RESOLUTION NO. 25-___
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HERCULES FINDING
THAT NO MAJORITY PROTEST EXISTS AND ADOPTING SEWER RATES
WHEREAS, the City of Hercules (“City”) has evaluated the cost of different alternatives for wastewater collection, treatment and disposal services to properties located within the City; and
WHEREAS, a well maintained and operated sewer system is essential to protect human health and the environment; and
WHEREAS, the City retained Willdan Financial Services (“Willdan”) to perform a sewer rate study , attached as an exhibit to this resolution, to analyze the revenue sources and expenditures of the sewer utility system, develop a five -year financial analysis, and provide recommendations for proposed rate/and or rate structure adjustments to meet the financial and administrative goals and objectives of the City; and
WHEREAS, the City completed a Collection System Master Plan Update in April 2020 to identify capital improvements that the City must implement in order to remain in compliance with the terms and conditions of California Regional Water Quality Control Board (“RWQCB”) Order No. R2- 2023-0008 and NPDES No. CA0037796 (the “NPDES Permit”) and related state and federal regulations; and
WHEREAS, Hercules Municipal Code Title 5, Chapter 4 allows the City’s sewer service charges to be modified by resolution or ordinance; and
WHEREAS, property related fees and charges, including rates for the sewer service are subject to the requirement of Article XIII D, Section 6 of the California Constitution (also known as Proposition 218); and
WHEREAS, pursuant to Proposition 218, prior to extending, imposing or increasing sewer rates, property owners shall be provided at least 45 days’ notice of a public hearing to consider such modifications to the sewer rates together with an explanation of: (1) the amount of the propose rates, (2) the basis on which the rates are calculated, (3) the reason for the rate modifications, and (4) the date, time and place of a public hearing to consider the rate modifications. The proposed rate modifications may not be imposed if, prior to the close of the public hearing, written protests are submitted by a majority of the parcels subject to the modified rates (“majority protest”); and
WHEREAS, on May 27, 2025, at its regularly scheduled City Council Meeting, the City Council approved a motion stating the City Council’s intention to adopt sewer rates , setting the Public Hearing date for July 22nd and directing staff to give notice of a Public Hearing pursuant to Proposition 218; and
WHEREAS, notice of the public hearing, which is attached to the staff report accompanying this Resolution, to consider proposed adjustments to the sewer rates was mailed to property owners of record and customers of record in accordance with Proposition 218; and
WHEREAS, the Sewer Rate Study prepared by Willdan for the City and presented at this meeting projected that under the existing rates the sewer system would not meet its collective projected operating (O&M) financial obligations, cover costs of capital projects, and be able to make anticipated transfers , and the written report has been prepared and filed with the City Clerk; and
WHEREAS, pursuant to Proposition 218, the Sewer Rate Study, shows that (a) the revenues from the fees will not exceed the funds to provide the sewer service; (b) the revenues will only be used for the purposes described and for no other purpose; (c) the amount of the fee imposed on a parcel or a person as an incident of property ownership does not exceed the proportional cost of service attributable to such parcel; (d) no fee is charged unless the service is used by or immediately available to the property owner; and (e) no fee is charged for a general government service where the service is available to the public at large in substantially the same manner as it is to property owners; and
WHEREAS, the City published notice of the July 22, 2025 public hearing on Ju ly 10, 2025 in the West County Times; and
WHEREAS, the mailed notice of public hearing included a statement that there is a 120 day statute of limitations for challenging the sewer rates should the proposed rates be adopted; and
WHEREAS, at the time, date and place for the Public Hearing, the City Council did hear and consider any and all objections or protests and written protests to the proposed changes to the annual sewer rates; and
WHEREAS, the City hereby finds and determines that the proposed rate adjustment is being enacted for the purpose of (1) meeting operating expenses, including employee wage rates and fringe benefits, (2) purchasing or leasing supplies, equipment or materials, (3) meeting financial reserve needs and requirements, and (4) obtaining funds for capital projects necessary to maintain service within existing service areas.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Hercules as follows:
1. The foregoing recitals are true and correct statements of fact and are incorporated into this Resolution by this reference.
2. The Resolution has been reviewed with respect to applicability of the California Environmental Quality Act (“CEQA”) and the CEQA Guidelines. The Resolution is not a project under CEQA Guidelines Section 15378(b)(4) because the Resolution does not have the potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, as the Resolution creates government funding mechanisms which do not involve any commitment to any specific project. The Resolution is also exempt from CEQA as there is no possibility for causing a significant effect on the environment, per CEQA Guideline Section 15061(b)(3). No specific sewer projects are associated with this Resolution. The Resolution is policy-oriented and would create a funding mechanism for the development of future sewer facilities.
When and if specific sewer projects are developed and proposed for implementation, the environmental impacts of such facilities would be evaluated in accordance with CEQA and City practice. Finally, the action is exempt from CEQA 15273(a) as the resolution is adopting updated sewer rates that are necessary to meet the operating, maintenance, and capital project funding needs of the City's sewer utility and to maintain service within the City's existing service area.
3. All notices required by law have been duly and timely given.
4. All information related to the proposed rate adjustment has been made available for review by the public at the office of the City Clerk as required by law.
5. The rates and charges established by this Resolution effective July 1, 2025, July 1, 2026, July 1, 2027, July 1, 2028, and July 1, 2029, shall increase at the rates shown in the table below for each of five successive fiscal years for all residential and non-residential units.
6. After due notice and public hearing in an open meeting, the City Council hereby finds that the rates in the preceding table hereto are fair and reasonable, reflect the reasonable cost for the services for which they are to be charged, are correctly calculated and are hereby adopted.
7. The City Council hereby approves and adopts the Sewer Rate Study attached hereto as Exhibit A, which sets forth the adopted rates.
8. The City Clerk is hereby authorized to file a Notice of Exemption from CEQA with the County Clerk of the County of Contra Costa, California, regarding this Resolution and the rates and charges hereby adopted.
