Water and Sewer Rate Study
Final Recommendations
City Council Workshop
September 18, 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
Self-supported by rates
Separate from the General Fund
Rate study will cover a 5-year period
First rate increase effective January 1, 2024
Subsequent increases will go into effect on 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 FUND
4 Water Cost of Service Analysis FY2024
Estimated current reserves of $3.0M as of July 1, 2023 Last year, revenues of about $2.2M covered operating costs of $2M and provided $300,000 net revenues
Debt repayment of $229,000
$35,000 of capital projects
$57,000 contribution to reserves
Upcoming cost of service increases
Inflationary cost increases for operating expenses
City will borrow to fund $7.1M in capital projects for pipeline replacements and a new tank New debt service payments of about $450,000 annually beginning in 2024/25 Up to $250,000 for vehicle replacements and miscellaneous repairs Proposed rate revenue increases of +7% per year
5 2023/24 2024/25 2025/26 2026/27 2027/28
Rate Revenue
Increase 7.0% 7.0% 7.0% 7.0% 7.0%
6 Current Monthly Water Rates
7 Water Service Fees
Residential Per Meter
5/8" meter $21.01
1" meter $22.31
Multi-Family
1-1/2" meter $23.61
2" meter $24.94
2-1/2" meter $25.91
Commercial
3" meter $27.66
4" meter $28.99
6" meter $30.33
Unmetered Service/Standby $31.62
Consumption Fees*
Residential/Commercial Charge per ccf
0 - 25 ccf $2.16
26 - 30 ccf $2.23
31 - 49 ccf $2.43
50+ ccf $2.69
Industrial Users
All use $2.16
*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 tiered rate structure for residential and commercial customers All customer classes will pay uniform consumption charges (i.e. same $/ccf charge for all levels of use)
Add drought rates to make the City financially whole if water sales decrease due to drought Fund about $40,000/year in low income discounts through non-rate revenues Realign the fixed meter fee with max capacity of each meter size Larger meter sizes will pay higher meter fees based on capacity 5/8” and 1” meters will be combined and will be charged the same meter fee About 97% of customers have either a 5/8” or 1” meter 8 Proposed Water Meter Fees
9 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 $604.40
10 11
12 13
Proposed Water Volume Rates
14 Proposed
Fiscal Year Current 2023/24 2024/25 2025/26 2026/27 2027/28 Effective Date Jan. 1, 2024 Jan. 1, 2025 Jan. 1, 2026 Jan. 1, 2027 Jan. 1, 2028 Volume Rates ($/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
10% Water Cutback $2.61 $2.79 $2.98 $3.19 $3.42
25% Water Cutback $3.00 $3.21 $3.43 $3.67 $3.93
40% Water Cutback $3.58 $3.83 $4.10 $4.39 $4.69
Water Rate Survey – Avg Single Family Bill
15 SEWER FUND
16 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 payments of $1.25M expected to begin in FY2027 In addition, the sewer utility will fund $3.6M of improvements to the existing treatment plant and collection system
Must fund $1.25M debt service reserve from rates
Proposed rate revenue increases:
17 2023/24 2024/25 2025/26 2026/27 2027/28
Rate Revenue
Increase 20.0% 20.0% 20.0% 6% 6%
18 Current Sewer Rates
19 Sewer Flat Rate Per Account
Residential $31.77
Commercial $22.31
Industrial 312.62
Volume Rate Per ccf*
Commercial & Industrial $2.40
Lift Pump Users Per Account
Residential $2.35
Schools (Billed Annually) Per ADA
Average Daily Attendance (ADA) $0.91
*One unit = 100 Cubic Feet (ccf) = 748 gallons
Sewer Rate Design
20 Proposed customer service fee of $10.57/month for all customers Plus a flow charge of $3.39 per ccf to cover the costs to convey, treat, and dispose of wastewater
Average residential flow is 205 gallons per day = 8.336 ccf/month Estimated
Monthly Flow
(ccf)
Flow Charge
($/ccf)
Total Flow
Charge
Customer
Service Fee
($/month)
Total Monthly
Charge
8.336 x $3.39 $28.26 $10.57 $38.83
Proposed Sewer Rates
21 Proposed
Fiscal Year Current 2023/24 2024/25 2025/26 2026/27 2027/28 Effective Date July 1, 2023 Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Fixed Charge per Month ($/account)
+20% +20% +6% +6%
Residential $31.77 $38.83 $46.60 $55.92 $59.28 $62.84
Commercial $15.18 $10.57 $12.68 $15.22 $16.13 $17.10
Industrial $312.62 $10.57 $12.68 $15.22 $16.13 $17.10
Schools $0.91 $1.04 $1.24 $1.49 $1.58 $1.67
Commercial & Industrial Volume Rate ($/ccf) (in addition to fixed charge) $2.40 $3.39 $4.06 $4.87 $5.16 $5.47
Note: Schools are billed annually rather than monthly based on reported average daily attendance (ADA) Sewer Rate Survey – Single Family Residential
22 Average Water + Sewer Utility Bill
23 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 $38.83 $7.06
Total $81.13 $90.81 $9.68
Rate Study Schedule
September 18: Present final recommendations to City Council September/October: Community Outreach
September 29 : Mail Prop 218 notice to customers
October/November: 45-day Prop 218 waiting period; conduct ratepayer outreach November 20: Proposition 218 hearing
January 1: Implement new rates absent a majority protest 24 Questions?
25