 $88.70 $90.47 $92.28 $94.13 $96.01
3/4" $132.06 $129.41 $132.00 $134.64 $137.33 $140.08
1" $220.08 $210.81 $215.03 $219.33 $223.72 $228.19
1 1 /2" $440.16 $414.33 $422.62 $431.07 $439.69 $448.48 2" $704.24 $658.55 $671.72 $685.15 $698.85 $712.83
3" $1,408.46 $1,309.82 $1,336.02 $1,362.74 $1,389.99 $1,417.79 4" $2,200.72 $2,042.49 $2,083.34 $2,125.01 $2,167.51 $2,210.86 Fairgrounds $67,968.00 $76,298.59 $77,824.56 $79,381.05 $80,968.67 $82,588.04 85 May 6, 2024 Item 11
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cost of providing for the amount of peaking that is required. Calculating the tiered rates for residential customers needs to ensure that the rates reflect the cost of providing service across the range of tiers.

All other customers pay uniform Commodity charges, which is appropriates because these customers each have varying levels of demand and less predictable peaking patterns of demand.

Single Family Residential Commodity Charges
The City’s Single Family Residential customers are currently charged a two-tier increasing block rate structure.4 Tier quantity and the location of the breakpoint between tiers results from evaluating the City’s historical water consumption. The breakpoint was calculated using the total Single Family Residential daily demand consumption divided by the number of accounts, as shown in Figure V-7.

Figure V-7. Breakpoint Locations – Single Family Residential The Average Day breakpoint of 22 HCF per bi-monthly period was set as the breakpoint between the first and second tier to delineate peaking and average levels of demand, following the City’s current practice.

With breakpoints that correspond to the service levels in the cost-of-service analysis, it is possible to calculate the rate per tier by dividing the cost of service per tier by the water demand in each tier. The resulting rates represent the unit cost of service for each tier. 5 Figure V-8 shows the calculations of the incremental cost per tier. The costs in each column were determined in Figure IV-10, such that the allocation of $1,418,687 for Single-Family Residential is distributed to the three demand service levels. To maintain the two-tier structure, the Maximum Day and Maximum Hour service level volumes and allocations were added together. The unit costs are the result of the cost of service at each tiered demand service level divided by the level of respective demand. The incremental rates are additive. In other words, demand in Tier 1 only pays the Average Day rate. Demand in Tier 2 pays the Average Day rate plus the Maximum Day and Maximum Hour increments. The bi-monthly rates for Single Family Commodity Charges resulting from the cost-of-service are shown in Figure V-8. 4 For simplicity, we use the term “tiered rates” synonymously with “increasing block rates.” “Inclining block rates” is commonly used for “increasing block rates.” However, because an incline can slope both up or down, it is ambiguous in this context and therefore is not used in this study. 5 In this report, “rates” and “unit costs” are synonymous.

Average Maximum Maximum
ustomer (hcf per month) Day Day Hour
Singel-Family Residential
hcf per day 570 713 1,070
hcf per month 17,112 21,392
# of Accounts 1,558 1,558
Average flow per Acct (hcf/mo) 11 14 15+
Average flow per Acct (hcf/bi-mo) 22 28 29+
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Figure V-8. Calculation of Proposed Commodity Charge Rates – Single Family Residential Note: Rounding differences caused by stored values in electronic models may exist Uniform Commodity Charges
We recommend the City apply the same uniform rate structure for all Multi-Family, Commercial/Institutional, Irrigation, and Fairgrounds customers. The proposed adjustments for FY 2024-25 are intended to increase the uniform rate to re-align with the cost of service for each customer class. Figure V-9 derives the uniform Commodity Charge for each class based on their respective share of water demand and the cost allocations derived in Figure IV-8 for Fairgrounds and Figure IV-10 for City customers.

Figure V-9. Calculation of Commercial/Multi Family Uniform Commodity Charges Commodity Charges Summary
The five-year schedule of proposed Commodity Charges for Single Family Residential, Multi-Family Residential, Commercial, Irrigation, and Fairgrounds customers isshown in Figure V-10. After rates are revised to meet the cost-of-service in FY 2024-25, all rates will increase uniformly by 2% each of the next four fiscal years.

Single Family Average Maximum Maximum
Residential COS per Unit Day Day Hour Total
Cost of Service - Commodity $1,280,520 $107,114 $31,052 $1,418,687 Tier 1 Tier 2
COS Revised $1,280,520 $138,166
Monthly Demand per Tier
Average Day - Tier 1 (0 - 11 hcf) 80,760
Max Day - Tier 2 (12 - 14 hcf) 16,743 16,743
Max Hour - Tier 3 (15+ hcf) 107,174 107,174
204,677 123,917
Cost-of-Service per Unit (hcf) $6.26 $1.11
Bi-Monthly Tiers
Tier 1 (0 - 22 hcf) $6.26
Tier 2 (23+ hcf) $7.37
Customer Class Multi-Family Commercial Irrigation Fairgrounds Cost of Service Commodity Charge $360,237 $287,910 $361,865 $392,870 Annual water use (hcf) 52,877 42,338 50,888 48,649
Unit rate per hcf $6.81 $6.80 $7.11 $8.08
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Figure V-10. Current and Proposed Commodity Charges
Drought Rate Factors
During prolonged shortages, customers are required to conserve or even ration their water use. The magnitude of the water savings can significantly reduce water sales revenue from commodity charges.

Currently the City has Demand Management Rates in place which go into effect during declared water shortages. The rates apply a surcharge to both the Service Charges and Commodity Charges. The Demand Management Rates applied to Service Charges are graduated by meter size. The surcharge applied to all Commodity Charges is a uniform rate per HCF, which is the same for all customer classes.

HF&H recommends a set of drought rate factors that would be applied solely to the Commodity Charges and implemented during declared water shortage stages in accordance with the City’s Water Shortage Contingency Plan (WSCP), state mandated reductions in the level of potable water usage, or other natural disaster or event that results in a water shortage and an unforeseen drop in water demand that requires reductions in water use.

The drought rate factors were developed to reflect variations in the level of outdoor and discretionary water use of each customer class. Customer classes with more discretionary water use for landscaping and irrigation activities would be required to reduce demand more during periods of shortage. As a result, customer classes with larger discretionary water use habits, and a greater ability to conserve water, would see larger increases via the proposed drought rate factors. It is proposed that the shortage reductions would vary by customer class, based on their respective abilities to conserve water. A customer class’s ability to conserve is directly related to the proportion of their current water use which is highly discretionary and considered a non-beneficial use (e.g., water used for landscape purposes, “outdoor” water use) and less discretionary use for health and safety (e.g., water used for cooking, cleaning, bathing, “indoor” water use). Each class’s reduction was determined by reducing their proportion of water that is for “outdoor” water use (seasonal water use) 3.0 times more than their “indoor” (average winter water use) water use. At Stage 6, it is assumed all Irrigation use would be suspended. A three-year analysis of 2020- 2022 water use data informed the proposed factors associated with each water conservation stage.

The drought rate factors would be applied to each of the Commodity Charges. The higher rates will generate the revenue which was lost due to conservation and has been calculated to keep the City revenue neutral so they can cover the portion of fixed costs paid through the consumption rate revenues. 88 May 6, 2024 Item 11
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Analysis
Based on CY 2020-2022 metered water use data, the resulting reductions are summarized in Figure V-11.

The reductions shown represent the customer class reductions required to achieve the reduction associated with each shortage stage. The customer class reductions are greater or less than the overall average for each stage depending on how much of each class’s water demand is seasonal.

Figure V-11. WSCP Required Water Use Reductions by Class Figure V-12A and Figure V-12B show the calculation of each customer class’s respective shortage reduction required during each shortage stage. The annual demand for each class is separated into indoor and outdoor water use where indoor water use is defined as the minimum average monthly period multiplied times 12 to get the annualized indoor water use over 12 months. Subtracting indoor water use from the total annual water use determines the seasonal outdoor water use. March represented the lowest period of use for the City’s customers.

The percentage reductions for each customer class required to achieve the overall reduction for a particular stage are derived so that outdoor water use is reduced 3.0 times indoor water use. In a Stage 1 shortage, a 5.7% reduction in indoor water use and a 17.2% reduction in outdoor water use are required to achieve an overall 10% reduction. Applying the same reduction factors to each class results in different overall reductions for the class based on the relative proportions of their indoor and outdoor water use.

In each stage reduction each customer class isrequired to conserve different percentages. This is because of the variation in water use patterns among the customer classes. Note, the larger reduction for MultiFamily versus Single Family customers is due to the inclusion of Multi-Family Residential accounts with irrigation. These customers are identified separately by the City but their potable irrigation water is recorded on the same meter as domestic use.

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6
Shortage Shortage Shortage Shortage Shortage Shortage
Up to Up to Up to Up to Up to Up to
Class (10% Reduction) (20% Reduction) (30% Reduction) (40% Reduction) (50% Reduction) (56% Reduction) Single Family 8% 16% 24% 31% 39% 43%
Multi-Family 9% 18% 27% 37% 46% 51%
Commercial 8% 16% 24% 32% 40% 43%
Irrigation 17% 34% 52% 69% 86% 100%
Fairgrounds 14% 29% 43% 58% 72% 83%
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Figure V-12A. Calculation of 10-30% Shortage Reductions by Stage and Customer Class The service charges are fixed and generate 41.6% of the total rate revenue regardless of shortages. The remaining 58.4% of revenue is generated by the volumetric rates. In deriving the Drought Rate Factors, the factors will only apply to the volumetric rates because short-term reductions in water use correlate with short-term fluctuations in variable costs. Conversely, short-term reductions in water use would not affect fixed costs, or costs that would require a long-term change in customer demand (e.g. population decline) to be affected. Each customer class has its own set of Drought Rate Factors corresponding to its reduction in each stage of shortage.

The formula for the Drought Rate Factors comprises conservation and variable cost components. The conservation component adjusts to account for the required reduction in water demand. A portion, not all, of the costs (e.g., power, water purchases) covered by Commodity Charge rates are variable and will not be incurred when less water is used during short-term demand reductions. To ensure the Drought Rate Factors do not result in excess revenue collection, the variable cost component of the calculation reduces the factor to account for the portion of variable costs, which is covered by the quantity charges, and will not be incurred when demand decreases.
10% Shortage Level 1 Reduction (up to 10% reduction)
Class Total Indoor Outdoor Indoor Outdoor Indoor Outdoor Total Total Single Family 208,198 170,183 38,015 5.7% 17.2% 9,753 6,536 16,288 8% Multi-Family 52,877 37,220 15,657 5.7% 17.2% 2,133 2,692 4,825 9% Commercial 42,338 34,252 8,086 5.7% 17.2% 1,963 1,390 3,353 8% Irrigation 50,888 - 50,888 0.0% 17.2% - 8,749 8,749 17% Fairgrounds 48,649 11,886 36,763 5.7% 17.2% 681 6,320 7,002 14% Total 402,949 253,541 149,408 14,530 25,687 40,216 10.0% 20% Shortage Level 2 Reduction (up to 20% reduction)
Class Total Indoor Outdoor Indoor Outdoor Indoor Outdoor Total Total Single Family 208,198 170,183 38,015 11.5% 34.4% 19,505 13,071 32,577 16% Multi-Family 52,877 37,220 15,657 11.5% 34.4% 4,266 5,384 9,650 18% Commercial 42,338 34,252 8,086 11.5% 34.4% 3,926 2,780 6,706 16% Irrigation 50,888 - 50,888 0.0% 34.4% - 17,497 17,497 34% Fairgrounds 48,649 11,886 36,763 11.5% 34.4% 1,362 12,641 14,003 29% Total 402,949 253,541 149,408 29,060 51,373 80,433 20.0% 30% Shortage Level 3 Reduction (up to 30% reduction)
Class Total Indoor Outdoor Indoor Outdoor Indoor Outdoor Total Total Single Family 208,198 170,183 38,015 17.3% 51.8% 29,358 19,674 49,032 24% Multi-Family 52,877 37,220 15,657 17.3% 51.8% 6,421 8,103 14,524 27% Commercial 42,338 34,252 8,086 17.3% 51.8% 5,909 4,185 10,093 24% Irrigation 50,888 - 50,888 0.0% 51.8% - 26,336 26,336 52% Fairgrounds 48,649 11,886 36,763 17.3% 51.8% 2,050 19,026 2 1,076 43% Total 402,949 253,541 149,408 43,738 77,323 121,062 30.0% Baseline Annual Demand (HCF) Reductions
Baseline Annual Demand (HCF) Reductions
Baseline Annual Demand (HCF) Reductions
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Figure V-12B. Calculation of 40-56% Shortage Reductions by Stage and Customer Class The Drought Rate Factors are the product of the conservation component multiplied by the variable cost component. Each component is defined as follows:

Drought Rate Factor = Conservation Component multiplied times Variable Cost Component, where
Conservation Component = 1/(1 - a), where
a = required percentage reduction, which varies by customer class.

Variable Cost Component = (b - (c * a))/b, where
a = required percentage reduction, which varies by customer class. b = percentage of revenue from total service charges and volumetric rates for all customer classes that is attributable to volumetric rates, an amount that is 58.4% based on the costof-service analysis. 40% Shortage Level 4 Reduction (up to 40% reduction)
Class Total Indoor Outdoor Indoor Outdoor Indoor Outdoor Total Total Single Family 208,198 170,183 38,015 22.9% 68.8% 39,040 26,162 65,202 31% Multi-Family 52,877 37,220 15,657 22.9% 68.8% 8,538 10,775 19,313 37% Commercial 42,338 34,252 8,086 22.9% 68.8% 7,857 5,565 13,422 32% Irrigation 50,888 - 50,888 0.0% 68.8% - 35,021 35,021 69% Fairgrounds 48,649 11,886 36,763 22.9% 68.8% 2,727 25,300 28,027 58% Total 402,949 253,541 149,408 58,162 102,823 160,985 40.0% 50% Shortage Level 5 Reduction (up to 50% reduction)
Class Total Indoor Outdoor Indoor Outdoor Indoor Outdoor Total Total Single Family 208,198 170,183 38,015 28.7% 86.1% 48,843 32,731 81,573 39% Multi-Family 52,877 37,220 15,657 28.7% 86.1% 10,682 13,481 24,163 46% Commercial 42,338 34,252 8,086 28.7% 86.1% 9,830 6,962 16,792 40% Irrigation 50,888 - 50,888 0.0% 86.1% - 43,814 43,814 86% Fairgrounds 48,649 11,886 36,763 28.7% 86.1% 3,411 31,653 35,064 72% Total 402,949 253,541 149,408 72,766 128,641 201,407 50.0% 56% Shortage Level 6 Reduction (up to 56% reduction)
Class Total Indoor Outdoor Indoor Outdoor Indoor Outdoor Total Total Single Family 208,198 170,183 38,015 30.0% 100.0% 51,055 38,015 89,070 43% Multi-Family 52,877 37,220 15,657 30.0% 100.0% 11,166 15,657 26,823 51% Commercial 42,338 34,252 8,086 30.0% 100.0% 10,276 8,086 18,361 43% Irrigation 50,888 - 50,888 0.0% 100.0% - 50,888 50,888 100% Farigrounds 48,649 11,886 36,763 30.0% 100.0% 3,566 36,763 4 0,329 83% Total 402,949 253,541 149,408 76,062 149,408 225,471 56.0% Baseline Annual Demand (HCF) Reductions
Baseline Annual Demand (HCF) Reductions
Baseline Annual Demand (HCF) Reductions
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c = percentage of total revenue requirement covered by service charges and volumetric rates that varies based on fluctuations in demand, an amount that is currently 49.5%.6 The following example illustrates how the formula determined the 1.028 Drought Rate Factor in Figure V13 for the Single Family Residential customer class in a Stage 2 shortage in which an overall conservation goal of 20% if required.

