NOTICE OF SPECIAL MEETING OF THE GROVER BEACH CITY COUNCIL A Special Meeting of the City Council of the City of Grover Beach is hereby called for Tuesday, September 5, 2023 at 6:00 p.m. this City Council Special Meeting will be held in the Council Chamber at City Hall at 154 S. 8th Street, Grover Beach, CA 93433, to consider the matters set forth in the attached Special Meeting Agenda.
________________________________
KAREN BRIGHT, MAYOR
SPECIAL MEETING AGENDA
GROVER BEACH CITY COUNCIL
TUESDAY, SEPTEMBER 5, 2023 @ 6:00 P.M.
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a City meeting, please contact the City Clerk's Office (805) 473-4568 at least 48 hours prior to the meeting to ensure that reasonable arrangements can be made to provide accessibility to the meeting.
CALL TO ORDER
ROLL CALL
City Council: Council Members Daniel Rushing, Clint Weirick, Zach Zimmerman, Mayor Pro Tem Robert Robert, and Mayor Karen Bright.
PUBLIC COMMUNICATIONS Any member of the public may address the Council for a period not to exceed three minutes total on any item described in this Agenda. The Council will listen to all communications; however, in compliance with the Brown Act, the Council cannot act on items not on the agenda.
WORKSHOP
1. Utility Rate Study Workshop – Administrative Services Director Purcell (Recommended Action: Receive Utility Rate Study findings and recommendations and provide questions and comments to staff along with direction on the Proposition 218 noticing process.)
ADJOURNMENT
* * * * *
Staff reports or other written materials relating to each item of business referred to on this agenda are on file in the City Clerk’s Office and are available for public inspection and reproduction during normal business hours at City Hall, 154 South 8th Street, Grover Beach, CA. If you have questions regarding any agenda item, please contact the appropriate City Department.
Note: This agenda was prepared and posted pursuant to Government Code Section 54956. Please refer to the agenda posted at City Hall for any revisions or call the City Clerk’s Office at (805) 473-4567 for more information.
Meetings can be viewed on Channel 20 and are live streamed on the City’s website and on www.slospan.org. Members of the public may provide public comment during the meeting by calling (805) 321- 6639 to provide public comment via phone (the phone line will open just prior to the start of the meeting at 6:00 PM) or written public comments can be submitted via email to [email protected] prior to 3:00 PM. If submitting written comments in advance of the meeting, please note the agenda item.
Agenda: Special City Council Meeting
Tuesday, September 5, 2023 Page 2
c: Mayor and Council Members
Commissions & Committee Members
City Manager; City Attorney
Department Directors
Media: The Tribune / New Times
Post: City Hall
Agenda Item No. 1
$3.6
CITY COUNCIL STAFF REPORT
TO: Honorable Mayor and City Council DATE: September 5, 2023 FROM: Matthew Bronson, City Manager
PREPARED BY: Deanne Purcell, Administrative Services Director SUBJECT: Utility Rate Study Workshop
RECOMMENDATION
Receive Utility Rate Study findings and recommendations and provide questions and comments to staff along with direction on the Proposition 218 noticing process.
BACKGROUND
In 2023, the City contracted with Tuckfield and Associates (Tuckfield) to conduct a Utility Rate Study for both Water and Wastewater Enterprise Funds. A rate study is recommended to be conducted approximately every five years to ensure the City will have sufficient water and wastewater revenues to meet ongoing operational and capital obligations. Over the past 10 years, the City has conducted two prior rate studies: a study in 2016 with a five-year rate structure approved by the Council on March 6, 2017 and a subsequent study in 2020 with a five-year rate structure approved by the Council on May 10, 2021. Staff initiated the current rate study earlier than the normal five-year cycle after determining that revenues from the existing rate structure are insufficient to fund increased infrastructure and capital project needs in the City’s water and wastewater systems.
Staff worked closely with Tuckfield to produce the comprehensive review of the City’s utility rates including an extensive review of current water and wastewater rates and future operating and capital costs to the Water and Wastewater Enterprise Funds. The desired outcome of this study was to ensure that the rates are sufficient to cover costs associated with ongoing maintenance and operations of the water and wastewater utilities. The rates should also fund anticipated capital improvement costs for needed infrastructure improvements and water resiliency projects while supporting debt service obligations and maintaining reserves equal to at least six months of typical maintenance and operations expenditures in accordance with industry standards.
Overview of Water System Needs
A key objective of this rate study was to develop future water rates to provide funding for the City’s share of costs for the Central Coast Blue recycled water project. Central Coast Blue is a local water sustainability project that will create a new, high quality, and reliable water supply for residents and businesses in the cities of Arroyo Grande, Grover Beach, and Pismo Beach. The City is working with the other two agencies to design an advanced water purification facility located in Grover Beach that will produce this new water source to supplement existing supply and provide sufficient water even in times of water shortage or drought. This water resiliency project would also protect the groundwater basin from seawater intrusion which would contaminate the water supply in the basin.
Staff Report: Utility Rate Study Findings and Recommendations Page 2 September 5, 2023
The Council has received numerous updates on this project most recently at the June 5th joint meeting of the three City Councils. As the Council is aware, the cost of the project has gone up substantially since the last rate study in 2020 given increased costs of construction, equipment, and other items. The future water rates proposed in the current study are needed to support this project, including pre-construction, construction, and future operating and maintenance costs of Central Coast Blue. The Central Coast Blue pre-construction costs are estimated at $6.34 million, and the construction phase is expected to cost $92.99 million for a total project cost of $99.33 million. The Cost Sharing Agreement approved by the three cities determined that cost sharing would be 39% by Pismo Beach, 36% by Grover Beach, and 25% by Arroyo Grande.
The cities are working with Water Systems Consulting, Inc. (WSC) to apply for various federal and state grants that would help support the Central Coast Blue project. The project has been awarded $2 million for a Proposition 1 Planning Grant supporting project planning efforts in 2019- 22 with an additional $8 million awarded for the Proposition 1 Groundwater Grant Program. The Water Recycling Funding Program selected this project for an award of $15 million that is guaranteed when the agencies forgo the State Revolving fund loan. Instead, the project will be financed through the U.S. Environmental Protection Agency Water Infrastructure Finance and Innovation Act (WIFIA) loan program. A Federal Title XVI Water Reclamation & Reuse Grant has also been awarded in the amount of $14.1 million as well as the Proposition 1 Integrated Regional Water Management grant of $1 million.
All told, these grants total nearly $40 million in funding awarded or anticipated to be awarded with additional funding opportunities identified. An additional $10.8 million will be requested through the Federal Title XVI Water Reclamation & Reuse Grant program in subsequent funding rounds.
Although staff and WSC believe it is highly likely that this additional funding will be awarded, the application has not been submitted and the final amount will depend on eligible costs after construction bids are received. The City of Grover Beach has not included this grant in the rate study since it has not yet been received. However, if the grant is awarded, this would help reduce the rate increases for future years based on staff review and Council approval.
The current rate study also evaluated the significant reduction in water revenues that resulted from a large reduction of water usage due to both water conservation efforts in the last couple of years and the recent winter storms. These revenue losses of approximately $400,000 create the need to build back water reserve balances that were used due to lower than unanticipated revenues. Lastly, the rate study also incorporated debt service funding and coverage requirements for bonds related to Lopez Lake and water system upgrades.
Overview of Wastewater System Needs
The future wastewater rates include providing funding for sewer system upgrades that modernize outdated wastewater infrastructure and meet future development needs in the community. Key streets included in this list of wastewater system upgrades include Manhattan Avenue, South 4th Street, North 8th Street, Ramona Avenue, and North 9th Street. The most recent Five-Year Capital Improvement Program adopted with the FY 2023-25 budget projected the total cost of the next wastewater system upgrade project to be $2.9 million, although the project is now estimated to cost approximately $3.6 million. The improvements in this project have an estimated life of 50 years. Due to the significant cost of the project as compared to the estimated life of the improvements, staff determined that it would be prudent to finance the project to spread the cost over time and minimize the burden on the current rate payers. Additional wastewater infrastructure work is also included in the rate study.
Staff Report: Utility Rate Study Findings and Recommendations Page 3 September 5, 2023
Rate Study Overview
The Utility Rate Study report is included as Attachment 1. Representatives from Tuckfield will be available at the September 5th meeting to answer questions regarding the findings and recommendations contained in the report. The key elements of the study include:
• Develop a five-year financial plan for the water and wastewater utilities to ensure financial sufficiency, recover operation and maintenance costs, ensure sufficient funding for capital projects, including the Central Coast Blue project, and preserve the health of both utilities • Perform cost-of-service analysis which calculates the cost to serve each customer class • Develop water and wastewater rates for FY 2023-24 through FY 2027-28 that are fair, equitable, and in proportion to the cost of providing service to the City’s customers.
The wastewater rates cover the City’s cost of ongoing operations, maintenance and repair of the City’s wastewater collection system. The cost for treatment by the South San Luis Obispo County Sanitation District (District) were not studied and are a direct pass-thru from the District as these costs are billed to ratepayers with revenue remitted by the City to the District.
Findings and Recommendations
The revenue analysis as part of the study concludes that revenue projections from the water and wastewater utilities for FY 2023-24 through FY 2027-28 based on existing rates are insufficient to keep pace with increasing operating, capital improvement, and debt service obligation costs. As a result, the study recommends annual water rate increases of 19.7% for years 1-4 beginning in January 2024 along with a 4% increase in year 5 and annual wastewater rate increases of 19.5% for years 1-4 beginning in January 2024 along with a 4% increase in year 5. The average bimonthly bill for residential water customers using 15 units per billing period is projected to increase from $94 to $130 ($36 increase bi-monthly or $18 per month). For sewer customers, the projected increase is from $77 to $82 ($5 increase bi-monthly or $2.50 per month). The combined total increase is from $170 to $211 ($41 increase bi-monthly or $20.50 per month).
Attachment 2 identifies how current and recommended utility rates in Grover Beach compare with other cities and unincorporated areas in the county. Currently, the City’s water rates are the lowest in the county and the wastewater rates are the third lowest. If the proposed rate increases are adopted and go into effect in January 2024, both the water and wastewater rates would be the third lowest in the county behind Paso Robles and Atascadero for water and Oceano and Arroyo Grande for wastewater. Modernizing and upgrading utility infrastructure is occurring throughout the county with resulting rate increases enacted by respective communities. Lastly, staff would add that the City has a Utility Assistance Program that provides a billing discount to low-income customers that are enrolled in the PG&E or Gas Company Care Program. The Council approved this program several years ago and the operating budget allocates $50,000 annually paid out of the General Fund.
Following the presentation of this information and questions and comments from the Council, staff is seeking Council direction on preparing an agenda item for September 25 authorizing the Proposition 218 noticing process for a public hearing on changes to the water and wastewater utility rates. Notices would be sent out to customers to inform them of the recommended rate increases and the date of the public hearing, which would be scheduled for the November 13, 2023 Council meeting. Pending the public hearing and a related protest vote of less than 50% plus one along with subsequent Council action approving the fees, the new rates would go into effect on January 1, 2024, with the first billing sent out in the spring.
Staff Report: Utility Rate Study Findings and Recommendations Page 4 September 5, 2023
FISCAL IMPACT
The Utility Rate Study has identified insufficient revenue in the Water and Wastewater Funds.
Tuckfield is recommending rate increases to eliminate the projected revenue deficiencies in funding the necessary operating and capital reserves along with requirements for reserves and debt service for the Enterprise Funds. The recommended rate increases would result in additional Water Fund revenue of approximately $318,000 and additional Wastewater Fund revenue of $77,000 for FY 2023-24.
ALTERNATIVES
The Council has the following alternatives to consider:
1. Receive Utility Rate Study findings and recommendations and provide direction to staff to return to Council on September 25, 2023, for formal approval to proceed with implementing the Proposition 218 noticing process; or
2. Provide alternate direction to staff.
PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.
Attachments
1. Utility Rate Study
2. Utility Billing Comparison with Other Communities in San Luis Obispo County Submitted By:
Tuckfield & Associates
Contact: Mr. Clayton Tuckfield
2549 Eastbluff Dr, #450B
Newport Beach, CA 92660
(949) 760-9454
www.tuckfieldassociates.com
August 2023
Report To:
City of Grover Beach
154 S. Eighth Street
Grover Beach, CA 93433
(805) 473-4550
Report on
Water and Wastewater
Rate Study
DRAFT
Attachment 1
DRAFT
[This Page Intentionally Left Blank for Two-sided Printing] Tuckfield & Associates
2549 Eastbluff Drive, Suite 450B, Newport Beach, CA 92660 Phone (949) 760-9454 Fax (949) 760-2725
Email [email protected]
DRAFT
August 31, 2023
Ms. Deanne Purcell
Administrative Services Director
City of Grover Beach
154 S. Eighth Street
Grover Beach, CA 93433
Dear Ms. Purcell:
I am pleased to present this Water and Wastewater Rate Study (Study) report to the City of Grover Beach (City).
The water and wastewater rates presented in this report have been developed based on cost of service principles and industry methods that result in fair and equitable rates for the users of the water and wastewater system in accordance with Proposition 218.
This Study includes the City’s share of capital and operation and maintenance costs of the future Central Coast Blue (CCB) project into the City’s Water Fund. CCB is a regional recycled water project that will create a new, high quality, and reliable water supply for the communities of Pismo Beach, Grover Beach, and Arroyo Grande.
These cities are designing and building a new advanced water purification facility to create a high-quality water source to supplement local supplies.
