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2625 Alcatraz Ave, #602
Berkeley, CA 94705
Tel 510 653 3399
www.bartlewells.com
DATE: March 15th, 2024
TO: City of Foster City/Estero Municipal Improvement District FROM: Bartle Wells Associates
SUBJECT: Wastewater Rate Study Update Results
SUMMARY OF FINDINGS AND RECOMMENDATIONS
Introduction and Background
The Estero Municipal Improvement District (District) engaged Bartle Wells Associates (BWA) to develop 10-year financial projections for the District’s Wastewater Enterprise and to project wastewater rate adjustments for the next five-year period. BWA last conducted a rate study update in 2023. No public hearing was held for wastewater, as the adopted maximum wastewater rate of 10% was determined to be adequate and, in fact, was able to be reduced to 3% and still maintain the necessary revenue requirement.
Current and projected wastewater service rates are in the middle-high range compared to other agencies on the Peninsula. However, because water rates are comparatively very low, combined water and wastewater service rates are in the middle-low range compared to other agencies on the Peninsula.
Wastewater Enterprise Summary
The District has entered into a Joint Powers Agreement with the City of San Mateo where the District receives treatment of its wastewater via the San Mateo Wastewater Treatment Plant (WWTP). The District is responsible for its share of operating and maintenance costs that San Mateo (as the lead agency and the contracting party) incurs treating the District’s wastewater, as well as approximately 24% of the WWTP improvement costs incurred as part of the Clean Water Program (CWP), a 10-year comprehensive capital improvement project initiated in 2014. The Cities of San Mateo and the District are expanding the jointly owned WWTP at an estimated cost of $670 MM with $164.4 MM of that falling under Foster City’s contributions. This is in addition to local capital projects for the District’s own wastewater collection system. 2 | P a g e
The wastewater enterprise revenue model is designed to fund collection system capital expenditures through annual transfers from the operating fund to the capital improvement fund.
In June 2020, to fund the anticipated costs of the WWTP CWP improvements, the District Board approved 5 years of wastewater rate increases: three 14.25% per year increases in FY 2021 through FY 2023, a 10% wastewater rate increase in FY 2024, and a 2% increase in FY 2025. BWA’s 2023 analysis shows that the District had adequate financing capacity for projected debt issuances in the next several years and recommended spreading the remaining rate increases out over a longer period. Thus, the City Council reduced the 10% increase in FY 2024 to 3%. BWA recommends implementing the previously adopted 2% increase in FY 2025. BWA recommends conducting a 5-year rate study analysis in FY 2025, which would result in an adopted rate schedule for FY 2026 through FY 2031.
Detailed wastewater rate calculations are shown in APPENDIX B.
Rate Surveys
A survey of communities along the San Francisco Peninsula was conducted to compare the District’s typical wastewater bills with neighboring communities. The results of the wastewater survey are summarized in APPENDIX A.
Including the recommended increase, the District’s proposed monthly residential wastewater bill for FY 2025 is $133.49. Since it is unknown what the comparator agencies are proposing for FY 2025, the District compared its FY 2024 monthly residential wastewater bills to the FY 2024 monthly residential wastewater bills for the neighboring agencies. The survey indicates that the District’s current wastewater rates are above the average amongst its comparator agencies. The average monthly bill for the region is $117.71 and the District’s rate is $130.87 per month, or about 11% more.
APPENDIX C shows how the combined water and wastewater bills compare to regional agencies based on FY 2024 rates. The average monthly combined water and wastewater bill for the region is $225.98. The District’s total combined water and wastewater bill is $209.35 per month, or about 7.4% less than the regional average.
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Wastewater Enterprise Fund
There are approximately 13,937 wastewater accounts serviced by the District. The majority of accounts are residential with the remainder consisting of commercial and institutional accounts as shown in Table 1.