Conservation Component: 1/(1 - a) = 1/(1 - 0.15647) = 1.18549, where a = required percentage reduction is 15.647% for the Residential customer class (see Figure V-13 where a rounded 16% is shown).

Variable Cost Component: (b - (c * a))/b = (0.58423 - (0.49524 * 0.15647))/0.58423 = 0.867365, where
a = 15.647% reduction for Residential customers in a Stage 2 shortage. b = 58.423% of total rate revenue is generated by quantity charges; and c = 49.524% of revenue requirement is related to variable costs.

Drought Rate Factor = 1.18549 * 0.67365 = 1.028, as it is shown in Figure V-13 (Single Family, Stage 2 Shortage).

The Single Family Residential Water Use Charge rates in effect under non-shortage conditions would be multiplied by 1.028 (or an additional 2.8%) to derive the Commodity Charge rates to be in effect during a Stage 2 water shortage. Figure V-13 shows the Drought Rate Factors that would be applied to the rates that would normally be in effect absent declared shortages. The Stage 6 value for Irrigation customers is shown as ”n/a” because all Irrigation water use is assumed to be suspended at this shortage stage. Hence, a factor would be applied.

Figure V-13. Drought Rate Factors by WSCP-Defined Shortage Stage 6 The cost of SFPUC water is the largest example of a variable cost, which varies with water demand.

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6
Shortage Shortage Shortage Shortage Shortage Shortage
Up to Up to Up to Up to Up to Up to
Class (10% Reduction) (20% Reduction) (30% Reduction) (40% Reduction) (50% Reduction) (56% Reduction) Single Family 1.013 1.028 1.047 1.069 1.098 1.114
Multi-Family 1.015 1.034 1.058 1.088 1.128 1.157
Commercial 1.013 1.029 1.048 1.071 1.100 1.117
Irrigation 1.032 1.080 1.163 1.336 1.944 n/a
Farigrounds 1.026 1.062 1.116 1.207 1.393 1.738
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Implementation
The recommended Drought Rate Factors in Table V-13 are implemented only during periods of declared water shortage emergencies. Once a mandatory shortage is declared, the City Council has discretion to enact Drought Rate Factors corresponding to the level of shortage reduction implemented using the factors provided in Table V-13 or calculated using the formula for a specific level of reduction. The adjustments can go in either direction from stage to stage depending on whether the level of reduction is increasing or decreasing during the shortage. At least 30 days prior to making the adjustment, notice must be provided to rate payers, which can be included in the customer’s bills. No protest process is required.

These adjustments would be temporary, and rates would return to the regular schedule at the conclusion of the water shortage emergency.

The Drought Rate Factors could be applied when the City requires its customers to reduce water use. At such times, the Drought Rate Factors would be multiplied times the Commodity Charges proposed in the current rate study. The City can choose to enact Drought Rate Factors when the water emergency demand levels will fall short of the respective year of modeled demand.

The Drought Rate Factors only apply to the tiered and uniform Commodity Charges and not to Service Charge rates, which are independent of water demand. The Drought Rate Factors are multiplied times the non-water shortage, normal-year Water Use Charge rates proposed in this report. The Drought Rate Factors would be adopted as part of the rate notification in the Proposition 218 implementation process.

Once adopted, the City could apply the Drought Rate Factors as needed during conservation stages.

As a further example, Figure V-14 has Commodity Charge rates after applying the Drought Rate Factors to the rates proposed for FY 2024-25. The table shows the proposed Drought Rate Factors followed by the rates that correspond to each stage of conservation.

Figure V-14. Sample Rates With Drought Rate Factors – FY 2024-25 Rates 93 May 6, 2024 Item 11
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Note that if reductions in water use are higher or lower than the specified stages set in the WSCP due to state mandated reductions in the level of potable water usage, or other natural disaster or event that results in a water shortage and an unforeseen drop in water demand, the Drought Rate Factors will be adjusted in accordance with the formula above.
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VI. COMPARISON TO WATER AGENCIES
Neighboring Agency Comparison
The Finance Committee (January 2024) asked to take a closer look at comparing water rates to similar agencies. Figure VI-1 compares single-family customer water rates of smaller coastal cities in the San Diego region, assuming water use totaling 22 HCF in a bi-monthly period, the average bi-monthly water use of the city’s single family residential customers. The current and recommended FY 2024-25 rates for Del Mar are included.

Figure VI-1. Neighboring Agency Water Bi-Monthly Bill Comparison Note: All agencies compared received water via SDCWA.

Some factors that are likely to contribute to the City having the highest water rates are as follows:

1. All agencies aside from the City have their own water filtration plants, providing them with more control over their water treatment costs. In contrast, Del Mar must rely on the City of San Diego to treat the water at the Miramar filtration plant before it is pumped to Del Mar for its use.

2. A population per miles of water mains ratio was developed to compare each agency. The City has the lowest ratio. Therefore 3,830 people must pay for the maintenance and eventual replacement of 27 miles of water mains. In other words, the City population is less concentrated along the miles of water mains maintained compared to other agencies and the costs of water service are spread over the smallest population of agencies compared.

While the City currently has the highest water bills, the variance between the City bill and neighboring agencies should decrease in the future as other agencies increase their rates more rapidly. Based on this study, proposed increases in the next five years will be only 2-3%. In contrast, other agencies are proposing 5% to 10 % per year rate increasesin part to address neglected CIP programs needing critical financing.

The City has been taken a proactive approach to its CIP program over the years of addressing critical needs without having to suddenly raise rates.

Also, during the proposed rate period, the City is scheduled to investigate an automated meter reading program which may reduce future rate increases. Santa Fe Irrigation District, who installed an automated meter reading system previously, benefits from this infrastructure as their rates are lower within the comparison.

Water Agency
Fixed
Charge
Volumetric
Charge
TotaL Water
Bill
Water
Treatment
Population
Served
Miles of
Water Mains
Population
Per Mile
Sweetwater Authority (National City) $26.09 $140.06 $166.15 Purdue WTP 200,000 388 515 Olivenhain MWD (Solana Beach, 40% Encinitas) $72.62 $103.94 $176.56 OMWD 87,000 466 187 San Dieguito WD (60% Encinitas) $72.68 $110.26 $184.94 Badger WFD 37,856 168 225 Sante Fe Irrigation District (Fairbanks Ranch,
Rancho Santa Fe, Solana Beach) $98.51 $110.44 $208.95 Badger WFD 19,800 150 132 Del Mar (Current) $88.04 $139.34 $227.38 City of SD 3,830 27 142 95 May 6, 2024 Item 11
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VII. WASTEWATER REVENUE REQUIREMENTS
A spreadsheet model was developed to derive revenue requirements for a ten-year planning period, FY 2024-25 through FY 2033-34. The revenue requirements represent the costs that must be covered by revenue from rates and other sources. The City’s budget for FY 2024-25 served as the starting point for projecting the City’s expenses and revenues. The escalation factors summarized in Figure VII-1 were incorporated in the model for projecting expenses and revenues for the duration of the Study Period. For brevity, only the first five years of modeling assumptions are shown. Factors driving these annual increases are discussed in more detail following Figure VII-2.

Figure VII-1. Key Modeling Assumptions
The application of these projections to O&M and capital expenses are summarized graphically in Figure VII-2 and are described below in more detail.

Operating & Maintenance (O&M) Expenses
The City’s Collection System Operations and Maintenance (O&M) expenses include salaries, benefits, materials, supplies, insurance, vehicle maintenance, utilities, and administrative expenses, and City administrative charges. Expense projections were calculated using assumptions reviewed with City staff. Collectively, this category represents approximately 50% of the total revenue requirement. These O&M expenses are projected to increase annually by an average of 5% over the five-year period, averaging $2.4 million per fiscal year from FY 2024-25 through FY 2028-29. No additional headcount in staffing is assumed during the five-year rate setting period.

Wastewater Transportation Expenses
The City pays Solana Beach and San Diego Metro for conveyance of wastewater to their respective treatment plants. These costs are determined by the respective agency and billed to the City for reimbursement. Transportation expenses attributable to San Diego Metro service comprise approximately 10% of the total amount of this categorical expense. Future San Diego Metro service expenses were assumed to remain flat as the City relies more on the Solana Beach force main to deliver wastewater to the SEJPA treatment plant. Transportation costs resulting from the Solana Beach force main are assumed to increase 5% annually, based on input from City staff. Wastewater transportation expenses make up approximately 3% of the total revenue requirement and average $153,000 per fiscal year.

Assumptions FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 General Inflation Per Budget 3.0% 3.0% 3.0% 3.0% 3.0%
Salaries and Wages Per Budget 5.0% 5.0% 5.0% 5.0% 5.0%
Benefits Per Budget 5.0% 5.0% 5.0% 5.0% 5.0%
Utilities Per Budget 4.0% 4.0% 4.0% 4.0% 4.0%
Construction Cost Inflation Per Budget 3.9% 3.4% 3.4% 3.4% 3.4% Growth in Residential Accounts Per Budget 0.0% 0.0% 0.0% 0.0% 0.0% Growth in Commercial Accounts Per Budget 0.0% 0.0% 0.0% 0.0% 0.0% Interest on Fund Balance 1.00% 1.0% 1.0% 1.0% 1.0% 1.0% Interest on Fund Balance - Debt Reserve 0.41% 0.4% 0.4% 0.4% 0.4% 0.4% Treatment Costs Per Budget 5.0% 5.0% 4.0% 4.0% 4.0%
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Figure VII-2. Total Annual Projected Revenue Requirements for Wastewater Enterprise Wastewater Treatment Expenses
San Diego Metro and SEJPA charge the City for its share of wastewater treatment expenses. according to the City’s share of flow contributed to each treatment plant. Like transportation expenses paid to San Diego Metro, treatment expenses have also been assumed to remain constant during the five-year period.

The City’s treatment expenses paid to SEJPA account for 95% of the categorical expense. Based on input from City staff, SEJPA treatment expenses are assumed to increase 5% annually. Note, increases to future costs have not accounted for any increases due to growth, as the City does not anticipate an expansion of its ratepayers.

Treatment expenses make up the second largest portion of the revenue requirement paid for with City wastewater rates. Across both treatment agencies, annual projected expenses will average more than $1.1 million. The combined sum of wastewater transportation and treatment expenses accounts for more than 25% of the total revenue requirement. In other words, more than one-quarter of all City wastewater expenses are controlled by third parties, which are passed on to ratepayers.

Debt Service
The City has existing debt service that was previously issued to fund various capital infrastructure improvements. The pump station at 21st street was funded through a Clean Water State Revolving Fund (CWSRF) Loan in 2013. This debt service is scheduled to conclude in 2032. In 2015, the City issued debt service to fund the San Elijo pipeline, through IBank. This debt service will be repaid over a 20-year period, ending in 2035. Annual debt service payments average $567,700 during the five-year period. 97 May 6, 2024 Item 11
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No future debt service issuance has been assumed in this study.

Capital Project Costs
Capital Improvement Program (CIP) expenditure projections average $499,361 annually during the fiveyear period. All projects have been assumed to be cash funded. Figure VII-3 provides a detailed listing of the Wastewater Enterprise five-year CIP. The City’s focus continues to be on addressing risk-based sections of its system through the Annual High Priority 1 Repairs and Annual Medium Priority Repairs programs to maintain system reliability. All project costs shown have been escalated using an assumed Construction Cost Index of 3.8% for FY 2024-25 and 3.4% thereafter based on historical changes in the Engineering News Record-Construction Cost Index.

Figure VII-3. Wastewater Five-Year Capital Improvement Plan Reserve Contributions
Based on conversations with the City, it was assumed the City would spend nearly all the $300,000 balance in this reserve during FY 2024-25. The City plans to replenish this amount in FY 2025-26 to satisfy the target balance.

RESERVES
The City uses its reserves to stabilize rates against annual fluctuations in capital expenditures, variances between projected and actual water demands, and unanticipated expenditures and other expenditure variances. In some years, there is surplus revenue that is available to replenish reserves. In other years, reserves are drawn down to cover the cost of service.

Reserves are required to stabilize rates and to provide for contingencies. Reserves can be drawn on in years when the City’s Wastewater Enterprise Fund 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 optimum target balance.

Note, the types of reserves held by the Wastewater Enterprise mirror the reserves held by the Water Enterprise, including the target balance.

Rates must be set so that the fund balance achieves the target balance.

Capital Projects FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Total Wastewater Enterprise Fund
Annual High Priority 1 Repairs $375,000 $375,000 $400,000 $400,000 $0 $1,550,000 Annual Medium Priority 2 Repairs $0 $0 $0 $0 $400,000 $400,000 Wastewater Overflow Containment $0 $0 $0 $0 $0 $0
San Diego Forcemain Cleanout Project $50,000 $150,000 $0 $0 $0 $200,000 Condition Assessment $0 $60,000 $0 $0 $0 $60,000
San Dieguito Drive Pump Station Rehabilitation $0 $0 $0 $0 $0 $0 Little Orphan Alley PS Removal $0 $0 $0 $0 $40,000 $40,000 Total Capital Projects $425,000 $585,000 $400,000 $400,000 $440,000 $2,250,000 Construction Cost Index 1.039 1.074 1.111 1.149 1.188
Total Inflated CIP $441,621 $628,562 $444,409 $459,530 $522,681 $2,496,803 Average Annual PAYGo-Funded CIP $499,361
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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 approved reserve policy is 45 days of operating expenses The City’s Reserves should never drop below this minimum balance.

Self-Insurance Reserve
The City maintains a Self-Insurance Fund for the Water utility with a targeted minimum balance of $50,000. The purpose of the reserve is solely to pay out claims related to Wastewater utility damage.

Pension Reserve
The City has a fully funded Pension Reserve to pay for the Water Enterprise’s share of staff costs. The targeted minimum balance is set to $200,000.

Debt Service Reserve
A target balance of $561,800 is maintained to satisfy the City’s current debt obligations. Once each of the obligations is paid off, the funds will become available to the City. The obligations are scheduled to mature in FY 2032-33 and FY 2035-36. This reserve is unique to only the Wastewater Enterprise as the Water Enterprise has no existing obligations.

Capital Reserve
The capital improvement component of the reserves provides working capital for the City’s capital improvement program. 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 approved policy requires a reserve threshold of $350,000. This total is less than the five-year average of annual capital improvement expenses, $465,551. The City could contemplate increasing this reserve to account for rising construction costs.

Equipment Replacement Reserve
This reserve is maintained to fund capital outlay projects, such as the replacement or purchase of new vehicles, large maintenance items, machinery, and equipment. An approved policy reserve target of $300,000 is maintained. The reserve provides an emergency source of funding in the event of an unanticipated breakdown or failure.

Rate Stabilization Fund
The Rate Stabilization Fund provides funding which the City can draw upon prior to passing funding for unanticipated events onto its customers. For example, in the event of a water shortage, the City could utilize reserves from the Rate Stabilization Fund as a short-term solution while flows remain lower. The reserve helps to offset the financial burden ratepayers might experience when the City is required to raise rates. The current approved reserve target is set at $200,000. 99 May 6, 2024 Item 11
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REVENUE INCREASES
Rates are set to generate sufficient revenue to cover annual expenses. In addition, rates are set to maintain adequate reserves. Figure VII-4 summarizes the projected revenue from current rates, annual revenue requirements, annual variances, and the rate increases necessary to cover the City’s costs.