The CCB project will allow the cities of Grover Beach, Pismo Beach, and Arroyo Grande to have sufficient water supplies even in times of drought. The facilities of the CCB project include pipelines and storage of recycled water, advanced treatment, recycled water pump station, and injection wells. The City’s share of the CCB project is 36 percent, whereas the City of Pismo Beach and Arroyo Grande’s share is 39 percent and 25 percent respectively.
This study includes a review and analysis of the water and wastewater enterprise revenue and revenue requirements, number of customers, volumes, and current rate structure. The major objectives of the Study include the following.
Generate positive levels of income in the Study period Maintain operating and capital reserves at or greater than target levels Maintain debt service coverage ratios at or greater than the minimum required Meet annual capital replacement and improvement requirements through revenue from rates and charges, financing, and reserves
This report presents the findings and recommendations for the financial plans and rates for the City’s water and wastewater enterprises. Tables and figures throughout the report are provided to demonstrate the calculations.
Ms. Deanne Purcell Page 2
City of Grover Beach August 31, 2023
DRAFT
It has been a pleasure to work with City staff during the performance of this study. If there are any questions, please contact me at (949) 760-9454.
Very Truly Yours,
TUCKFIELD & ASSOCIATES
G. Clayton Tuckfield
President/Project Consultant
Water and Wastewater Rate Study
City of Grover Beach
Table of Contents
Page
DRAFT
Executive Summary ............................................................................................... 1 Water Financial Plan ....................................................................................................................................... 1 Proposed Water Rates .................................................................................................................................... 2 Current Water Rates ................................................................................................................................ 2 Proposed Water Rate Structure and Rates ............................................................................................. 3 Water Bill Impacts ........................................................................................................................................... 3 Water Rate Survey .......................................................................................................................................... 4 Wastewater Financial Plan .............................................................................................................................. 5 Proposed Wastewater Rates .......................................................................................................................... 6 Current Wastewater Rates ...................................................................................................................... 6 Proposed Wastewater Rate Structure and Rates.................................................................................... 6 Wastewater Bill Impacts .................................................................................................................................. 6 Wastewater Rate Survey ................................................................................................................................ 7 Introduction ............................................................................................................. 9 Background ..................................................................................................................................................... 9 Objectives ...................................................................................................................................................... 10 Scope of Study .............................................................................................................................................. 10 Assumptions ......................................................................................................... 10 Reserve Policy .............................................................................................................................................. 11 Beginning Balances and Reserve Targets .................................................................................................... 12 Water Financial Planning ..................................................................................... 12 Current Water Rates ..................................................................................................................................... 12 Water User Classifications ............................................................................................................................ 13 Number of Customers............................................................................................................................ 13 Number of Water Meters ....................................................................................................................... 13 Water Sales Volumes ............................................................................................................................ 14 Water Financial Plan ..................................................................................................................................... 14 Revenues ............................................................................................................................................... 15 Miscellaneous Revenues ............................................................................................................... 15 Revenue Requirements ......................................................................................................................... 16 Operation and Maintenance Expense ............................................................................................ 16 Lopez Water Supply Expense ........................................................................................................ 16 Central Coast Blue Project Expense .............................................................................................. 16 Water and Wastewater Rate Study
City of Grover Beach
Table of Contents (continued)
Page
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JPA O&M Expense ........................................................................................................................ 16 CCB Operating and Capital Reserves Expense ............................................................................ 16 Capital Improvement Funding ........................................................................................................ 17 Debt Service ................................................................................................................................... 17 Water Capital Improvement Program .................................................................................................... 18 Water Financial Plan .............................................................................................................................. 18 Proposed Revenue Adjustments.................................................................................................... 19 Water Cost of Service .......................................................................................... 21 Industry Methodology .................................................................................................................................... 21 Costs of Service to be Allocated ................................................................................................................... 22 Water Rate Design ................................................................................................ 22 Proposed Rate Structure ............................................................................................................................... 23 Proposed Fixed Charges ..................................................................................................................... 23 Proposed Variable Charges ................................................................................................................. 24 Tier Definitions................................................................................................................................ 24 Deliver Costs .................................................................................................................................. 24 Peaking Costs ................................................................................................................................ 25 Water Supply Costs........................................................................................................................ 25 Water Conservation Costs ............................................................................................................. 26 Proposed Variable Rates ............................................................................................................... 26 Proposed Water Rates .................................................................................................................................. 27 Water Bill Impact Analysis ................................................................................... 28 Water Rate Survey ................................................................................................ 30 Wastewater Financial Planning ........................................................................... 31 Current Wastewater Rates ............................................................................................................................ 31 Wastewater User Classifications ................................................................................................................... 32 Number of Customers............................................................................................................................ 32 Wastewater Financial Plan ............................................................................................................................ 32 Revenues ............................................................................................................................................... 32 Miscellaneous Revenues ............................................................................................................... 33 Revenue Requirements ......................................................................................................................... 33 Operation and Maintenance Expense ............................................................................................ 33 Capital Improvement Funding ........................................................................................................ 33 Water and Wastewater Rate Study
City of Grover Beach
Table of Contents (continued)
Page
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Debt Service .......................................................................................................................................... 34 Wastewater Capital Improvement Program........................................................................................... 34 Wastewater Financial Plan .................................................................................................................... 35 Proposed Revenue Adjustments.................................................................................................... 35 Wastewater Cost of Service ................................................................................ 37 Wastewater Rate Design ...................................................................................... 38 Proposed Wastewater Rates ................................................................................................................. 38 Wastewater Bill Impact Analysis ......................................................................... 39 Wastewater Rate Survey ...................................................................................... 40 List of Tables
Table ES-1 Proposed Water Fixed Charges and Variable Charges ................................................................. 2 Table ES-2 Comparison of Current Single-family Residential Bi-Monthly Bills with a 3/4-inch Meter with Proposed Bills Using January 2024 Water Rates ......................................................................... 3 Table ES-3 Proposed Wastewater Fixed Charges ........................................................................................... 6 Table 1 Assumptions and Planning Factors .............................................................................................. 11 Table 2 June 30, 2022 Beginning Cash Balances and Reserve Targets .................................................. 12 Table 3 Current Water Rates .................................................................................................................... 13 Table 4 Historical and Projected Water Customers by Classification ....................................................... 13 Table 5 Historical and Projected Number of Water Meters by Size .......................................................... 14 Table 6 Historical and Projected Water Consumption (in HCF) ................................................................ 14 Table 7 Projected Rate-based Water Revenue Using Existing Rates ...................................................... 15 Table 8 Projected Miscellaneous Water Revenue .................................................................................... 15 Table 9 Projected Water Operation and Maintenance Expense ............................................................... 17 Table 10 Water Capital Improvement Program ........................................................................................... 18 Table 11 Water Financial Plan .................................................................................................................... 19 Table 12 Allocation of Water Revenue Requirements to Cost Component ................................................ 22 Table 13 Design of Monthly Water Fixed Charges ..................................................................................... 23 Table 14 Design of Monthly Fixed Charges by Meter Size ......................................................................... 24 Table 15 Design of Uniform Volume Rate for Delivery Costs ..................................................................... 25 Table 16 Design of Residential Peaking Rate ............................................................................................. 25 Table 17 Design of Water Supply Rate by Tier ........................................................................................... 26 Table 18 Design of Residential Conservation Rate..................................................................................... 26 Water and Wastewater Rate Study
City of Grover Beach
Table of Contents (continued)
Page
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Table 19 Design of Water Variable Rates ................................................................................................... 27 Table 20 Proposed Water Fixed Charges and Variable Charges ............................................................... 28 Table 21 Comparison of Current Single-family Residential Bi-Monthly Water Bills with a 3/4-inch Meter With Proposed Bills Using January 2024 Water Rates ................................................................ 29 Table 22 Current Wastewater Rates ........................................................................................................... 31 Table 23 Historical and Projected Wastewater Customers by Classification .............................................. 32 Table 24 Projected Rate-based Wastewater Revenue Using Current Rates ............................................. 33 Table 25 Projected Miscellaneous Wastewater Revenue ........................................................................... 33 Table 26 Projected Wastewater Operation and Maintenance Expense ..................................................... 34 Table 27 Wastewater Capital Improvement Program ................................................................................. 35 Table 28 Wastewater Financial Plan ........................................................................................................... 36 Table 29 Proposed Wastewater Rates ....................................................................................................... 39 List of Figures
Figure ES-1 Current and Future Single-family Residential Bi-monthly Water Bills at 15 HCF ........................... 4 Figure ES-2 Current and Future Single-family Residential Bi-monthly Wastewater Bills ................................... 7 Figure 1 Water Financial Plan Comparison of Revenue with Revenue Requirements .............................. 20 Figure 2 Water Reserves versus Target Reserves .................................................................................... 21 Figure 3 Current and Future Single-family Residential Bi-monthly Water Bills at 15 HCF ......................... 29 Figure 4 Wastewater Financial Plan Comparison of Revenue with Revenue Requirements .................... 37 Figure 5 Wastewater Reserves versus Target Reserves ........................................................................... 38 Figure 6 Current and Future Single-family Residential Bi-monthly Wastewater Bills ................................. 40 List of Charts
Chart ES-1 Single-family Residential Bi-Monthly Water Bills Using 15 HCF .................................................... 5 Chart ES-2 Single-family Residential Bi-Monthly Wastewater Bills .................................................................. 8 Chart 1 Single-family Residential Bi-Monthly Water Bills Using 15 HCF .................................................. 30 Chart 2 Single-family Residential Bi-Monthly Wastewater Bills Using ...................................................... 41 Appendix
Appendix A-1 Allocation of Water Revenue Requirements to Cost Component ............................................... 43 Water and Wastewater Rate Study City of Grover Beach
Tuckfield & Associates DRAFT 1
Executive Summary
The City of Grover Beach (City) engaged Tuckfield & Associates to conduct a comprehensive Water and Wastewater Rate Study (Study) for its utility enterprise systems. This Study includes development of pro forma statements of revenues and revenue requirements for each system, analyses to determine the costs of providing service, and design of new rates and charges for implementation.
Water Financial Plan
The revenue and revenue requirements of the water system were identified and projected to create a forwardlooking financial plan of the water system. Annual costs of the water system include operation and maintenance (O&M) expense, Lopez water supply expense, Central Coast Blue (CCB) project O&M expense and debt service payments, Joint Powers Authority (JPA) expense and reserves contribution, existing debt service payments, and annual capital improvement funding.
The projections of O&M expense include the City’s FY 2023-24/2024-25 budget expenses for two years of projection with future expenses projected through application of inflation factors to budget year expenses.
Projections of Lopez water supply operating and capital expenses are from San Luis Obispo County projections.
The cities of Grover Beach, Pismo Beach, and Arroyo Grande are advancing the CCB project. CCB is a regional recycled water project that will utilize treated wastewater which is currently discharged to the ocean to increase groundwater supplies, and secure a sustainable, drought-resistant local water supply. CCB is intended to be a critical component of the future drinking water supply portfolio for the local cities and will help protect against the threat of seawater intrusion into their groundwater supplies and future droughts in the State of California.
The project is a multi-city collaboration between the City of Grover Beach, Pismo Beach, and Arroyo Grande.
Estimates of CCB O&M expense and construction financing are included in the water enterprise financial plan.
The City’s share of CCB O&M expense is projected to begin January of 2026 at an estimated annual cost of $1,225,800 inflated at 4 percent annually. New debt is proposed that will provide $22.205 million of proceeds in early 2024 to finance the construction of the City’s allocated cost of the CCB project. The debt issue has an assumed interest rate of 5 percent and a 30-year term with interest only payments for the first three years.
The City also has existing debt service from a 2020 debt issue with an annual payment of about $280,000.
A JPA has been created to manage the CCB project operations which will be supported by all three cities. The City is projected to pay its share of JPA O&M expense of about $60,000 annually. An operating reserve equal to 6 months of operating expense and a capital reserve for the CCB project will be funded proportionally by all three cities. The City will make a one-time payment of $612,900 in January 2026 while capital reserves will be funded at about $368,600 annually for the CCB project.
The City has prepared a five-year Capital Improvement Program (CIP) spending plan that includes improvements and various replacements. Major projects of the CIP include CCB pre-construction and construction costs, reservoir maintenance, water meter replacement program, and 16th Street Booster Station project. CIP expenditures total about $26.1 million over the study period. The costs of the CIP are proposed to be financed with the annual water revenue, CCB grants, capital reserves, and the proposed new debt issue in FY 2023-24.
Water and Wastewater Rate Study City of Grover Beach
Tuckfield & Associates DRAFT 2
An analysis was performed that compared the projected revenue using the City’s current water rates with the projected revenue requirements (costs) of the water system. The analysis indicated that the current level of revenue received is not sufficient to meet future obligations and revenue increases are recommended to adequately meet revenue requirements, debt coverage requirements, and other financial planning criteria.
The revenue increases include 19.7 percent revenue increases beginning on January 1, 2024 through January 1, 2027, followed by 4.0 percent increases beginning January 1, 2028 for two years. The water financial plan is presented in Table 11.
Proposed Water Rates
Current Water Rates
The current water rates consist of fixed charges by meter size and variable charges. All customers are charged a fixed charge for the meter size at the property location. Residential customers are charged a three-tier variable rate structure while all other customers are charged a uniform volume charge. The Residential tiered variable charges apply to blocks of water consumption. Table ES-1 and Table 3 provide the current water rates charged to water customers.