The District has approximately $27,456,097 in its wastewater maintenance and operations reserve fund as shown in Table 2. The District’s minimum operating reserve target is 25% of operating and maintenance expenses (est. to be about $2.7 million).
T a b l e 1
F o s t e r C i t y / E s t e r o M u n i c i p a l I m p r o v e m e n t D i s t r i c t W a s t e w a t e r S e r v i c e A c c o u n t s
D a t a a s o f : 0 2 / 0 1 / 2 4
N u m b e r o f A c c o u n t s
R e s i d e n t i a l
S i n g l e F a m i l y 4 , 5 3 6
T o w n h o u s e / D u p l e x 2 , 2 8 3
A p a r t m e n t / C o n d o m i n i u m ( P o o l s w / R e s t r o o m s ) 6 , 8 6 6 R e s i d e n t i a l T o t a l 1 3 , 6 8 5
C o m m e r c i a l
R e s t a u r a n t s 4 3
C o m m e r c i a l / H o t e l s / O f f i c e s / I n d u s t r i a l / L a u n d r o m a t s 1 7 3 C o m m e r c i a l T o t a l 2 1 6
I n s t i t u t i o n a l
I n s t i t u t i o n a l / S c h o o l s 3 6
I n s i t u t i o n a l T o t a l 3 6
T o t a l 1 3 , 9 3 7
S o u r c e : C o g n o s S e w e r C u s t o m e r C o u n t R e p o r t C u s t o m e r C l a s s
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Table 3 summarizes the current wastewater service rates.
Table 2
Foster City / Estero Municipal Improvement District
Wastewater Operating Fund Reserves
July 1, 2023
Fund Reserve Component Balance
Reserved for Maintenance & Operation $27,456,097
Total $27,456,097
operating and capital expenditures.
Note: Rate model only includes fund reserve components available to fund ongoing Source: City of Foster City/Estero Municipal Improvement District Staff Table 3
Foster City / Estero Municipal Improvement District
Current Wastewater Rates
Current
Fiscal Year Ending June 30 2024
Residential (flat monthly rate)
Single Family $130.87
Townhouse/Duplex 109.93
Apartment/Condominium (Pools w/ Restrooms) 109.93
Commercial (rate per ccf of water use)
Restaurants 23.78
Commercial/Hotels/Offices/Industrial/Laundromats 8.36
Institutional (rate per ccf of water use)
Institutional/Schools 5.50
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Table 4 summarizes the operating expenditures of the enterprise. Projected operating expenditures are anticipated to increase over the next five years by about 33%.
Table 4
City of Foster City / Estero Municipal Improvement District Wastewater Enterprise O&M Projection
Revised
Budget
FY2024 FY2025 FY2026 FY2027 FY2028 FY2029
Employee Services $2,886,634 $3,039,154 $3,160,720 $3,287,149 $3,418,635 $3,555,380 4.0% Internal Services (from City) 1,318,932 1,557,041 1,595,967 1,635,866 1,676,763 1,718,682 2.5% Internal Services -ERF 342,955 462,234 473,790 485,635 497,776 510,220 2.5% Services & Supplies 733,550 901,950 924,499 947,611 971,301 995,584 2.5% EMID Share WWTP O&M 3,700,000 3,700,000 4,000,000 4,200,000 5,200,000 5,300,000 N/A Reallocation [2] 955,715 1,051,791 1,078,086 1,105,038 1,132,664 1,160,981 2.5% TOTAL O&M Expenditures $9,937,786 $10,712,170 $11,233,062 $11,661,299 $12,897,139 $13,240,847
7.8% 4.9% 3.8% 10.6% 2.7%
[1] Based on historical results
[2] Costs allocated to the Wastewater Enterprise from other departments based on the City's cost allocation study.
Annual %
Increase [1]Expenditures Five Year Projection
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Wastewater Financial Projections
Wastewater projections are shown in APPENDIX B.
Table 5 shows debt service estimates for the District’s share of WWTP costs. Annual debt service for the total debt issuances is estimated to amount to approximately $6 MM by FY 2026.