The foregoing Resolution was duly and regularly adopted at a regular meeting of the City Council of the City of Hercules held on the 22
nd day of July 2025 by the following vote of the
Council:
AYES:
NOES:
ABSENT:
______________________________
Dion Bailey, Mayor
ATTEST:
_________________________________
Eibleis Melendez, City Clerk
EXHIBIT A – COMPREHENSIVE SEWER UTILITY RATE STUDY
City of Hercules, CA
Comprehensive Sewer
Utility Rate Study
Report
i Sewer Rate Study
May 13, 2025
TABLE OF CONTENTS
TABLE OF CONTENTS ................................ ................................ ................................ ............................... i Section 1 – Executive Summary................................ ................................ ................................ ...........1
1.1 Introduction ......................................................................................................................................... 1
1.1.1 Sewer System Background ..................................................................................................... 1
1.1.2 Rate Study Background .......................................................................................................... 1
1.2 Overview of the Rate Study Process ............................................................................................ 2
1.3 Summary of Proposed Rates .......................................................................................................... 3 Section 2 – Revenue Sufficiency Analysis ................................ ................................ .......................... 5
2.1 Financial Planning Principles .......................................................................................................... 5
2.2 Existing Rates ....................................................................................................................................... 5
2.3 Revenue Sufficiency Process ......................................................................................................... 6
2.3.1 Budget .......................................................................................................................................... 6
2.3.2 Capital Improvement Plan (CIP) .......................................................................................... 7
2.3.3 Debt Service ............................................................................................................................... 8
2.3.4 Gross and Net Revenue Requirement ................................................................................ 9
2.4 Customer Data ................................................................................................................................... 9
2.4.1 Customer Billing Analysis........................................................................................................ 10
2.5 Financial Projections Under Existing Rates ................................................................................ 10 Section 3 – Cost-of-Service (COS) Analysis ................................ ................................ ..................... 12
3.1 General .............................................................................................................................................. 12
3.2 Sewer Cost-of-Service .................................................................................................................... 12
3.2.1 Functional Unbundling of Revenue Requirements ........................................................ 12
3.2.2 Classification of Revenue Requirements .......................................................................... 13
3.2.3 Allocation to Customer Classes and Unit Cost Development.................................... 14
3.2.4 Rate Design by Unit Cost ....................................................................................................... 16
3.2.5 Cost-of-Service and Revenue Check ............................................................................... 17 Section 4 – Proposed Test Year Rates ................................ ................................ ............................... 19
4.1 General .............................................................................................................................................. 19
ii Sewer Rate Study
May 13, 2025
4.2 Rate Comparison with Other Utilities ......................................................................................... 20 Section 5 – Projected Operating Results ................................ ................................ .......................... 22
5.1 General .............................................................................................................................................. 22
5.2 Projected User Rate Revenues .................................................................................................... 22
5.3 Debt Service Coverage ................................................................................................................ 24
5.4 Summary of Projected Operating Results ................................................................................ 25 Section 6 – Conclusions and Recommendations ................................ ................................ ............ 27
6.1 Disclaimers............................................................................................................................................... 27
6.1.1 General Disclaimer ................................................................................................................. 27
6.1.2 Municipal Advisory Disclaimer ............................................................................................. 27
6.2 Conclusions ....................................................................................................................................... 28
6.3 Recommendations ......................................................................................................................... 29
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Section 1 – Executive Summary
1.1 Introduction
Willdan Financial Services (Willdan) is pleased to submit to the City of Hercules (City) the following Sewer Rate Study report (Report) for your consideration. Willdan has completed this study of the City’s sewer rates, which are submitted annually to the Contra Costa County Auditor-Controller’s Office for placement each year on the Secured Property Tax Roll. The results of the investigations, analyses, and conclusions from this study are summarized in this Report.
1.1.1 Sewer System Background
The City’s wastewater collection system serves the area within the City limits and collects and conveys an average dry weather flow of approximately 1.7 million gallons per day (MGD) of wastewater. This service area includes 8,300 parcels through 7,000 private laterals, which encompasses a population of approximately 26,000 residents.
The wastewater generated by the City is conveyed to and treated by the Pinole -Hercules Water Pollution Control Plant (WPCP), located southwest of the City limits in the City of Pinole.
All wastewater conveyed to the WPCP is processed before being safely discharged into the San Francisco Bay. The system is built exclusively for sanitary waste and operates 24/7 to protect public health and the environment. While Hercules and Pinole share the WPCP, The City of Pinole handles the daily operations of the WPCP, and The City of Hercules reimburses Pinole for their respective share of wastewater treatment plant operating and maintenance costs incurred. All capital costs associated with the WPCP are split 50/50 between the City and The City of Pinole.
The City’s collection system consists of gravity sewer mains, force mains, and lift stations. The collection system includes approximately 62 miles of gravity sewer mains and 1,660 manholes, most of which were constructed after 1970. Gravity sewers located in the older areas of the City are believed to be constructed of asbestos cement (AC) pipe, also known as “Transite” pipe. New gravity sewer construction is typically polyvinylchloride (PVC) pipe.
The City also owns seven lift stations within the collecti on system, and their associated 4.5 miles of force mains.
1.1.2 Rate Study Background
The City has focused a significant amount of attention and effort on strategic and master planning measures in all areas of sewer utility operations to ensure that it is able to continue providing uninterrupted service to its customers and maintaining the critical infrastructure that ensures the health and safety of the community , and a stable and well -functioning wastewater system that is prepared for the future. As part of its ongoing planning efforts, the City commissioned Willdan to perform a sewer rate study to analyze the revenue sources
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and expenditures of the sewer utility system , develop a five -year financial analysis, and provide recommendations for proposed rate and/or rate structure adjustments to meet the financial and administrative goals and objectives of the City. The primary objectives of the rate study include:
➢ Full recovery of costs related to utility operations (i.e., operating and maintenance costs, debt, and other expenditure requirements);
➢ Development of cost-based rate structures;
➢ Maintaining consistency with Water Environment Federation (WEF) guidelines; ➢ Providing for equity among customer classes;
➢ Meeting substantive and procedural Proposition 218 requirements; ➢ Maximizing administrative efficiency (i.e., easy to understand and implement); and ➢ Incorporation into the analysis of a 5-Year capital funding plan.
1.2 Overview of the Rate Study Process
This study includes the development and presentation of a pro-forma sewer financial plan for a 5-year planning period, as well as the development of cost-based rates through a cost- of-service and rate design analysis. Utility rates must be set at a level such that operating, maintenance, debt , and capital expenses are funded with the revenues received from customers. In addition, the revenues generated from utility rates must only be used for this purpose and for the sewer system only. This is a significant point, as failure to achieve the revenues needed can lead to unacceptable service levels and inadequately maintained facilities. Therefore, a rate study typically consists of the following three interrelated analyses:
I. Financial Planning/Revenue Requirement Analysis : Creates a five-year plan to support an orderly, efficient program of on -going maintenance and operating costs, capital improvement and replacement activities, debt financing, and retirement of outstanding debt. In addition, the plan should fund and maintain appropriate reserve balances based on industry standards, as well as the City’s fiscal policies and specific needs.
II. Cost -of-Service Analysis : Identifies and apportions annual revenue requirements (i.e., expenditures) to operational and functional cost components based on the demand placed on the sewer utility system. The purpose of this analysis is to develop rates that generate revenues relatively proportionate to the share of the utility’s costs. This objective is consistent with industry standards as well as the requirements of Proposition 218 (Prop 218).
III. Rate Design: Develops an equitable and proportionate schedule of rates for the City’s customer base. The policy objectives are coordinated with Prop 218 requirements and cost-of-service objectives to achieve a balance between customer equity and financial stability goals.
