WATER AND WASTEWATER
RATE STUDY
City of Grover Beach
Presented By:
Clayton Tuckfield PE
Tuckfield & Associates
August 2023
Purpose of Rate Study
• Evaluate sufficiency of existing water and sewer revenues to:
• Provide funding for current and future operating,
maintenance, and capital improvements
• Meet minimum reserve level requirements
• Meet legal obligations associated with outstanding
debt
• Develop rates which will generate sufficient revenue to meet cost of providing essential services
2 3
• Review and analyze Water and Sewer Fund revenue and
expenses
• Historical revenue and expenses
• Budgets
• Project future revenue and expenses
• Develop Water and Wastewater Financial Plans
• Perform Cost of Service Analysis
• Review rate structures, select rate option, calculate rates Study Major Tasks
4 • On-going financial support for enterprise systems
• O&M expense increases (benefits, purchased water, electricity, chemicals, G&A) • Capital needs (system replacements, improvements)
• Maintain cash reserves (operating and capital)
• Meet debt service coverage ratio requirements
• Financial support for Central Coast Blue
• O&M expense
• Debt service payments
• Included into Water Fund
Why Are Rates Changing?
5 • Regional Recycled Water Project
• Advantages
• Sustainable water supply
• Protects the Santa Maria GW Basin from seawater intrusion • Provides a supplemental groundwater supply
• Enhances water supply reliability
• Protects against droughts
Central Coast Blue
6 • Advanced by Grover Beach, Pismo Beach, Arroyo Grande • Each city is responsible for a share of O&M expense, capital, and reserves • Grover Beach share – 36%
• Pismo Beach share – 39%
• Arroyo Grande share – 25%
• Project Construction Cost after Grants is $48.9M
• Awarded: Proposition 1 Planning Grant Pre-construction - $2.0M • Awarded: Federal Title XVI Water Reclamation and Reuse Grant - $14.1M • Awarded: Proposition 1 Integrated Regional Water Management - $1.0M • Awarded: State Prop 1 Grant Water Board - $8.0M
• Awarded: CA State Water Recycling Water Funding Program - $15.0M • Will apply: Federal Title XVI Water Reclamation and Reuse Grant - $10.8M Central Coast Blue
Water Capital Improvement Program
7 Project FY23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28
Central Coast Blue [1] $2,528,4900 $19,676,777
Water Main Zone Valves $75,000
Well Capacity Improvements $75,000
16th Street Booster Station $180,000 $780,000
Water Meter Replacements $300,000 $150,000 $150,000 $150,000 $150,000 Automated Meter Reading $300,000
Reservoir Maintenance $1,577,700
Total $4,556,100 $20,006,777 $930,000 $150,000 $450,000 [1] Proposing $22.2M debt issue to finance the Central Coast Blue project. 8 Water Financial Plan
$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 $ millions
O&M Water Supply JPA Expense 2020 Debt Service
CCB Debt Service Capital Spending Reserves Rev w/ Incr
Rev w/o Incr Column1
End of Year Cash Reserves Versus
Target Reserves
Water Enterprise
$0
$1
$1
$2
$2
$3
$3
$4
$4
$5
$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
End of Year Cash Reserves Target Reserves
Rates implemented January 1 of each year. Target Reserves = 6 mo. O&M plus $500k CIP Spending 9 • A methodology to assign costs to user classifications based on their demands on the water system
• Methodology from American Water Works Association (AWWA) • Water rates are designed to recover fixed and variable costs • 25% of revenue generated from fixed charges
• 75% of revenue generated from consumption charges
Water Cost of Service Analysis
10 Five-Year Projection
of SFR Water Bill
SFR Bi-monthly Water Bill with 3/4-inch
Meter at 15 HCF (average)
First year increase is different from financial
plan due to cost of service adjustments in
this year.