Table 5
City of Foster City / Estero Municipal Improvement District Debt Service
Debt Service FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032 FYE 2033 WIFIA Loan $0 $730,453 $2,652,882 $2,652,882 $2,652,882 $2,652,882 $2,652,882 $2,652,882 $2,652,882 $2,652,882 2019 Bonds 2,085,000 2,084,250 2,086,875 2,087,750 2,086,875 2,084,250 2,084,750 2,088,125 2,084,375 2,083,500 2023 SRF Loan/Bonds 0 134,332 1,259,604 1,259,573 1,259,540 1,259,508 1,259,475 1,259,443 1,259,410 1,259,376 Total Debt Service $2,085,000 $2,949,035 $5,999,361 $6,000,205 $5,999,297 $5,996,640 $5,997,107 $6,000,450 $5,996,666 $5,995,758 7 | P a g e
Wastewater Cost of Service Analysis
BWA performed a Wastewater Cost of Service Analysis to determine equitable cost allocation to the various user classes. BWA recommends continuing the practice of placing commercial customers into three wastewater strength categories, (low, medium and high) based on the State Water Resources Control Board (SWRCB) Wastewater Revenue Program Guidelines. Low strength wastewater (Class A) customers include banks, laundromats, retail stores, schools, churches and others as shown in Table 6.
Medium strength wastewater (Class B) customers have wastewater strength factors that are assumed to be similar to residential wastewater strength factors. They include typical commercial activities such as libraries, spas, nail salons, gas stations and bars.
High strength wastewater (Class C) customers primarily include food-related businesses such as restaurants, bakeries, dairies, wineries, catering, butcher shops and fish markets.
Table 6
City of Foster City/Estero Municipal Improvement District Strength Classifications into Low, Medium/Domestic, and High Strength Dischargers
Low Strength Banks & Financial Institutions
Barber Shops/Hair Salons (hair cutting only)
Post Offices/Government
Retail Stores
Libraries
Schools
Churches, Halls & Lodges
Parking Garages
Warehouses
Medium/Commercial/ Residential - All
Domestic Strength Appliance Repair
Beauty Shops (hair cutting w/additional treatments)
Dry Cleaners
Nail Salons
Pet Groomers
Commercial Laundromats
Bars & Taverns
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Tasting Rooms
Hospitals - General, Convalescent & Veterinarian
Hotels, Motels, B&Bs, and Vacation Rentals
Offices - Business and Professional
Offices - Medical/Dental
Pools with Restrooms (Clubhouse)
Theaters
Car Washes
High Tech Medical Manufacturing
Light Manufacturing/Industrial
Gym or Health Club
Machine Shops
Service Stations, Garages, Auto Repair Shops
Mini Marts - W/O Dish Washer or Garbage Disposal
Mini Mart with Gas Pumps - W/O Dish Washer or Garbage Disposal Spa with Various Beauty Treatments
High Strength Restaurants
Coffee Shops
Ice Cream Parlors
Catering
Eatery
Bakeries
Butcher Shops
Fish Market/Shop
Markets - with Dish Washer or Garbage
Disposal
Markets - with Bakeries or Butcher Shops
Mini Marts - with Dish Washer or Garbage Disposal
Wineries
Market
Dairies (milk producers, yogurt, ice cream maker)
Specialty Foods Manufacturing (e.g., cheese or olive oil maker)
Note: Wastewater users who have Fats, Oils, and Grease (FOG) waste will be put into the High Strength user category
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Table 7 summarizes the assumed wastewater strength factors for the low, medium and high strength groups that are based on typical strengths provided in the SWRCB’s Revenue Program Guidelines. The strength factor for medium strength customers is equivalent to residential or “domestic” strength, of 1.00. The strength factor for low strength is calculated at 0.66 and for high strength is calculated at 2.85 based on the SWRCB guidelines.