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This rate study utilizes generally accepted rate-making principles and standards established by industry experts such as the WEF in its “Financing and Charges for Sewer Systems, Manual of Practice No. 27”. The principles established by WEF are used as guidelines in the development of the proposed sewer rates. A discussion of some of the key principles of ratemaking is presented in the following subsection of this Report.
1.3 Summary of Proposed Rates
The rate study methodology applied in the development of updated sewer rates, outlined in this Report, consisted of reviewing the historical operating results of the sewer utility system, analyzing the budget to identify the net revenue requirements to be recovered from user rate revenues, performing general cost-of-service allocations based on the rate components and functional cost categories, and revising the rates based on the applicable costs and expenditures to be recovered from user rates. In additio n, an analysis of the system’s customers was performed to identify the rate determinants since they drive the recommended rates, which are the primary source for generating revenues. The allocated revenue requirements were utilized in conjunction with the rate determinants and rate structure to develop the proposed sewer rates.
The findings and conclusions of the rate analysis, as well as the resulting revised rate recommendations, were utilized to develop a projection of future operating results for a 5 - year planning period from Fiscal Year (FY) 2026 (beginning July 1, 202 5) through FY 2030 (ending June 30, 20 30), herein referred to as the “Projection Period”. The purpose for developing the 5 -year projections is to demonstrate the financial capability of the sewer revenues to support system operations and maintenance, and fund pl anned capital improvements. The analyses, findings and accompanying recommendations are presented in the subsequent sections of the Report.
Rate Design Analysis
Considers both the level and structure of the rate design to collect the appropiate and targeted level of revenues.
Cost of Service Analysis
Allocates the revenue requirements to the fixed/variable cost components based on cost of service.
Revenue Requirement Analysis
Compares the revenues to the expenses of the utility
to determine the overall rate adjustment required.
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The sewer rate analysis described in the Report is performed based on the general guidelines of the defined objectives, as well as common industry standards for setting utility rates. In addition to focusing on these major objectives, the rate analyses performed herein may consider other factors in designing rates. As discussed in detail later in this Report, other rate considerations may generally include sensitivity to the impact of rate changes on existing customers, relative comparability with neighboring utilities, and variations or changes (if any) from the City’s existing rate structure. The proposed sewer rates for assumed implementation effective July 1, 2025 (or other such date as determined by the City) for FY 2025/26 (FY 2026, herein referred to as the “Test Year”) are provided in Table 1 . It is anticipated that the charges, based on these rates, will be submitted to Contra Costa County for placement on Fiscal Year 202 5/2026 Annual Secured Property Tax Bills, which are typically sent out to property owners in early fall each year. The existing rates are provided in Table 2.
Table 1 – Proposed Annual Sewer Rates
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Section 2 – Revenue Sufficiency Analysis
2.1 Financial Planning Principles
While the individual rates for a utility system vary based on a variety of factors, rates should be consistent with common rate-making principles within the utility industry . The guiding principle is that rates designed for any utility should provide a reasonable balance between several key factors. In general, the utility rates should:
➢ Generate a stable revenue stream that, when combined with other sources of funds, is sufficient to meet the expenditure requirements and goals of the system; ➢ Be based upon the proportionate cost of providing the service and not exceed the cost of providing the service – in compliance with California Proposition 218; ➢ Be equitable – that is, they should generate revenue from customer classes in a manner which is reasonably in proportion to the cost of providing the service to that customer class;
➢ Be easy to understand by customers; and
➢ Be easy to administer by the utility.
Striking the appropriate balance between the principles of ratemaking is the result of a detailed process of evaluation of revenue requirements and cost-of-service, and how those translate into the rate design alternatives which meet legal requirements and the specific objectives of the utility under the circumstances in which it operates.
2.2 Existing Rates
As described in the Introduction to this report, The City has established sewer charges that are submitted annually to Contra Costa County for inclusion on the annual secured property tax roll. These charges are based on customer classification, and these rates charged for sewer service are approved by the City Council and are not subject to administrative review or approval by any other local or state agency. The City has historically adjusted rates , as necessary, to provide for recovery of financial oblig ations including operating expenses, debt service, capital expenditures and any other expenses and transfers.
The existing annual sewer rates consist of 1) a separate flat rate for different types of residential customers that is applied per dwelling unit regardless of their usage, 2) a fixed fee for commercial/non-residential customers that designates the minimum amount they will pay by account, regardless of usage, and 3) a commercial /non-residential volumetric rate component per 100 cubic feet that recovers the costs of treatment and disposal of wastewater. The existing rates for sewer service are provided in Table 2.
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Table 2 – Existing Annual Sewer Rates
2.3 Revenue Sufficiency Process
In evaluating whether the existing rates will generate sufficient revenue to meet the expenditure requirements of the sewer system, the annual expenditures required for the sewer utility system (herein referred to as the “Revenue Requirements”) must be developed.
The Revenue Sufficiency Analysis compares the forecasted revenues f or the sewer utility system under existing rates (including customer growth) to the projected Revenue Requirements.
2.3. 1 Budget
The Revenue Sufficiency Analysis performed as part of this study and summarized in this Report utilizes the City’s adopted budget for FY 2024/25 (the “Budget” for FY ending June 30, 2025) as one source of data and information to determine the gross Revenue Requirements to be recovered from user rates over the Projection Period. The Budget, as prepared by the City, is provided on a line-item basis, and is used for projecting the budgeted financial needs for the Test Year and the remainder of the Projection Period. In developing the rate analysis, certain adjustments are made such that the expenditures are categorized into either Operating and Maintenance (O&M) expenses or non-operating expenses. In addition, only recurring costs included in the current Budget were included as part of the Revenue Sufficiency Analysis. One-time costs were identified and evaluated in discussions with City Staff and removed if appropriate. Recurring annual costs were escalated using suitable cost
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indexes or cost escalation factors, again in discussion with City Staff and based on historical trends.
The O&M expenses are primarily those ongoing costs for labor, materials, supplies, services, etc., required to manage and operate the utility system on a day -to-day basis while maintaining a dependable level of service. The O&M requirements are generally a function of a budgetary process and are directly related to the level of service provided to customers of the utility system. The largest O&M expense identified in the City’s budget is the reimbursement to Pinole for operating costs associated with the WPCP. The non-operating expenses include such items as capital outlay and any other expenses & transfers.
The Budget also identifies estimated revenues to be derived from sources other than sewer user rates. Such other revenue sources include interest earnings on investments and various other miscellaneous service charges . The revenues generated from the other sources are applied to the gross Revenue Requirements to reduce the amount of revenue required from user rates. The result is the net Revenue Requirement.