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
11 Water Bill Comparison with Other Communities
$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220 $240 $260 Cambria CSD
Avila Beach CSD
Morro Bay
San Luis Obispo
Cayucos CSA 10A
Oceano CSD
Pismo Beach
Arroyo Grande
Grover Beach January 1, 2024 Bill
Paso Robles
Atascadero
Grover Beach Current Bill
Wastewater System
12 Wastewater Capital Improvement Program
13 Project FY23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28
Sewer Upgrade/Future Flows $3,600,000
Front St Lift Station Upgrades $144,748
S. Oak Park Lift Station Upgr. $150,000
Sewer Upgrade/Existing Flow $400,000
Replace Damage Storm Drain $140,000 $3,100,000
Citywide Sewer Lining $100,000 $100,000 $100,000 $100,000 $100,000 Total $4,394,748 $240,000 $100,000 $100,000 $3,200,000
Proposing $3.6M debt issue to finance the Sewer Upgrade/Existing Flows project. 14 Wastewater Financial Plan
$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 $ millions
O&M New Debt Capital Spending
Reserves Rev w/ Incr Rev w/o Incr
End of Year Cash Reserves
Versus Target Reserves
Wastewater Enterprise
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
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 $ millions
End of Year Cash Reserves Target Reserves
Rates implemented January 1 of each year. Target Reserves = 6 mo. O&M plus $500k CIP Spending 15 Wastewater Cost of Service
• South San Luis Obispo CSD provides wastewater treatment • No City expenses are related to wastewater treatment or strength (BOD or SS) • City’s costs are related to the wastewater collection system only • Wastewater rates are designed to recover costs assigned to user classes in proportion to their contributed wastewater flow to the system
16 Five-Year Projection
of SFR Wastewater
Bill
SFR Bi-monthly Wastewater Bill
First year increase is different from financial
plan due to cost of service adjustments in
this year.
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
17 Wastewater Bill Comparison with Other Communities
$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220 $240 Avila Beach CSD
Morro Bay
Cayucos CSD
Cambria CSD
San Luis Obispo
Paso Robles
Pismo Beach
Atascadero
Grover Beach January 1, 2024 Bill
Grover Beach Current Bill
Oceano CSD
Arroyo Grande
18 Combined Bill Comparison with Other Communities
$0 $30 $60 $90 $120 $150 $180 $210 $240 $270 $300 $330 $360 $390 $420 $450 $480 Avila Beach CSD
Cambria CSD
Morro Bay
Cayucos CSA 10A
San Luis Obispo
Pismo Beach
Paso Robles
Oceano CSD
Grover Beach January 1, 2024 Bill
Arroyo Grande
Atascadero
Grover Beach Current Bill
19 Proposed Timeline and Next Steps
Event Date
Council Workshop September 5
City Council Authorization to Send
Proposition 218 Notices September 26
Proposition 218 Notices Mailed Out September 28
Public Hearing November 13
Implement new Rates January 1, 2024
RECOMMENDATIONS
Water Enterprise
1. Implement rate increases to fund Central
Coast Blue operating expenses and debt
service, JPA expenses and reserves, and
other water system operating and capital
expenses.
1. Finance Sewer Upgrades/Existing Flow
project with $3.6M in new debt proceeds.
2. Implement rate increases to fund operating,
capital, and new debt service payments.
Wastewater Enterprise
20 QUESTIONS?
[email protected]
Clayton Tuckfield PE
Tuckfield & Associates
22 • Working cash as of June 30, 2022
• Operating Fund Reserve
• 3 months (25%) of O&M expense (current City Goal)
• Capital Replacement Reserve
• Average annual 5-year CIP spending
Wastewater Cash Reserves
Wastewater
Reserve Reserve
Reserve Type Balance Target
Operating Fund Reserve $162,000 $162,000
Capital Replacement Reserve $941,468 $1,672,400
Total $1,103,468 $1,834,400
Local Sewer Rate Structure Comparison
23 City
Rate
Structure SFR MFR Commercial
Fixed
$ per bi-mo
Variable
$ per 1,000 gal
Fixed
$ per bi-mo/DU
Variable
$ per 1,000 gal
Fixed
$ per bi-mo
Variable
$ per 1,000 gal
Brea Fixed $18.86 $11.82 $156.26 Per bi-mo [1]
Stanton Fixed $12.04 $9.63 $12.04 [2]
Placentia Variable $0.47 $0.52 $0.49