Table 7
City of Foster City/Estero Municipal Improvement District Assumed Wastewater Strength Factors
Strength Class LOW LOW-MEDIUM MEDIUM HIGH
Examples: Institutional Residential Restaurant
Bank Offices Bakery
Flow (gpd) 200 168 200 200
BOD1 (mg/l) 135 240 240 1000
TSS2 (mg/l) 100 240 240 800
Strength Factor 0.66 0.84 1.00 2.85
Strength Factor Formula SF=(Flow(gpd)/200)*(0.33+(0.34*BOD(mg/l)/240)+(0.33*TSS(mg/l)/240)) WW flows and strengths based on State Water Resources Control Board's Revenue Program Guidelines 1 "BOD" stands for Biochemical Oxygen Demand
2 "TSS" stands for Total Suspended Solids
Townhouse, Duplex,
Apartment, Condo
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Table 8 summarizes the mass-balance analysis for the City’s wastewater system and calculates the wastewater rates for each customer class. Single family residences are assumed to have an average daily (dry weather) flow of 200 gallons per day (gpd). The flow estimate is based on the State Water Resources Control Board Revenue Program Guidelines Table G-1, which estimates flow in gallons per day per person for residential dwelling units to be up to 75 gallons.
Based on residential occupancy data provided by the City of Foster City, single family residences are estimated to have an average of 2.67 residents per household and multi-family residences are estimated to have an average of 2.25 residents per household (84% of a single family household).
Multi-family dwellings are billed based on an estimated flow of 168 gpd or 0.84 times the single family flow. As a check, the mass balance in Table 8 compares the total calculated and measured daily wastewater flows for Foster City (average dry weather flow).
The results agree well with the estimated daily flow at 2.6 million gallons per day (mgd) and the measured flow at 2.4 mgd.
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Table 8
City of Foster City/Estero Municipal Improvement District Summary of Wastewater Users by Customer Class
FY 2024 Estimate
Customer Class EDU x Flow Calculated
EDUs1 ADWF Flow ADWF Flow BOD3 TSS4 Current
(gal/day) (gal/day) (mg/l) (mg/l) Rate
Residential
Single Family Residential 4,536 200 907,200 240 240 130.87 Townhouse/Duplex 2,283 168 383,544 240 240 109.93
Apartment/Condos 6,866 168 1,153,488 240 240 109.93
Subtotal 2,444,232
Use Estimated Calculated
Accounts (gal/day) Flow Factor ADWF Flow BOD3 TSS4 Current Commercial (gal/day) (mg/l) (mg/l) Rate
Low Strength 36 40,776 65% 26,504 135 100 5.50
Medium/Domestic Strength 173 212,049 52% 110,178 240 240 8.36 High Strength 43 53,890 70% 37,723 1000 800 23.78
Subtotal 306,715 174,406
Totals 2,618,638
Check Against Lowest Actual Monthly Avg. Day Flow (May 2014 from LS 59 Flow Log): 2,367,806 1 "EDU" stands for Equivalent Dwelling Unit
2 "ADWF" stands for Average Dry Weather Flow
3 "BOD" stands for Biochemical Oxygen Demand
4 "TSS" stands for Total Suspended Solids
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Low Income Discount
Currently Foster City has approximately 25 customers enrolled in the Water/Wastewater Rate Assistance Program (WWRAP), which was implemented in 2020. Customers meeting the eligibility and qualification requirements below are granted a discount of up to $15 per month each on their qualifying Wastewater accounts, not to exceed a $30 per month discount per customer. To be eligible for the WWRAP, customers must show that they qualify for the PG&E CARE Program or other public assistance program or submit proof of income eligibility.
The estimated maximum potential cost of a $15/month discount for 25 wastewater customers amounts to $4,500 per year. Since the low income discount revenue sources cannot be funded with rates, rates are unaffected by the decision on the terms of the program and hence are not required to be included in a Proposition 218 notification.