Table ES-1
Proposed Water Fixed and Variable Charges
Current Proposed
Rate Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Residential
Meter Size Fixed Charge ($ per month)
5/8" $16.47 $17.91 $21.44 $25.67 $30.73 $31.96
3/4" $16.47 $17.91 $21.44 $25.67 $30.73 $31.96
1" $16.47 $17.91 $21.44 $25.67 $30.73 $31.96
1.5" $54.85 $59.70 $71.47 $85.55 $102.41 $106.51
2" $87.80 $95.52 $114.34 $136.87 $163.84 $170.40
3" $175.61 $191.04 $228.68 $273.73 $327.66 $340.77
4" $274.55 $298.50 $357.31 $427.71 $511.97 $532.45
Non-Residential
Meter Size Fixed Charge ($ per month)
5/8" $16.47 $17.91 $21.44 $25.67 $30.73 $31.96
3/4" $24.71 $26.87 $32.17 $38.51 $46.10 $47.95
1" $27.52 $29.85 $35.74 $42.79 $51.22 $53.27
1.5" $54.85 $59.70 $71.47 $85.55 $102.41 $106.51
2" $87.80 $95.52 $114.34 $136.87 $163.84 $170.40
3" $175.61 $191.04 $228.68 $273.73 $327.66 $340.77
4" $274.55 $298.50 $357.31 $427.71 $511.97 $532.45
Variable Charge ($ per HCF)
Residential
Tier 1 - 0 to 10 units $2.99 $5.81 $6.96 $8.34 $9.99 $10.39 Tier 2 - 11 to 22 units $6.17 $7.12 $8.53 $10.22 $12.24 $12.73 Tier 3 - Over 22 units $8.90 $10.52 $12.60 $15.09 $18.07 $18.80 Landscape $6.72 $8.22 $9.84 $11.78 $14.11 $14.68
All Other $6.47 $7.01 $8.40 $10.06 $12.05 $12.54
Classification
Water and Wastewater Rate Study City of Grover Beach
Tuckfield & Associates DRAFT 3
Proposed Water Rate Structure and Rates
The proposed water rate structure keeps the current fixed and variable charge rate structure for all customers.
Table ES-1 presents the proposed water rates to be adopted January 2024 and for future years.
Water Bill Impacts
Table ES-2 presents the impacts to Residential bills from the implementation of the proposed January 2024 water rates. For a Single-family Residential customer with a 3/4-inch meter using the average consumption of 15 hundred cubic feet (HCF) bi-monthly, the bill will increase from $90.69 to $129.52, an increase of $35.83, or 38.2 percent. The percentage increase in water bills for January 1, 2024 does not match the overall revenue increase of 19.7 percent from the water financial plan due to costs of service adjustments in this year. Future year’s water bills increase following the revenue increases in the water financial plan.
Figure ES-1 provides how Single-family Residential bills with a 3/4-inch meter using the bi-monthly average consumption of 15 HCF will escalate over time with implementation of the proposed water rates from Table ES1.
Table ES-2
Comparison of Current Single-family Residential Bi-Monthly Bills with a 3/4 -inch Meter with Proposed Bills Using January 2024 Water Rates
Current Bill Proposed FY 23-24 Bill
Service Volume Current Service Volume Proposed Dollar Percent Description Use (HCF) Charge Charge Bill Charge Charge Bill Difference Change 0 $32.94 $0.00 $32.94 $35.82 $0.00 $35.82 $2.88 8.7%
Very Low 5 $32.94 $14.95 $47.89 $35.82 $29.05 $64.87 $16.98 35.5% Low 10 $32.94 $29.90 $62.84 $35.82 $58.10 $93.92 $31.08 49.5% Median 12 $32.94 $42.24 $75.18 $35.82 $72.34 $108.16 $32.98 43.9% Average 15 $32.94 $60.75 $93.69 $35.82 $93.70 $129.52 $35.83 38.2% 20 $32.94 $91.60 $124.54 $35.82 $129.30 $165.12 $40.58 32.6% High 30 $32.94 $175.14 $208.08 $35.82 $227.70 $263.52 $55.44 26.6% Very High 50 $32.94 $353.14 $386.08 $35.82 $438.10 $473.92 $473.71 22.8% Water and Wastewater Rate Study City of Grover Beach
Tuckfield & Associates DRAFT 4
Water Rate Survey
Chart ES-1 has been prepared to compare Grover Beach’s average SFR water bill with a 3/4-inch meter using 15 HCF with those of other communities at the same consumption. The chart indicates that with the January 2024 rates, a Grover Beach SFR customer with a bi-monthly consumption of 15 HCF will experience a bill that is among the lowest of the communities listed.
Figure ES-1
Current and Future Single-family Residential Bi-monthly Water Bills at 15 HCF Proposed
SFR Charges Current FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Fixed Charges $32.94 $35.82 $42.88 $51.34 $61.46 $63.92 Variable Charges 60.75 93.70 112.25 134.50 161.10 167.55 Total Charges $93.69 $129.52 $155.13 $185.84 $222.56 $231.47 Dollar Change $35.83 $25.61 $30.71 $36.72 $8.91
Percent Change 38.2% 19.8% 19.8% 19.8% 4.0%
$93.69
$129.52
$155.13
$185.84
$222.56 $231.47
$0
$50
$100
$150
$200
$250
Current FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28
Fixed Charges Variable Charges
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Wastewater Financial Plan
The revenue and revenue requirements of the wastewater system were identified and projected to create a forward-looking financial plan of the wastewater system. Annual costs include O&M expense, capital improvement funding, and debt service. Future O&M expenses include the City’s FY 2023-24/2024-25 budget expenses for the first two years with future expenses projected through application of inflation factors to budget year expenses.
The City has prepared a five-year CIP spending plan for the wastewater system. Major projects of the CIP include sewer upgrades, South Oak Park lift station, and city-wide sewer lining projects. CIP expenditures total about $8.2 million over the Study period. The CIP expenditures are planned to be funded through the rate revenue, debt proceeds from a new debt issue, and reserves.
An analysis was performed that compared the projected revenue using the City’s current wastewater rates with the projected revenue requirements (costs) of the wastewater system. The analysis indicated that the current level of revenue received is not sufficient to meet future obligations and revenue increases are recommended to adequately meet revenue requirements, debt coverage requirements, and other financial planning criteria. The increases include 19.5 percent revenue increases beginning on January 1, 2024 and on each January 1 through 2027, followed by 4.0 percent increases each January 1 for the remaining years of the Study. The wastewater financial plan is presented in Table 31.
Chart ES-1
Single-family Residential Bi-Monthly Water Bills Using 15 HCF For Rates in Effect July 2023
Note: Above table uses water rates in effect July 2023. Grover Beach January 2024 bill is based on the rate structure and rates in Table ES-1. Grover Beach includes 1% utility tax.
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Proposed Wastewater Rates
Current Wastewater Rates
The current wastewater rates consist of fixed charges for all customers. Single-family Residential, Boarding House, Hotel/Motel/Auto Court, Mobile Home, and Multifamily customers are charged by the dwelling unit. Nonresidential customers may be charged a fixed charge or a combination of a fixed charge and additional employee or other measure. The current rates are provided in Table ES-3 and Table 23.
Proposed Wastewater Rate Structure and Rates
The proposed wastewater rate structure keeps the current rate structure in place for the proposed wastewater rates. Wastewater rates are updated with the analyses of this Study. Table ES-3 presents the proposed wastewater rates for the next five years.
Wastewater Bill Impacts
From inspection of Table ES-3, an SFR customer will have a bi-monthly bill that will increase from $76.60 [($12.82 + $25.48) x 2] which includes the $25.48 monthly South San Luis Obispo County Sanitation District (SSLOCSD) treatment charge, to $81.60 [($15.32 + $25.48) x 2], an increase of $5.00, or 6.5 percent.
Table ES-3
Proposed Wastewater Fixed Charges
Current Proposed
Classification Charge Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Fixed Charge ($ per month)
Boarding House (per unit) $15.54 $18.57 $22.19 $26.52 $31.69 $32.96 Per Bedroom Charge 10.00 11.95 14.28 17.06 20.39 21.21
Car Washes & Laundromats (min charge) 6.19 7.40 8.84 10.56 12.62 13.12 Per 100 cubic feet above minimum 0.00 0.00 0.00 0.00 0.00 0.00 Church 15.06 18.00 21.51 25.70 30.71 31.94
Per parsonage or dwelling unit 12.82 15.32 18.31 21.88 26.15 27.20 Commercial Establishment (Public place up to 5 Fixtures) 15.04 17.97 21.47 25.66 30.66 31.89 Each additional fixture 4.12 4.92 5.88 7.03 8.40 8.74
Factories, Industrial Plants (20 employees or less) 10.12 12.09 14.45 17.27 20.64 21.47 Each additional employee over 20 1.16 1.39 1.66 1.98 2.37 2.46 Hotel, Motel Auto Court or Lodge (per unit) 15.45 18.46 22.06 26.36 31.50 32.76 Mobile Home (per space) 12.82 15.32 18.31 21.88 26.15 27.20 Restaurants (min charge) 2.14 2.56 3.06 3.66 4.37 4.54
Per 100 cubic feet against minimum 0.00 0.00 0.00 0.00 0.00 0.00 Schools (min annual charge per ADA and employee) 3.31 3.96 4.73 5.65 6.75 7.02 Schools with Cafeterias (additional) Per ADA and employees 1.38 1.65 1.97 2.35 2.81 2.92 Single-Family Dwelling Unit 12.82 15.32 18.31 21.88 26.15 27.20 Theater, Clubhouse or Place of Amusement 15.04 17.97 21.47 25.66 30.66 31.89 Travel Trailer and Recreation Vehicle Space 6.60 7.89 9.43 11.27 13.47 14.01 Multi-family, Two or More Dwellings (per unit) 12.82 15.32 18.31 21.88 26.15 27.20 Per each coin-operated washer 2.80 3.35 4.00 4.78 5.71 5.94 Excess Discharge per 100 cubic feet $0.40 $0.48 $0.57 $0.68 $0.81 $0.84 Water and Wastewater Rate Study City of Grover Beach
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Figure ES-2 shows how the SFR bi-monthly wastewater bill will increase over time from the implementation of the proposed wastewater rates from Table ES-3. The figure assumes a constant SSLOCSD treatment charge which is included in the wastewater bill.
Wastewater Rate Survey
Chart ES-2 has been prepared to compare Grover Beach’s SFR wastewater bill with those of other communities.
The chart indicates that Grover Beach’s SFR wastewater bill is among the lowest of the communities listed.
Figure ES-2
Current and Future Single-family Residential Bi-monthly Wastewater Bills Proposed
SFR Charges Current FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Fixed Charges $25.64 $30.64 $36.62 $43.76 $52.30 $54.40 SSLOCSD Charge $50.96 $50.96 $50.96 $50.96 $50.96 $50.96 Fixed Charges $76.60 $81.60 $87.58 $94.72 $103.26 $105.36 Dollar Change $5.00 $5.98 $7.14 $8.54 $2.10
Percent Change 6.5% 7.3% 8.2% 9.0% 2.0%
$76.60
$81.60
$87.58
$94.72
$103.26 $105.36
$0
$20
$40
$60
$80
$100
$120
Current FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Fixed Charges
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Chart ES-2
Single-family Residential Bi-Monthly Wastewater Bills
For Rates in Effect July 2023
Note: Above table uses wastewater rates in effect July 2023. Grover Beach January 2024 bill is based on the rate structure and rates in Table 29. Grover Beach, Arroyo Grande, and Oceano CSD bill includes the SSLOCSD treatment charge. Grover Beach also includes the storm water charge.
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Introduction
The City of Grover Beach (City) engaged Tuckfield & Associates to conduct a comprehensive Water and Wastewater Rate Study (Study) for its water and wastewater enterprise systems. This Study includes development of pro forma statements of revenues and revenue requirements for each enterprise, analyses to determine the cost of providing service, and design of new water and wastewater rates and charges for implementation.
Background
The City of Grover Beach (City) is located along the central coast of the state of California in San Luis Obispo County, north of Los Angeles by approximately 175 miles. The City has a population of over 12,400 and provides water and wastewater service within the City limits. Water and wastewater service is accounted for in separate enterprise funds. The City relies upon user charges to meet all financial obligations of each enterprise fund.
The City obtains its water supply from two sources consisting of groundwater wells and a surface water entitlement to the Lopez Reservoir Project. The City obtains groundwater from the TriCities Mesa – Arroyo Grande Plain of the Santa Maria Valley Groundwater Basin (SMVGB). The City shares this groundwater supply with the Cities of Arroyo Grande and Pismo Beach, Oceano CSD, and other agricultural uses. The City also receives an entitlement of 800 ac-ft of surface water from the Lopez Reservoir through a 1965 agreement with the San Luis Obispo County Flood Control and Water Conservation District (District) that was updated in August 2000. Surplus water from the Lopez Reservoir may be available to the City depending upon rainfall and the availability of water supply for downstream release. The water system also includes four storage reservoirs, water treatment facilities, booster stations, and transmission and distribution facilities including over 29 miles of pipeline ranging in size from 2 to 16 inches in diameter.
In an effort to protect the Northern Cities Management Area (NCMA) section of the SMVGB from seawater intrusion, the cities of Grover Beach, Pismo Beach, and Arroyo Grande are advancing the Central Coast Blue (CCB) project. CCB is a regional recycled water project that will utilize treated wastewater which is currently discharged to the ocean to increase groundwater supplies, and secure a sustainable, drought-resistant local water supply.
CCB is intended to be a critical component of the future drinking water supply portfolio and will help protect against the threat of seawater intrusion into their groundwater supplies and future droughts in the State of California. The project would involve recharging the SMVGB with purified water via injection wells. Recycled water would be sourced from two of the region’s wastewater treatment facilities, the Pismo Beach Wastewater Treatment Plant (PBWWTP) and the South San Luis Obispo County Sanitation District (SSLOCSD) wastewater treatment plant.