Figure VII-4. Rate Increase Calculations
Rate increases account for rate revenue and future revenue requirements. The revenue requirement (shown in greater detail in Figure VII-2) increases due to wastewater transportation and treatment costs and capital expenditures. The proposed revenue increases serve to decrease the projected shortfalls facing the City. As shown in Figure VII-4, the City’s reserves have been used to keep the revenue increases low (i.e., there are projected revenue shortfalls in FY 2025-26 through FY 2028-29 after accounting for the revenue increases, which will be covered by reserves.

The rates are derived in Chapter V. With these rate increases, the City is able to pay for its annual O&M and capital expenses and maintain adequate reserves, as further discussed below.

DEBT SERVICE COVERAGE
Figure VII-5 shows the debt service coverage provided by the revenue increases in Figure VII-4. The City is required to maintain a minimum coverage ratio of 1.20. A higher ratio provides a greater margin of safety to bondholders and enhances the credit rating on bonds. Moreover, a higher credit rating benefits ratepayers by reducing the cost of future borrowing, if needed.

Figure VII-5. City Debt Coverage Ratio Calculations (with rate adjustments) Note: Revenue sources includes sewer rate revenues, non-operating revenues, and investment interest.

FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29
Revenue from Current Rates $4,283,285 $4,283,285 $4,283,285 $4,283,285 $4,283,285 Revenue Requirement ($4,430,849) ($4,870,204) ($4,704,142) ($4,843,548) ($4,988,655) Non-Operating Revenue $37,000 $38,110 $39,253 $40,431 $41,644 Transfer to Reserves ($60,768) $0 $0 $0 $0
Net Revenue Requirement ($4,454,617) ($4,832,094) ($4,664,889) ($4,803,118) ($4,947,011) Revenue Surplus/(Shortfall) ($171,331) ($548,809) ($381,603) ($519,832) ($663,725) Proposed Revenue Increase 4.0% 2.0% 2.0% 2.0% 2.0%
Revenue at Proposed Rates $4,454,617 $4,543,709 $4,634,583 $4,727,275 $4,821,820 Revenue Surplus/(Shortfall) $0 ($288,385) ($30,305) ($75,843) ($125,190) FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Revenue Sources $4,207,175 $4,503,550 $4,594,626 $4,685,557 $4,780,237 $4,875,948 Operating Expenses ($3,132,620) ($3,362,640) ($3,502,545) ($3,637,044) ($3,777,024) ($3,922,717) Net Revenue $1,074,555 $1,140,910 $1,092,081 $1,048,513 $1,003,212 $953,231 Debt Service $532,491 $535,037 $537,657 $540,353 $543,127 $545,983 Debt Coverage Ratio 2.02 2.13 2.03 1.94 1.85 1.75
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RESERVE FUND BALANCE
Figure VII-6 shows the annual fluctuations (solid green line) in the fund balance that are caused by the differences between the revenue requirement and revenue from rates with the rate increases; the dashed green line is the projected fund balance without rate increases. The revenue and rate increases in Figure VII-4 were derived to balance increasing rates while maintaining a level of reserves that continues to meet the City’s reserve target (blue line) through FY 2028-29.

For purposes of rate setting, the following combined reserve target balances were established. The red line labeled, “Minimum Balance” represents the target balance for the Operating Reserve, Self-Insurance Reserve, Pension Reserve, and Debt Service Reserve. The blue line labeled, “Total Target Reserve” is the sum of the Minimum Balance plus the Capital Reserve, Equipment Replacement Reserve, and Rate Stabilization reserve targets.

The ten-year projection in Figure III-6 demonstrates the use of reserves beyond FY 2028-29 as expense projections outpace revenue increases. Initially, after the 4% increase in FY 2024-25, revenue increases are kept to 2-3% annually through FY 2033-34. However, the cumulative growth of expenses, driven by 5% projected increases in water supply costs, overtakes revenue growth, requiring a greater share of reserves to support rate revenues. Consequently, reserves project to decline beginning in FY 2028-29, despite larger revenue increases. The reserve fund balance projects to fall below the Target Reserve by FY 2032-33.

While this is a similar scenario to the reserve fund balance projection of the Water Enterprise discussed in Section III, the maturity of the City’s SRF loan obligation in FY 2032-33 reduces wastewater expenses and the overall target reserve threshold (see blue line). Therefore, the forecast for future wastewater rate increases is more positive when compared to the Water Enterprise. Over the ten-year period, wastewater rates would be increased cumulatively by 25.5% while water rates would be increased cumulatively by

38.3%. Further, the Wastewater Enterprise fund balance projects to meet the target reserve balance while the Water Enterprise fund balance would fall short of the target reserve by $200,000, or 11%.

If revenue levels remain stagnant, the dashed green line reflectsthat without revenue increases, the yearend fund balance of $2.2 million in FY 2022-23 is projected to drop below the City’s Minimum Reserve by FY 2028-29.
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Figure VII-6. Projected Year-End Fund Balance
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VIII. WASTEWATER RATE

COST OF SERVICE ANALYSIS

METHODOLOGY
The revenue requirement analysis establishes how much revenue is required from rates. The next step in the analysis is determining the cost of service. Cost-of-service analysis is used to derive rates that proportionally allocate the cost of service. This is achieved by allocating the revenue requirements to the components of the rate structure.

A cost-of-service analysis determines how much each customer and customer class should pay based on its respective share of service-related expenses and flow. The volume of wastewater discharged influences the design of the collection and treatment systems. The cost-of-service analysis allocates expenses to “cost components on the basis of operating considerations or design capacity of each facility.” Therefore, a larger proportion of expenses associated with wastewater flow on the sewer system are allocated to customers who place a greater burden on the system.

Note, the City’s agreements with its wastewater conveyance and treatment providers align costs with wastewater volume. Costs for these services are not affected by the strength of wastewater. Hence, the cost of service accounts only for flow and service-related expenses.

CUSTOMER CLASSES
The cost-of-service analysis distributes the revenue requirements among customer classes in proportion to their service requirements. Like water rates, there is no industry standard that specifies which customer classes should be used. The law allows utilities to exercise discretion in determining the appropriate customer classes provided the rates yield charges that are proportional to the cost of providing service for each category. As a result, the allocation of costs needs to be tailored to the customer classes.

The City currently has multiple customer classes: Single Family Residential, Multi-Family Residential, Commercial, Institutional, Hotels/Motels without Restaurants, Hotels/Motels with Restaurants, Restaurants, Shopping Centers, Fairgrounds, and Fats, Oils, and Greases (FOG) Non-Compliance Customers.

These classes were last reviewed as part of the previous cost-of-service study in 2019.

VOLUMETRIC RATES MODIFICATIONS
Changes to the customer classes affect how costs are allocated among all wastewater customers. HF&H recommends reducing all current Non-Residential customer classes to two classes: 1) Commercial; and 2) Fairgrounds. Simplifying the customer classes is possible because the third-party agencies, who bill the City for transportation and treatment of wastewater, charge for services according to the volume of wastewater. There is no distinction for these charges to reflect wastewater strength, as was considered under previous service agreements. Because these agencies do not make a wastewater strength distinction in their billing, there is no nexus for the City charging high strength wastewater customers a higher rate for sewer service. Therefore, all Commercial, Multi-Family, and Single-Family customers will be charged a uniform rate per volume of metered water use. Single-Family Residential bills will continue the practice of the sewer bill cap, set by winter water use. Also, Multi-Family Residential and Commercial 103 May 6, 2024 Item 11
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customers will continue to be charged for 90% of metered water use to account for volumes of water recorded that do not return to the sewer. The method for how sewer flows are calculated for billing purposes would remain, but how customers are charged would be revised from current practices.

Note, the proposed rates exclude revisions to the (FOG Non-Compliance surcharges. HF&H recommends the surcharges assessed FOG Non-Compliance customers be converted into miscellaneous fees charged to customers who are out of compliance with City requirements for its FOG program. The surcharges would recover the additional costs incurred by the City for non-compliance.

The result of these modifications to the volumetric rates affects the cost of service allocations discussed below.

COST-OF-SERVICE ALLOCATIONS
The cost-of-service analysis allocation process follows the same process as the one performed for the allocation of water costs. The FY 2024-25 revenue requirement was summarized by function and these functional costs were allocated between the Fairgrounds and City customers. The proportionate shares of the revenue requirement were then further allocated among the fixed and variable components for cost recovery.

Figure VIII-1 allocates the FY 2024-25 revenue requirement between the Fairgrounds and the City customers. Figure VIII-2 summarizes the percentage allocations used in apportioning the revenue requirement between the Fairgrounds and the City customers. A discussion of the methodology behind the allocation of costs follows. 104 May 6, 2024 Item 11
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Figure VIII-1. Allocation of FY 2024-25 Revenue Requirement to Fairgrounds Figure VIII-2. Fairgrounds Allocation Factors
Fairgrounds Allocation Factors
Staff Allocation
The City estimates roughly 26% of personnel staffing costs can be attributed to serving the Fairgrounds.

This allocation was used in the previous 2019 study and confirmed with City staff as part of the current analysis.

Hydraulic Capacity
The City has reported a count of 1,693 water meters tied to City sewer accounts. Of these water meters, the Fairgrounds receive water and requires available capacity for one – 8” meter and two -10” meters.

The size of the water service and the capacity afforded to the service serves as a proxy for the capacity of Rev. Req't Fairgrounds Fairgrounds City
Description FY 2024-25 Allocation Factor Proportion Proportion Collection System O&M
Adminstrative Personnel $401,129 Flow $58,275 $342,854
Operations Personnel $478,591 Flow $69,528 $409,063
O&M - Tools, Supplies, Insurance $1,115,230 Flow $162,017 $953,213 O&M - Admin Expenses $27,180 Hydraulic Capacity $3,462 $23,718 O&M Variable $135,320 Flow $19,659 $115,661
Wastewater Treatment $1,039,550 Flow $151,022 $888,528
Wastewater Conveyance $139,740 Flow $20,301 $119,439
Subtotal O&M $3,336,740 $484,265 $2,852,475
Fairgrounds O&M Composite 22.2% 130.8%
Debt Service $568,848 System Sizing $94,998 $473,851
Subtotal O&M + Admin $3,905,588
Capital Outlay $25,900 System Sizing $4,325 $21,575
Capital Expenses (PAYGo) $499,361 System Sizing $83,393 $415,967 Subtotal Expenses $4,430,849 $666,981 $3,763,868
Expense Composite
Non-Operating Revenues ($37,000) FG O&M Composite ($5,370) ($31,630) Transfers to/from Reserves $60,768 FG O&M Composite $8,819 $51,949 Total Revenue Requirement $4,454,617 $670,430 $3,784,186 % of total revenue requirement 15.1% 84.9%
Fairgrounds (FG) Allocation Factors Fairgrounds City Total Notes Staff Allocation 26.4% 73.6% 100.0% Historical City assumption Hydraulic Capacity 12.7% 87.3% 100.0% Percentage of EMUs System Sizing 16.7% 83.3% 100.0% Historical City assumption Flow 14.5% 85.5% 100.0% Percentage of CY 2019-2023 metered wastewater flow FG O&M Composite 14.5% 85.5% 100.0% Calculated in Figure VIII-1 105 May 6, 2024 Item 11
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wastewater flow to be discharged into the City’s collection system. Connections are converted to Equivalent Meter Units (EMUs) to apportion the revenue requirement costs for operations and maintenance (O&M) administrative expenses. The capacity multipliers are the same as used in the water rate study and this aligns with historical practice. The Fairgrounds make up 320 EMUs of the total 2,512 EMUs served by the system, as shown in Figure VIII-3. This accounts for 12.7% of the overall hydraulic capacity.

Figure VIII-3. Capacity Calculations for City Wastewater Service Collection System Sizing
The City’s wastewater collection system sizing was calculated assuming 16.7% of the peak flows of the system were attributable to the Fairgrounds. The revenue requirement costs for debt service, capital outlay (e.g. machinery and vehicle replacement), and capital improvements were allocated, using the assumption Fairgrounds accounted for 16.7% of these overall costs. This allocation was used in the previous 2019 study and confirmed with City staff as part of the current analysis.

Wastewater Flow
The Fairgrounds average wastewater flow over the past five years accounts for 14.5% of the overall conveyed and treated. Figure VIII-4 summarizes the average annual flows between the Fairgrounds and other City customers from 2019-2023. City flows are the difference of the flows from the Fairgrounds wastewater meter subtracted from the total flows recorded by SEJPA. This allocation was applied to wastewater treatment, conveyance, and utility expenses, which vary based on the level of wastewater volume. Based on previous studies, personnel and supplies costs were also allocated using this factor.

Figure VIII-4. Wastewater Flow Analysis
Note: 2021 includes only ten months of recorded volumes due to instrument failure.

Applicable Total Capacity
Service Size Meters Multiplier EMUs
Single Family Customers 1,395 1.00 1,395
5/8" Meters 143 1.00 143
3/4" Meters 44 1.50 66
1" Meters 42 2.50 105

1.5" Meters 23 5.00 115
2" Meters 40 8.00 320
3" Meters 3 16.00 48
4" Meters 0 25.00 0
6" Meters 0 60.00 0
8" Meters 1 80.00 80
10" Meters 2 120.00 240
Total 1,693 2,512
Recorded Recorded Recorded Recorded Recorded 5-Year
Metered Flow by Calendar Year 2023 2022 2021 2020 2019 Average Total Recorded Flow (MG) 146.10 135.44 111.21 145.37 160.42 139.71 Fairgrounds Flow (MG) 22.92 13.79 12.96 18.70 33.10 20.30 City Flow (MG) 123.18 121.65 98.25 126.67 127.31 119.41 Proportion of City Flow 84.3% 89.8% 88.3% 87.1% 79% 85.5% Proportion of Fairgrounds Flow 15.7% 10.2% 11.7% 12.9% 21% 14.5% 106 May 6, 2024 Item 11
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Operations & Maintenance Composite
Non-operating revenue and transfers to reserves were allocated to the Fairgrounds and City customers based on each’s proportionate share of the total O&M costs, as derived in Figure VIII-1.

Results of Initial Allocation
Fairgrounds was apportioned 15.1% of the overall revenue requirement. The Fairgrounds allocation has decreased since the previous cost-of-service study, which yielded an overall allocation of 17.25%. The decrease can be attributed to a reduced proportionate share of flow-related costs allocated to the Fairgrounds. While the five-year period of wastewater flows analyzes accounts for pre-pandemic, pandemic, and post-pandemic wastewater discharge patterns, the share of the Fairgrounds flow decreased from

16.5% to 14.5% from the previous study. The expenses allocated according to share of contributed wastewater flow are the largest portion of costs allocated. Therefore, it stands to reason that Fairgrounds is receiving a smaller share of costs because their proportionate burden placed on the system, the largest cost driver, decreased. Thus, the Fairgrounds share of the revenue requirement to be recovered through the FY 2024-25 rates will be $670,430 (15.1%) and the remaining City customer’s share will be $3,784,186 (84.9%).

Cost-of-Service Allocations and Allocation Factors
The allocation factors in Figure VIII-5 were used to apportion the Fairgrounds allocation of costs in Figure VIII-6 and to apportion the City customers’ allocation of costs in Figure VIII-7. The CIP Composite, Expense Composite, and Fairgrounds O&M Composite allocations are based on the subtotals of the O&M and capital costs that were directly allocated to either the service or flow categories.