The District funds the current low income discount through non-rate sources of revenue such as fines and penalties, cell tower lease and general fund revenue to maintain compliance with California Proposition 218. The discount is recommended to be provided as funds are available.
Late penalties collected year to date for wastewater in FY 2024 amounted to $31,500, exceeding the cost of the program.
APPENDIX A
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APPENDIX B
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Table 9City of Foster City / Estero Municipal Improvement District Wastewater Enterprise Cash Flow Projection 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034Assumptions:Interest Earnings Rate 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%Revenue Increase from Growth 0.37% 0.37% 0.37% 0.37% 0.37% 0.37% 0.37% 0.37% 0.37% 0.37%Rate Adjustment 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%Monthly Service Charge for Single Family $130.87 $133.49 $136.16 $138.88 $141.66 $144.49 $147.38 $150.33 $153.34 $156.41 $159.54 Beginning O&M Fund Balance $27,456,097 $25,321,200 $25,901,000 $23,425,600 $25,488,100 $26,884,700 $28,508,200 $30,264,400 $32,258,000 $34,405,300 $36,711,500 Operating RevenuesService Charges 20,792,268 21,284,000 21,788,000 22,304,000 22,832,000 23,372,000 23,925,000 24,491,000 25,070,000 25,663,000 26,270,000Connection Fees [1] 45,500 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000Interest Earnings [2] 549,122 506,000 518,000 469,000 510,000 538,000 570,000 605,000 645,000 688,000 734,000Other Revenue 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000Operating Revenue 21,387,890 21,841,000 22,357,000 22,824,000 23,393,000 23,961,000 24,546,000 25,147,000 25,766,000 26,402,000 27,055,000 Total Revenue 21,387,890 21,841,000 22,357,000 22,824,000 23,393,000 23,961,000 24,546,000 25,147,000 25,766,000 26,402,000 27,055,000 Operating ExpensesEmployee Services 2,886,634 3,039,154 3,160,720 3,287,149 3,418,635 3,555,380 3,697,595 3,845,499 3,999,319 4,159,292 4,325,664Internal Services (from City) 1,318,932 1,557,041 1,595,967 1,635,866 1,676,763 1,718,682 1,761,649 1,805,690 1,850,832 1,897,103 1,944,531Internal Services -ERF 342,955 462,234 473,790 485,635 497,776 510,220 522,976 536,050 549,451 563,187 577,267Services & Supplies 733,550 901,950 924,499 947,611 971,301 995,584 1,020,474 1,045,986 1,072,136 1,098,939 1,126,412EMID Share WWTP O&M 3,700,000 3,700,000 4,000,000 4,200,000 5,200,000 5,300,000 5,500,000 5,600,000 5,800,000 6,000,000 6,000,000Reallocation 955,715 1,051,791 1,078,086 1,105,038 1,132,664 1,160,981 1,190,006 1,219,756 1,250,250 1,281,506 1,313,544Operating Expenses 9,937,786 10,712,170 11,233,062 11,661,299 12,897,139 13,240,847 13,692,700 14,052,981 14,521,988 15,000,027 15,287,418 Operating Net Revenue 11,450,104 11,128,830 11,123,938 11,162,701 10,495,861 10,720,153 10,853,300 11,094,019 11,244,012 11,401,973 11,767,582 Capital ExpensesTransfer Out - District CIP 11,500,000 7,600,000 7,600,000 3,100,000 3,100,000 3,100,000 3,100,000 3,100,000 3,100,000 3,100,000 3,100,000Capital Expenses 11,500,000 7,600,000 7,600,000 