City of Hercules
Sewer Utility Rate Study
May 27, 2025
Willdan Financial Services
o Chris Fisher, Vice President
o Michael Cronan, Project Manager
2 Rate Study Goals & Objectives
o Evaluate current financial condition of sewer utility o Develop 5-year financial plan – provide funding for current and future operations, capital needs
o Debt repayment, compliance with bond covenants
o Maintain adequate reserves for operations, capital, and debt service o Provide recommendations to improve and maintain financial health and stability of sewer utility over next five years
o Develop equitable, cost-based rate structure
o Ensure proposition 218 compliance – COS and procedures 3 Factors Driving Financial Plan
o Rising operating costs (equipment, supplies, treatment, etc.) o Rising personnel costs (labor, benefits, pensions, etc.) o Financial plan includes addition of a Sewer & Stormwater Supervisor o Debt service coverage to maintain compliance with debt covenants o Increasing operating and capital costs at the Pinole-Hercules Water Pollution Control Plant
o Funding ongoing sewer collection capital projects
o Have not increased rates since 2014
City of Hercules
Sewer Utility Rate Study
Methodology & Projections
4 5
Customer
Accounts/Units Usage/Volumes
Customer Billing/Revenue Reconciliation
Revenue Sufficiency under
Existing Rates
Other Revenues Rate Design
Total Revenue Requirements
O&M Expenses Debt Service & Debt
Service Coverage ReservesCapital Expenditures
General Rate Study Methodology
6 -$4.00
-$2.00
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
2026 2027 2028 2029 2030
Millions
Revenues over Expenditures (excluding Capital Expenses) Revenues Expenditures Net Results
0 50
100
150
200
2026 2027 2028 2029 2030
Number of Days O&M in Operating Cash Reserves
Days Target
-
0.50 1.00
1.50 2.00
2026 2027 2028 2029 2030
Debt Service Coverage
Ratio Target (1.50x) Minimum (1.20x)
Status Quo Projections
7 Capital Improvement Program
2025 2026 2027 2028 2029 2030
Sewer System Improvements
Sycamore Ave (Lower Trunk Main) 0$ 0$ 0$ 0$ 0$ 0$ Sycamore Trunk Sewer Overflow Line Project 202,263 1,000,000 0 0 0 0 Sewer Manholes in Business Park 0 0 0 0 0 0 Sewer Manholes in Business Park 0 0 0 0 0 0 Promenade Lift Station 0 185,000 1,170,450 0 0 0 Repair/ Replace Sewer Lines under SR-4 & Along Willow Ave 0 200,000 100,000 1,080,000 0 0 Total Sewer System Improvements 202,263$ 1,385,000$ 1,270,450$ 1,080,000$ -$ 0$ Hercules Share of Pinole WW Plant
As-Built WWTP Drawings 12,500$ 0$ 0$ 0$ 0$ 0$ Boiler Rehabilitation 22,500 0 0 0 0 0 Centrifuge Feed Pump Replacement 25,000 0 0 0 0 0 Digester Feed Pump Replacement 37,500 0 0 0 0 0 Energy Recovery Building and Admin Roof 40,000 0 0 0 0 0 Misc. Plant Improvements 37,500 0 0 0 0 0 SCADA System Upgrade 22,500 0 0 0 0 0 SS2002 Water Pollution Control Plant Lab Remodel 50,000 0 0 0 0 0 SS2101 Second Clarifier - Center Column Rehabilitation 212,500 0 0 0 0 0 SS2102 Air Release Valve Replacement 25,000 0 0 0 0 0 SS2203 Effluent Outfall Project Design 75,000 500,000 1,000,000 0 0 0 Effluent Pipe Coating - Rodeo Creek Crossing 15,000 0 0 0 0 0 Spare Influent Pump 50,000 0 0 0 0 0 Chlorine Contact Basin - Coating 0 100,000 0 0 0 0 Energy Recovery System Replacement 0 0 0 100,000 650,000 0 Aeration Basin - Coating 0 0 150,000 0 0 0 Water Pollution Control Plant Boiler Replacement 0 0 330,000 0 0 0 Water Pollution Control Plant Centrifuge Replacement 0 0 0 495,000 0 0 Total Hercules Share Of Pinole WW Plant Improvements 625,000$ 600,000$ 1,480,000$ 595,000$ 650,000$ -$ Total Sewer Projects 827,263$ 1,985,000$ 2,750,450$ 1,675,000$ 650,000$ -$ Projected for Fiscal Year Ending June 30, ($1,000s)Description 5-Year Financial Plan
8 o 5-year annual rate path
o 5-year annual bill path
