Water and Sewer Rate Study
Progress Update
City Council Workshop
August 7, 2023
Alison Lechowicz
Project Manager
CITY OF GONZALES
Background
▪ Last comprehensive water and sewer rate study was conducted in 1989 ▪ Last water and sewer CPI rate increase was July 1, 2023 (+5.3%) ▪ The City is facing significant growth from industrial customers and needs to re-evaluate rates for service expansion
▪ Water and Sewer Funds are Enterprise Funds -> should be self-supported by rates
▪ Rate study will cover a 5-year period
▪ First rate change January 1, 2024
▪ January 1 of 2025, 2026, 2027, 2028
2 Proposition 218
▪ Governs how property-related charges are adopted
▪ Covers rates over a maximum 5-year period
▪ Rates must be based on the reasonable cost of service and proportionally recover costs based on how customers take service
▪ Tiered water rates cannot be adopted unless based on the actual cost to deliver water at various levels of use (San Juan Capistrano legal ruling) ▪ Procedural requirements:
▪ Conduct a rate study
▪ Mail a notice to property owners
▪ Hold a public hearing a minimum of 45 days after notice is mailed ▪ Rates cannot be adopted if more than 50% of ratepayers submit written protests 3 Water Cost of Service Analysis FY2024
▪ Estimated current reserves of $3.0M as of July 1, 2023 ▪ Last year, revenues of about $2.3M covered operating costs of $2M and provided $300,000 net revenues for
▪ Debt repayment of $229,000
▪ $35,000 of capital projects
▪ $57,000 contribution to reserves
▪ Upcoming cost of service increases
▪ Inflationary cost increases for services and supplies ▪ $6.1M over the next three years for pipeline replacements plus $1M for a new tank ▪ These major projects are proposed to be debt funded resulting in new debt service payments of about $450,000 annually
▪ Up to $250,000 for vehicle replacements and miscellaneous repairs ▪ Proposed rate revenue increases of +7% per year
4 Review of Current Monthly Water Rates
5 Meter Fees July 1, 2023
Residential Per Meter
5/8" meter $22.12
1" meter $23.50
Multi-Family
1-1/2" meter $24.86
2" meter $26.26
2-1/2" meter $27.28
Commercial
3" meter $29.12
4" meter $30.53
6" meter $31.94
Unmetered Service
/Standby
$33.30
Review of Current Monthly Water Rates
6 Consumption Fees* July 1, 2023
Residential/Commercial Charge per Unit
0 - 25 ccf $2.27
26 - 30 ccf $2.35
31 - 49 ccf $2.56
50+ ccf $2.84
Industrial Users
All use $2.27
*One unit = 100 Cubic Feet (ccf) = 748 gallons
About 90% of single
family residential use
falls in Tier 1
Proposed Water Rate Adjustments
▪ Adopt a rate structure compliant with Proposition 218 / San Juan Capistrano legal ruling
▪ Current tiers are not cost-justified; do not reflect water use patterns ▪ Eliminate the tiers
▪ Customers will pay uniform consumption charges (i.e. same $/ccf charge for all levels of use)
▪ Realign the meter fee with max capacity of each meter size ▪ Larger meter sizes will pay higher meter fees
▪ 5/8” and 1” meters will be charged the same meter fees 7 Proposed Water Meter Fees
8 Proposed
Fiscal Year Current 2023/24 2024/25 2025/26 2026/27 2027/28 Effective Date Jan. 1, 2024 Jan. 1, 2025 Jan. 1, 2026 Jan. 1, 2027 Jan. 1, 2028 Meter Size +7% +7% +7% +7%
5/8" $22.12 $23.06 $24.68 $26.40 $28.25 $30.22
1" $23.50 $23.50 $24.68 $26.40 $28.25 $30.22
1-1/2" $24.86 $46.12 $49.36 $52.80 $56.50 $60.44
2" $26.26 $73.79 $78.98 $84.48 $90.40 $96.70
2-1/2" $27.28 $110.69 $118.46 $126.72 $135.60 $145.06
3" $29.12 $147.58 $157.95 $168.96 $180.80 $193.41
4" $30.53 $230.60 $246.80 $264.00 $282.50 $302.20