The wastewater system consists of seven lift stations, sewer access holes, and over 26 miles of sewer collection pipe to collect the City’s wastewater. The City has contracted with the South San Luis Obispo County Sanitation District (SSLOCSD) to provide wastewater treatment services for the City’s wastewater. The elements of the contract are delineated in an agreement dated October 1, 1991 between the City and SSLOCSD. Treatment charges for service are included with customer’s property tax bills and are not included in the City’s wastewater rates.
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Objectives
The objectives of this Study are to (1) review the current and future financial status of each of the water and wastewater enterprises, (2) make any adjustments to the revenue being received to ensure that revenue requirements are being met now and, in the future, including adequate reserves and debt service coverage, and (3) design water and wastewater rates that generate the required revenue while being fair and equitable for its customers. Additionally, the Study also sought to provide the following. Revenue sufficiency to fund operating and capital needs Appropriate levels of operating and capital reserves
Cost of service allocations following appropriate standards, regulations, and guidelines Rates that are consistent with industry practice
Ease of understanding and administration of the rates Scope of the Study
This Study includes the findings and recommendations of analyzing each of the water and wastewater enterprise’s financial status and related CIP. Historical trends were analyzed from data supplied by the City showing the number of customers, volumes, revenue, and revenue requirements.
Revenue requirements of each enterprise include O&M expense, capital improvement funding, transfers, debt service, and additions to reserves. Changing conditions such as additional facilities, system growth, employee additions/reductions, and non-recurring maintenance expenditures are recognized. Inflation for ongoing expenditures is included to reflect cost escalation.
The financial plan and rates developed herein are based on funding of the capital improvement plan as stated as well as estimates of O&M expenses developed from information provided by the City. Deviation from the financial plans, construction cost estimates and funding requirements, major operational changes, or other financial policy changes that were not foreseen, may result in the need for lower or higher revenue than anticipated. It is suggested that the City conduct an update to the rate study at least every five years for prudent rate planning.
Assumptions
Several assumptions were used to conduct the Study for the period FY 2022-23 to FY 2027-28. The assumptions included growth rates in customer accounts and annual consumption, expense inflation factors, and other assumptions used for projecting revenue and expense and estimating debt service payments. The financial planning assumptions are provided in Table 1.
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Reserve Policy
The City currently does not have written reserve policies regarding the level of reserves to be maintained for the water and wastewater enterprises. The City does have reserve policy goals for maintaining reserves for water and wastewater operations and capital reserves. The reserve goals provide a means to meet unanticipated reductions in revenues, changes in the costs of providing services, fixed asset repair and replacement, natural disaster, and other issues. The reserves also provide guidelines to maintain the financial health and stability of the enterprise funds.
To develop the financial plans presented in this Study, certain reserve targets have been established with the intent to provide planning criteria for the financial plans of each utility system. The reserve types and the amount of reserves used in this Study are discussed below.
Operating Reserve – The purpose of the Operating Reserve is to provide working capital to meet cash flow needs during normal operations and support the operation, maintenance and administration of the utility. This reserve ensures that operations can continue should there be significant events that impact cash flow. The target balance to be maintained is 180 days (50 percent) of the current annual operating expense budget.
Capital Reserve – The Capital Reserve is used to fund replacement of assets and fund new capital improvement projects. The target balance is equal to $500,000.
Table 1
Assumptions and Planning Factors
Description Value
Annual Account & Demand growth [1]
Single-family Residential 0.5%
All Other 0.0%
Interest earnings on fund reserves (annual) 2.0%
Cost Escalation
Personnel Services [2] 3.0%
Benefits 8.0%
Electrical Power 3.0%
Chemicals 3.0%
Purchased Water 4.0%
All Other Operations & Maintenance 2.0%
Capital 3.0%
[1] Annualized growth in water accounts is based on historical information provided by staff.
[2] Personnel Services growth in staffing, promotions, and inflation is 3.0% annually.
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Beginning Balances and Reserve Targets
As of June 30, 2023, the City’s beginning fund balances are listed in the table below. The reserves are used in developing the financial plans for the water and wastewater utilities. Target Reserves are also provided.
Water Financial Planning
Financial planning for the water system includes identifying and projecting revenues and revenue requirements for a five-year planning period. Estimates of revenue from various sources are compared with the projected revenue requirements of the water system. This comparison allows the review of the adequacy of existing revenue to meet annual obligations and provide the basis for any rate adjustments. New water rates and charges have been created to recover all of the City’s annual operating and capital costs associated with the water system.
This section discusses current water rates, current user classifications, projected revenues and revenue requirements, capital improvement expenditures and financing sources, and proposed revenue adjustments.
Current Water Rates
The current water rates consist of fixed and variable charges to residential and non-residential customers. All customers are charged a fixed charge by meter size monthly, however are billed bi-monthly. Additionally, Residential customers are charged for consumption using a three-tier variable rate structure. Other customers are charged a uniform rate for water consumed. Table 3 provides the current water rates of the water system.
Table 2
June 30, 2023 Beginning Cash Balances and Reserve Targets Water Wastewater
Reserve Reserve Reserve Reserve
Reserve Type Balance Target Balance Target
Operating Fund Reserve $1,680,000 $1,680,000 $701,000 $701,000 Capital Reserve $3,168,900 $500,000 $3,642,200 $500,000 Total $4,848,900 $2,180,000 $4,343,200 $1,201,000
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Water User Classifications
Number of Customers
The City classifies water customers as Residential (SFR, MFR, apartments, condominium, Mobile Home), Landscape, and All Other. Residential accounts for more than 91 percent of the total customers served by the water system. Growth is projected to occur only in Residential accounts at a rate of 0.50 percent annually or about 20 accounts added each year, following the assumptions listed in Table 1. Table 4 provides the historical and projected number of customers by classification.
Number of Water Meters
Table 5 provides a summary of the number of current and projected meters by size. The majority of customers have 3/4-inch meters installed at the service location. All new Residential customers will have 1-inch meters installed and this is the minimum size for new meter installations for the City’s customer base.
Table 3
Current Water Rates
Fixed Variable
Meter Size Charge Customer Class Rate
($/mo) ($/HCF)
5/8" $16.47 Residential
3/4" $16.47 Tier 1 - 0 to 10 units $2.99
1" $16.47 Tier 2 - 11 to 22 units $6.17
1.5" $54.85 Tier 3 - Over 22 units $8.90
2" $87.80 Landscape $6.72
3" $175.61 All Other $6.47
4" $274.55
Table 4
Historical and Projected Water Customers by Classification Historical Projected
Customer Class FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Number of Accounts
Residential [1] 4,280 4,301 4,323 4,345 4,367 4,389 4,411 Landscape 89 89 89 89 89 89 89
All Other 311 311 311 311 311 311 311
Total Accounts 4,680 4,701 4,723 4,745 4,767 4,789 4,811 [1] Residential accounts/units are forecast to increase based on the assumed growth rate of 0.5% annually.
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Water Sales Volumes
Table 6 provides the historical and projected water sales volume by customer classification. Water sales volumes were projected by recognizing the growth in the number of accounts and the FY 2021-22 use per customer. FY 2022-23 was a year that had high rainfall and the City experienced lower water sales volumes as a result.
Projections after this year assume that water consumption resumes to levels of previous years.
Water Financial Plan
The financial plan provides the means of analyzing the revenue and revenue requirements of the water system and its impact on reserves as well as the ability to fund on-going O&M expense and capital infrastructure requirements. This section of the Report discusses the projection of revenue, O&M expenses, capital Table 5
Historical and Projected Number of Water Meters by Size Historical Projected
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Active Water Meters/Accounts [1]
5/8" 2 2 2 2 2 2 2
3/4" 3,922 3,922 3,922 3,922 3,922 3,922 3,922
1" 651 672 694 716 738 759 781
1.5" 49 49 49 49 49 50 50
2" 48 48 48 48 48 48 48
3" 7 7 7 7 7 7 7
4" 1 1 1 1 1 1 1
Total Accounts 4,680 4,701 4,723 4,745 4,767 4,789 4,811 [1] Historical water accounts for FY 21-22 were provided through City billing records.
Table 6
Historical and Projected Water Consumption (in HCF)
Historical Projected [1]
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Residential 391,189 349,050 395,119 397,130 399,141 401,152 403,162 Landscape 21,071 21,812 21,071 21,071 21,071 21,071 21,071 All Other 71,434 65,376 71,434 71,434 71,434 71,434 71,434 Total Consumption 483,694 436,238 487,624 489,635 491,646 493,657 495,667 [1] Forecast assumes that the use per customer from FY 21-22 is applied to the number of customers.
FY 22-23 recognizes high rainfall in this year. Consumption increases due to the gowth in customers.
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improvement needs, capital financing, and revenue adjustments needed to maintain a sustainable water enterprise.
Revenues
The City receives operating and miscellaneous revenue from several sources. Operating revenue is received from rates and charges for water service. Revenue from water rates is projected by applying the current water rates to the projected number of accounts and consumption volume. Table 7 presents the projected revenue from current water rates of the System.
Miscellaneous Revenue
Miscellaneous revenues are received from several sources including water meter installations, account set-up fees, water turn on fees, penalties/late fees, utility tax, and other sources. Table 8 below provides sources of miscellaneous revenue.
Table 7
Projected Rate-based Water Revenue Using Current Rates
Projected
Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Water Service Revenues
Fixed Charges [1] $1,236,851 $1,278,338 $1,282,686 $1,282,686 $1,282,686 $1,282,686 Variable Charges [2] 2,263,044 2,598,582 2,608,734 2,618,887 2,629,040 2,639,188 Total Revenues From Current Rates $3,499,895 $3,876,920 $3,891,420 $3,901,573 $3,911,726 $3,921,874 [1] FY 22-23 and forecast revenue calculated by multiplying current w ater service rate by the number of projected meters. [2] FY 22-23 and forecast revenue calculated by multiplying projected w ater sales by the current variable rates.
Table 8
Projected Miscellaneous Water Revenue
Estimated Budget Budget Projected
Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Account Set-up Fee $48,951 $45,000 $46,000 $47,000 $48,000 $49,000 Meter Installation Fees 10,484 8,000 10,000 10,000 10,000 10,000 Reconnect Fees 7,378 4,000 4,000 1,700 1,700 1,700
Late Fee Penalty 57,837 75,000 75,000 50,000 50,000 50,000 Door Notice Fee 12,754 12,000 12,000 12,000 12,000 12,000 Transfer In - 25,000 25,000 25,000 25,000 25,000
Total Miscellaneous Revenues $137,404 $169,000 $172,000 $145,700 $146,700 $147,700 Water and Wastewater Rate Study City of Grover Beach
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Revenue Requirements
Revenue requirements of the water system include O&M expense, Lopez purchased water, CCB project O&M expense, JPA O&M Expense, CCB Reserves, capital improvement funding, and debt service. Each of these items are discussed below.
Operation and Maintenance Expense
O&M expenses are an on-going obligation of the water system and such costs are normally met from water service revenue. O&M includes the cost to operate and maintain the water supply, reservoirs, and distribution system facilities. Costs also include technical services and other general and administrative expenses. O&M has been projected recognizing the major expense categories of personnel services, electric power expense, chemicals, purchased water, capital outlay, all other expenses following inflation factors presented in Table 1.
Table 9 provides a summary of the O&M expenses for the Study period.
Lopez Water Supply Expense
Expenses for Lopez purchased water is projected from estimates provided by San Luis Obispo County (County).
The County provides a five year forecast of the Lopez water project expenses allocated to Grover Beach. Expenses beyond the 5 year forecast are inflated at 4 percent annually.
Central Coast Blue Project O&M Expense
Central Coast Blue (CCB) is a water sustainability project that will create a new, high quality, and reliable water supply for the City of Pismo Beach and other agencies. The CCB project is further described under the section Water Capital Improvement Program of this report. The CCB annual O&M expense is estimated at $3,405,000 of which Grover Beach’s share is 36 percent. The CCB O&M expense begins in January 2026 with annual O&M expense amount of estimated to be $1,225,800. Futures years are inflated at 4 percent annually.
JPA O&M Expense
The CCB project is intended to be managed by a newly formed JPA. Each city participating in the CCB project is expected to contribute annually to the operations expense of the JPA. The City’s share of this expense is estimated at $59,400 beginning in July 2025 with estimated annual inflation of 4 percent. Other small miscellaneous JPA expenses occur before this time.
CCB Operating and Capital Reserves Expense
The newly created JPA’s mission is to manage the on-going operations and maintenance of the CCB project. Each city participating in the CCB project is expected to contribute to the build-up of operating and capital reserves in proportion to their share of the project. Operating reserves are estimated at 180 days of CCB O&M expense and capital reserves are estimated as provided by the City’s consulting engineer. The City is expected to pay for its 36 percent share of these costs.
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Capital Improvement Funding
The City pays for water system replacements and capital improvements from the water fund. The City plans for these expenses through its capital improvement planning during the fiscal year. The annual amount necessary to fund the improvements is included in the financial plan such that revenue from water rates is providing funding to aid in the cost of these replacements and improvements. Any money not spent accumulates into reserves to be used for future capital improvement spending.