2.3. 2 Capital Improvement Plan (CIP)
The City provided a list of anticipated capital projects to be funded over the Projection Period. These are also included in the development of the gross Revenue Requirements. The capital projects provided by and identified by the City in the CIP are required in order to maintain uninterrupted service to customers by investing in improvements, repairs, or replacements of aging system components as they wear over time. The City provided cost estimates for the identified capital projects by the fiscal year in which they are estimated to be undertaken. Along with the City provided list of anticipated capital projects, The City of Pinole identified shared capital costs associated with the WPCP, which are also included in the list of anticipated capital projects to be undertaken over the Projection Period . The funding for the City’s and shared WPCP capital projects was then used in the analysis, along with O&M and non-operating expenses, to determine the gross Revenue Requirements for the sewer system. The capital projects included in the CIP for the Projection Period are provided in Table 3.
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Table 3 – Sewer CIP ($1,000s)
2.3. 3 Debt Service
The City currently has two outstanding debt issuances for the sewer system. A minimum debt service coverage ratio of 1.20 times is required to be maintained on an annual basis, based on the City’s current bond covenants associated with the existing debt. In simple terms, this means that the utility must have at least $1.20 in net operating revenues for every $1.00 of debt service they are committed to pay on existing debt. The debt service coverage is calculated by dividing net operating revenues (revenues less operations and maintenance expenses) by annual debt service. There are no future or additional debt issuances assumed to take place over the Projection Period outside of the current outstanding debt obligations.
The annual existing debt payments over the Projection Period are provided in Table 4.
Table 4 – Annual Debt Service Payments
2025 2026 2027 2028 2029 2030
Sewer System Improvements
Sycamore Ave (Lower Trunk Main) 0$ 0$ 0$ 0$ 0$ 0$ Sycamore Trunk Sewer Overflow Line Project 202 1,000 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 1,170 0 0 0 Repair/ Replace Sewer Lines under SR-4 & Along Willow Ave 0 200 100 1,080 0 0 Total Sewer System Improvements 202$ 1,385$ 1,270$ 1,080$ -$ 0$ Hercules Share of Pinole WW Plant
As-Built WWTP Drawings 13$ 0$ 0$ 0$ 0$ 0$ Boiler Rehabilitation 23 0 0 0 0 0 Centrifuge Feed Pump Replacement 25 0 0 0 0 0 Digester Feed Pump Replacement 38 0 0 0 0 0 Energy Recovery Building and Admin Roof 40 0 0 0 0 0 Misc. Plant Improvements 38 0 0 0 0 0 SCADA System Upgrade 23 0 0 0 0 0 SS2002 Water Pollution Control Plant Lab Remodel 50 0 0 0 0 0 SS2101 Second Clarifier - Center Column Rehabilitation 213 0 0 0 0 0 SS2102 Air Release Valve Replacement 25 0 0 0 0 0 SS2203 Effluent Outfall Project Design 75 500 1,000 0 0 0 Effluent Pipe Coating - Rodeo Creek Crossing 15 0 0 0 0 0 Spare Influent Pump 50 0 0 0 0 0 Chlorine Contact Basin - Coating 0 100 0 0 0 0 Energy Recovery System Replacement 0 0 0 100 650 0 Aeration Basin - Coating 0 0 150 0 0 0 Water Pollution Control Plant Boiler Replacement 0 0 330 0 0 0 Water Pollution Control Plant Centrifuge Replacement 0 0 0 495 0 0 Total Hercules Share Of Pinole WW Plant Improvements 625$ 600$ 1,480$ 595$ 650$ -$ Total Sewer Projects 827$ 1,985$ 2,750$ 1,675$ 650$ -$ Projected for Fiscal Year Ending June 30, ($1,000s)Description
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2.3. 4 Gross and Net Revenue Requirement
The proposed sewer rates developed in the Report are designed for assumed implementation in FY 2025/26 (the Test Year as previously defined). The projected Test Year gross and net Revenue Requirements are estimated by utilizing the Budget , actual debt service requirements as provided in the applicable debt service schedules, capital estimates and assumed funding sources for capital projects as provided by the City, a long with anticipated transfers. The Test Year Revenue Requirements that are used for developing the user rates proposed herein are detailed in Appendix A at the end of this report and summarized in Table 5.
Table 5 – Test Year Revenue Requirements – FY 2026
The projected Revenue Requirements for the sewer system over the entire Projection Period are provided in Table 6.
Table 6 – Sewer Revenue Requirements for the Projection Period
2.4 Customer Data
The rate study described herein, particularly the cost -of-service analysis, is heavily reliant upon a detailed analysis of system customers and demand characteristics. The existing utility customer base provide s the determinants utilized in the cost -of-service analysis, and ultimately in calculating the sewer charges, which become the foundation for projecting future revenues generated by the sewer system.
It is important to note that the customer analysis focuses primarily on the customer classifications that will be subject to and impacted by the user rates and charges to be developed in the Report. This consists of the general service (retail) customers that currently
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pay for utility service pursuant to the existing user rates and charges as previously detailed.
For the purposes of the rate study, it is these customers that will generate revenues based upon the proposed user rates and charges.
2.4.1 Customer Billing Analysis
For the rate study, detailed billing information was provided for each customer. This data offered a breakdown of customers by class, usage characteristics, and billed charges. An analysis of the billing data was conducted to obtain an understanding of the existing customers, customer classes, and usage characteristics per customer class. In accordance with the data, as well as discussions with the City staff, the utility system provides service to various identifiable retail customer classes consisting of:
➢ Single-Family Residential
➢ Multi-Family Residential
➢ Senior Housing, and
➢ Commercial/Non-Residential
Each of these customer classes embodies certain common characteristics in their utility use and service demand profiles that provide the basis for establishing an equitable allocation of system costs. The billing data was utilized to identify the number of customer accounts within each class, the applicable equivalent residential units (ERUs) based on dwelling units, usage profiles, and strength characteristics.
The historical customer data was also utilized to establish growth trends for each customer classification. The growth trends were then used to project the average number of customers, ERUs, and usage within each class for the Test Year plus the remaining years of the Projection Period.
2.5 Financial Projections Under Existing Rates
The projected customers and accompanying billable flows are applied to the existing rates to develop a projection of user rate revenues that would be generated under existing rates.
The revenues are then compared to the projected revenue requirements/expenditures to determine if revenue adjustments are needed. Based on this comparison, it is projected that under the existing rates, the sewer system would not meet its collective projected operating (O&M) financial obligations , debt service payment s or coverage requirements, costs of capital projects , and transfers . Therefore, revenue increases are required to generate additional cash to fund projected costs of operations and capital projects , meet debt service requirements, and maintain adequate cash reserves.
The City has established an objective of maintaining at least 180 days of cash reserves to help fund ongoing operations in the event of periodic fluctuations in cash flow , and to address unexpected needs that may require cash funding. Since the City currently collects sewer user revenues through the annual secured property tax roll, as opposed to receiving cash through monthly or bi -monthly billings , it is essential that there are adequate cash
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reserves to cover expenditures between cycles of revenue collection from annual secured tax roll payments. The cash-flow statement outlining the projected operating results under existing rates is summarized in Table 7 for the sewer system. The proposed rates and projected financial results are addressed in the subsequent sections of this Report.