Figure VIII-5. Cost-of-Service Allocation Factors
System-Wide Allocation Factors Service Flow Total
Flow Only 0.0% 100.0% 100.0%
Customer Meters 100.0% 0.0% 100.0%
O&M Composite 60.6% 39.4% 100.0%
CIP Composite 18.1% 81.9% 100.0%
Expense Composite 48.5% 51.5% 100.0%
FG O&M Composite 60.6% 39.4% 100.0%
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Figure VIII-6. Fairgrounds Cost-of-Service Allocations
Source: Fairgrounds revenue requirement from Figure VIII-1. 108 May 6, 2024 Item 11
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Figure VIII-7. City Customers Cost-of-Service Allocations Source: City customers revenue requirement from Figure VIII-1.

Units of Service
The units of service provided by the City to its customers are the sum of the services provided to each of the City’s customer classes.

Estimates of City customer flows (excluding the Fairgrounds) associated with each customer class are shown in Figure VIII-8. Flow volumes were calculated using recorded water use for CY 2022. Flow volumes were adjusted based on the City’s current rate structure such that the billed sewer flows were used. Single Family Residential flow volumes accounted for the cap of the maximum of the lowest two-month bill period or 8 HCF while all Mult Family and Commercial flow volumes were adjusted to 90% of the total water use. All Commercial customers were grouped together based on the volumetric rate modification described previously. The Fairground’s billed flow was generated from the CY 2023 metered data, recently made available, shown in Figure VIII-4, and shown as Figure VIII-8 for convenience.

At the time the analysis was performed, 2023 water use data was not available so that City customers’ flows could be analyzed independently from the flow volumes read by SEJPA. The Fairgrounds usage increased significantly during 2023, constituting a three-year high. Further, the proportionate share of the City
Rev. Req't Allocation Cost Allocation
Description FY 2024-25 Factor Service Flow
Collection System O&M
Adminstrative Personnel $342,854 Customer Meters $342,854 $0 Operations Personnel $409,063 Customer Meters $409,063 $0 O&M - Tools, Supplies, Insurance $953,213 Customer Meters $953,213 $0 O&M - Admin Expenses $23,718 Customer Meters $23,718 $0 O&M Variable $115,661 Flow Only $0 $115,661
Wastewater Treatment $888,528 Flow Only $0 $888,528
Wastewater Conveyance $119,439 Flow Only $0 $119,439
Subtotal O&M $2,852,475 $1,728,848 $1,123,628
Debt Service $473,851 Flow Only $0 $473,851
Subtotal O&M + Admin $3,326,326 $1,728,848 $1,597,478
Capital Outlay $21,575 Customer Meters $21,575 $0
Capital Expenses (PAYGo) $415,967 CIP Composite $75,295 $340,672 Subtotal Expenses $3,763,868 $1,825,718 $1,938,150
Expense Composite 48.5% 51.5%
Non-Operating Revenues ($31,630) Expense Composite ($15,343) ($16,287) Transfers to/from Reserves $51,949 Customer Meters $51,949 $0 Total Revenue Requirement $3,784,186 $1,862,324 $1,921,863 % of total revenue requirement 49.2% 50.8%
Service Volumetric
Charge COS Charge COS
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Fairgrounds’ wastewater volumes relative to the total flows recorded grew closer to the 2019 proportion, aligning with pre-pandemic patterns, when more events were held, which caused the Fairgrounds to have higher flows. Post-pandemic, we assume the Fairgrounds share of wastewater volumes will continue to normalize such that their proportionate share will return closer to 20% of the overall volume. These assumptions are reflected in the cost of service and the rates derived.

Figure VIII-8. Wastewater Flow Analysis
Note: 2021 includes only ten months of recorded volumes due to instrument failure.

Figure VIII-9 summarizes the units of service by customer class.

Figure VIII-9. Summary of Units of Service by Customer Class Unit Costs of Service
The functionalized costs in Figure VIII-6 and Figure VIII-7 are divided by the respective units of service in Figure VIII-9 to determine the unit costs. The Fairgrounds service charge is exclusive to a single account.

The flow-related cost allocation of $352,160 is divided by 30,645 HCF to determine a unit cost of $11.49 per HCF.

The derivation of the unit costs applicable to the City customers is shown in Figure VIII-10. These unit costs are the costs of providing the units of service to all customer classes without exception, thereby ensuring that all customers pay their share in proportion to their respective units of service.

Figure VIII-10. Unit Costs of Service (City)
Figure VIII-11 summarizes the small shift away from the overall Volumetric Rate revenues to the Service Charge revenues to align with the cost-of-service. The exercise performed indicates the proportion of Recorded Recorded Recorded Recorded Recorded 5-Year
Metered Flow by Calendar Year 2023 2022 2021 2020 2019 Average Total Recorded Flow (MG) 146.10 135.44 111.21 145.37 160.42 139.71 Fairgrounds Flow (MG) 22.92 13.79 12.96 18.70 33.10 20.30 City Flow (MG) 123.18 121.65 98.25 126.67 127.31 119.41 Proportion of City Flow 84.3% 89.8% 88.3% 87.1% 79% 85.5% Proportion of Fairgrounds Flow 15.7% 10.2% 11.7% 12.9% 21% 14.5% Customer Class EMUs Billed Flow (HCF)
Single Family Residential 1,395 125,289
Multi Family Residential 457 37,931
Commercial (all customers) 340 40,403
City Customers Total 2,192 203,624
Fairgrounds 240 30,645
Service Flow Total
Allocationed Functional Costs $1,862,324 $1,921,863 $3,784,186 Units of Service 2,192 203,624
Unit Costs $849.60 $9.44
per EMU per hcf
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Service Charge revenues will increase from 46.7% to 49.0% of total rate revenues, while the share of Volumetric Rate revenues will decrease from 53.3% to 51.0%. Similarly, the cost-of-service indicates the proportion of Fairgrounds Volumetric Rate revenue relative to total revenue will decrease slightly while the Service Charge revenue proportion increases.

Rates need to be designed to generate each class’s share of the revenue requirement related to volumetric charges. The next section provides the recommended modifications to the Service Charges and Volumetric Rates needed to meet the cost of service.

Figure VIII-11. Cost-of-Service Revenue Summary
Note: FY 2023-24 revenues assume 12 months of rates implemented on January 1, 2024..

Revenue at Cost of Service Difference
Components of Rate Structure Current Rates FY 2023-24 Proposed Rates FY 2024-25 COS Minus Current Single Family Residential
Fixed Charge Revenue $1,063,827 48.6% $1,185,192 50.1% $121,365 11.4% Volumetric Rates Revenue $1,125,095 51.4% $1,182,515 49.9% $57,420 5.1% Subtotal $2,188,922 100.0% $2,367,708 100.0% $178,785 8.2% Multi Family Residential
Fixed Charge Revenue $348,501 50.6% $388,267 52.0% $39,766 11.4% Volumetric Rates Revenue $340,624 49.4% $358,008 48.0% $17,384 5.1% Subtotal $689,125 100.0% $746,275 100.0% $57,150 8.3%
Commercial
Fixed Charge Revenue $259,277 37.2% $288,864 43.1% $29,587 11.4% Volumetric Rates Revenue $438,153 62.8% $381,339 56.9% ($56,814) -13.0% Subtotal $697,430 100.0% $670,204 100.0% ($27,227) -3.9% Fairgrounds
Fixed Charge Revenue $330,144 46.6% $318,270 47.5% ($11,874) -3.6% Volumetric Rates Revenue $377,664 53.4% $352,160 52.5% ($25,503) -6.8% Subtotal $707,808 100.0% $670,430 100.0% ($37,377) -5.3% Total Fixed Charge Revenue $2,001,750 46.7% $2,180,594 49.0% $178,844 8.9% Total Volumetric Charge Revenue $2,281,536 53.3% $2,274,023 51.0% ($7,513) -0.3% Total Revenue $4,283,285 100.0% $4,454,617 100.0% $171,331 4.0% 111 May 6, 2024 Item 11
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IX. WASTEWATER RATE DESIGN
The City has historically charged water customers the combination of a fixed Service Charge and a variable volumetric charge based on the product of metered water use and the Volumetric Rates. As previously discussed, this is a common set of charges that is prevalent throughout the wastewater industry. This chapter explains the derivation of the Volumetric Rates and Service Charges that reflect the projected cost of service.

CURRENT RATES
The City’s current wastewater rate structure is composed of two components: Service Charges and Volumetric Rates.

Current Service Charges
The Service Charges are fixed rates that are charged on a fixed rate graduated in proportion to the capacity of the water meter serving each customer. The City assumes all single-family accounts are served by a 5/8” meter, recognizing that certain customers have larger water meters due to fire flow requirements, which is immaterial to sewer flow impacts. All customers are billed on a bi-monthly7 basis. Figures IX-1 summarizes the current Service Charges, which were last increased on January 1, 2024.

Figure IX-1. Current Service Charges
Current Volumetric Rates
Customers are billed based on metered water use per bi-monthly period multiplied by their respective Volumetric. Water is metered in “units” of HCF of metered water use, whereby one unit or HCF equals 748 gallons. Volumetric Rates are charged to the following customer classes: Single Family Residential, Multi-Family Residential, Commercial, Institutional, Irrigation, Hotels/Motels without Restaurants, Hotels/Motels with Restaurants, Restaurants, Shopping Centers, and Fairgrounds customers. 7 Bi-monthly periods assume a billing period of 60 days.

Bi-Monthly Current
Fixed Service Charges Rates
Single-Family Residential (per DU) $127.10
Meter Size
5/8" $127.10
3/4" $190.66
1" $317.74

1.5" $635.48
2" $1,016.76
3" $2,033.52
Fairgrounds $55,024.00
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The Fairgrounds have a wastewater flow meter and their bill reflects the volume of water recorded. Unless sub-metered, the City bills all other customers according to metered water use. Single Family Residential customers bills are subject to the maximum of the minimum bi-monthly water use or 8 HCF, for which the current volumetric rate of $8.98 is applied. For Multi-Family Residential and all other types of commercial customers, the City bills based on 90% of metered water use, assuming 10% of flow does not return to the sewer.

No adjustments are recommended to the City’s current practices of a wastewater cap or to the 90% return to sewer factor applied to Multi-Family and commercial customers sewer bills.

Figure IX-2. Current Volumetric Rates

SERVICE CHARGE DESIGN
The bi-monthly Service Charges for City customers are calculated using the unit cost determined in Figure VIII-10. The charge is graduated in proportion to the water meter capacity, as is current practice. The unit cost is divided by 6 to generate the bi-monthly amount per meter.

Figure IX-3. Proposed City Customers Bi-Monthly Service Charge Rates – FY 2024-25 The bi-monthly Service Charge for Fairgrounds customers is the bi-monthly rate of the cost allocation calculated in Figure VIII-6, $318,270. The bi-monthly rate of $53,045.02 would be charged to each bill.

Current
Bi-Monthly Rates
Volumetric Rates ($/HCF)
Single Family Residential $8.98
Multi-Family Residential $8.98
Commercial $8.98
Institutional $8.98
Hotels/Motels w/o Restaurants $8.84
Hotels/Motels w/ Restaurants $12.73
Restaurants $15.06
Shopping Centers $10.45
Fairgrounds $10.27
Total
Capacity COS Current $
Service Size $/EMU Multiplier Total Charge Difference
a b c = a * b d e = c - d
Single Family Meters $141.60 1.00 $141.60 $127.10 $14.50 5/8" Meters $141.60 1.00 $141.60 $127.10 $14.50
3/4" Meters $141.60 1.50 $212.40 $190.66 $21.74
1" Meters $141.60 2.50 $354.00 $317.74 $36.26

1.5" Meters $141.60 5.00 $708.00 $635.48 $72.52
2" Meters $141.60 8.00 $1,132.80 $1,016.76 $116.04
3" Meters $141.60 16.00 $2,265.60 $2,033.52 $232.08
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With the proposed rates, all Service Charges billed to City customers would see an increase, while the Fairgrounds would see a decrease. The increase in rates reflects the increase to service charge revenues calculated in Figure VIII-9. The Fairgrounds Service Charge is decreasing as the nominal share of Service Charge revenue is decreasing based on the cost of service, as previously identified in Figure VIII-11. Figure IX-4 shows the proposed five-year schedule of Service Charges.

Figure IX-4. Current and Proposed Service Charge Rates

VOLUMETRIC RATES DESIGN
The Volumetric Rates were determined via the unit cost exercise in the previous Section. The resulting Volumetric Rate for each of the revised customer classes is shown in Figure IX-5, as well as the proposed rates for FY 2025-26 through FY 2028-29, assuming 2.0% annual increases are applied. Volumetric Rates are increasing to reflect the additional burdens placed on the sewer system.

Figure IX-5. Current and Proposed Volumetric Rates
Proposed Rates
Bi-Monthly Current FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Fixed Service Charges Rates eff. 7/1/2024 eff. 7/1/2025 eff. 7/1/2026 eff. 7/1/2027 eff. 7/1/2028 rate increase: varies 2% 2% 2% 2%
Single-Family Residential (per DU) $127.10 $141.60 $144.43 $147.32 $150.27 $153.28 Meter Size
5/8" $127.10 $141.60 $144.43 $147.32 $150.27 $153.28
3/4" $190.66 $212.40 $216.65 $220.98 $225.40 $229.91
1" $317.74 $354.00 $361.08 $368.30 $375.67 $383.18

1.5" $635.48 $708.00 $722.16 $736.60 $751.33 $766.36
2" $1,016.76 $1,132.80 $1,155.46 $1,178.57 $1,202.14 $1,226.18 3" $2,033.52 $2,265.60 $2,310.91 $2,357.13 $2,404.27 $2,452.36 Fairgrounds $55,024.00 $53,045.02 $54,105.92 $55,188.04 $56,291.80 $57,417.64 Proposed Rates
Bi-Monthly Current Revised FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Volumetric Rates Rates Customers eff. 7/1/2024 eff. 7/1/2025 eff. 7/1/2026 eff. 7/1/2027 eff. 7/1/2028 rate increase: varies 2% 2% 2% 2%
Single Family Residential $8.98
Single
Family
Residential $9.44 $9.63 $9.82 $10.02 $10.22
Multi-Family Residential $8.98
MultiFamily
Residential $9.44 $9.63 $9.82 $10.02 $10.22
Commercial $8.98 Commercial $9.44 $9.63 $9.82 $10.02 $10.22 Institutional $8.98
Hotels/Motels w/o Restaurants $8.84
Hotels/Motels w/ Restaurants $12.73
Restaurants $15.06
Shopping Centers $10.45
Fairgrounds $10.27 Fairgrounds $11.49 $11.72 $11.95 $12.19 $12.43 114 May 6, 2024 Item 11
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X. COMPARISON TO WASTEWATER AGENCIES
In the previous chapter, the Service Charges and Volumetric Rate structures were compared for the current and proposed rates. A further understanding of the differences between the two structures can be gained by comparing bills for each customer class.

NEIGHBORING AGENCY COMPARISON
The Finance Committee (January 2024) asked to take a closer look at comparing wastewater rates to similar agencies. Figure X-1 compares single-family customer wastewater rates of smaller coastal cities in the San Diego region, assuming a bi-monthly sewer flow volume of 16 HCF. The current and FY 2024- 25 rates for Del Mar are included.

Figure X-1. Neighboring Agency Wastewater Bi-Monthly Bill Comparison Some factors that are likely to contribute to the City having the highest water rates are as follows:

1. The City must contract with the City of Solana Beach and the City of San Diego to transport wastewater to treatment plants. However, most of the other agencies are in close proximity to their wastewater treatment plants, saving them the expense of conveying wastewater.