Debt Service
Currently, the water system has one outstanding loan that includes a 2020 debt issue that financed certain water improvements. Debt service payments on the 2020 debt total about $280,000 annually. Additionally, a proposed Table 9
Historical and Projected Water Operation and Maintenance Expense Estimated Budget Budget Projected
Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Utility Billing
Salaries $245,234 $250,533 $261,828 $269,683 $277,773 $286,106 Benefits 73,608 88,852 92,366 99,756 107,737 116,354
Supplies and Services 86,843 92,600 79,900 81,498 83,126 84,789 Total Utility Billing $405,685 $431,985 $434,094 $450,937 $468,636 $487,249 Water Oprations
Salaries $332,556 $365,159 $398,530 $410,486 $422,801 $435,485 Benefits 113,952 143,771 155,624 168,074 181,520 196,042 Utilities - Electricity 90,500 131,000 134,000 138,020 142,161 146,426 Services - Legal 23,153 14,000 15,000 15,300 15,606 15,918 Services - Engineering 128,115 135,000 135,000 137,700 140,454 143,263 Services - Communications 1,270 3,000 3,000 3,060 3,121 3,183 Services - Maintenance 42,860 40,000 40,000 40,800 41,616 42,448 Services - Other 31,512 40,000 40,000 40,800 41,616 42,448 Contractual Obligations (7,601) 35,066 37,540 38,291 39,057 39,838 Maintenance of Vehicles 9,627 10,000 10,000 10,200 10,404 10,612 Maintenance of City Facilities 33,682 34,000 34,000 34,680 35,374 36,081 Maintenance of Equipment 2,386 27,000 27,000 27,540 28,091 28,653 Capital Outlay 61,568 40,000 40,000 40,800 41,616 42,448 All Other 173,013 143,225 144,225 147,110 150,052 153,052 Subtotal $1,036,593 $1,161,221 $1,213,919 $1,252,861 $1,293,489 $1,335,897 Non-Departmental
Transfers Out $455,990 $473,868 $458,153 $467,316 $476,662 $486,195 PERS Retirement 26,114 105,903 105,169 113,583 122,670 132,484 Insurance 103,893 108,700 111,500 113,730 116,005 118,325 Other 8,325 - - - - -
Total Non-Departmental $594,322 $688,471 $674,822 $694,629 $715,337 $737,004 Central Coast Blue Water Supply
Central Coast Blue O&M Expense $0 $0 $0 $612,900 $1,274,832 $1,325,825 JPA Oerating Expense - 19,285 20,250 59,400 60,588 61,800 Total Central Coast Blue $0 $19,285 $20,250 $672,300 $1,335,420 $1,387,625 Lopez Water Supply [1]
Lopez Contract O&M $828,088 $954,097 $979,064 $965,046 $991,533 $1,031,194 Lopez Dam Bonds - 2011A Debt Service 92,602 92,602 92,602 92,602 92,602 92,602 Lopez SRF Loan Debt Service 295,254 295,254 295,254 295,254 295,254 295,254 Lopez Capital Outlay 88,300 81,481 54,040 50,331 82,119 80,000 Total Lopez Water Expense [1] $1,304,244 $1,423,434 $1,420,960 $1,403,233 $1,461,508 $1,499,050 Water Conservation Fund $19,082 $13,794 $14,100 $14,535 $14,985 $15,455 Total O&M Expense $3,359,926 $3,738,190 $3,778,145 $4,488,495 $5,289,375 $5,462,280 [1] Lopez water expense provided by San Luis Obispo County for FY 23-24 through FY 26-27.
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new debt issue is assumed to fund the City’s share of construction of the Central Coast Blue (CCB) project with proceeds totaling $22.205M in FY 2023-24. The proposed debt issue is projected to have interest only payments for the first three years and includes an interest rate of 5 percent with a 30-year repayment term. The CCB project is discussed further below.
Water Capital Improvement Program
The City has developed a CIP that lists capital expenditures for FY 2022-23 through FY 2027-28 provided in Table
10. Over this period the City projects that it would spend approximately $26.1 million. The major improvements include the CCB project, 16th street booster station, Reservoir Maintenance, and water meter replacement program.
The CCB project is a regional recycled water project that will utilize treated wastewater which is currently discharged to the ocean to increase groundwater supplies, and secure a sustainable, drought-resistant local water supply. The project is a multi-agency collaboration between the cities of Grover Beach, Pismo Beach, and Arroyo Grande. The CCB project is intended to be a critical component of the future drinking water supply portfolio for the stakeholder agencies and will help protect against the threat of seawater intrusion into their groundwater supplies and future droughts in the State of California.
The project would involve recharging the SMVGB with purified water via injection wells. Recycled water would be sourced from two of the region’s wastewater treatment facilities, the Pismo Beach Wastewater Treatment Plant and the South San Luis Obispo County Sanitation District (SSLOCSD) wastewater treatment plant. The City’s share of the project cost is 36 percent while Pismo Beach’s share and Arroyo Grande’s share are 39 percent and 25 percent respectively. The CIP in Table 10 is funded by water rate revenue, reserves, and debt proceeds from a new debt issue (described above) to pay for the construction costs of the CCB project.
Water Financial Plan
A financial plan has been prepared that includes the revenues and revenue requirements that were identified for the water system and is presented in Table 11. The plan incorporates specific financial planning criteria to Table 10
Water Capital Improvement Program
Budget Projected
Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Capital Improvement Program (CIP) Projects [1]
Central Coast Blue $0 $2,528,400 $19,676,777 $0 $0 $0
Water Main Zone Valves - 75,000 - - - -
Well Capacity Analysis Improvements - 75,000 - - - -
16th Street Booster Station - - 180,000 780,000 - -
Water Meter Replacement Meter Program - 300,000 150,000 150,000 150,000 150,000 Automated Meter Reading - - - - - 300,000
Reservoir Maintenance 17,300 1,577,700 - - - -
Total Water CIP $17,300 $4,556,100 $20,006,777 $930,000 $150,000 $450,000 [1] CIP Source: FY 22-23 City CIP document.
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Table 11
Water Financial Plan
Projected
Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Proposed Revenue Increase (January 1) 19.7% 19.7% 19.7% 19.7% 4.0% Water Fund
Revenue
Revenues from Existing Water Rates [1] $3,499,895 $3,876,920 $3,891,420 $3,901,573 $3,911,726 $3,921,874 Total Additional Water Sales Revenue [2] - 318,231 1,148,957 2,147,499 3,347,855 4,263,694 Miscellaneous Income 137,404 169,000 172,000 145,700 146,700 147,700 Rate Stabilization - - 400,000 140,000 - -
Interest Income [3] 151,132 76,900 55,900 39,600 25,100 27,900 Total Revenues $3,788,431 $4,441,051 $5,668,277 $6,374,372 $7,431,381 $8,361,168 Operating Expenses
Salaries and Benefits $772,374 $856,234 $916,573 $956,541 $998,703 $1,043,207 Supplies and Services 635,019 710,766 705,540 720,992 736,791 752,946 Non-Capitalized Equipment 61,568 40,000 40,000 40,800 41,616 42,448 Non-Departmental 594,322 688,471 674,822 694,629 715,337 737,004 Lopez Contract O&M [4] 820,487 954,097 979,064 965,046 991,533 1,031,194 Lopez Dam Bonds - 2011A Debt Service [4] 92,602 92,602 92,602 92,602 92,602 92,602 Lopez SRF Loan Debt Service [4] 295,254 295,254 295,254 295,254 295,254 295,254 Lopez Capital Outlay [4] 88,300 81,481 54,040 50,331 82,119 80,000 Central Coast Blue O&M Expense - - - 612,900 1,274,832 1,325,825 Transfer Out JPA Operating Expense - 19,285 20,250 59,400 60,588 61,800 Transfer Out to JPA Operating Reserve - - - 612,900 24,516 25,497 Transfer Out to JPA Capital Reserve - - - 368,606 368,606 368,606 Total Operation and Maintenance Expenses $3,359,926 $3,738,190 $3,778,145 $5,470,001 $5,682,497 $5,856,383 Capital Expenditures
Capital Improvements [5] $17,300 $2,027,700 $330,000 $930,000 $150,000 $450,000 2020 Debt Service 281,443 280,923 281,294 281,543 281,671 281,678 Central Coast Blue Debt Service [6] - - 1,231,000 1,231,000 1,231,000 1,581,000 Total Capital Expenditures $298,743 $2,308,623 $1,842,294 $2,442,543 $1,662,671 $2,312,678 Total Revenue Requirements $3,658,669 $6,046,813 $5,620,439 $7,912,544 $7,345,168 $8,169,061 Net Funds Available $129,762 ($1,605,762) $47,838 ($1,538,172) $86,213 $192,107 Available Reserves
Beginning available reserves [7] $4,848,900 $2,843,138 $2,750,976 $1,212,803 $1,299,016 Rate Stabilization Set Aside (400,000) (140,000) - - -
Ending available reserves $2,843,138 $2,750,976 $1,212,803 $1,299,016 $1,491,124 Target Reserves [8] 2,180,000 2,369,000 2,389,000 3,235,000 3,341,000 3,428,000 Above (below) Target $474,138 $361,976 ($2,022,197) ($2,041,984) ($1,936,877) Debt Service Coverage
Total Revenues $3,788,431 $4,441,051 $5,668,277 $6,374,372 $7,431,381 $8,361,168 Total O&M Expenses $3,359,926 $3,738,190 $3,778,145 $4,488,495 $5,289,375 $5,462,280 Net Revenues $428,505 $702,861 $1,890,132 $1,885,877 $2,142,006 $2,898,888 25% Coverage Factor of Lopez 2011A Bonds $23,151 $23,151 $23,151 $23,151 $23,151 $23,151 Total O&M Expenses for Lopez Coverage $3,383,077 $3,761,341 $3,801,296 $4,511,646 $5,312,526 $5,485,431 Debt Service Payments
2020 Debt Service $281,443 $280,923 $281,294 $281,543 $281,671 $281,678 Central Coast Blue Debt Service - - 1,231,000 1,231,000 1,231,000 1,581,000 Total Debt Service for Coverage $281,443 $280,923 $1,512,294 $1,512,543 $1,512,671 $1,862,678 Lopez Debt Service Coverage [9] 112% 118% 149% 141% 140% 152% Debt Service Coverage [10] 152% 250% 125% 125% 142% 156% [1] Projected using the Proposition 218 rates for FY 22-23 and through FY 25-26. [2] Additional revenue from proposed rate adjustments.
[3] Interest earnings on the average fund balance calculated at 2.0% annually. [4] From SLO County Projections.
[5] From Table 10, but excludes FY 23-24 through FY 25-26 CCB construction costs, funded by proceeds of a new CCB debt issue. [6] City's share of new Central Coast Blue debt service. [7] The available beginning FY 23-24 cash balance provided by the City. [8] Includes 6 months of O&M expense and a suggested $500,000 for capital reserve. [9] Minimum coverage on the Lopez 2011A Bonds is 100 percent. [10] Minimum coverage on the 2020 Bonds is 120 percent.
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provide guidance to maintain the health of the water utility on an on-going basis. The criteria included the following.
Generate positive levels of income in each year of the Study period Maintain the operating and capital reserves at or greater than target levels Maintain debt service coverage ratios at or greater than the minimum required Meet annual capital replacement and improvement spending requirements Proposed Revenue Adjustments
Table 11 provides the annual revenue increases recommended to meet the financial planning criteria for the five-year Study period. The financial plan indicates that 19.7 percent revenue increases are proposed beginning on January 1, 2024 through January 1, 2027, followed by 4.0 percent increases beginning January 1, 2028 for the next two years. The increases are necessary to meet the planning criteria discussed above.
A graphical depiction of the revenue and revenue requirements from Table 11 are presented in Figure 1.
Revenue using the current rates is shown as the black line while revenue with revenue adjustments is shown as the red line.
Figure 1 shows that the revenue increases outlined in Table 11 are necessary to meet revenue requirements, fund the CIP program, maintain the operating and capital reserves, and meet minimum debt service coverage ratios required by debt covenants.
Figure 1
Water Financial Plan
Comparison of Revenue with Revenue Requirements
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 Sources and Uses ($ Millions) O&M Lopez Water Capital Improvement Funding Central Coast Blue O&M Debt Service Reserves Revenue w/o Increases Revenue with Increases Water and Wastewater Rate Study City of Grover Beach
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Figure 2 shows a graphical depiction of the operating and capital reserves of the water fund in comparison to the established annual Target reserves. The purple line represents the Target Reserve level while the green column indicates the cash reserve balance at the end of year. The figure shows that the water fund reserve balance (green column) decreases below the Target Reserve (purple line) in the middle years of the 10 year period but returns to meet the Target Reserve in the last year if the proposed revenue increases are implemented.
Water Cost of Service
This section of the report discusses the allocation of the water system’s operating and capital costs for use in designing water rates. The agency responsible for imposing property-related fees in California is required to establish rates that create a nexus between the cost of providing service and the rates to be imposed.
Industry Methodology
This Study uses methodologies from the American Water Works Association (AWWA) to allocate water system costs in an appropriate manner for use to design water rate structures and rates. AWWA is an industry trade organization providing guidance on operations and management of water utilities. AWWA provides general principles to assist agencies in the design of water rates such that they are consistent with local requirements Figure 2
Water Reserves versus Target Reserves
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
FY 22-23 FY 24-25 FY 26-27 FY 28-29 FY 30-31 Reserves Total Reserves Water and Wastewater Rate Study City of Grover Beach
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while also recognizing state laws and legal framework. The AWWA guidelines have been used to conduct this Study and have been used in the design of the City’s water rates while also following Proposition 218 legislation.
The annual costs of providing water service from the financial plan are allocated to cost components following industry standards provided in the AWWA Manual M1. The methodology provides the basis to design rates to generate adequate revenue to meet estimated annual revenue requirements from the financial plan. Costs are then recovered through fixed charges and variable charges to system users.