Table 7 – Sewer System Projected Operating Results - Existing Rates ($1,000s)
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Section 3 – Cost -of-Service (COS) Analysis
3.1 General
The costs incurred by a sewer utility system are generally driven by specific service requirements imposed on the system by its customers. There are several different options that can be used to perform a cost -of-service (COS) analysis, and the allocation methodology depends upon the basis applied. The sewer COS analysis detailed in Section 3.2 involves an examination of the number and type of customers served in accordance with the California State Water Resources Control Board (SWRCB) Revenue Program Guidelines for Wastewater Agencies.
3.2 Sewer Cost -of-Service
The COS analysis for the sewer utility utilizes the revenue requirements for the Test Year as the cost basis. The Test Year revenue requirement s are functionally unbundled, classified and allocated to customer classes to determine the cost-of-service by class. More detail relating to the sewer COS approach can be found in Appendix B.
3.2.1 Functional Unbundling of Revenue Requirements
The sewer system costs are unbundled into Collection, Treatment, Customer and Administrative functions. A brief description of each component is as follows:
• Collection – costs associated with lines and facilities that transport wastewater from customer properties to treatment facilities;
• Treatment – costs associated with treating wastewater for disposal reclamation and/or discharge;
• Customer – costs associated with billing, and providing other services to customers (e.g., printing, delivering, and collecting utility bills, recordkeeping, etc.). • Administration – various overhead and other non-operating costs.
The allocation of the functionally unbundled revenue requirement s for the Test Year are summarized in Table 8.
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Table 8 - Functional Unbundled Cost Allocations
3.2.2 Classification of Revenue Requirement s
The functionally unbundled Revenue Requirements for the sewer system are classified into fixed and volumetric customer components based on methodology consistent with the WEF, Manual of Practice No. 27. Since the City is mostly built out, and there are no anticipated losses or gains of significant wastewater customers, it is anticipated that the allocation percentages will not change materially during the Projection Period. However, it is important to note that COS analyses are based on the data at a specific point in time ( i.e., the most recent fiscal year). To the extent that weather conditions, economic conditions and customer usage characteristics change during the Projection Period, the cost allocations can be impacted. The system-wide costs by service characteristics are shown in Table 9.
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Table 9 - Classification of Unbundled Revenue Requirements
3.2.3 Allocation to Customer Classes and Unit Cost
Development
The functionalized and classified Revenue Requirements are allocated to customer classes utilizing a unit cost approach as follows:
• Collection – Based on relative percentage of annual sewer usage; • Treatment – Based on relative percentage of sewer strength discharge (BOD and TSS);
• Customer – Based on relative percentage of units by customer class.
The units of service for each component of cost by customer class (if applicable) are provided in Table 10. The units of service consist of the number of ERUs, annual flows in 100 cubic feet, and sewer strength discharge . ERUs are based on the number of residential dwelling units and commercial/non -residential customers by account as provided in the customer data. Collection is the total annual sewer flows projected for the Test Year. BOD and TSS reflect the strength per pound of the sewer discharge collected by the City from each customer class based on standards for wastewater discharge included in the SWRCB Guidelines.
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Table 10 – Units of Service
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The revenue requirement for each cost component is divided by its respective unit of service to calculate a unit cost. The unit cost for each cost component is demonstrated in Table 11.
Table 11 – Cost Per Unit
The allocation of the revenue requirement to each customer class is based on the unit costs for each component multiplied by the units of service for each customer class. The total costs to be recovered from each customer class by rate component are shown in Table 12.
Table 12 – Cost of Service by Customer Class and Cost Component
3.2.4 Rate Design by Unit Cost
The unit costs developed in the previous section are used to develop the proposed rates for the Test Year. The fixed rate components are based on accounts, ERUs and the allocated customer-related costs. The volumetric rate component is based on the annual usage and sewer strength discharge.
The fixed rate component s by ERU for single -family and multi -family customers are determined using the total number of residential dwelling units being served. Each residential dwelling unit is equivalent to one ERU. The fixed rate components for commercial/non- residential customers are determined based on the total number of non-residential customers.
The volumetric rate componen t is determined by the sewer usage and the strength characteristics associated with each customer classification based on the standards for wastewater discharge included in the State Water Resources Control Board Guidelines .
Residential customers will pay a flat fee, regardless of their usage, so all costs relating to the volumetric rate component are included in the flat fee. This is a common industry standard
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for setting residential sewer rates since residential customers have similar usage profiles and place similar demand on a sewer utility system, and their wastewater discharge is not directly metered.
For commercial/non-residential customers, the volumetric rate component is determined by dividing the volume, capacity, BOD, and TSS volumetric cost categories by the total commercial/non-residential sewer flows to determine the commercial/non-residential volumetric rate per 100 cubic feet. It is a common industry practice to have commercial/non-residential customers pay a volumetric rate per unit of sewer usage since the commercial/non -residential customer class varies in usage and strength discharge characteristics between customers. Section 3.2.5. demonstrates how the sewer rates are developed from the fixed and volumetric cost components, respective to each customer classification, to recover their proportional cost of providing service to them.
3.2.5 Cost -of-Service and Revenue Check
Once the unit costs are developed and the costs associated with each customer class based on the units or service are determined in Section 3.2.3, rates can be developed to ensure that each customer class is generating sufficient revenues to cover their allocated cost of service. The proposed rate structure for the sewer rates are as follows:
• Single -Family , Multi -Family , & Senior Housing Residential Customers – For single-family, multi-family, and senior housing residential customers, the proposed rates will consist of only a flat annual fixed charge based on the number of dwelling units.
• Commercial/Non -Residential Customers – For commercial/non -residential customers, the proposed rates will consist of an annual fixed charge per account and a volumetric rate per 100 cubic feet of sewer usage.
The revenues generated by each customer class vs the cost allocated to each customer class are provided in Table 13.
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Table 13 – Proposed Rate Revenues vs COS
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Section 4 – Proposed Test Year Rates
4.1 General
The methodology used to calculate the recommended sewer rates proposed herein involves applying the projected customers , ERUs, and sewer flows to the user rates developed in the preceding COS and rate analysis to calculate the estimated revenues that would be generated. Then, these projected revenues are compared to the estimated Test Year Revenue Requirements, and the sewer rates are adjusted on a percentage basis as necessary until the revenues generated are sufficient to meet the revenue needs of the sewer utility system. In addition, there are other factors that must be considered in designing rates to satisfy the City’s objectives. Such other rate considerations include, but are not limited to:
1. Sensitivity to existing customers - the proposed rates must consider the impact on existing customers and avoid putting an inequitable financial burden on any particular customer class.
2. Comparability with neighboring utilities - the proposed rates should consider the rates and charges applied to customers of neighboring utilities of relatively similar size for similar service.
3. Existing rate structure - the proposed rates must consider the logistics and cost/benefit implications of instituting changes to the existing rates and rate structure.