2. A population per miles of water mains ratio was developed to compare each agency. The City has the lowest ratio. Therefore 3,830 people must pay for the maintenance and eventual replacement of 25 miles of sewer mains. In other words, the City population is less concentrated along the miles of sewer mains maintained compared to other agencies and the costs of water service are spread over the smallest population of agencies compared.

While the City currently has the highest wastewater bills, we anticipate other agencies will raise rates to be more in line with the City’s rates in the near future. Based on this study, proposed increases in the next five years will be only 2-4%. In contrast, other agencies are proposing 5% to 19% per year rate increases, (i.e. the City of Encinitas) in part to address neglected CIP programs needing critical financing. Fairbanks Ranch CSD will be raising fees 24% on July 1, 2024. The City has been taking a proactive approach to its CIP program over the years of addressing critical needs without having to suddenly raise rates.

Also, during the proposed rate period, the City will continue to pursue cost saving measures, such as contracting out sewer cleaning services. Solana Beach contracts out sewer cleaning services and this may allow them to charge lower rates.

Wastewater Agency
Fixed
Charge
Volumetric
Charge
Total WW
Bill
WW
Transport
WW
Treatment
Miles of
Sewer Mains
Population
Served
Population
Per Mile
Encinitas Sanitary Division (City of Encinitas) $5.83 $83.04 $88.87 Encinitas SEJPA 40 17,000 425 Cardiff Sanitary Division (City of Encinitas) $7.86 $88.16 $96.02 Encinitas SEJPA 82 20,000 244 National City $102.36 $0.00 $102.36 City of SD Metro 97 56,173 579 Solana Beach (San Elijo) $113.72 $0.00 $113.72 Solana Beach SEJPA 50 12,941 259 Fairbanks Ranch CSD $205.00 $0.00 $205.00 Fairbanks
Ranch
Fairbanks
Ranch
16 3,148 197
Del Mar (current) $127.10 $143.68 $270.78 Solana Beach SEJPA 25 3,830 153 115 May 6, 2024 Item 11
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XI. COMBINED UTILITY BILL IMPACTS
In the previous sections, the proposed water and wastewater rates were compared for the current and proposed rates. However, a customer’s level of water demand may fluctuate throughout the year and bill amounts correspond accordingly. Comparing bills provides customers with further understanding of how both water and wastewater bills may adjust under the proposed rates for their specific meter size. Figure XI-1 through Figure XI-6 show how combined water and wastewater bills at current rates compare to bills at the proposed rates across a range of water usage. The final difference rows in each figure state the nominal change the and percentage change that customers can expect at the billed levels of water use for a given meter size.

Figure XI-1. Single Family Residential Bill Comparison
Percentage of bills based on 2022 billing data.

Single Family Residential customers - (5/8" meter)
Water Use Low Average High Very High
Demand Assumptions
hcf/bi-monthly period 11 22 44 66
gallons per day 137 274 549 823
% of bills up to flow assumption 33% 61% 88% 95%
Assumed Sewer Cap (hcf) 8 16 32 48
Utility Bill at Current Rates
Water Bill $156.46 $227.38 $391.72 $556.06
Wastewater Bill $198.94 $270.78 $414.46 $558.14
Total Bill $355.40 $498.16 $806.18 $1,114.20
Bills at Proposed Rates
Water Bill $157.56 $226.42 $388.56 $550.70
Wastewater Bill $217.12 $292.64 $443.68 $594.72
Total Bi-Monthly Bill $374.68 $519.06 $832.24 $1,145.42 $ Difference $19.28 $20.90 $26.06 $31.22
% Difference 5.4% 4.2% 3.2% 2.8%
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Figure XI-2. Multi-Family Residential Bill Comparison
Percentage of bills based on 2022 billing data.

Figure XI-3. Commercial/Institutional Customer Bill Comparison Multi Family Residential customers - (1" meter)
Water Use Low Average High Very High
Demand Assumptions
hcf/bi-monthly period 23 46 92 138
gallons per day 287 574 1,147 1,721
Sewer volume (hcf) 21 41 83 124
% of bills up to flow assumption 53% 79% 88% 93%
Utility Bill at Current Rates
Water Bill $367.51 $514.94 $809.80 $1,104.66
Wastewater Bill $506.32 $685.92 $1,063.08 $1,431.26
Total Bill $873.83 $1,200.86 $1,872.88 $2,535.92
Bills at Proposed Rates
Water Bill $367.44 $524.07 $837.33 $1,150.59
Wastewater Bill $552.24 $741.04 $1,137.52 $1,524.56
Total Bi-Monthly Bill $919.68 $1,265.11 $1,974.85 $2,675.15 $ Difference $45.85 $64.25 $101.97 $139.23
% Difference 5.2% 5.4% 5.4% 5.5%
Commercial/Institutional customers - (1" meter)
Water Use Low Average High Very High
Demand Assumptions
hcf/bi-monthly period 26 52 313 573
Sewer volume (hcf) 23 47 282 516
Utility Bill at Current Rates
Water Bill $389.60 $559.12 $898.16 $1,237.20
Wastewater Bill $524.28 $739.80 $2,850.10 $4,951.42
Total Bill $913.88 $1,298.92 $3,748.26 $6,188.62
Bills at Proposed Rates
Water Bill $387.61 $564.41 $918.01 $1,271.61
Wastewater Bill $571.12 $797.68 $3,016.08 $5,225.04
Total Bi-Monthly Bill $958.73 $1,362.09 $3,934.09 $6,496.65 $ Difference $44.85 $63.17 $185.83 $308.03
% Difference 4.9% 4.9% 5.0% 5.0%
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Figure XI-4. Hotels with Restaurant Customer Bill Comparison Figure XI-5. Restaurant Customer Bill Comparison
Hotels with Restaurant customers - (2" meter)
Water Use Low Average High Very High
Demand Assumptions
hcf/bi-monthly period 26 226 544 863
Sewer volume (hcf) 23 203 490 777
Utility Bill at Current Rates
Water Bill $873.76 $2,177.76 $4,251.12 $6,331.00
Wastewater Bill $1,309.55 $3,600.95 $7,254.46 $10,907.97 Total Bill $2,183.31 $5,778.71 $11,505.58 $17,238.97
Bills at Proposed Rates
Water Bill $835.35 $2,195.35 $4,357.75 $6,526.95
Wastewater Bill $1,349.92 $3,049.12 $5,758.40 $8,467.68 Total Bi-Monthly Bill $2,185.27 $5,244.47 $10,116.15 $14,994.63 $ Difference $1.96 ($534.24) ($1,389.43) ($2,244.34)
% Difference 0.1% -9.2% -12.1% -13.0%
Restaurant - (2" meter)
Water Use Low Average High Very High
Demand Assumptions
hcf/bi-monthly period 72 146 273 400
Sewer volume (hcf) 65 131 246 360
Utility Bill at Current Rates
Water Bill $1,173.68 $1,656.16 $2,484.20 $3,312.24
Wastewater Bill $1,995.66 $2,989.62 $4,721.52 $6,438.36 Total Bill $3,169.34 $4,645.78 $7,205.72 $9,750.60
Bills at Proposed Rates
Water Bill $1,148.15 $1,651.35 $2,514.95 $3,378.55
Wastewater Bill $1,746.40 $2,369.44 $3,455.04 $4,531.20 Total Bi-Monthly Bill $2,894.55 $4,020.79 $5,969.99 $7,909.75 $ Difference ($274.79) ($624.99) ($1,235.73) ($1,840.85) % Difference -8.7% -13.5% -17.1% -18.9%
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Figure XI-6. Fairgrounds Customer Bill Comparison
The figures above provide information as to how a customer’s bi-monthly bill will increase or decrease for a single combined water and wastewater bill. Annually, customers can expect bills to modulate based on seasonal water demands or changing water needs. Figure XI-7 through Figure XI-9 provide additional context as to how City customers could see their combined utility bill payments for these services adjust over a full year. The analysis compares prospective bills at proposed rates for FY 2024-25 with bills at current rates, using recorded water use from CY 2022.

Figure XI-7. Annual Single-Family Residential Customer Combined Bill Adjustments If customers use water at the same levels of past demand, their bills will likely increase. The majority of single family households will see an increase of at least 3% in their combined water and wastewater payments, based on the figure above, with the largest annual increase being 7% for the year. Increases greater than 5% are attributable to the increased fixed service charged for wastewater service. All accounts regardless of water use will be required to pay the fixed service charge.

Fairgrounds
Low Average High Very High
Demand Assumptions
hcf/bi-monthly period 3,999 7,998 11,095 14,192
Sewer volume (hcf) 2,862 5,724 9,958 14,192
Utility Bill at Current Rates
Water Bill $94,041.48 $120,114.96 $140,307.40 $160,499.84 Wastewater Bill $84,416.74 $113,809.48 $157,292.66 $200,775.84 Total Bill $178,458.22 $233,924.44 $297,600.06 $361,275.68 Bills at Proposed Rates
Water Bill $108,610.51 $140,922.43 $165,946.19 $190,969.95 Wastewater Bill $85,929.40 $118,813.78 $167,462.44 $216,111.10 Total Bi-Monthly Bill $194,539.91 $259,736.21 $333,408.63 $407,081.05 $ Difference $16,081.69 $25,811.77 $35,808.57 $45,805.37 % Difference 9.0% 11.0% 12.0% 12.7%
Annual Bill
Adjustment % of accounts
Decrease 0.6%
0-1% increase 0.6%
1-2% increase 12.1%
2-3% increase 11.8%
3-4% increase 23.4%
4-5% increase 21.6%
5-6% increase 18.5%
6-7% increase 11.6%
Total 100.0%
Single Family Residential Customers
119 May 6, 2024 Item 11
City of Del Mar Water and Wastewater Rate Cost-of-Service Study Final Report Revised April 12, 2024 XI. Combined Utility Bill Impacts HF&H Consultants, LLC Page 70 April 12, 2024
Figure XI-8. Annual Multi-Family Residential Customer Combined Bill Adjustments Assuming future water usage follows 2022 patterns, multi-family accounts can expect an annual increase between 4-7% for the year.

Figure XI-9. Annual Commercial Customer Combined Bill Adjustments Commercial customer bills demonstrate the highest order of variability due to the adjustment in wastewater rates. Previously, customers charged more to account for their wastewater strength will see a significant decrease, as shown in Figure XI-4 and Figure XI-5. Accounts connected to shopping centers, restaurants, and hotels with a restaurant will see the largest decrease in their combined utility bills. While these customers will likely see lower utility bills, the majority of customers (80.8%) can expect an increase of up to 7% of their annual utility bills for water and wastewater services. The increases capture the increases to Fixed Service charges for all wastewater customers and the increases to Volumetric Rates for customers previously categorized as Commercial or Institutional. The increases in bills reflect the higher Commodity Charges proposed, as well.

Annual Bill
Adjustment % of accounts
4-5% increase 15.9%
5-6% increase 36.5%
6-7% increase 47.6%
Total 100.0%
Multi Family Residential Customers
Annual Bill
Adjustment % of accounts
15% to 22% decrease 7.5%
7% to 14% decrease 7.5%
0% to 6% decrease 4.2%
0-7% increase 80.8%
Total 100.0%
Commercial Customers Customers
120 May 6, 2024 Item 11

EXHIBIT A
TITLE 21 - WATER SUPPLY
Chapter 21.12 WATER SUPPLY—WATER RATES AND CHARGES
Del Mar, California, Municipal Code Created: 2024-04-03 15:46:31 [EST] (Supp. No. 8)

Chapter 21.12 WATER SUPPLY—WATER RATES AND CHARGES

21.12.010 Purpose.

A. The purpose of this Chapter is to provide water rates and charges.

B. Deposit and Documentation Required Upon Application for Service; Refund of Deposit. All applicants for water service shall complete the required forms supplied by the City before approval of water service can be given. Forms will be returned to the City within ten working days of application of service. Applicants failing to return the required forms will be subject to discontinuation of service. All applicants for water service shall deposit with the City a deposit for water service as provided in this Code. After the deposit has been held for 12 consecutive billing periods, during which time service has been continuous and bills have been paid within the allowable period without incurring a late penalty, the deposit will be automatically refunded without interest.
(Ord. No. 554; Ord. No. 664; Ord. No. 687; Ord. No. 768; Ord. No. 828)

21.12.020 Rates and Charges for Water Service.

The minimum bimonthly rate for all water furnished to a consumer through a water meter shall be determined by the size of water meter combined with usage as follows:

A. Bimonthly Service Charge. All water service customers of the City shall be subject to a fixed bimonthly service charge. The amount of the service charge shall be determined by the size of the water meter as follows:

Meter
Size Meter Bimonthly Service Charge Effective:
7/1/24 7/1/25 7/1/26 7/1/27 7/1/28
⅝" $$88.70 $90.47 $92.28 $94.13 $96.01
¾" 129.41 $132.00 $134.64 $137.33 $140.08
121 May 6, 2024 Item 11

EXHIBIT A
Created: 2024-04-03 15:46:31 [EST]
(Supp. No. 8)

1" $210.81 $215.03 $219.33 $223.72 $228.19
1 ½" $414.33 $422.62 $431.07 $439.69 $448.48
2" $658.55 $671.72 $685.15 $698.85 $712.83
3" $1,309.82 $1,336.02 $1,362.74 $1,389.99 $1,417.79
4" $2,042.49 $2,083.34 $2,125.01 $2,167.51 $2,210.86
22nd
DAA*
$76,298.59 $77,824.56 $79,381.05 $80,968.67 $82,588.04
*Total bimonthly charge for all meters
B. Bimonthly Commodity Charge. All water service customers of the City shall be subject to commodity rates for each unit (100 cubic feet, 748 gallons) of water used. Commodity rates applicable to water service customers are as follows:

1. Residential.

Bimonthly
Usage Bimonthly Rate per Unit of Water Used, Effective:
7/1/24 7/1/25 7/1/26 7/1/27 7/1/28
Tier 1 0-
22 units
$6.26 $6.39 $6.52 $6.65 $6.78
Tier 2
23+ units
$7.37 $7.52 $7.67 $7.82 $7.98
All
usage/per
unit
$6.81 $6.95 $7.09 $7.23 $7.37

2. Non-Residential. Commercial, Institutional, Fairgrounds, Irrigation.

The commodity rate per unit of water use is as follows:
122 May 6, 2024 Item 11

EXHIBIT A
Created: 2024-04-03 15:46:31 [EST]
(Supp. No. 8)

7/1/24 7/1/25 7/1/26 7/1/27 7/1/28
Commercial/
Institutional
$6.80 $6.94 $7.08 $7.22 $7.36
Irrigation $7.11 $7.25 $7.40 $7.55 $7.70
Fairgrounds $8.08 $8.24 $8.40 $8.57 $8.74

3. Billing. Charges for water service are billed on a bimonthly basis. Tier rate usage limits shall be double the monthly values for bimonthly billing purposes. Further adjustments of usage limits shall be made on a proportional basis only if the actual billing period exceeds 70 days.

C. Special Use Charges.

1. Fire Service charges will be assessed as follows:

Service Size Monthly Charge
2—4" $18.26
6" 23.08

2. A monthly service charge set forth in the City of Del Mar Fee Schedule per backflow prevention device will be assessed.

D. Outside City Users. When it appears to be in the best interest of the City and the people thereof, and when approved in writing by the City Manager, the owner or occupant of property situated outside the City may be permitted to have such property connected to the water system of the City. In addition to other fees, assessments or charges provided by this Chapter, the owner or occupant of property situated outside the City shall pay a water service charge equal to 100 percent of the charge for applicable service established by this Section.