3,100,000 3,100,000 3,100,000 3,100,000 3,100,000 3,100,000 3,100,000 3,100,000 Annual Debt Service 2,085,000 2,949,035 5,999,361 6,000,205 5,999,297 5,996,640 5,997,107 6,000,450 5,996,666 5,995,758 5,997,475Debt Service 2,085,000 2,949,035 5,999,361 6,000,205 5,999,297 5,996,640 5,997,107 6,000,450 5,996,666 5,995,758 5,997,475 Debt Coverage [3] 5.49 3.77 1.85 1.86 1.75 1.79 1.81 1.85 1.88 1.90 1.96 Total Expenditures 23,522,786 21,261,205 24,832,423 20,761,504 21,996,436 22,337,487 22,789,807 23,153,431 23,618,654 24,095,785 24,384,893 Revenues Less Total Expenditures (2,134,896) 579,795 (2,475,423) 2,062,496 1,396,564 1,623,513 1,756,193 1,993,569 2,147,346 2,306,215 2,670,107 Ending O&M Fund 25,321,201 25,900,995 23,425,577 25,488,096 26,884,664 28,508,213 30,264,393 32,257,969 34,405,346 36,711,515 39,381,607 Cash Fund Reserve Test: Minimum Fund Balance > 25% O&M ExpensesYear-end O&M Fund 25,321,201 25,900,995 23,425,577 25,488,096 26,884,664 28,508,213 30,264,393 32,257,969 34,405,346 36,711,515 39,381,60725% Operating Expenses 2,484,447 2,678,043 2,808,266 2,915,325 3,224,285 3,310,212 3,423,175 3,513,245 3,630,497 3,750,007 3,821,855# of Days O&M in Reserves 930 883 761 798 761 786 807 838 865 893 940 Pass/fail PASS PASS PASS PASS PASS PASS PASS PASS PASS PASS PASS [1] Growth projections for planning purposes [2] Projected interest calculated as 2% of the Beginning Fund Balance of the Wastewater O&M Fund.[3] Minimum requirement debt service covereage requirement = 1.25x Five Year Projection Extended Year Projection
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Table 10
City of Foster City / Estero Municipal Improvement District Projected Wastewater Rate Impacts
Current
FY2024 FY2025 FY2026 FY2027 FY2028 FY2029
% Rate Increase 2.00% 2.00% 2.00% 2.00% 2.00%
Residential (flat monthly rate)
Single Family $130.87 $133.49 $136.16 $138.88 $141.66 $144.49 Increase (Decrease) 2.62 2.67 2.72 2.78 2.83
Townhouse/Duplex $109.93 $112.13 $114.37 $116.66 $118.99 $121.37 Increase (Decrease) 2.20 2.24 2.29 2.33 2.38
Apartment/Condominium (Pools w/ Restrooms) $109.93 $112.13 $114.37 $116.66 $118.99 $121.37 Increase (Decrease) 2.20 2.24 2.29 2.33 2.38
Commercial (rate per ccf of water use)
High Strength $23.78 $24.26 $24.75 $25.25 $25.76 $26.28 Increase (Decrease) per ccf 0.48 0.49 0.50 0.51 0.52
Medium/Domestic Strength $8.36 $8.53 $8.70 $8.87 $9.05 $9.23 Increase (Decrease) per ccf 0.17 0.17 0.17 0.18 0.18
Low Strength $5.50 $5.61 $5.72 $5.83 $5.95 $6.07
Increase (Decrease) per ccf 0.11 0.11 0.11 0.12 0.12
Projected - Fiscal Year Ending June 30Projected Rates
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Table 11
City of Foster City / Estero Municipal Improvement District Projected Wastewater Rate Impacts
Current
FY2024 FY2025 FY2026 FY2027 FY2028 FY2029
% Rate Increase
Single Family Residential Flat Monthly Flat $130.87 $133.49 $136.16 $138.88 $141.66 $144.49 $ Increase (Decrease) 2.62 2.67 2.72 2.78 2.83
% Increase (Decrease) 2.00% 2.00% 2.00% 2.00% 2.00%
Projected - Fiscal Year Ending June 30Rate Change Scenarios 17 | P a g e
CHART C
APPENDIX C
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