4. Economic and property development - the proposed rates must consider the potential for future development within the City’s service area and ensure that the rates do not make it cost-prohibitive for future development.
The proposed rates developed herein utilize these considerations, as well as discussions with the City staff, professional judgment, and prior experience with comparable utility systems .
When reviewing potential rate structure options in conjunction with the need for additional revenues, it was determined that revenue adjustments are needed, and the existing rate structure needs to be adjusted based on the COS analysis.
In conjunction with the existing rate structure, the proposed sewer rates for the upcoming fiscal year are composed of two rate components consisting of an annual fixed charge and a volumetric rate per 100 cubic feet for commercial/non -residential customers only . The proposed annual sewer rates for the Test Year are provided again in Table 14.
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Table 14 – Proposed Annual Sewer Rates
4.2 Rate Comparison with Other Utilities
In order to provide the City with additional insight regarding the proposed rate levels, the analysis includes a comparison of both the existing and proposed user rates relative to the user rates imposed by other sewer utility systems located in the same region. A summary analysis is provided comparing the cost of the annual sewer service for a typical single-family residential customer calculated under the existing and proposed rates of the City with those of the other utilities. Since the City currently bills customers annually through the Contra Costa County Secured Property Tax Roll, for purposes of a meaningful comparison, the bills for sewer utilities that do not bill annually (i.e., monthly, or bi -monthly) were converted into annual bills. The rates utilized for the other neighboring utilities bills shown in Figure 1 were in effect as of January 2025 and are exclusive of local taxes, outside surcharges, franchise fees, regulatory fees, or other rate adjustments. An annual summary comparison with other utilities for a typical single-family residential customer is illustrated in Figure 1.
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It should be noted that when making comparisons of sewer service, several factors affect the level of rates and charges. Such factors may include:
1) Terms of wholesale service agreements;
2) Time since last rate update for comparison providers; 3) Level of treatment and effluent disposal methods of sewer service; 4) Anticipated capital improvement programs and capital financing methods; 5) Plant capacity utilization, age of facilities, and assistance in construction by federal or state grants, connection fees, developer contributions, etc.; 6) General Fund and/or administrative fee transfers made by other systems which may account for differences in the level of rates charged; and 7) Bond covenants and funding requirements of the rates.
For the utilities included in the rate comparisons, no analysis has been performed with consideration of the above-mentioned factors as they relate to the reported sewer rates currently being charged.
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Section 5 – Projected Operating Results
5.1 General
As a conclusion to the study, a pro-forma operating statement is developed for the sewer system. The statement summarize s the projected financial results based on the system’s revenues, expenses and other Revenue Requirements anticipated in future years.
The operating statement cover s the 5-fiscal year Projection Period through June 30, 20 30, and is prepared on a cash -flow basis. In addition, the pro-forma statement includes the applicable annual percentage rate adjustments necessary to meet the projected Revenue Requirements. The following discussions describe the development of the major components of the projected operating results.
5.2 Projected User Rate Revenues
The user rate and charge revenues are estimated by applying the existing and proposed rates to the projected customer accounts, ERUs, and sewer flows. The resulting revenues are then compared to the projected Revenue Requirements (i.e., O&M expenses, debt service, capital outlay, CIP, transfers, etc.) in each fiscal year to determine if the revenues are sufficient to satisfy the expenditure needs of the system. To the extent that there are revenue shortfalls in any given year of the Project Period , the sewer rates developed from the COS and Rate analysis outlined in Section 3 of this Report are adjusted on a percentage basis each year as necessary to generate the required level of revenues. The projected sewer user rate revenues are provided in Table 15.
Table 15 – Projected User Rate Revenues
The projected revenues include the annual sewer rate adjustments anticipated for the remaining years of the Projection Period beyond the Test Year. The proposed user rates, from which the projected operating results are developed for the entire 5 -fiscal year Projection Period are provided in Table 16. The rates identified in the table below reflect the cost o f providing service to individual customer classes based on accounts, ERUs, volume of flow, and strength characteristics.
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Table 16 – Proposed Annual Sewer Rates
The projected user rates provided herein for the periods beyond the Test Year are intended for strategic planning purposes, and to provide the City with the estimated future rates that may be needed to satisfy the projected cash flow requirements. The rates are developed in accordance with the assumed customer , flow, expenditure, and revenue estimates projected in this rate study. It is important to note that, since it is necessary to utilize numerous assumptions to develop the projected operating results, to the extent that actual customers, flows and/or system expenditures differ from those assumed herein, additional rate adjustments may be necessary. For informative purposes, the annual charge for a representative City residential customer based on the projected rates, as well as the accompanying change in the annual charge for each year of the Projection Period is included herein. An illustration of the projected annual flat fee charge for a single-family residential customer is provided in Figure 2.
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5.3 Debt Service Coverage
The sewer operating statement also include s a calculation of the annual debt service coverage. Debt service coverage is generally viewed as an indicator of the financial strength of the utility. The debt service coverage ratio is broadly calculated by dividing the net revenues by the annual debt service requirement. For the purposes of the debt service coverage calculation developed herein, the net revenues consist of the total operating revenues (user rate revenues plus other revenues) less the O&M expenses. In accordance with the requirements of the outstanding loan agreements, the City must maintain coverage of at least 120% (1.20 times) of the annual debt service payment. The pro-forma operating statement indicate s that the sewer system is expected to meet or exceed the required minimum level of debt service coverage in each fiscal year of the Projection Period. It is important to note that the coverage results are provided for informative purposes only and are not intended as a legally supportable calculation for representation to bondholders. The debt service coverage for the sewer system over the projection period is provided in Table
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Table 17 –Sewer Utility System Projected Debt Service Coverage
5.4 Summary of Projected Operating Results
The cash-flow statement outlining the projected operating results is summarized in Table 18 for the sewer system. The results demonstrate that the proposed rates and charges along with the other system revenues are anticipated to be sufficient to satisfy the projected Revenue Requirements and capital needs of the utility system.
Projected Minimum
2026 1.26 1.20
2027 1.35 1.20
2028 1.44 1.20
2029 1.47 1.20
2030 1.50 1.20
Fiscal Year Sewer Enterprise
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Table 18 – Sewer System Projected Operating Results - Proposed Rates ($1,000s)
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Section 6 – Conclusions and Recommendations
6.1 Disclaimers
6.1.1 General Disclaimer
In the development of the proposed user rates and charges, certain historical reviews and analyses have been performed, together with the application of assumptions based on prudent financial, operational, and ratemaking relationships. The cost criteria and customer usage characteristics associated with general ratemaking procedures are representative of averages and are not intended as indicators of any individual customer.
In the preparation of the rate study, certain assumptions have been made with respect to conditions that may occur in the future. While it is believed that these assumptions are reasonable for the purpose of this update, they are dependent upon future even ts and actual conditions may differ from those assumed. In addition, the study has used and relied upon certain information that was provided by other parties not associated with Willdan.