In the event that the owner or occupant of such property fails to pay such water service charge, the City Manager shall have the right, upon five days notice, to disconnect the owner's or occupant's property from the water system.

E. Pass Through Fees and Charges for Wholesale Water and Water Treatment and Delivery. In accordance with Government Code § 53756, as it may be amended from time to time, all San Diego County Water Authority, Metropolitan Water District of Southern California, and the City of San Diego fees and charges for wholesale water, water related services and the treatment and delivery of water shall be passed through to Del Mar water utility customers.
(Ord. No. 488; Ord. No. 554; Ord. No. 564; Ord. No. 628; Ord. No. 650; Ord. No. 654; Ord. No. 664; Ord. No. 687; Ord. No. 713; Ord. No. 730; Ord. No. 768; Ord. No. 828; Ord. No. 903; Ord. No 948 , § 2, Exh. A, 6-3-2019; Ord. No. 968 , § 1, 7-20-2020)

21.12.030 Procedure for Altering Water Rates.

The City Manager shall, from time to time, prepare a recommendation for any change as deemed to be necessary for the ensuing fiscal year. Such recommendation shall be based upon a study of any increase or decrease in the cost of maintenance, repair and replacement of the water system. 123 May 6, 2024 Item 11
Created: 2024-04-03 15:46:31 [EST]
(Supp. No. 8)

The City Council shall, after public notice and hearing thereon, by ordinance, approve, disapprove or modify the recommendation of the City Manager. The effective date of any change in the water rates shall be specified in the ordinance passed by the City Council.
(Ord. No. 472)

21.12.040 Same—Fire Service and Automatic Fire Sprinkler Service.

The rates to be so charged and collected each month for fire service and automatic fire sprinkler service within the City shall be established by ordinance.

21.12.050 Same—Construction of Water Service.

The rates to be charged and collected for construction of water service and meter installation shall be established by ordinance.

21.12.060 Same—Service to City Departments.

The rates for water and water service supplied to the various departments of the City shall be the same as those rates in effect for all other consumers within the City, as in this Chapter specified, and the water and water service so furnished shall be charged to their respective budget accounts and paid for monthly from such funds into the fund provided for by the receipts from sale of water.

21.12.070 Reading of Meters; Average Bills When Meters Not Read; Billing When Meter Fails to Function; Where Water Bills to be Mailed.

Under ordinary conditions, continuous service meters shall be read monthly on approximately the same day of the month, and a bill issued showing the period covered by the meter readings, the quantity of water used, and the total charge for the service rendered. When it is impossible to read the meter due to any obstructions, an average bill, or a series of average bills, will be rendered, will be adjusted at the next actual reading date. If the meter fails to register, the charge for water will be based upon the average of the comparable period of the preceding year, taking into consideration the volume of business, weather conditions, and any other factors that may assist in determining an equitable charge. Unless the applicant for water service shall direct otherwise, all bills will be mailed to the premises where service is furnished.

21.12.080 Testing of Water Meters.

When the accuracy of a water meter is questioned, the department shall, upon the request of a consumer on the form provided, cause an official test to be made upon deposit by the consumer, an amount determined by the meter size and as established by ordinance.

If, upon examination of the meter to ascertain the accuracy of its operation, it shall be found to register over three percent more water than actually passed through it, another meter will be substituted therefor, and the fee charged for such test will be refunded to the person making the application. An adjustment for a period of three months prior to the test will be made on the basis of the percentage the meter is in error.

21.12.090 When Bills to be Mailed; When Bills Due; Re-establishment of Service.

A. Water bills based on meter readings shall be prepared and mailed to the consumers bimonthly. Bills will be due and payable upon receipt. No less than 19 days shall be allowed from the date of mailing such bills for 124 May 6, 2024 Item 11
Created: 2024-04-03 15:46:31 [EST]
(Supp. No. 8)

payment thereof, and bills will be deemed delinquent thereafter. A ten percent penalty per billing period will be charged on all delinquent bills.

B. If service is terminated in accordance with the provisions of the Title, service will not be renewed until the delinquent bill is paid together with penalties and charges, including the cost of reconnection as defined in this Title. An additional deposit will also be required pursuant to the rates established in this Chapter.

C. In the case of service to rental property, the property owner shall be liable for any billings not paid by the tenant.
(Ord. No. 554)

21.12.100 Adjustment of Bills.

Water bill adjustments may be made by the City in accordance with administrative regulations approved by the City Manager.

21.12.110 Persons Using Water Without Proper Application Liable for All Water Chargeable to Premises.

A person taking possession of any premises and using water through an active service connection without having made application to the City for water service shall be held liable for the water delivered from the date of the last recorded meter reading, and if the meter was found inoperative, the quantity of water consumed shall be estimated.

If proper application for water service is not made promptly upon notification to do so by the department without further notice.

21.12.120 Service May Be Denied Former Consumers Having Outstanding Bills.

When an application for water service is made by a former consumer who has failed to pay all bills for service previously rendered, the City may refuse to furnish water to such applicant until the outstanding bills are paid, plus any applicable penalties.

21.12.130 Department May Render Additional Services; Charges.

A. The department may render any reasonable service in connection with the supply of water service to consumers upon application at the main office of the department; provided that reasonable charges may be made for any expense involved in rendering the service.

B. All bills for labor, material furnished, or other charges not provided for otherwise, shall become due and payable at the same time and in the same manner as the next regular billing for water, and shall become delinquent at the same time as is provided for delinquent payments on regular water bills.

21.12.140 Water Rates and Charges.

The following rates and charges are established:

A. Refundable Water Deposit. The deposit shall be three times the base monthly service charge for new accounts, with a refund upon request after two years of acceptable payment history or upon termination of the account. If a customer's service is discontinued because of nonpayment, the customer is required to deposit with the City an amount equal to three times the base monthly service 125 May 6, 2024 Item 11
Created: 2024-04-03 15:46:31 [EST]
(Supp. No. 8)

charge. When two consecutive years of acceptable payments have been made or upon termination of the account, the deposit will be refunded at the request of the customer.

B. Notification to Pay Bill (Door Hangers). If a door hanger or any other personally delivered form of notification is required to notify customers of pending water shutoff, a charge as set forth in the City of Del Mar Fee Schedule will be paid before the water will be reconnected.

C. Water Reconnect Penalties. When it is necessary to shut off a customer's water because of nonpayment, the City will impose a penalty in an amount set forth in the City of Del Mar Fee Schedule and customer will be billed at actual costs of labor and vehicle for after hours reconnection. The penalty and all outstanding charges must be paid before the water will be reconnected.

If a disconnected service is illegally reconnected by the customer, a penalty in an amount set forth in the City of Del Mar Fee Schedule will be assessed. If it is necessary to remove the meter to prevent the customer from reconnecting the water, the customer will be required to pay an amount set forth in the City of Del Mar Fee Schedule and all outstanding charges before the meter can be reinstalled.

D. Testing of Water Meters. When the accuracy of a water meter is questioned by the customer, the City will remove the meter and send it out to be calibrated if requested by the customer and the meter is found to be in good working order, the customer will be charged the actual cost of the testing to the City. If the meter is found to be faulty, the City will incur the cost of calibration. (Ord. No. 512; Ord. No. 828; Ord. No. 968 , § 2, 7-20-2020) 126 May 6, 2024 Item 11

EXHIBIT B
TITLE 21 - WATER SUPPLY
Chapter 21.70 EMERGENCY WATER MANAGEMENT
Del Mar, California, Municipal Code Created: 2024-04-03 15:46:32 [EST] (Supp. No. 8)

Chapter 21.70 EMERGENCY WATER MANAGEMENT1

21.70.010 Purpose.

This Chapter establishes an emergency water management program in order to conserve water supplies, minimize the effects of water supply shortages, and allow the City to respond to water emergency conditions. (Cal.

Const. Art. X, §§ 2 and 7; and Water Code § 375.)
(Ord. No. 603; Ord. No. 816; Ord. No. 828; Ord. No. 903; Ord. No. 998 , § 1, 6-19-2023)

21.70.020 Scope of Chapter.

The provisions of this Chapter shall apply to all persons using water delivered by the City. ( Ord. No. 998 , § 1, 6-19-2023)

21.70.030 Water Conservation Policy.

A. It is the policy of the City that all public and private users of water delivered by the City shall use such water for reasonable purposes and in a reasonable manner in a conscientious effort to conserve water.

B. When the emergency water use regulations in this Chapter are not declared to be in effect, those regulations may still be considered as recommended methods for voluntarily conserving water.

C. The City may initiate and maintain education programs to encourage the conservation of water. ( Ord. No. 998 , § 1, 6-19-2023)
Cross reference(s)—Water conservation program, Ch. 21.60.

21.70.040 Water Management Regulations.

A. Levels. During water shortages, the City shall impose water use regulations in levels. Sections 21.70.100 et seq. of this Chapter contain a sequential, regulatory program of increasingly more stringent prohibitions on the use of water delivered within the City. When the City declares that a particular water shortage level is in effect, the regulations contained in a declared level shall be complied with by all persons using water delivered by the City.

B. Declaration of Level.
1Ord. No. 998 , § 1, adopted June19, 2023 amended Ch. 21.70 in its entirety to read as set out herein. Former Ch.

21.70, §§ 21.70.010—21.70.160 pertained to similar subject matter. Historical notations have been retained for reference purposes.
127 May 6, 2024 Item 11

EXHIBIT B
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

1. The City shall monitor the projected supply of water and the demand for water by persons within its jurisdiction and, in consultation with those agencies providing water to City, determine when water management regulations are required in order for the City to deal with water shortages.

2. When it is determined that a particular level of water management regulation is required, either the City Council or the City Manager may issue a declaration which will announce the level of regulatory management that is to be imposed. Moving to Level 6 requires a properly noticed public hearing.

3. The declaration shall be made by public announcement posted at City Hall. Also, the City Manager may publish a notice of the determination in a newspaper of general circulation and on the City website.

4. If the declaration is made by the City Manager, the matter shall be placed on the agenda of the City Council at its next meeting. The City Council shall thereupon ratify the City Manager's declaration, rescind the declaration, or issue its own declaration.

5. The regulatory level announced in the declaration shall become effective seven days following the date of posting; except, when a water emergency is declared, the regulatory level shall become effective immediately upon posting.
( Ord. No. 998 , § 1, 6-19-2023)

21.70.050 Modification of Regulation as Applied In Special Circumstance.

A. Appeals Board. An Appeals Board for this Chapter shall consist of the City Council.

B. Appeal.

1. Any person subject to the regulations and decisions imposed in accordance with the provisions of this Chapter may submit an appeal, in writing, to the City Clerk.

2. The City Manager may render a decision or set the matter to be heard by the Appeals Board which will render a written decision within 30 calendar days of the receipt of the appeal.

3. If the appellant is dissatisfied with the City Manager's determination, the appellant may seek a review by the Appeals Board.

C. Modification Authorized. In accordance with the procedures provided above, the City Manager and the Appeals Board are authorized to make minor and limited modifications to any regulation in this Chapter when it has been demonstrated that due to special circumstances as applied to a particular case, the application of the unmodified regulation constitutes a threat to health, safety or welfare or will result in an undue, unreasonable hardship. Provided, however, that such modification shall not cause water to be wasted or used in an unreasonable manner and the purposes of this Chapter can be accomplished. ( Ord. No. 998 , § 1, 6-19-2023)

21.70.060 Prohibition.

A. It is unlawful for any person to knowingly use water or permit the use of water supplied by the City in a manner contrary to any provision of this Chapter declared to be in effect. (Misdemeanor in accordance with Water Code § 377.)
128 May 6, 2024 Item 11

EXHIBIT B
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

B. The use of reclaimed or "grey" water in accordance with the regulations of the Department of Health Services and in accordance with any other applicable regulations, is not subject to the regulations of this Chapter.

C. It is a misdemeanor for anyone to tamper with or otherwise interfere with the operation of a water meter without the express authority, in writing, of the City.

D. It is unlawful for any person to knowingly present false information to the City when information is requested by the City in accordance with the provisions of this Chapter.

E. Compliance with this Section is a condition imposed upon the continued uninterrupted delivery of water. ( Ord. No. 998 , § 1, 6-19-2023)

21.70.090 Enforcement—Restricting or Discontinuing Water Service.

A. A continued, willful failure to comply with the conditions imposed upon the continued, uninterrupted delivery of water may result in a Notice of Violation being mailed to the metered customer, accompanied by a copy of relevant portions of these regulations.

B. Failure to correct the violation by bringing water use into compliance with the conditions imposed upon the continued, uninterrupted delivery of water will result in a Notice of Hearing Re: Violation being mailed to the metered customer.

C. The City Manager shall conduct the hearing. The noticed person shall have the opportunity to present information and arguments in response to the notice.

D. Following the hearing, if an uncured violation is found to exist, the City Manager may order either:

1. The installation of a flow restrictor in the meter for a minimum of 72 hours; or

2. Discontinuance of water service for a specified period of time.

E. When it is necessary to install a flow restrictor or to discontinue service, a metered customer shall pay a fee of $250.00 to the City. When it is necessary to remove a flow restrictor or to re-establish water service, a metered customer shall pay a fee of $250.00 to the City. The fees referenced in this subparagraph are payable by the metered customer when the service is rendered. Further, payment in full of all outstanding fees is a condition to the restoration of full service. ( Ord. No. 998 , § 1, 6-19-2023)

21.70.110 Water Shortage Level 1—Watch Condition.

A. A Water Shortage Level 1 condition is also referred to as a " Water Storage Watch" condition. Level 1 shall be declared to encourage voluntary water conservation with an aim towards reducing water demand by up to 10%. This Level 1 condition applies when the Water Authority notifies its member agencies to activate the appropriate voluntary provisions of the water shortage contingency plan.

B. When Level 1 is declared and in effect, all persons shall comply with the voluntary water usage reductions and other mandatory conditions as may be identified by the Governor, State of California, or San Diego County Water Authority.

C. When Level 1 is declared and in effect, metered customers of the City shall receive uninterrupted water delivery subject to the modified volumetric rates as follows:

Volumetric rates applied to usage by customer classes.
129 May 6, 2024 Item 11

EXHIBIT B
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

Bimonthly Bimonthly Rate per Unit of Water Used During Water Shortage Level 1 Usage 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028
Single-Family
Tier 1: 1-22 units $6.34 $6.47 $6.60 $6.74 $6.87
Tier 2: 23+ units $7.47 $7.62 $7.77 $7.92 $8.08
Multi-Family $6.91 $7.06 $7.20 $7.34 $7.48
Commercial/ $6.89 $7.03 $7.17 $7.31 $7.46
Institutional
Irrigation $7.33 $7.48 $7.63 $7.79 $7.94
Fairgrounds $8.29 $8.45 $8.62 $8.79 $8.96
C. Irrigating "Non-Functional Turf" at commercial, industrial, and institutional sites is prohibited. "NonFunctional Turf," as defined in section 996 of title 23 of the California Code of Regulations, as may be amended from time to time, is defined as any turf (grass) that is solely ornamental and not regularly used for human recreational purposes or for civic or community events. "Non-Functional Turf" does not include sports fields and turf that is regularly used for human recreational purposes of for civic or community events.

1. Notwithstanding subsection (C)(1), the use of water is not prohibited by this section to the extent necessary to ensure the health of trees and other perennial non-turf plantings or to the extent necessary to address an immediate health and safety need.

2. Notwithstanding subsection (C)(1), the City may approve a request for continued irrigation of nonfunctional turf where the user certifies that the turf is a low water use plant with a plant factor of 0.3 or less, and demonstrates the actual use is less than 40% of reference evapotranspiration.