Fullerton Variable $1.90 $1.90 $1.90
La Palma Variable $1.14 $1.14 $1.14
[1] A fixed Charge that varies based on assigned wastewater flow in feet per minute. [2] Various, value shown is standard commercial rate per 1,000 square feet. 24 Sewer Rate Structures and Rate Calculations
Classification
Rate Structure #1:
Fixed Charges
($ per account)
Rate Structure #2:
Variable Rates
($/1,000 gal)
Residential $11.19
Single-Family $0.65
Multifamily $0.80
Commercial $136.21 $0.87
• Two rate structures reviewed and calculated for Buena Park • Rate Structure #2 was selected. Rate Structure #1 doesn’t recognize multiple dwelling units on an MFR account. 25 • Customer account growth of 0.25% annually (about 50 new accounts annually) • Interest earnings on cash reserves is 2.5% annually
• Inflation occurs at the following rates:
• Salaries – 5.0% annually
• Benefits – 8.0% annually
• Water Supply – 5.0% annually
• Electricity/Chemicals – 3.0% annually
• Capital – 3.0% annually
• All Other – 2.0% annually
• 50% of Sewer costs allocated to Water Fund which are related to storm water activities
• Minimum Debt Service Coverage Ratio is 125%
Assumptions
26 Water Capital Improvement Program
• Projected capital expenditures for the next 10 years
Line Projected
No. Description 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 1 Pipeline Replacement Program $100,000 $103,000 $106,100 $109,300 $112,600 $115,900 $119,400 $123,000 $126,700 $130,500 2 Water Systems Interconnect - - 318,300 - - - - - - -
3 Enterprise Fund Business Plan - - 159,100 - - - - 184,500 - - 4 Smart Timer Rebate Program 5,000 5,200 5,300 5,500 5,600 5,800 6,000 6,100 6,300 6,500 5 Water Well Rehabilitation - 824,000 - 874,200 - 927,400 - 983,900 - 1,043,800 6 New Water Well - - 5,304,500 - - - - - - -
7 CIP Project(s) - Water 1,000,000 1,030,000 1,060,900 1,092,700 1,125,500 1,159,300 1,194,100 1,229,900 1,266,800 1,304,800 8 Misc. Storm Drain Improvements - - - - 562,800 - - - - 652,400 9 Total Water CIP $1,105,000 $1,962,200 $6,954,200 $2,081,700 $1,806,500 $2,208,400 $1,319,500 $2,527,400 $1,399,800 $3,138,000 Note: A Grant is expected to be received to pay for the New Water Well in FY 24-25. 27 Wastewater Capital Improvement Program
Line Projected
No. Description 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 1 Misc. Sewer System Imp. $100,000 $103,000 $106,100 $109,300 $112,600 $115,900 $119,400 $123,000 $126,700 $130,500 2 Utility Main Lining 500,000 515,000 530,500 546,400 562,800 579,600 597,000 614,900 633,400 652,400 3 Sewer Manhole Rehab 300,000 309,000 318,300 327,800 337,700 347,800 358,200 369,000 380,000 391,400 4 CIP Project(s) - Sewer - 695,300 716,100 737,600 759,700 782,500 806,000 830,200 855,100 880,700 5 Total Wastewater CIP $900,000 $1,622,300 $1,671,000 $1,721,100 $1,772,800 $1,825,800 $1,880,600 $1,937,100 $1,995,200 $2,055,000 • Projected capital expenditures for the next 10 years
28 • Operating Reserves
• Operations 25% of O&M
• Loss of Largest Customer Commercial/Industrial Cust
• High Rainfall Use/cust high to low rev impact
• Timely Repl of Rolling Stock Largest Vehicle in $ terms • Unforeseen Litigation Dollar Amount
• Rate Stabilization Dollar Amount
• Any legislative Impact ?
• Capital Reserves
• Average Annual CIP Spending Dollar Amount
• Annual Depreciation Expense Depreciation
• % of OCLD % of Fixed Asset Value
• Emergency Reserve
• Emergency Water Supply/Interconnect Amount of Supply/Cost to Connect • Recovery from Natural Disaster % of Fixed Asset Value Reserve Policy Considerations
29 Wastewater Cost of Service and Rates
Allocated
Description Total Cost Flow Customer
Unit Costs of Service $0.6732 $1.1561
Units of Measure 1,000 gal Bills
Single Family (SFR)
Units of Service 1,190,809 101,688
Allocated Cost of Service $919,183 $801,616 $117,566
Multi-family (MFD)
Units of Service 488,888 4,164
Allocated Cost of Service $333,919 $329,104 $4,814
Commercial (COM)
Units of Service 1,053,044 6,450
Allocated Cost of Service $716,334 $708,876 $7,457
Total Costs of Service $1,969,436 $1,839,596 $129,837
FY 2022-23