Such information includes, among other things, the City’s audited f inancial statements, annual operating budgets, periodic reports, and other information and data provided by the City, its independent auditors, and other sources. While the sources are believed to be reliable, there has been no independent verification of the information, and no assurances are offered with respect thereto. To the extent that future conditions differ from those assumed herein or provided by others, the actual results may vary from those projected.
6.1.2 Municipal Advisory Disclaimer
Unless the City of Hercules, California (the “City”) has a written engagement from Willdan Financial Services (“Willdan”) for municipal advisory services, Willdan is not advising or recommending any action be taken by the recipient of this information with respect to any prospective, new, or existing municipal financial products or issuance of municipal securities (including with respect to the structure, timing, terms and other similar matters concerning such financial products or issues). The City shall discuss any such informatio n and material contained in Willdan’s work product with any and all internal and/or external advisors and experts, including its own municipal advisor, that it deems appropriate before acting on the information and material.
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 City with respect to financial, economic or other matters relat ing to a prospective, new or existing issuance of municipal securities of the City, (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 City, 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
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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, including any revisions or amendments thereto.
6.2 Conclusions
As previously addressed, the purpose of this study is to provide a review of the City’s existing utility rates to determine if rate adjustments are necessary to meet the budgeted and/or projected financial needs in future years. This Report is the result of the collaborative efforts of representatives from both the City and Willdan. City staff were diligent and cooperative in their efforts to ensure the availability and quality of source data on financial and operating matters. Based on the reviews, analyse s and assumptions discussed herein, it is concluded that:
1. The proposed user rates and charges are anticipated to generate sufficient revenues to meet the Revenue Requirements of the system based upon the projected expenditures, transfers, customers, and billable flows estimated for the Test Year. The proposed rates are based on an assumed implementation date of July 1, 2025. To the extent that the actual implementation date varies from the assumed implementation date , additional rate adjustments and/or appropriations from existing reserves may be necessary.
2. The estimated revenues and resulting rate adjustments for the remaining years of the Projection Period beyond the Test Year are developed based on the customer growth assumptions generated from the historical analyses and discussions with City staff. If the customer growth projections are not realized, additional rate adjustments may be necessary.
3. Customer growth for the sewer system is projected based on historical customer data as provided by the City as well as discussions with the City staff regarding development activity and anticipated construction. If it turns out that the customer growth assumptions are not realized, the resulting revenues could be different than projected.
4. Future capital improvement projects are assumed to occur as reported by the City in its CIP. To the extent that the timing of such projects may change from that estimated herein, the cost of such projects and resulting impact on future rates and charges may vary from those indicated
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5. The proposed rates and rate structure are consistent with industry standards for rate-setting practices, comply with Proposition 218 and conform to the City’s financial policies with respect to:
a. Equitably recovering costs;
b. Being based upon the proportionate cost of providing services; and c. Generating sufficient revenue to recover system Revenue Requirements, meet debt service coverage requirements and annual payment obligations, fund capital needs, and meet reserve requirements.
6.3 Recommendations
Based on the reviews, analyses and assumptions addressed herein, as well as the resulting conclusions provided above, it is respectfully recommended that the City:
1. Adopt the proposed sewer rates to be placed on the annual secured property tax roll.
2. Enact the proposed rates to become effective as of July 1, 2025 (or other such date as determined by the City). Based on the timing of the project and the required public hearing notice procedures, it is expected that the effective date will occur on the recommended date.
3. Readdress the COS analysis portion of this study every three to five years to ensure costs are recovered consistent with COS principles and customer characteristics.
We appreciate the opportunity to be of service to the City in this engagement. In addition, we would like to thank City staff for the valuable assistance provided during the completion of the rate study.
Respectfully Yours,
WILLDAN FINANCIAL SERVICES
APPENDIX
DETAIL FOR THE COMPREHENSIVE
SEWER UTILITY RATE STUDY
COMPREHENSIVE SEWER UTILITY RATE STUDY FOR THE
CITY OF HERCULES, CALIFORNIA
APPENDIX A
Revenue Requirement for
User Rates
APPENDIX - A
CITY OF HERCULES, CA
Development of Rate Revenue Requirements
[A] [B] [C]=[A]*[B]
FY 2026 % to Sewer Sewer
1 Total Operating Revenues 7,809,792$ 7,809,792$ Less:
Other Operating Revenues
2 Interest Income 238,000$ 100% 238,000$ 3 Sewer Connection Fee - 100% - 4 Sewer Facilities Fees - 100% - 5 Sewer Lateral Inspection - 100% - 6 Rate Stabilization - 100% -
7 Sewer Ent. Fund - 100% -
8 Total Other Operating Revenues 238,000 238,000 9 Total Rate Revenue Requirement 7,571,792$ 100% 7,571,792$ Line No: Description Test Year for Rate Revenue Requirement A - 1
APPENDIX B
Sewer Cost-of-Service
Analysis
APPENDIX - B
CITY OF HERCULES, CA
Allocation of Test Year Costs to Sewer Function
Line No: Expense Group FY 2026
1 Collection $321,347
2 Treatment 3,080,232
3 Administration 1,746,738
4 Pumping 60,564
5 Customer Service 0
6 Transfers 0
7 Existing Debt 2,066,306
8 New Debt 0
9 CIP 1,985,000
10 Capital Outlay 0
11 Total 9,260,187$
Test Year Revenue Requirement
B - 1
APPENDIX - B
CITY OF HERCULES, CA
Sewer Customer Account & Stength Characteristics by Customer Class - Test Year FY 2026 Total Total CCF BOD BOD TSS TSS
Parcels ERUs Flow Factor [1] Pounds Factor [1] Pounds
Residential Classes
1 Resid. Single Family 6,378 6,378 474,268 200 591,727 200 591,727 2 Multi-Family 1,876 2,650 149,988 200 187,135 200 187,135 3 Senior Housing 2 111 4,015 200 5,009 200 5,009 4 Sub-total Residential 8,256 9,139 628,271 783,871 783,871 Non-Residential Classes
5 Amusement Services 3 3 3,660 150 4,579 150 4,579 6 Auto Laundries 1 1 2,573 150 3,219 150 3,219 7 Construction 1 1 119 200 198 200 198 8 Eating Places, Fast 5 5 3,534 1,000 29,474 600 17,684 9 Electrical Machinery 1 1 73 200 122 200 122 10 Food Sales 3 3 5,368 150 6,715 150 6,715 11 Food Service 3 8 1,264 1,000 10,542 600 6,325 12 Gasoline And Oil 2 2 3,441 180 5,166 280 8,035 13 Health Services 2 2 1,114 250 2,323 100 929 14 Laboratories 3 3 8,007 150 10,017 150 10,017 15 Metal Products 1 1 1,697 150 2,123 150 2,123 16 Non-Profit 4 4 2,439 130 2,644 80 1,627 17 Offices 25 31 20,755 130 22,503 80 13,848 18 Personal Services 1 1 271 130 294 80 181 19 Retail Trade, Other 20 51 12,470 150 15,600 150 15,600 20 Schools 9 9 4,025 130 4,364 100 3,357 21 Specialty Food 1 1 277 150 347 150 347 22 Warehousing 5 5 1,665 150 2,083 150 2,083 23 Wholesale Trade 9 9 420 150 525 150 525 24 Sub-Total Non-Residential 99 141 73,172 122,836 97,514 25 Sewer System Total 8,355 9,280 701,443 906,707 881,385 Notes: 1.52% 10.43% 13.55% 11.06%
Line No: Description
(1) Average strength factors for BOD and TSS are based on the State Water Resources Control Board Revenue Program Guidelines, Appendix G.