D. Wasteful and Unreasonable Water Uses are prohibited as listed in section 995 of title 23 of the California Code of Regulations to prevent unreasonable use of water and to promote water conservation. The following water usage activities are prohibited:

1. Washing down paved surfaces, including but not limited to sidewalks, driveways, parking lots, tennis courts, or patios, except when it is necessary to alleviate safety or sanitation hazards.

2. Water waste resulting from inefficient landscape irrigation, such as runoff, low head drainage, or overspray, etc. Similarly, irrigation causing water flows onto non-targeted areas, such as adjacent property, non-irrigated areas, hardscapes, roadways, or structures are prohibited.

3. Irrigation is prohibited during and within 48 hours after measurable rainfall of at least one-fourth of one inch of rain.

4. Use of a handheld hose equipment without a positive shut-off nozzle to wash vehicles, except where the hose is fitted with a shut-off nozzle. It is encouraged to use a bucket to wash vehicles or at a commercial site with recirculated water.

5. Use of potable water to operate ornamental fountains with exceptions for those fountains that use pumps to recirculate water and only require refilling to replace evaporative losses.

6. Use of potable water for street cleaning or construction purposes, unless non-potable water is unavailable or as-needed to protect the health and safety of the public. 130 May 6, 2024 Item 11

EXHIBIT B
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

E. In addition to the water usage reductions and other conditions referenced in subsections B, C, and D above, when Level 1 is declared and in effect all persons are requested to comply with the following water demand reduction measures;

1. Irrigate residential and commercial landscape before 10:00 a.m. or after 6:00 p.m.; limited to three applications per week.

2. Serve and re-fill water in restaurants, bars, and other food service establishments only upon request.

3. Offer guests in hotels, motels, and other commercial lodging establishments the option of not laundering towels and linens daily.

4. Repair all water leaks within 72 hours of notification by the City.

Additional Conditions on Uninterrupted Delivery: None.
(Ord. No. 816; Ord. No. 828; Ord. No 948 , § 2, Exh. B, 6-3-2019; Ord. No. 984 , § 1, 12-13-2021; Ord. No. 991 , § 1, 7-11-2022; Ord. No. 998 , § 1, 6-19-2023)

21.70.120 Water Shortage Level 2—Warning Condition.

A. Water Shortage Level 2 condition is also referred to as a " Water Shortage Warning" condition. Level 2 shall be declared when the City determines that water usage should be reduced up to 20 percent from the ordinary demand requirement, as determined by the City.

B. When Level 2 is declared and in effect, metered customers of the City shall receive uninterrupted water delivery subject to the modified volumetric rates as follows:

Volumetric rates applied to usage by customer classes.

Bimonthly Bimonthly Rate per Unit of Water Used During Water Shortage Level 2 Usage 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028
Single-Family
Tier 1: 1-22 units $6.44 $6.57 $6.70 $6.84 $6.97
131 May 6, 2024 Item 11

EXHIBIT B
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

Tier 2: 23+ units $7.58 $7.73 $7.89 $8.04 $8.21
Multi-Family $7.04 $7.19 $7.33 $7.48 $7.62
Commercial/ $6.99 $7.14 $7.28 $7.43 $7.57
Institutional
Irrigation $7.68 $7.83 $7.99 $8.15 $8.31
Fairgrounds $8.58 $8.75 $8.92 $9.10 $9.28
C. When Level 2 is declared and in effect, the demand reduction measures listed in Level 1 shall become mandatory. Additional measures may be implemented based on City Council direction or Emergency Orders. (Ord. No. 816; Ord. No. 828; Ord. No. 903; Ord. No 948 , § 2, Exh. B, 6-3-2019; Ord. No. 991 , § 1, 7-11-2022; Ord.

No. 998 , § 1, 6-19-2023)

21.70.130 Water Shortage Level 3— Acute Condition.

A. A Water Shortage Level 3 condition is also referred to as an "Acute Water Shortage" condition. Level 3 shall be declared when the City determines that water usage should be reduced up to 30 percent from the ordinary demand requirement, as determined by the City.

B. When a Level 3 is declared and in effect, metered customers of the City shall receive uninterrupted water delivery subject to the modified volumetric rates as follows:

Volumetric rates applied to usage by customer classes.

Bimonthly Bimonthly Rate per Unit of Water Used During Water Shortage Level 3 Usage 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028
Single-Family
Tier 1: 1-22 units $6.55 $6.69 $6.83 $6.96 $7.10
Tier 2: 23+ units $7.72 $7.87 $8.03 $8.19 $8.35
Multi-Family $7.20 $7.35 $7.50 $7.65 $7.80
Commercial/ $7.12 $7.27 $7.42 $7.56 $7.71
Institutional
Irrigation $8.27 $8.43 $8.61 $8.78 $8.96
Fairgrounds $9.02 $9.20 $9.38 $9.57 $9.76
C. In addition to the water usage reductions and other conditions referenced in Level 1 and Level 2, when Level 3 is declared and in effect all persons are requested to comply with the following water demand reduction measures:

1. Irrigate residential and commercial landscape before 10:00 a.m. or after 6:00 p.m.; limited to two applications per week. Irrigation is prohibited during and within 48 hours after measurable rainfall of at least one-fourth of one inch of rain.

2. Repair all water leaks within 48 hours of notification by the City. 132 May 6, 2024 Item 11
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(Supp. No. 8)

3. Only wash vehicles or at a commercial site with recirculated water. (Ord. No. 816; Ord. No. 828; Ord. No. 903; Ord. No 948 , § 2, Exh. B, 6-3-2019; Ord. No. 998 , § 1, 6-19-2023)

21.70.140 Water Shortage Level 4—Critical Condition.

A. A Water Shortage Level 4 condition is also referred to as a " Critical Water Shortage " condition. Level 4 shall be declared when the City requires a demand reduction of 40 percent in order for the City of Del Mar to have maximum supplies available to meet anticipated demands from the ordinary demand requirement, as determined by the City.

B. When Level 4 is declared and in effect, metered customers of the City shall receive uninterrupted water delivery subject to the modified volumetric rates as follows:

Volumetric rates applied to usage by customer classes.

Bimonthly Bimonthly Rate per Unit of Water Used During Water Shortage Level 4 Usage 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028
Single-Family
Tier 1 1-22 units $6.69 $6.83 $6.97 $7.11 $7.25
Tier 2 23+ units $7.88 $8.04 $8.20 $8.36 $8.53
Multi-Family $7.41 $7.56 $7.71 $7.86 $8.02
Commercial/ $7.28 $7.43 $7.58 $7.73 $7.88
Institutional
Irrigation $9.50 $9.69 $9.89 $10.09 $10.29
Fairgrounds $9.75 $9.95 $10.14 $10.34 $10.55
C. The water usage reductions and other conditions established in Level 1, Level 2, and Level 3 will remain in place. Additional demand reduction measures will be established by the City Council and implemented. (Ord. No. 816; Ord. No. 828; Ord. No. 903; Ord. No 948 , § 2, Exh. B, 6-3-2019; Ord. No. 998 , § 1, 6-19-2023)

21.70.150 Water Shortage Level 5—Emergency Condition.

A. A Water Shortage Level 5 condition is also referred to as a "Water Shortage Emergency" condition. A Level 5 shall be declared when the City requires a demand reduction of 50 percent in order for the City of Del Mar to have maximum supplies available to meet anticipated demands from the ordinary demand requirement, as determined by the City.

B. When Level 5 is declared and in effect, metered customers of the City shall receive uninterrupted water delivery subject to the modified volumetric rates as follows:

Volumetric rates applied to usage by customer classes.

Bimonthly Bimonthly Rate per Unit of Water Used During Water Shortage Level 5 Usage 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028
Single-Family
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Tier 1 1-22 units $6.87 $7.02 $7.16 $7.30 $7.45
Tier 2 23+ units $8.09 $8.26 $8.42 $8.59 $8.76
Multi-Family $7.68 $7.84 $8.00 $8.16 $8.31
Commercial/ $7.48 $7.63 $7.79 $7.94 $8.10
Institutional
Irrigation $13.82 $14.09 $14.38 $14.67 $14.97
Fairgrounds $11.26 $11.48 $11.70 $11.94 $12.18
C. The water usage reductions and other conditions established in Level 1, Level 2, Level 3, and Level 4 will remain in place. Additional demand reduction measures will be established by the City Council and implemented.
( Ord. No. 998 , § 1, 6-19-2023)

21.70.160 Water Shortage Level 6—Catastrophic Condition.

A. A Water Shortage Response Level 6 condition is also referred to as a "Catastrophic Water Shortage" condition. Level 6 shall be declared when the City declares a water shortage emergency pursuant to California Water Code Section 350 which requires a demand reduction of greater than 50 percent in order for the City of Del Mar to have maximum supplies available to meet anticipated demands from the ordinary demand requirement, as determined by the City.

B. When Level 6 is declared and in effect, metered customers of the City shall receive uninterrupted water delivery subject to the modified volumetric rates as follows:

Volumetric rates applied to usage by customer classes.

Bimonthly Bimonthly Rate per Unit of Water Used During Water Shortage Level 6 Usage 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028
Single-Family
Tier 1 1-22 units $6.97 $7.12 $7.26 $7.41 $7.55
Tier 2 23+ units $8.21 $8.38 $8.54 $8.71 $8.89
Multi-Family $7.88 $8.04 $8.20 $8.36 $8.53
Commercial/ $7.59 $7.75 $7.91 $8.06 $8.22
Institutional
Irrigation N/A N/A N/A N/A N/A
Fairgrounds $14.05 $14.32 $14.60 $14.90 $15.19
Note: Irrigation use is assumed to be curtailed at this Shortage Level.

B. The water usage reductions and other conditions established in Level 1, Level 2, Level 3, Level 4 and Level 5 will remain in place. Additional demand reduction measures will be established by the City Council and implemented.
( Ord. No. 998 , § 1, 6-19-2023)
134 May 6, 2024 Item 11
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(Supp. No. 8)

21.70.170 Wastewater Utility Rates During Water Shortage Conditions.

A. Wastewater customers are billed for sewer service based on their water usage. During water shortage periods, water usage will decline and threaten the fiscal stability of the wastewater utility. Therefore, during water shortage periods, wastewater charges will be calculated based on the assumption that sewer usage is the same as the commensurate month from the last non-drought fiscal year. Drought sewer charges will be lifted after one full year of non-drought consumption records can be established.

1. Residential. Sewer discharges will be estimated based on the assumed sewage usage during the last non-drought year.

2. Commercial. Sewer discharges will be estimated based on 90 percent of the water usage during the last non-drought year. A user may petition to have their sewer discharge (water usage) assumption lowered if their annual water demand drops below their non-drought water demands by a level below the drought reduction levels plus an additional 20 percent. As a user can meet the previously defined criteria, their sewage discharge assumptions will be lowered to the current water demands, adding back any water savings required under the drought requirements. As an example, if the drought reductions are 20 percent, and the user drops their water consumption by 45 percent, then the resulting sewer will be calculated based on 120 percent of the current water consumption.

3. Fairgrounds. Sewer commodity charges during drought conditions will be calculated based on the greater of (1) the rolling average of the past same bimonthly period during the last three fiscal years or (2) the actual metered sewage.
(Ord. No 948 , § 2, Exh. B, 6-3-2019; Ord. No. 998 , § 1, 6-19-2023)

21.70.180 Additional Conditions on Uninterrupted Delivery.

In accordance with California Government Code § 53756, the rates posted above will be adjusted accordingly to account for any increases in the purchase cost of wholesale water, or increases in inflationary measure. ( Ord. No. 998 , § 1, 6-19-2023)
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EXHIBIT C
TITLE 22 - SEWERS AND SEWAGE DISPOSAL
Chapter 22.04 GENERAL
Del Mar, California, Municipal Code Created: 2024-04-03 15:46:32 [EST] (Supp. No. 8)

Chapter 22.04 GENERAL

22.04.010 Definitions.

For the purpose of this Chapter, the following words and phrases shall have the meanings respectively ascribed to them by this Section.

A. Unless otherwise defined herein, terms related to water quality shall be as adopted in the latest edition of Standard Methods for Examination of Water and Wastewater, published by the American Public Health Association, the American Water Works Association and the Water Environment Federation.

The testing procedures for waste constituents and characteristics shall be as provided in 40 CFR 136 (Code of Federal Regulations).

B. Other terms not herein specifically defined shall have the same definition as set forth in the latest adopted editions of the California Codes of Regulations applicable to building construction adopted pursuant to the California Building Standards Law.

C. Subject to the foregoing provisions, the following definitions shall apply in these regulations:

1. Applicant means any person who applies for connections to the sewer system.

2. Assessment means a levy of special assessment which is shown on the records of the City. Any other assessment for a sewer main shall be construed as a nominal or partial assessment for the purposes of this Chapter.

3. Best Management Practices means schedules of activities, prohibitions of practices, maintenance procedures and other management practices to prevent or reduce the introduction of Fats, Oils, and Grease (FOG) to the sewer facilities as more specifically provided for in Subsection

22.08.051.B. of these regulations.

4. Change in Operations. Any change in the ownership, food types, operational procedures or business practices that have the potential to increase the amount of FOG generated and/or discharged by Food Service Establishments in an amount that alone or in conjunction with other FOG discharges causes or creates a potential for sanitary sewer overflows (SSOs) to occur.

5. City. The City of Del Mar or the City Council of Del Mar.

6. Composite Sample. A collection of individual samples obtained at selected intervals based on an increment of either flow or time. The resulting mixture (composite sample) forms a representative sample of the waste stream discharged during the sample period.

7. Department. The Department of Public Works of the City. Action of the Department may be taken by the Director of Public Works or his duly authorized representative.

8. Director. The person designated by the City Manager to have charge of the administration and supervision of the Public Works Department, and such other duties as the City Manager may prescribe.

9. Discharger. Any person who discharges or causes a discharge of wastewater or waste directly or indirectly to the sewer facilities. Discharger shall mean the same as User. 136 May 6, 2024 Item 11

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10. Effluent. Any liquid outflow from a Food Service Establishment that is discharged to the sewer facilities.

11. Equivalent Dwelling Unit means the unit of measure which is based on the flow characteristics of an average single-family residence in terms of sewage quantity and constituent quality.

12. Extension means an extension of an existing sewer main.

13. Fats, Oils, and Grease ("FOG") means any substance such as a vegetable or animal product that is used in, or is a by-product of, the cooking or food preparation process, and that turns or may turn viscous or solidifies or may solidify with a change in temperature or due to other conditions.

Discharges of FOG to the sewer system from a Food Service Establishment constitute the discharge of industrial waste.

14. FOG Control Program means the FOG control program required by and developed pursuant to SWRCB Order No. 2006-0003-DWQ, Section (D)(13)(vii) and by the RWQCB directive R9-2007- 0005.

15. FOG Control Program Administrator means the individual designated by the City Manager to administer the FOG Control Program. Except as otherwise set forth in this Chapter, the FOG Control Program Administrator is responsible for all determinations of compliance with the FOG control program.

16. Food Service Establishment means facilities defined in California Uniform Retail Food Facilities Law (CURFFL), California Health and Safety Code Section 113785, and any commercial entity discharging directly or indirectly to the City's sewer system, operating in a permanently constructed structure such as a room, building, or place, or portion thereof, maintained, used, or operated for the purpose of storing, preparing, serving, manufacturing, packaging, or otherwise handling food for sale to other entities, or for consumption by the public, its members or employees, and which has any process or device that uses or produces FOG, or grease vapors, steam, fumes, smoke or odors that are required to be removed by a Type I or Type II hood.