6" $31.94 $461.20 $493.60 $528.00 $565.00 $604.40
9 10
11 12
Proposed Water Volume Rates
13 Proposed
Fiscal Year Current 2023/24 2024/25 2025/26 2026/27 2027/28 Effective Date Jan. 1, 2024 Jan. 1, 2025 Jan. 1, 2026 Jan. 1, 2027 Jan. 1, 2028 Volume Rates ($/ccf charged to all usage)
Residential/Commercial +7% +7% +7% +7%
0 - 25 ccf $2.27 $2.41 $2.58 $2.76 $2.95 $3.16
26 - 30 ccf $2.35 $2.41 $2.58 $2.76 $2.95 $3.16
31 - 49 ccf $2.56 $2.41 $2.58 $2.76 $2.95 $3.16
50+ ccf $2.84 $2.41 $2.58 $2.76 $2.95 $3.16
Industrial Users
All use $2.27 $2.41 $2.58 $2.76 $2.95 $3.16
Water Rate Survey – Typical Bills
14 Sewer Cost of Service Analysis FY2024
▪ Estimated current reserves of $1.2M as of July 1, 2023 ▪ Estimated operating revenues of $2M to cover about $1.1M of operating costs plus $100,000 to $200,000 of capital outlay
▪ Major upcoming capital projects:
▪ SRF loan will be used to construct new industrial treatment plant ($25M) ▪ New debt service cost of $1.25M expected to begin in FY2026 ▪ In addition, the sewer utility will fund $3.6M of improvements to the existing treatment plant and collection system
▪ Proposed rate revenue increases:
15 2023/24 2024/25 2025/26 2026/27 2027/28
Rate Revenue
Increase 27.0% 27.0% 27.0% CPI (3%) CPI (3%)
Review of Current Sewer Rates
16 Customer Class Rates [1]
Residential $31.77 + $2.35 for Lift Pump Users (if applicable) Commercial $15.18 + $2.40 per unit
Industrial $312.62 + $2.40 per unit
Schools $0.91 per Student Average Daily Attendance [2]
1 - Effective July 1, 2023
2 - Schools are billed annually rather than monthly
Sewer Rate Design
17 ▪ Proposed customer service fee of $11.30/month for all customers ▪ Plus a flow charge of $3.38 per ccf to cover the costs to convey, treat, and dispose of wastewater
▪ Average residential flow is 205 gallons per day = 8.336 ccf/month Estimated
Monthly
Flow (ccf)
Flow Charge
($/ccf)
Total Flow
Charge
Customer
Service Fee
($/month)
Total
Monthly
Charge
8.336 x $3.38 $28.18 $11.30 $39.48
Proposed Sewer Rates
18 Proposed
Fiscal Year Current 2023/24 2024/25 2025/26 2026/27 2027/28 Effective Date July 1, 2023 Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Fixed Charge per Month ($/account)
+27% +27% +3% +3%
Residential $31.77 $39.48 $50.13 $63.67 $65.58 $67.55
Commercial $15.18 $11.30 $14.35 $18.22 $18.77 $19.33
Industrial $312.62 $11.30 $14.35 $18.22 $18.77 $19.33
Schools $0.91 $1.04 $1.32 $1.68 $1.73 $1.78
Commercial & Industrial Volume Rate ($/ccf) (in addition to fixed charge) $2.40 $3.38 $4.29 $5.45 $5.61 $5.78
Note: Schools are billed annually rather than monthly based on reported average daily attendance (ADA) Sewer Rate Survey
19 Average Water + Sewer Utility Bill
20 Current
(July 1, 2023)
Proposed
(Jan 1, 2024) Increase
Water Meter Fee
(5/8”) $22.12 $23.06 $0.94
Current
(July 1, 2023)
Proposed
(Jan 1, 2024) Increase
Water Meter Fee
(5/8”) $22.12 $23.06 $0.94
Water Usage
Charges
(12 ccf)
$27.24 $28.92 $1.68
Current
(July 1, 2023)
Proposed
(Jan 1, 2024) Increase
Water Meter Fee
(5/8”) $22.12 $23.06 $0.94
Water Usage
Charges
(12 ccf)
$27.24 $28.92 $1.68
Sewer Charges $31.77 $39.48 $7.71
Total $81.13 $91.46 $10.33
Rate Study Schedule
▪ August 7 – Present initial rate recommendations to City Council ▪ September TBD – Community Outreach Meeting
▪ October 2 – Present final report to City Council
▪ October 20 – Mail Prop 218 notice of rate hearing to customers ▪ October/November – 45-day Prop 218 waiting period; conduct ratepayer outreach
▪ December 4 – Proposition 218 hearing
▪ January 1 – Implement new rates absent a majority protest 21 Questions?
22