Costs of Service to be Allocated
The annual cost of service consists of the O&M expenses and capital costs of the water system. O&M expenses include costs related to water supply, water distribution, operation and maintenance of the facilities, transfers, and general and administrative costs. Capital costs include annual capital spending and debt service discussed in the financial plan.
Costs are first allocated to water system cost component based on the operating characteristics and design of the water system facilities. Cost allocations consider the average quantity of water consumed as well as the peak rate at which water is consumed. The water system is designed to serve average and peak demands, and costs that are related to serving average and peak demands are allocated in a manner such that they may be recovered appropriately.
The cost allocation components for water service for this Study are Water Supply (groundwater and Lopez water), Delivery, Peaking, Meters and Services, Customer, and Conservation. FY 2023-24 was used as the Test Year for assigning the operating and capital costs of the water system to each of these parameters. The total cost to be recovered from the users of the water system by cost component for each year of the Study is presented in Table
12. Appendix A provides a detailed allocation.
Water Rate Design
The cost of service analyses described in the previous section provides the basis for water rate design. The emphasis on the design of rates is to achieve fairness and ensure that each customer class pays its fair share of costs. Rates should be simple to administer, easy to understand, and comply with regulatory requirements. This section describes how water rates and charges are designed and includes the proposed schedule of water rates for implementation.
Table 12
Allocation of Water Requirements to Cost Component
Total
Revenue Water Supply Customer
Fiscal Year Requirement Lopez Groundwater Delivery Peaking Meters/Serv Customer Conservation FY 23-24 $4,640,673 $1,423,434 $121,300 $692,628 $1,919,391 $316,822 $153,304 $13,794 Water and Wastewater Rate Study City of Grover Beach
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Proposed Rate Structure
The recommended water rates include keeping the current rate structure. The current rates include fixed charges by meter size and the three-tier variable Residential variable rate structure and uniform volume rate structure for all other customers. The design of the fixed charges and variable charges are discussed below.
Proposed Fixed Charges
The proposed fixed charges recover the Meters and Services and Customer costs of service identified in Table 12, and additionally recover 35 percent of the Peaking costs. All of the Meters and Services costs, Customer costs, and Peaking costs are recovered on meter capacity ratios provided by AWWA. Table 13 below presents the design of the proposed monthly fixed charges for water customers. The proposed fixed charges generate approximately 25 percent of the revenue from water rates.
Fixed charges for meter sizes greater than 5/8-inch are increased through application of meter capacity ratios as shown below in Table 14. All of the Meter and Service, Customer, and Peaking charges are increased through meter capacity ratios. The charges are summed to provide the total monthly charge by meter size as shown in the last column of Table 14.
Table 13
Design of Monthly Water Fixed Charges
Customer Service Cost FY 23-24
Customer Cost $153,304
Number of Bills 63,754
Customer Cost per Unit $2.40
Meters and Services Cost FY 23-24
Meters and Services Cost $316,822
Number of Equivalent Meters & Services 63,754
Meters and Services Cost per Unit $4.97
Peaking Costs FY 23-24
Peaking Costs $671,787
Number of Equivalent Meters 63,754
Peaking Cost per Unit $10.54
Base Fixed Charge - 5/8" $17.91
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Proposed Variable Charges
Variable charges are designed to recover the Water Supply, Delivery, Peaking (65 percent), and Conservation costs from Table 12. Consumption and peaking characteristics of water system customers were analyzed to allocate costs to customer classification as well as between each Residential tier. Water Supply costs, consisting of groundwater and Lopez Water, were allocated to each Residential tier based on water availability and the demand in each tier.
Tier Definitions. No changes are proposed to the rate tiers for Residential customers. Tier 1 is defined as the consumption to provide basic indoor water use and is the same as defined in the City’s last rate study as 0 to 1,000 cubic feet (10 HCF). Tier 2 is defined as consumption related to outdoor water use and is all water consumed beyond Tier 1 and below Tier 3. The Tier 2 upper breakpoint is defined as the Residential summer peak demand of 2,200 cubic deet (22 HCF). Tier 3 is defined as use beyond Tier 2.
For the other customer classes of Landscape and All Other, these classes will have individual uniform volume rates, the same rate structure as is currently used, which also recognizes the peaking characteristics of each class in their variable rate.
Delivery Costs. Delivery costs from Table 12 are operating and capital costs of the water system related to delivering water to all customers at an average rate of use. Delivery costs tend to vary with the total quantity of water consumed under average-load conditions. These costs are shared uniformly by all customers of the system.
Table 15 provides the per unit Delivery cost.
Table 14
Design of Monthly Water Fixed Charges by Meter Size
Meter Meter & Total
Meter Capacity Services Peaking Customer Monthly
Size Ratio Charge Charge Charge Charge
inches
Residential
5/8" 1.00 $4.97 $10.54 $2.40 $17.91
3/4" 1.00 $4.97 $10.54 $2.40 $17.91
1" 1.00 $4.97 $10.54 $2.40 $17.91
1.5" 3.33 $16.57 $35.13 $8.00 $59.70
2" 5.33 $26.51 $56.21 $12.80 $95.52
3" 10.67 $53.01 $112.43 $25.60 $191.04
4" 16.67 $82.83 $175.67 $40.00 $298.50
Non-Residential
5/8" 1.00 $4.97 $10.54 $2.40 $17.91
3/4" 1.50 $7.46 $15.81 $3.60 $26.87
1" 1.67 $8.28 $17.57 $4.00 $29.85
1.5" 3.33 $16.57 $35.13 $8.00 $59.70
2" 5.33 $26.51 $56.21 $12.80 $95.52
3" 10.67 $53.01 $112.43 $25.60 $191.04
4" 16.67 $82.83 $175.67 $40.00 $298.50
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Peaking Costs. Peaking costs are costs associated with meeting peak demand rates of use requirements of the water system and include operating and capital costs beyond that required for average rates of use. Water system facilities are designed to meet peak characteristics and are apportioned to customer classes based on their system use characteristics. Peaking costs may be assigned to tiers in a tiered-rate structure based on the customers within the tier that are causing the peak demand.
Peaking costs are first allocated to each customer class based on their total demand. Then for Residential peaking costs, the costs are allocated to the tiers based on the peaking factors that occur from customer’s use within the tiers, based on the tier breakpoints discussed above. Tier 1 is considered to have a peaking factor of 1.0, Tier 2 and Tier 3 have peaking factors that reflect the average use per customer within these tiers as a ratio to Tier 1.
Table 16 presents the calculation of the Residential tier rates which shows the Residential consumption, peaking factor, Peaking cost allocation, and the resulting rate by tier for Residential customers.
Water Supply Costs. The City’s water supply currently consists of groundwater and Lopez water. In FY 2021- 22, groundwater production accounted for about 11 percent of the total water supply and is the least expensive source of water. Lopez water is the most expensive water.
The sources of water supply are allocated to each tier assuming the least expensive source of water is used first, followed by remaining sources in order of cost to meet the demand. Table 17 provides the City’s demand by tier, Table 15
Design of Uniform Rate for Delivery Costs
Delivery Uniform
Customer Class Costs Volume Rate
Residential $561,233 395,119 $1.42
Landscape 29,930 21,071 $1.42
All Other 101,466 71,434 $1.42
Total $692,628 487,624 $1.42
Table 16
Design of Residential Peaking Rate
Percent Peaking
Consumption Peaking Weighted Cost Rate in
Tier in Tier Consumption Factor Consumption Allocation Tier Tier 1 - 0 to 10 units 53.1% 209,939 1.00 209,939 $287,349 $1.37 Tier 2 - 11 to 22 units 25.6% 101,247 1.73 175,553 240,284 $2.37 Tier 3 - Over 22 units 21.2% 83,934 4.18 350,607 479,884 $5.72 100.0% 395,119 736,099 $1,007,516
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the water supply source used to meet the demand in the tier, the costs associated with the water supply, and the resulting water supply rate in the tier.
Water Conservation Costs. The City has established a water conservation program to encourage the public to be conscious of water use and consider methods to conserve water. Such conservation efforts are generally directed at those customers who consume water in Tier 2 and Tier 3 (outdoor consumption). Therefore, Conservation costs of the program are assigned and recovered from customers who consume water in Tiers 2 and 3. Table 18 provides the method used to calculate the conservation rate in each tier to recover conservation costs.
Proposed Variable Rates. Table 19 provides a summary of the variable rate components from Tables 15 through 18 for the customer classifications. The table shows that each customer classification pays for the same Delivery costs; however, each class pays for their individual peaking, water supply, and conservation costs.
The Residential classification pays for more expensive water supply in Tier 2 and Tier 3 due to the customers in those tiers causing the City to obtain more expensive water to meet that demand. Landscape and Other customers pay for a blend of water supply.
Table 17
Design of Water Supply Rate by Tier
Projected Consumption Met From Water Water
Tier Consumption Groundwater Lopez Supply Costs Supply Rates Tier 1 - 0 to 10 units 225,513 55,575 169,939 $681,181 $3.02 Tier 2 - 11 to 22 units 111,999 111,999 368,993 $3.29
Tier 3 - Over 22 units 150,112 150,112 494,560 $3.29
55,575 487,624 432,049 $1,544,734
Table 18
Design of Residential Conservation Rate
Percent Peaking
Consumption Peaking Weighted Cost Rate in
Tier in Tier Consumption Factor Consumption Allocation Tier Tier 1 - 0 to 10 units 53.1% 209,939 1.00 $0 $0.00
Tier 2 - 11 to 22 units 25.6% 101,247 1.73 175,553 3,729 $0.04 Tier 3 - Over 22 units 21.2% 83,934 4.18 350,607 7,447 $0.09 100.0% 395,119 526,160 $11,176
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Proposed Water Rates
Table 20 presents the proposed fixed charges and variable charges for the water system for the next five years.
The table provides the current fixed and variable charges, the proposed fixed and variable charges for January 1, 2024 that were developed in the tables above, and the proposed fixed and variable charges for each January 1 through January 1, 2028.
Table 19
Design of Water Variable Rates
Proposed
Differentiated Volume
Customer Class Delivery Peaking Supply Conservation Rate Residential
Tier 1 - 0 to 10 units $1.42 $1.37 $3.02 $0.00 $5.81
Tier 2 - 11 to 22 units $1.42 $2.37 $3.29 $0.04 $7.12
Tier 3 - Over 22 units $1.42 $5.72 $3.29 $0.09 $10.52
Landscape $1.42 $3.53 $3.24 $0.03 $8.22
All Other $1.42 $2.32 $3.24 $0.03 $7.01
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Water Bill Impact Analysis
An impact analysis was performed to evaluate the change in SFR customer bills that would occur from the implementation of the proposed January 2024 water rates. The impacts are provided in Table 21. For an SFR customer with a 3/4-inch meter size using the average consumption of 15 HCF bi-monthly, the bill will increase from $90.69 to $129.52, an increase of $35.83 or 38.2 percent. The percentage increase in water bills for January 1, 2024 does not match the overall revenue increase of 19.7 percent from the water financial plan due to costs of service adjustments in this year. Future year’s water bills increase following the revenue increases in the water financial plan.
Table 20
Proposed Water Fixed and Variable Charges
Current Proposed
Rate Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Residential
Meter Size Fixed Charge ($ per month)
5/8" $16.47 $17.91 $21.44 $25.67 $30.73 $31.96
3/4" $16.47 $17.91 $21.44 $25.67 $30.73 $31.96
1" $16.47 $17.91 $21.44 $25.67 $30.73 $31.96
1.5" $54.85 $59.70 $71.47 $85.55 $102.41 $106.51
2" $87.80 $95.52 $114.34 $136.87 $163.84 $170.40
3" $175.61 $191.04 $228.68 $273.73 $327.66 $340.77
4" $274.55 $298.50 $357.31 $427.71 $511.97 $532.45
Non-Residential
Meter Size Fixed Charge ($ per month)
5/8" $16.47 $17.91 $21.44 $25.67 $30.73 $31.96
3/4" $24.71 $26.87 $32.17 $38.51 $46.10 $47.95
1" $27.52 $29.85 $35.74 $42.79 $51.22 $53.27
1.5" $54.85 $59.70 $71.47 $85.55 $102.41 $106.51
2" $87.80 $95.52 $114.34 $136.87 $163.84 $170.40
3" $175.61 $191.04 $228.68 $273.73 $327.66 $340.77
4" $274.55 $298.50 $357.31 $427.71 $511.97 $532.45
Variable Charge ($ per HCF)
Residential
Tier 1 - 0 to 10 units $2.99 $5.81 $6.96 $8.34 $9.99 $10.39 Tier 2 - 11 to 22 units $6.17 $7.12 $8.53 $10.22 $12.24 $12.73 Tier 3 - Over 22 units $8.90 $10.52 $12.60 $15.09 $18.07 $18.80 Landscape $6.72 $8.22 $9.84 $11.78 $14.11 $14.68
All Other $6.47 $7.01 $8.40 $10.06 $12.05 $12.54
Classification
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Figure 3 shows how future SFR bills will increase over time with the implementation of the proposed rates in Table 21 at the average consumption of 15 HCF bi-monthly.