17. Food Grinder means any device installed for the purpose of grinding food waste or food preparation by-products for disposal to the sewer system.

18. General Business/Institutional shall mean all businesses, offices, governmental agency offices and any other similar user not otherwise included in another category and with a combined sewer strength of less than or equal to a Single-Family Residence.

19. Grab Sample. A sample taken from a waste stream on a one-time basis without regard to the flow in the waste stream and without consideration of time.

20. Gravity Grease Interceptor means a multi-compartment device that is constructed in different sizes and is generally required to be located, according to the California Plumbing Code, underground between a Food Service Establishment and the connection to the sewer system.

These devices primarily use gravity to separate FOG from the wastewater as it moves from one compartment to the next. These devices must be cleaned, maintained, and have the FOG removed and disposed of in a proper manner on regular intervals to be effective.

21. Grease means any material which is extractable from an acidified sample of a waste by hexane or other designated solvent and as determined by the appropriate procedure in "Standard Methods" (includes fats and oils).

22. Grease Control Device means any gravity grease interceptor, hydromechanical grease interceptor or other mechanism, device, or process, which attaches to, or is applied to, wastewater plumbing fixtures and lines, the purpose of which is to trap, collect or treat FOG prior to discharge into the 137 May 6, 2024 Item 11

EXHIBIT C
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

sewer system. "Grease control device" may also include any other proven method to reduce FOG subject to the approval of the City.

23. Hotel/Motel means all living units of a transient nature including hotel and motel rental room units, and also living units of a permanent nature which do not contain any kitchen facilities.

Excluded from the category are Major Full Service Hotels.

24. Hot Spots means areas in sewer lines that have experienced sanitary sewer overflows or that must be cleaned or maintained frequently to avoid blockages of the sewer system.

25. Hydromechanical Grease Interceptor means a grease control device that is used to serve individual fixtures and have limited effect and should only be used in those cases where the use of a gravity grease interceptor or other grease control device is determined to be impossible or impracticable. Formerly referred to as a grease trap.

26. Industrial Wastewater means all water-carried wastes and wastewater of the community, excluding domestic wastewater and uncontaminated water. Includes all waste-water from any producing, manufacturing, processing, institutional, commercial or agricultural source.

27. Inflow means surface, storm water or urban runoff which enters the sewer system. Inflow may, in certain circumstances, cause a rapid increase in wastewater flows.

28. Infiltration means water entering the sewer system from the ground through such means as defective pipes, pipe joints, connections, or manhole walls.

29. Inspector means a person authorized by the City Manager to inspect any existing or proposed wastewater or waste generation, conveyance, processing and/or disposal facilities.

30. Interceptor means a hydromechanical or gravity grease interceptor.

31. Interference means any discharge which, alone or in conjunction with discharges from other sources, inhibits or disrupts the City's sewer system, collection processes or operations; or is a cause of violation of Chapter 22 of the City of Del Mar Municipal Code.

32. Limited Food Preparation Establishment means an establishment engaged only in reheating, hot holding or assembly of ready-to-eat (precooked and prepackaged) food products from which establishment there is only a de minimus discharge of FOG to the sewer system. A limited food service preparation establishment is not considered a Food Service Establishment under this Chapter. A limited food preparation establishment does not include any preparation that changes the form, flavor or consistency of food. Any person who contends that he/she/it meets the definition of a limited food preparation establishment shall have the burden to establish that he/she/it meets the criteria set forth in this definition.

33. Main means an existing sewer main in the sanitary sewer system of the City.

34. Major Full Service Hotel shall mean a full service facility having rooms, restaurant(s) and/or bars serving food, and/or providing room service from an onsite kitchen.

35. Manifest means that receipt to be retained by the generator of wastes for disposing of recyclable wastes or other liquid or solid wastes as required by the City or a regulatory agency.

36. New Construction means any structure planned or under construction for which a sewer connection permit has not been issued.

37. Person means any individual, partnership, co-partnership, firm, company, corporation, association, joint stock company, trust, estate, governmental entity or any other legal entity, or their legal representatives, agents, or assigns. The masculine gender shall include the feminine, the singular shall include the plural where indicated by the context. 138 May 6, 2024 Item 11

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38. Pretreatment or Treatment means the reduction of the amount of pollutants, the elimination of pollutants, or the alteration of the nature of pollutant properties in wastewater to a less harmful state prior to or in lieu of discharging or otherwise introducing to the sewer system.

39. Regulatory Agencies means regulatory Agencies shall mean those agencies having regulatory jurisdiction over environmental quality matters, including, but not limited to:
a. United States Environmental Protection Agency, Region IX, San Francisco and Washington, DC (EPA).
b. California State Water Resources Control Board (SWRCB). c. California Regional Water Quality Control Board, San Diego Region (RWQCB). d. Air Pollution Control District County of San Diego, Air Quality Management District (AQMD).
e. California Department of Health Services (DOHS).
f. San Diego County Department of Environmental Health (DEH).

40. Remodeling means a physical or operational change (a) causing an increase in the amount of FOG discharged to the sewer system by a Food Service Establishment which amount, alone or in conjunction with other FOG discharges, causes or creates a potential for an SSO to occur; or (b) exceeding a cost of $50,000.00 to a Food Service Establishment, requiring a building permit, and involving any one or combination of the following: (1) under slab plumbing in the food processing area, (2) a 30 percent increase in the net public seating area, (3) a 30 percent increase in the size of the kitchen area, or (4) any change in the size or type of food preparation equipment.

41. Residential shall refer to all living or dwelling units (as defined by the Uniform Building Code) of a permanent, rather than transient nature, including single-family residences, apartments, manufactured homes, townhouses and condominiums.

42. Restaurant shall mean all establishments whose principal activity involves on-premise service of meals and food, including coffee shops and cafes. Also included in this category are bakeries whose principal activity involves the production of baked goods onsite.

43. Sample Point means a location approved by the City, from which industrial wastewater can be collected that is representative in content and consistency of the entire flow of industrial wastewater being discharged to the sewer system.

44. Sampling Facilities means structure(s) provided at the user's expense for the City or user to measure and record wastewater constituent mass concentrations, collect a representative sample, or provide access to plug or terminate the discharge to the sewer system.

45. Sewage means wastewater.

46. Sewer Connection or lateral means the service pipes extending from the private property line to the public sewer main in a public street, alley or easement.

47. Sewer System means the sewer system of the City, as acquired by the City from the Del Mar Utilities, together with any additions thereto.

48. Shopping Center shall be defined as more than one commercial unit connected to the same water meter where at least one business exists whose principal activity falls into the restaurant category. Also included in this category are any businesses defined as a Take-Out-Food Business.

49. Sludge means any solid, semi-solid or liquid decant, subnate or supernate from a manufacturing process, utility service, or pretreatment facility.
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EXHIBIT C
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

50. Supermarket shall mean all businesses whose principal activity involves retail sale of groceries and which have onsite waste grinders attached to the sanitary sewer system.

51. Take-Out-Food Business shall be defined as all drive-ins, sandwich shops, fast food outlets and similar businesses whose principal activity involves food services but which do not provide onpremises eating facilities or which provide only disposable eating implements (paper plates, plastic utensils, etc.)

52. Twenty-five percent (25%) Rule. Requirement for gravity grease interceptors to be maintained such that the combined FOG and solids accumulation does not exceed 25 percent of the design hydraulic depth of the gravity grease interceptor. This is to ensure that the minimum hydraulic retention time and required available hydraulic volume is maintained to effectively intercept and retain FOG prior to entry into the public sewer system.

53. User means any person who discharges or causes a discharge of wastewater or waste directly or indirectly to sewer facilities. "User" shall mean the same as Discharger.

54. Waste means sewage and any and all other waste substances, liquid, solid, gaseous or radioactive, associated with human habitation or of human or animal nature, including such wastes placed within containers of whatever nature prior to and for the purpose of disposal.

55. Wastewater means the liquid and water-carried industrial or domestic wastes from dwellings, commercial buildings, industrial facilities, and institutions, whether treated or untreated, which is contributed into or permitted to enter the sewer system.

56. Waste Minimization Practices means plans or programs intended to reduce or eliminate discharges to the sewer system or to conserve water, including, but not limited to, product substitutions, housekeeping practices, inventory control, employee education, and other steps as necessary to minimize waste or wastewater produced.

57. Wastehauler means any person carrying on or engaging in vehicular transport of waste as part of, or incidental to, any business for that purpose.

58. Wastewater means the liquid and water-carried industrial or domestic wastes from dwellings, commercial buildings, industrial facilities, and institutions, whether treated or untreated, which is contributed into or permitted to enter the sewer system.

59. Wastewater Constituents and Characteristics means the individual chemical, physical and bacteriological parameters, including volume and flow rate, and such other parameters that serve to define, classify or measure the quality and quantity of wastewater.

D. Words used in these regulations in the singular may include the plural and the plural the singular. Use of masculine shall mean feminine and use of feminine shall mean masculine. Shall is mandatory; may is permissive or discretionary.
(Ord. No. 106, § 1; Ord. No. 488; Ord. No. 472; Ord. No. 655; Ord. No. 828; Ord. No. 831)

22.04.020 Service and Connection Charges.

A. The sewer service and connection charges for each residential, commercial or other persons using the municipal sanitary sewer system of the City shall be:

1. Bimonthly Service Charge.

Single Family: The bimonthly wastewater (sewer) service for single family is equal to the charge for a ⅝" meter of $127.10, regardless of size, beginning January 1, 2024; $141.60 beginning July 1, 2024; 140 May 6, 2024 Item 11

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Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

$144.43 beginning July 1, 2025; $147.32 beginning July 1, 2026; $150.27 beginning July 1, 2027; and $153.28 beginning July 1, 2028.

Multi-Family, Commercial, Institutional: The sewer service for each multi-family, commercial or institutional service using the municipal sanitary system of the City shall be:

Bimonthly Service Charge Effective:

Meter Size 7/1/24 7/1/25 7/1/26 7/1/27 7/1/28
⅝" $141.60 $144.43 $147.32 $150.27 $153.28
¾" $212.40 $216.65 $220.98 $225.40 $229.91
1" $354.00 $361.08 $368.30 $375.67 $383.18
1 ½" $708.00 $722.16 $736.60 $751.33 $766.36
2" $1,132.80 $1,155.4 $1,178.57 $1,202.14 $1,226.18
3" $2,265.60 $2,310.91 $2,357.13 $2,404.27 $2,452.36
Fairgrounds $53,045.02 $54,105.92 $55,188.04 $56,291.80 $57,417.64

2. Bimonthly Commodity/Volume Charge. For single family residential users the bimonthly commodity/volume charge will be based on winter water usage subject to the limitations of the sewer cap which is set annually each July 1. The sewer cap will be derived using 100 percent of the water usage for the lowest billing period (two months) during the wet winter months, October through April.

If that calculation yields a number less than eight units, the cap will be set at eight units.

Each billing period the single-family residential customer sewer commodity charge will be calculated by using 100 percent of the water used during that billing period by the single family residential commodity rate in effect. If the 100 percent calculation yields a water usage amount that exceeds the individual customer's cap, the customer will be billed for the cap amount. The cap will not apply in calculating the commodity charge for residential customers who have installed sub-meters or irrigation meters where household use without irrigation can be calculated. 141 May 6, 2024 Item 11

EXHIBIT C
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)

7/1/24 7/1/25 7/1/26 7/1/27 7/1/28
Single-Family
Residential
$9.44 $9.63 $9.82 $10.02 $10.22
General/MultiFamily $9.44 $9.63 $9.82 $10.02 $10.22
Fairgrounds:*
(*100% of metered
use)
$9.44 $9.63 $9.82 $10.02 $10.22
* The sewer commodity rate for the Fairgrounds is subject to change pending results of required annual strength testing. If strength measurements increase, the commodity rate will increase accordingly. Reductions in strength measurements will result in a commensurate decrease in the commodity rate.

3. Pass Through Fees and Charges for Wastewater Treatment and Transportation. All City of San Diego fees and charges for the treatment and transportation of Del Mar's wastewater shall be passed through to Del Mar sewer utility customers.

4. Fats, Oils, and Grease Program Non-Compliance Bimonthly Service Surcharge and Volume Charge.

Restaurants not compliant with the City's Fats, Oils, and Grease Program as identified in this Chapter

22.04 and Chapter 22.08 of the Del Mar Municipal Code may be assessed an additional FOG Program Non-Compliance Surcharge in addition to the monthly service charges identified above. The FOG Program Non-Compliance Surcharge shall be assessed on a bimonthly basis as a fixed additional bimonthly service charge as follows:
7/1/19 1/1/20 1/1/21 1/1/22 1/1/23 1/1/24
$82.11 $86.22 $90.53 $95.05 $99.81 $104.80
An additional volume charge will also apply to 90 percent of water usage as follows:
7/1/19 1/1/20 1/1/21 1/1/22 1/1/23 1/1/24
$12.42 $13.01 $13.66 $14.34 $15.06 $15.81

5. Sub Meters. If the property owner determines that it is in his/her best interest, a sub meter may be used to establish the wastewater units of return to sewer for the residential customer. a. Readings obtained from sub meters installed for the purpose of measuring exclusively indoor water use in hundred cubic feet (HCF) may be used by the City for the purpose of calculating the sewer commodity charge if the following conditions are met:
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(Supp. No. 8)

(1) An application requesting that the water readings from a sub meter be considered in determining the sewer commodity charge must be completed by the customer prior to the installation of a new sub meter. The application must, as a minimum, grant the City reasonable access to the property to read the sub meter on a periodic basis. (2) The use of the sub meter must be pre-approved by the Public Works Director. (3) The sub meter must be connected to a water line exclusively used for indoor water use, and shall read in units of water (HCF). The applicant agrees to City inspection and verification of indoor use.
(4) The sub meter must be registered, inspected and certified by the County Department of Agriculture, Weights, and Measures before its installation and every four years thereafter. (5) A monthly service charge will be imposed for the meter reading during which the usage is recorded. That charge shall be 50 percent of the monthly water service charge for a ⅝" water meter.
b. It shall be the responsibility of the property owner to obtain and install, at the property owner's expense, the sub meter subject to the requirements of this section. c. A penalty, requiring removal of the sub meter for a period of five years, will be imposed by the City for any sub meter found to be tampered with, adjusted, or improperly installed to produce false readings. It shall be the responsibility of the property owner to pay for the removal of the sub meter.

B. Connection and Installation Fees. The connection fee for a new connection needing to acquire capacity in the sewer system for the first time or upsizing an existing connection will be set as follows:

Meter
Size
1/1/15
⅝" $6,443.54
¾" $9,665.31
1" $16,108.84
1½" $32,217.69
2" $51,548.30
3" $103,096.61
Existing customers upsizing their water meter will be given a credit commensurate with the connection fee for the current meter.

C. Sewer Installation Fee. The owner or applicant for a connection to the City sewer system shall pay to the City an amount equal to the cost for labor and materials of the installation. (Ord. No. 561; Ord. No. 651; Ord. No. 655; Ord. No. 665; Ord. No. 688; Ord. No. 699; Ord. No. 714; Ord. No. 731; Ord. No. 769; Ord. No. 828; Ord. No. 903; Ord. No 948 , § 2, Exh. C, 6-3-2019)

22.04.030 Same—Billing and Payment.

All sewer service charges imposed under the provisions of this Chapter shall be due and payable at the times and in the manner provided for the payment of water bills. Such sewer service charges shall be billed to the owner 143 May 6, 2024 Item 11

EXHIBIT C
Created: 2024-04-03 15:46:32 [EST]
(Supp. No. 8)