o Comparison with neighboring utilities – annual bills
o Updated projections of financial metrics & operating results over 5-year financial plan - including rate adjustments 9 5-Year Annual Rate Path
2026 2027 2028 2029 2030
Minimum Fixed Charge:
Single-Family Residence [1] 625.80$ 801.40$ 857.50$ 908.95$ 949.85$ 983.09$ Multi-Family Residence (per Dwelling Unit) [1] 625.80$ 690.23$ 738.55$ 782.86$ 818.09$ 846.72$ Senior Living (per Dwelling Unit) [1] [2] 427.16$ 562.37$ 601.74$ 637.84$ 666.54$ 689.87$ Non-Residential Metered (per Business) 120.00$ 335.97$ 359.49$ 381.06$ 398.21$ 412.14$ Volumetric Rates Per 100 Cubic Feet - Non-Residential Metered:
All Flow 3.87$ 7.13$ 7.63$ 8.08$ 8.45$ 8.74$ Notes:
Description Existing
Rates
[1] All residential customers only pay a flat fee per dwelling unit, regardless of usage. [2] Apartments are currently charged the existing "Senior Living" flat fee per dwelling unit only, regardless of usage. Under the proposed rates, starting in FYE 2026, apartments will pay the "Multi-Family Residence" flat fee per dwelling unit only, regardless of usage.
Projected for Fiscal Year Ending June 30,
10 5-Year Annual Bill Path
Existing 2025 2026 2027 2028 2029 2030
Annual Sewer Bill $625.80 $801.40 $857.50 $908.95 $949.85 $983.09 Difference ($) $175.60 $56.10 $51.45 $40.90 $33.24
Difference (%) 28.06% 7.00% 6.00% 4.50% 3.50%
$625.80
$801.40 $857.50 $908.95 $949.85 $983.09
$-
$200
$400
$600
$800
$1,000
$1,200
Annual Sewer Bill
11 $473.55
$625.80
$725.00
$801.40 $815.00 $854.00 $916.00
$1,027.41
$1,210.00
$1,368.00
$923.62
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Total Sewer Bill Average of Comparison Utilities
Annual Neighboring Utility Comparison
12 $0.00
$2.00
$4.00
$6.00
$8.00
$10.00
2026 2027 2028 2029 2030
Millions
Revenues over Expenditures (excluding Capital Expenses) Revenues Expenditures Net Results
0 50
100
150
200
2026 2027 2028 2029 2030
Number of Days O&M in Operating Cash Reserves
Days Target
-
0.50 1.00
1.50 2.00
2026 2027 2028 2029 2030
Debt Service Coverage
Ratio Target (1.50x) Minimum (1.20x)
Adjusted Financial Metrics
City of Hercules, CA
Sewer Utility Rate Study
NEXT STEPS
13 Next Steps
14 o May 27 – First City Council meeting regarding rate study Present rate study results and recommendations
Set Prop 218 public hearing date for July 22
Approve mailing of public hearing notices
o June 6 – Deadline to mail out Proposition 218 Notices o July 22 – Conduct Public Hearing
Receive testimony/comments
Tabulate written protests
Council discussion and consideration
Adopt and implement updated rates - effective 7/1/2025 City of Hercules
Sewer Utility Rate Study
QUESTIONS
15 16
Municipal Advisor Disclosure
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For the avoidance of doubt and without limiting the foregoing, in connection with any revenue projections, cash-flow analyses, feasibility studies and/or other analyses Willdan may provide the municipality with respect to financial, economic or other matters relating to a prospective, new or existing issuance of municipal securities of the municipality, (A) any such projections, studies and analyses shall be based upon assumptions, opinions or views (including, without limitation, any assumptions related to revenue growth) established by the municipality, in conjunction with such of its municipal, financial, legal and other advisers as it deems appropriate; and (B) under no circumstances shall Willdan be asked to provide, nor shall it provide, any advice or recommendations or subjective assumptions, opinions or views with respect to the actual or proposed structure, terms, timing, pricing or other similar matters with respect to any municipal financial products or municipal securities issuances, unless formally engaged to provide such information.