B - 2
APPENDIX - B
CITY OF HERCULES, CA
Allocation of Sewer Costs - Test Year FY 2026
Line No: Description Sewer Costs Volume Capacity Strength - BOD Strength - SS Customer Total (Check)
Allocation Factors:
1 Treatment 14.09% 14.09% 36.42% 35.40% 0.00% 100.00%
2 Collection 50.00% 50.00% 0.00% 0.00% 0.00% 100.00%
3 Administration 0.00% 0.00% 0.00% 0.00% 100.00% 100.00% 4 Pumping 14.09% 14.09% 36.42% 35.40% 0.00% 100.00%
5 Customer Service 0.00% 0.00% 0.00% 0.00% 100.00% 100.00% 6 Transfers 40.00% 40.00% 10.00% 10.00% 0.00% 100.00%
7 CIP 14.09% 14.09% 36.42% 35.40% 0.00% 100.00%
8 Capital Outlay 14.09% 14.09% 36.42% 35.40% 0.00% 100.00% 9 Existing Debt 0.00% 0.00% 0.00% 0.00% 100.00% 100.00% 10 New Debt 14.09% 14.09% 36.42% 35.40% 0.00% 100.00%
Allocation of Costs:
11 Treatment 3,080,232$ 434,005$ 434,005$ 1,121,843$ 1,090,379$ -$ 3,080,232$ 12 Collection 321,347 160,674 160,673 - - - 321,347 13 Administration 1,746,738 - - - - 1,746,738 1,746,738 14 Pumping 60,564 8,533 8,533 22,058 21,440 - 60,564 15 Customer Service - - - - - - -
16 Transfers - - - - - - -
17 CIP 1,985,000 279,643 279,643 722,952 702,762 - 1,985,000 18 Capital Outlay - - - - - - -
19 Existing Debt 2,066,306 - - - - 2,066,306 2,066,306 20 New Debt - - - - - - -
21 Non-Rate Rev & Fund Balance (1,688,395) (160,969) (160,969) (340,380) (330,849) (695,228) (1,688,395) 22 Total 7,571,792$ 721,886$ 721,885$ 1,526,473$ 1,483,732$ 3,117,817$ 7,571,792$
9.53% 9.53% 20.16% 19.60% 41.18%
Total Units of Service 701,443 701,443 906,707 881,385 9,280 Units CCF CCF Pounds Pounds ERUs/Annually
Cost Per Unit 1.03$ 1.03$ 1.68$ 1.68$ 335.97$ Units CCF CCF Pounds Pounds ERUs/Annually
B - 3
APPENDIX - B
CITY OF HERCULES, CA
Sewer Cost of Service by Cost Component and Customer Class - Test Year FY 2026 [A] [B] [C] [D] [E] [F]
Volume Capacity Strength -
BOD Strength - SS Customer Total
1 Resid. Single Family 488,090$ 488,089$ 996,193$ 996,119$ 2,142,827$ 5,111,318$ 2 Multi-Family 154,359 154,359 315,048 315,024 890,325 1,829,115 3 Senior Housing 4,132 4,132 8,433 8,433 37,293 62,423 4 All Non-Residential Customers 75,305 75,304 206,799 164,156 47,372 568,936 5 Total 721,886$ 721,885$ 1,526,473$ 1,483,732$ 3,117,817$ 7,571,792$ Non-Residential Classes
Line No: Description
Residential Classes
B - 4
APPENDIX - B
CITY OF HERCULES, CA
Sewer Rate Calculation - Test Year FY 2026
[A] [B] [C]=[A]/[B] [D] [E]=[C]-[D] [F] [G] [H]=[F]/[G] [I] [J]=[H]-[I] Fixed Rate
Costs Annual ERUs
Proposed
Annual Fixed
Fee
Existing
Annual Fixed
Fee
Annual Fixed
Fee Difference
Volumetric
Rate Costs
Billable Annual
Volume (CCF)
Proposed
Volumetric
Rate
Existing
Volumetric
Rate
Volumetric
Rate
Difference
1 Resid. Single Family $ 5,111,318 6,378 $ 801.40 $ 625.80 $ 175.60 N/A N/A N/A N/A N/A 2 Multi-Family $ 1,829,115 2,650 $ 690.23 $ 625.80 $ 64.43 N/A N/A N/A N/A N/A 3 Senior Housing $ 62,423 111 $ 562.37 $ 427.16 $ 135.21 N/A N/A N/A N/A N/A 4 All Non-Residential Customers 47,372$ 141 $ 335.97 $ 120.00 $ 215.97 521,564$ 73,172 $ 7.13 $ 3.87 $ 3.26 Line No: Customer Class
Residential Classes
Non-Residential Classes
B - 5
APPENDIX - B
CITY OF HERCULES, CA
Sewer Revenue vs Cost of Service by Customer Class Check - Test Year FY 2026 [A] [B] [C]=[A]*[B] [D] [E] [F]=[D]*[E] [G]=[C]+[F] [H] [I]=[H]-[G] Annual ERUs
Proposed
Annual Fixed
Fee
Total Fixed
Fee Revenue
Billable
Annual
Volume (CCF)
Proposed
Volumetric
Rate
Total
Volumetric
Rate Revenues
Total
Calculated
Revenues Total COS
Difference
Calc vs COS
1 Resid. Single Family 6,378 801.40$ 5,111,318$ N/A N/A -$ 5,111,318$ 5,111,318$ -$ 2 Multi-Family 2,650 690.23$ 1,829,115$ N/A N/A -$ 1,829,115$ 1,829,115$ -$ 3 Senior Housing 111 562.37$ 62,423$ N/A N/A -$ 62,423$ 62,423$ -$ 4 All Non-Residential Customers 141 335.97$ 47,372$ 73,172 7.13$ 521,564$ 568,936$ 568,936$ -$ 5 Total 9,280 7,050,228$ 73,172 521,564$ 7,571,792$ 7,571,792$ -$ Line
No: Customer Class
Residential Classes
Non-Residential Classes
B - 6
27368 Via Industria, Suite 200
Temecula, CA 92590
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www.willdan.com