Table 21
Comparison of Current Single-family Residential Bi-monthly Water Bills with 3/4-inch Meter Size with Proposed Bills Using January 2024 Water Rates Current Bill Proposed FY 23-24 Bill
Service Volume Current Service Volume Proposed Dollar Percent Description Use (HCF) Charge Charge Bill Charge Charge Bill Difference Change 0 $32.94 $0.00 $32.94 $35.82 $0.00 $35.82 $2.88 8.7%
Very Low 5 $32.94 $14.95 $47.89 $35.82 $29.05 $64.87 $16.98 35.5% Low 10 $32.94 $29.90 $62.84 $35.82 $58.10 $93.92 $31.08 49.5% Median 12 $32.94 $42.24 $75.18 $35.82 $72.34 $108.16 $32.98 43.9% Average 15 $32.94 $60.75 $93.69 $35.82 $93.70 $129.52 $35.83 38.2% 20 $32.94 $91.60 $124.54 $35.82 $129.30 $165.12 $40.58 32.6% High 30 $32.94 $175.14 $208.08 $35.82 $227.70 $263.52 $55.44 26.6% Very High 50 $32.94 $353.14 $386.08 $35.82 $438.10 $473.92 $473.71 22.8% Figure 3
Current and Future Single-family Residential Bi-monthly Water Bills at 15 HCF Proposed
SFR Charges Current FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Fixed Charges $32.94 $35.82 $42.88 $51.34 $61.46 $63.92 Variable Charges 60.75 93.70 112.25 134.50 161.10 167.55 Total Charges $93.69 $129.52 $155.13 $185.84 $222.56 $231.47 Dollar Change $35.83 $25.61 $30.71 $36.72 $8.91
Percent Change 38.2% 19.8% 19.8% 19.8% 4.0%
$93.69
$129.52
$155.13
$185.84
$222.56 $231.47
$0
$50
$100
$150
$200
$250
Current FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28
Fixed Charges Variable Charges
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Water Rate Survey
A water rate survey was conducted for neighboring communities to the City of Grover Beach. Chart 1 compares the Grover Beach SFR estimated bi-monthly water bill with those of neighboring communities at the same consumption of 15 HCF bi-monthly. The rate survey includes rate schedules in effect July 2023.
Water bills for Grover Beach are shown using the current rates and the proposed rates for implementation on January 1, 2024. The chart indicates that with the January 2024 water rates, a Grover Beach SFR customer with a 3/4-inch meter using the average bi-monthly consumption of 15 HCF will experience a bill that is among the lowest of the communities surveyed.
Chart 1
Single-family Residential Bi-Monthly Water Bills Using 15 HCF For Rates in Effect July 2023
Note: Above table uses water rates in effect July 2023. Grover Beach January 2024 bill is based on the rate structure and rates in Table 20. Grover Beach bill includes 1% utility tax.
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Wastewater Financial Planning
Financial planning for the wastewater system includes identifying and projecting revenues and revenue requirements for a five-year planning period. Estimates of revenue from various sources are compared with the projected revenue requirements of the wastewater system. This comparison allows the review of the adequacy of existing revenue to meet annual obligations and provide the basis for any rate adjustments. New wastewater rates and charges are created to recover all of the City’s annual operating and capital costs associated with the wastewater system.
This section discusses current wastewater rates, current user classifications, projected revenues and revenue requirements, capital improvement expenditures and financing sources, and proposed revenue adjustments.
Current Wastewater Rates
The current wastewater rates consist of fixed charges to residential and non-residential customers. All customers are charged a fixed charge monthly, however are billed bi-monthly. Table 22 provides the current wastewater rates.
Table 22
Current Wastewater Rates
Fixed
Classification Charges
$/month
Boarding House (per unit) $15.54
Per Bedroom Charge 10.00
Car Washes & Laundromats (min charge) 6.19
Per 100 cubic feet above minimum 0.00
Church 15.06
Per parsonage or dwelling unit 12.82
Commercial Establishment (Public place up to 5 Fixtures) 15.04 Each additional fixture [2] 4.12
Factories, Industrial Plants (20 employees or less) 10.12 Each additional employee over 20 1.16
Hotel, Motel Auto Court or Lodge (per unit) 15.45
Mobile Home (per space) 12.82
Restaurants (min charge) 2.14
Per 100 cubic feet against minimum 0.00
Schools (min annual charge per ADA and employee) 3.31
Schools with Cafeterias (additional) Per ADA and employees 1.38 Single-Family Dwelling Unit 12.82
Theater, Clubhouse or Place of Amusement 15.04
Travel Trailer and Recreation Vehicle Space 6.60
Multi-family, Two or More Dwellings (per unit) 12.82
Per each coin-operated washer 2.80
Excess Discharge per 100 cubic feet $0.40
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Wastewater User Classifications
Number of Customers
The City classifies wastewater customers in one of a number of classifications. SFR customers represent more than 62 percent of the total customers served by the wastewater system. Growth is projected to occur only in SFR accounts at a rate of 0.50 percent annually or about 20 SFR accounts added each year, following the assumptions listed in Table 1. Table 23 provides the historical and projected number of customers by classification.
Wastewater Financial Plan
The financial plan provides the means of analyzing the revenue and revenue requirements of the wastewater system and its impact on reserves as well as the ability to fund on-going O&M expenses and capital infrastructure requirements. This section of the Report discusses the projection of revenue, O&M expenses, capital improvement needs, capital financing, and revenue adjustments needed to maintain a sustainable wastewater enterprise.
Revenues
The City receives operating and capital revenue from several sources. Operating revenue is received from rates and charges for wastewater service. Revenue is projected by applying the current wastewater rates to the projected number of accounts and consumption volume. Table 24 presents the projected revenue from current wastewater rates.
Table 23
Historical and Projected Number of Wastewater Customers by Classification Historical Projected
Customer Class FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Number of Accounts
Boarding House (per unit) [1] 0 0 0 0 0 0 0
Per Bedroom Charge 0 0 0 0 0 0 0
Car Washes & Laundromats (min charge) 2 2 2 2 2 2 2
Per 100 cubic feet above minimum 0 0 0 0 0 0 0
Church 9 9 9 9 9 9 9
Per parsonage or dwelling unit 5 5 5 5 5 5 5
Commercial Establishment (Public place up to 5 Fixtures) 393 393 393 393 393 393 393 Each additional fixture 32 32 32 32 32 32 32
Factories, Industrial Plants (20 employees or less) 28 28 28 28 28 28 28 Each additional employee over 20 5 5 5 5 5 5 5
Hotel, Motel Auto Court or Lodge (per unit) 142 142 142 142 142 142 142 Mobile Home (per space) 156 156 156 156 156 156 156
Restaurants (min charge) 5 5 5 5 5 5 5
Per 100 cubic feet against minimum 0 0 0 0 0 0 0
Schools (min annual charge per ADA and employee) 0 0 0 0 0 0 0 Schools with Cafeterias (additional) Per ADA and employees 0 0 0 0 0 0 0 Single-Family Dwelling Unit 3,789 3,808 3,827 3,846 3,865 3,885 3,904 Theater, Clubhouse or Place of Amusement 0 0 0 0 0 0 0
Travel Trailer and Recreation Vehicle Space 122 122 122 122 122 122 122 Multi-family, Two or More Dwellings (per unit) 1,443 1,443 1,443 1,443 1,443 1,443 1,443 Per each coin-operated washer 2 2 2 2 2 2 2
Excess Discharge per 100 cubic feet 0 0 0 0 0 0 0
Total Number of Customers 6,134 6,152 6,171 6,190 6,209 6,229 6,248 Water and Wastewater Rate Study City of Grover Beach
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Miscellaneous Revenue
Miscellaneous revenues are received from several sources including plan check and inspection fees, transfers in, fees, storm water revenue, and other sources. Table 25 below provides sources of miscellaneous revenue.
Revenue Requirements
Revenue requirements of the wastewater system include O&M expense and capital improvement funding. Each of these items are discussed below.
Operation and Maintenance Expense
O&M expenses are an on-going obligation of the wastewater system and such costs are normally met from wastewater service revenue. O&M includes the cost to operate and maintain the wastewater collection system facilities. Costs also include technical services and other general and administrative expenses.
O&M has been projected recognizing the major expense categories of personnel services, electric power expense, chemicals, capital outlay, and all other expenses. O&M expenses are inflated with the inflation factors presented in Table 1. Table 26 provides a summary of the O&M expenses for the Study period.
Capital Improvement Funding
The City plans for wastewater replacements and improvements in its capital planning during the fiscal year. The annual amount required to fund the replacements and improvements is included in the wastewater financial plan. No debt is planned for wastewater system improvements.
Table 24
Projected Rate-based Wastewater Revenue Using Current Rates Projected
Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Wastewater Service Revenues
Fixed Charge Revenue [1] $928,035 $949,446 $952,368 $955,291 $958,368 $961,291 Total Revenues From Current Rates $928,035 $949,446 $952,368 $955,291 $958,368 $961,291 [1] Current fixed charge multiplied by the number of customers.
Table 25
Projected Miscellaneous Wastewater Revenue
Estimated Budget Budget Projected
Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Miscellaneous $22,038 $27,000 $27,000 $27,000 $27,000 $27,000 Plan Check and Inspection Fees - 1,000 1,000 1,000 1,000 Transfers In - 85,000 - - - -
Storm Water Revenue 280,689 297,126 303,069 303,161 303,258 303,350 Total Miscellaneous Revenues $302,727 $409,126 $331,069 $331,161 $331,258 $331,350 Water and Wastewater Rate Study City of Grover Beach
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Debt Service
A proposed new debt issue is assumed to fund the Sewer Upgrade for Future Flows project with proceeds totaling $3.6M in FY 2023-24. The proposed debt issue is projected to have payments of $303,000 annually beginning in FY 2024-25 and includes an interest rate of 5 percent with a 20-year term.
Wastewater Capital Improvement Program
The City has developed a CIP that lists capital improvement expenditures for FY 2022-23 through FY 2027-28 provided in Table 27. Over this period the City projects that it would spend approximately $8.2 million. The major improvements include Sewer Upgrades for Future Flows, South Oak Park Lift Station Upgrades, and sewer lining projects. The CIP is funded from wastewater rate revenue, debt proceeds, and reserves.
Table 26
Historical and Projected Wastewater Operations and Maintenance Expense Estimated Budget Budget Projected
Desription FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Utility Billing
Salaries $259,119 $266,998 $278,951 $288,104 $297,594 $307,435 Benefits 60,226 74,241 77,177 83,352 90,018 97,220
All Other 76,583 90,800 78,100 79,662 81,253 82,879
Subtotal Salaries and Benfits $395,928 $432,039 $434,228 $451,118 $468,865 $487,534 Wastewater Operations
Salaries $157,431 $162,779 $174,064 $170,787 $175,911 $181,188 Benefits 50,941 57,952 61,529 66,440 71,743 77,470
Utilities - Electricity 8,294 11,000 11,000 11,330 11,670 12,020 Services - Maintenance 85,832 36,000 36,000 36,720 37,454 38,203 Contractual Obligations 121,381 35,000 35,000 35,700 36,414 37,142 Rentals & Leases - Facilities 1,500 7,125 7,125 7,268 7,413 7,561 Maintenance of Vehicles 2,883 1,700 1,900 1,938 1,977 2,017 Maintenance of City Facilities 332 750 750 765 780 796
Maintenance of Equipment 2,153 1,000 1,000 1,020 1,040 1,061 Capital Outlay 0 200,000 0 0 0 0
All Other 13,889 19,650 19,850 20,247 20,651 21,064
Subtotal Operations $444,636 $532,956 $348,218 $352,215 $365,053 $378,522 Storm Water $292,146 $282,760 $292,060 $299,028 $306,172 $313,492 Non-Departmental
Salaries $19,586 $88,005 $87,311 $89,930 $92,628 $95,407 Supplies and Services 72,204 69,400 71,000 72,420 73,868 75,346 Transfers Out 177,170 245,366 248,152 253,115 258,177 263,341 Subtotal Salaries and Benfits $268,960 $402,771 $406,463 $415,465 $424,673 $434,094 Total Wastewater O&M Expense $1,401,670 $1,650,526 $1,480,969 $1,517,826 $1,564,763 $1,613,642 Water and Wastewater Rate Study City of Grover Beach
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Wastewater Financial Plan
A financial plan has been prepared that includes the revenues and revenue requirements that were identified for the wastewater system and is presented in Table 28. The plan incorporates specific financial planning criteria to provide guidance to maintain the health of the wastewater utility on an on-going basis. The criteria included the following.
Generate positive levels of income in each year of the Study period Maintain the operating and capital reserves at or greater than target levels Maintain debt service coverage ratios at or greater than the minimum required Meet annual capital replacement and improvement spending requirements Proposed Revenue Adjustments
Table 28 provides the annual revenue increases recommended to meet the financial planning criteria for the Study period. The financial plan indicates that a 19.5 percent increase is recommended on January 1, 2024 and on each January through January 1, 2027, then 4 percent annual increases for the remaining years of the Study period. The increases are necessary to meet the planning criteria discussed above.
Table 27
Wastewater Capital Improvement Program
Projected
Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Current Capital Improvement Program (CIP) Projects [1]
Sewer Upgrade for Existing and Future Flows $121,398 $3,600,000 $0 $0 $0 $0 Front Street Lift Station Upgrades 15,252 144,748 - - - - South Oak Park Lift Station Upgrades - 150,000 - - - -
Sewer Upgrade for Existing Flows - 400,000 - - - 3,100,000 Replace Portion of Damaged Strom Drain - - 140,000 - - - Citywide Sewer Lining Project - 100,000 100,000 100,000 100,000 100,000 Total Wastewater CIP $136,650 $4,394,748 $240,000 $100,000 $100,000 $3,200,000 [1] CIP Source: FY 22-23 City CIP document.
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A graphical depiction of the revenue and revenue requirements from Table 28 is presented in Figure 4. Revenue using the current rates is shown as the black line while revenue with revenue adjustments is shown as the red line.
Figure 4 shows that the revenue increases from Table 28 are necessary to meet annual revenue requirements, fund the CIP requirements, maintain the operating reserve, and meet minimum debt service coverage ratios required by debt covenants. Revenue increases beyond FY 2027-28 are assumed to include a 17.0 percent increase in FY 2028-29 followed by 3.5 percent increases for the next three years.
Table 28
Wastewater Financial Plan
Projected
Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Proposed Revenue Increase (January 1) 19.5% 19.5% 19.5% 19.5% 4.0% Sewer Fund
Revenue
Rate-based Revenues, Current Rates [1] $928,035 $949,446 $952,368 $955,291 $958,368 $961,291 Total Additional Wastewater Revenue [2] - 77,142 278,181 519,728 809,957 1,031,699 Miscellaneous Income 302,727 409,126 331,069 331,161 331,258 331,350 Rate Stabilization - - 238,000 32,000 - -
Interest Income [3] 88,278 75,140 61,467 59,284 60,979 49,478 Total Revenue $1,319,040 $1,510,854 $1,861,085 $1,897,464 $2,160,562 $2,373,818 Operating Expenses
Operation and Maintenance Expense $1,401,670 $1,450,526 $1,480,969 $1,517,826 $1,564,763 $1,613,642 Minor Capital Outlay - 200,000 - - - -
Total Operating Expenses $1,401,670 $1,650,526 $1,480,969 $1,517,826 $1,564,763 $1,613,642 Capital Expenditures
Capital Improvement Funding $136,650 $4,394,748 $240,000 $100,000 $100,000 $3,200,000 New Debt Proceeds - (3,600,000) - - - (1,400,000)
New Debt Service - - 303,000 303,000 303,000 303,000
Total Capital Expenditures $136,650 $794,748 $543,000 $403,000 $403,000 $2,103,000 Total Revenue Requirements $1,538,320 $2,445,274 $2,023,969 $1,920,826 $1,967,763 $3,716,642 Net Funds Available ($219,280) ($934,420) ($162,884) ($23,362) $192,799 ($1,342,824) Available Reserves
Beginning available reserves [4] $4,343,200 $3,170,780 $2,975,896 $2,952,534 $3,145,333 Rate Stabilization Set Aside (238,000) (32,000) - - -
Ending available reserves $3,170,780 $2,975,896 $2,952,534 $3,145,333 $1,802,509 Target Reserves [5] $1,201,000 $1,325,000 $1,240,000 $1,259,000 $1,282,000 $1,307,000 Above (below) Target $1,845,780 $1,735,896 $1,693,534 $1,863,333 $495,509 Debt Service Coverage
Net Revenues [6] ($82,630) ($139,672) $380,116 $379,638 $595,799 $760,176 Annual Debt Service $0 $0 $303,000 $303,000 $303,000 $303,000 Coverage [7] n/a n/a 125% 125% 197% 251%
[1] Projected using the current rates.
[2] Additional revenue from rate adjustments.
[3] Interest earnings on the average fund balance calculated at 2.0%. [4] The available FY 23-24 cash balance provided by the City. Includes operating and capital fund reserves. [5] Target reserve estimated at 180 days of operation and maintenance expense plus $500,000 as a capital reserve. [6] Includes revenue from rates, rate adjustments, and miscellaneous revenue. [7] Minimum coverage is 125 percent.
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Figure 5 provides a graphical depiction of the wastewater fund end-of-year cash reserves versus the Target reserves. The green columns represent the cash reserve balance at the end of year while the purple line indicates the established Target Reserve level. The figure shows that the operating fund balance meets the Target Reserve level in each year for the first five years, dips below the Target Reserve for three years, then returns to meet the target in the last year of the Study.
Wastewater Cost of Service
Similar to AWWA, the Water Environment Federation (WEF) is an industry trade organization that provides guidance on operations, technical training, education, and management of wastewater utilities. General principles are provided to assist agencies with the design of wastewater rates and charges that are consistent with local requirements while also recognizing state laws and legal framework.
The wastewater system’s operating and capital costs would normally be allocated following industry methodology from the WEF. However, water consumption information by the wastewater customer classifications was not available for use in wastewater rate design. The City’s costs are wastewater collection costs and may be considered to be related to wastewater flow since treatment is provided by the SSLOCSD.
Figure 4
Wastewater Financial Plan
Comparison of Revenue with Revenue Requirements
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 Sources and Uses ($ Millions) Operating Exp Debt Service Capital Improvement Funding Reserves Revenue w/o Increases Revenue with Increases Water and Wastewater Rate Study City of Grover Beach
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Because the water information is not available which would be used to estimate wastewater flow of the customer classifications, the proportionality relationship of the current fixed charges between classifications developed in the City’s last rate study is used as a cost of service relationship for the proposed wastewater rate design.
Wastewater Rate Design
The emphasis on rate design is to achieve fairness and ensure that each customer class pays its fair share of costs.
Rates should be simple to administer, easy to understand, and comply with regulatory requirements. This section describes how water rates and charges are designed and includes the proposed schedule of water rates for implementation.
Proposed Wastewater Rates
The current wastewater rate structure is proposed to be maintained and rates are increased with the revenue increase percentages provided in the financial plan. Table 29 presents the proposed fixed charges for the wastewater system for the next five years. Current fixed charges are provided as well as proposed fixed charges for January 1, 2024 through January 1, 2028.
Figure 5
Wastewater Reserves versus Target Reserves
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 ($ Millions) Reserves Target Reserve Water and Wastewater Rate Study City of Grover Beach
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Wastewater Bill Impact Analysis
From inspection of Table 29, the change in SFR customer bills that would occur from the implementation of the proposed wastewater rates for the January 2024 rate increase can be determined. For a SFR customer, the bimonthly bill will increase from $76.60 [($12.82 monthly charge +$25.48 treatment charge) x 2 months] to $80.96 [($15.00 monthly + $25.48 treatment charge) x 2 months], an increase of $4.36 or 5.7 percent.
Figure 6 provides how SFR wastewater bills will increase over time with the implementation of the proposed rates in Table 29 assuming a constant SSLOCSD treatment charge.
Table 29
Proposed Wastewater Rates
Current Proposed
Classification Charge Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Fixed Charge ($ per month)
Boarding House (per unit) $15.54 $18.57 $22.19 $26.52 $31.69 $32.96 Per Bedroom Charge 10.00 11.95 14.28 17.06 20.39 21.21
Car Washes & Laundromats (min charge) 6.19 7.40 8.84 10.56 12.62 13.12 Per 100 cubic feet above minimum 0.00 0.00 0.00 0.00 0.00 0.00 Church 15.06 18.00 21.51 25.70 30.71 31.94
Per parsonage or dwelling unit 12.82 15.32 18.31 21.88 26.15 27.20 Commercial Establishment (Public place up to 5 Fixtures) 15.04 17.97 21.47 25.66 30.66 31.89 Each additional fixture 4.12 4.92 5.88 7.03 8.40 8.74
Factories, Industrial Plants (20 employees or less) 10.12 12.09 14.45 17.27 20.64 21.47 Each additional employee over 20 1.16 1.39 1.66 1.98 2.37 2.46 Hotel, Motel Auto Court or Lodge (per unit) 15.45 18.46 22.06 26.36 31.50 32.76 Mobile Home (per space) 12.82 15.32 18.31 21.88 26.15 27.20 Restaurants (min charge) 2.14 2.56 3.06 3.66 4.37 4.54
Per 100 cubic feet against minimum 0.00 0.00 0.00 0.00 0.00 0.00 Schools (min annual charge per ADA and employee) 3.31 3.96 4.73 5.65 6.75 7.02 Schools with Cafeterias (additional) Per ADA and employees 1.38 1.65 1.97 2.35 2.81 2.92 Single-Family Dwelling Unit 12.82 15.32 18.31 21.88 26.15 27.20 Theater, Clubhouse or Place of Amusement 15.04 17.97 21.47 25.66 30.66 31.89 Travel Trailer and Recreation Vehicle Space 6.60 7.89 9.43 11.27 13.47 14.01 Multi-family, Two or More Dwellings (per unit) 12.82 15.32 18.31 21.88 26.15 27.20 Per each coin-operated washer 2.80 3.35 4.00 4.78 5.71 5.94 Excess Discharge per 100 cubic feet $0.40 $0.48 $0.57 $0.68 $0.81 $0.84 Water and Wastewater Rate Study City of Grover Beach
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Wastewater Rate Survey
A wastewater rate survey was conducted for neighboring communities to the City of Grover Beach. Chart 2 compares the Grover Beach SFR estimated bi-monthly wastewater bill with those of neighboring communities at the same consumption of 15 HCF bi-monthly. The rate survey includes rate schedules in effect July 2023.
Wastewater bills for Grover Beach are shown using the current rates and the proposed rates for implementation on January 1, 2024. The chart indicates that with the January 2024 wastewater rate implementation, a Grover Beach SFR customer will experience a bill that is among the lowest of the communities listed.
Figure 6
Current and Future Single-family Residential Bi-monthly Wastewater Bills Proposed
SFR Charges Current FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Fixed Charges $25.64 $30.64 $36.62 $43.76 $52.30 $54.40 SSLOCSD Charge $50.96 $50.96 $50.96 $50.96 $50.96 $50.96 Fixed Charges $76.60 $81.60 $87.58 $94.72 $103.26 $105.36 Dollar Change $5.00 $5.98 $7.14 $8.54 $2.10
Percent Change 6.5% 7.3% 8.2% 9.0% 2.0%
$76.60
$81.60
$87.58
$94.72
$103.26 $105.36
$0
$20
$40
$60
$80
$100
$120
Current FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Fixed Charges
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Chart 2
Single-family Residential Bi-Monthly Wastewater Bills
For Rates in Effect July 2023
Note: Above table uses wastewater rates in effect July 2023. Grover Beach January 2024 bill is based on the rate structure and rates in Table 29. Grover Beach, Arroyo Grande, and Oceano CSD bill includes the SSLOCSD treatment charge. Grover Beach also includes the storm water charge.
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Appendix A
Detailed Water Cost of Service Allocation is provided in Appendix A.
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Appendix A-1
Allocation of Water Revenue Requirements to Cost Component Line Total Water Supply Peaking Customer
No. Description FY 23-24 Lopez Groundwater Delivery Max Day Max Hour Meters/Serv Customer Conservation 1 Utility Billing $431,985 - - - - - - $431,985 -
Water System
Salaries/Fringe Benefits
2 Salaries and Benefits $508,930 - - $138,915 $199,529 $170,486 - - - Services and Supplies
3 Supplies $60,100 - - $16,405 $23,563 $20,132 - - -
4 Miscellaneous Fees/Charges 31,000 - - 8,461 12,154 10,385 - - - 5 Vehicle Fuel 14,000 - - 3,821 5,489 4,690 - - -
6 Utilities - Electricity 131,000 - 117,900 3,576 5,136 4,388 - - - 7 Services 57,000 - - 15,558 22,347 19,095 - - -
8 Services - Engineering & Maintenance 175,000 - - 46,675 67,042 57,283 4,000 - - 9 Maintenance of Facilities 71,000 - 3,400 17,522 25,171 21,507 3,400 - - 10 Equipment - - - - - - - - -
11 All Other 73,191 - - 19,978 28,695 24,518 - - -
12 Total Services and Supplies $612,291 $0 $121,300 $131,996 $189,597 $161,998 $7,400 $0 $0 Operating Equipment
13 Equipment Purchases $0 - - $0 $0 $0 - - -
14 Water Meters 40,000 - - - - - 40,000 - -
15 Non Capital Special Projects - - - - - - - - -
16 Total Capital Outlay $40,000 $0 $0 $0 $0 $0 $40,000 $0 $0 17 Non-Departmental $688,471 - - $187,921 $269,921 $230,629 - - - 18 Central Coast Blue O&M Expense 19,285 - - 19,285 - - - - - 19 Lopez Water Expense $1,423,434 $1,423,434 - - - - - - - 20 Water Conservation Fund $13,794 - - - - - - - $13,794 21 Total Operation and Maintenance Expense $3,738,190 $1,423,434 $121,300 $478,117 $659,047 $563,113 $47,400 $431,985 $13,794 Capital Costs
22 Capital Improvements [5] $2,027,700 - - $449,815 $599,975 $677,910 300,000 - - 23 2020 Debt Service 280,923 - - 73,139 97,556 110,228 - - - 24 Total Capital Costs $2,308,623 $0 $0 $522,954 $697,531 $788,138 $300,000 $0 $0 Adjustments
25 Revenue Offsets ($245,900) $0 $0 ($53,939) ($74,351) ($63,528) ($5,347) ($48,735) $0 26 Adjustments for Annual Cash Balance (1,605,762) - - (352,230) (485,521) (414,847) (34,920) (318,244) - 27 Adjustments to Annualize Rate Increase 445,522 - - 97,726 134,709 115,100 9,689 88,298 - 28 Total Adjustments ($1,406,140) $0 $0 ($308,443) ($425,163) ($363,275) ($30,578) ($278,681) $0 29 Total O&M and Capital $4,640,673 $1,423,434 $121,300 $692,628 $931,415 $987,976 $316,822 $153,304 $13,794 30 Percentage Allocation 100.0% 30.7% 2.6% 14.9% 20.1% 21.3% 6.8% 3.3% 0.3% Rate Survey
Water Comparison of Other Communi�es in San Luis Obispo County Wastewater Comparison of Other Communi�es in San Luis Obispo County Grover Beach, Arroyo Grande, and Oceano CSD includes SSLOCSD treatment charge and storm water charge
Attachment 2