Water & Sewer
Rate Adjustment
Proposition 218 Public Hearing
April 16, 2024
Purpose and Need
• 60+ year-old utility infrastructure
• Aging well field is losing capacity
• Sewer lift station replacement/rehab
• Insufficient water pipeline replacement
• Maintain safe and reliable water and
wastewater service
• Ensure revenue sufficiency
• Capital replacement funding
• Maintain adequate reserves
Water Master Plan and CIP
• Evaluates water system from
2020 through 2040
• Identifies key projects over
next 20 years
• $167 million in projects
3 New Water Wells
$22 million
Aging Pipe Repl.
$36 million
Onsite Chlorine
Generation
$15 million
Avg. CIP
$3.2 million
past 5 years
Sewer Master Plan and CIP
• Evaluates sewer system
from 2020 through 2040
• Identifies key projects
over next 10 years
• $73.6 million in projects
Sewer Lift Station
Replacements
$17 million
Aging Pipe
Rehab
$7 million
Wet-well
Sewer
Infrastructure
Repairs
$27 million
Avg. CIP
$2.4 million
past 5 years
Water & Sewer Rate Studies
• Conducted per Prop 218 and industry standards
• Factors Considered in Determining Rates
• Operating costs impacted by recent inflation
• Fund key capital improvem ent program (CIP) projects
• Findings and Recommendations
• Adjust revenues to elimi nate deficit and meet target reserves by end of study period, FY 2028-29
• No change to rate components/categories
• No change to reserve methodology
Reserve Targets for FY 2024
WastewaterWaterReserve Type
4 months of Operations &
Maintenance
~$3.5 million
3 months of Operations &
Maintenance
~$12.5 million
Operating Reserves:
Deals with cash flow
Average of 5‐year Capital
Improvement Program
~$2.7 million
150% of Average 5‐year Capital
Improvement Program
~$12.2 million
Capital Reserves:
Assists with timing and
awarding contracts
Cost to replace one lift station
~$4.5 million
Cost to replace one
groundwater well +
incremental cost of buying
imported water
~$10.7 million
Emergency Reserve:
Asset Failure
~$11 million~$35 millionTOTAL
Sample Well Failure Impacts
Well w/design capacity of 3,000 gallons per minute
Well Failure
Impact
Build a Well
NowItem
$6 million$6 millionDesign and construct a
new well
$7 millionn/a3-year State Water Project
additional water costs
$13 million
(117% additional cost)$6 millionTotal Cost
How did we get here?
• 2011-2014 – No increases to water rates, capital
charge non-existent
• 2015-2018 – Rates were adjusted, capital charge
introduced in 2018
• 2019-2023 – Rates frozen in 2020 due impacts from
the COVID-19 Pandemic
• Costs to run the system increase significantly,
electrical/utility increased by 45.1%, construction
increased by 38.5%
Factors Driving Adjustments
• Aging Infrastructure/Deferred Maintenance
• Well Failure = $3.1 million added import water cost per year • Estimated Cost of New Well = $5.8 million
• Time to Design and Build a New Well = 3 years (approximate) • Wholesale Water Costs (2024)
• OCWD (85% groundwater) = $688 per acre-foot (+10.3% increase) • MWDOC (15% import) = $1,465 per acre-foot (+16.6% increase) • Inflation = higher labor and material costs
• New laws and regulations
Community Benefits
Improved
Service Quality
Reliable Water
Supply
Sustainable
Management
Legal Framework for Setting Rates
• California - 1996
• Voters approved Right to
Vote on Taxes Act, known
as Proposition 218
• Established requirements
for setting local
government fees and
charges, which includes
utility rates
Public Outreach and Process
99,430 Notices
Mailed 2/29
March bill inserts
City Website
City Manager’s
Newsletter
Two (2)
Public Workshops
Surf City Break
Social Media
HB TV
Water Rate Components
• Fixed Meter Charge - funds the operations and
maintenance of the water system
• Capital Charge - funds the capital improvements
needed to the system per the Water Master Plan
• Commodity Rate - pass-through cost of purchasing
water from Metropolitan Water District and Orange
County Water District
• Private Fire Line Fee – for costs directly related to fire protection (only applies to properties with a dedicated, private fire line service)
5-Year Water Meter Fee
5-Year Water Capital Charge
5-Year Commodity Rate
• Wholesale unit rates are ESTIM ATED based on the projected OCWD and MWDOC rates and charges
• If wholesale rates are higher than predicted, the City will pa ss through the increase in the wholesale water purchase costs • City has NO CONTROL over this rate increase component FY 2028/29FY 2027/28FY 2026/27FY 2025/26FY 2024/25CurrentComponent $3.5529$3.3999$3.1924$2.9423Wholesale Cost
(OCWD + MWDOC)
$0.6495$0.4853$0.3570$0.1128Estimated Pass‐
through Increase
$4.2024$3.8852$3.5494$3.0551$2.6870$2.4034TOTAL
5-Year Private Fire Service Charge
5-Year Water Rate Impact ($)
$10 $15
$22 $26 $27 $27
$36
$50 $53
$73
$78
$‐
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
5 Year Bill Difference ($)
Status Quo vs. Proposed: Water
‐$30
‐$20
‐$10
$0
$10
$20
$30
$40
$50
FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Millions
Ending Balance Reserve Target
• The water system is a public health and safety issue. Ensuring that we haveappropriate reserves protects the health and safety of our residents. • NOTE: Water funds can ONLY be used for the for the acquisition, construction, reconstruction, maintenance, and operation of water facilities.
SFR Water Rate Comparison
(Single Family Residential, 3/4” meter, 8 CCF = 5,984 gallons) City of
Huntington
Beach
(Current)
City of
Anaheim
City of
Orange
City of
Huntington
Beach
(Proposed)
City of
Westminster
City of
Garden
Grove
City of Seal
Beach
City of
Fullerton
City of
Newport
Beach
City of Santa
Ana
FY 2024 $43.86 $45.72 $47.36 $48.25 $49.08 $51.26 $55.76 $60.12 $64.53 $68.24 $0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
5-Year Sewer Rate
• Single-family and multi-family residential billing units based on dwelling units
• Commercial, industrial, and institutional billing units based on number of units or size/type of meter
• Education customers based on average daily attendance 5-Year Sewer Rate Impact ($)
$3 $4
$12 $12
$23 $26
$34 $38
$82
$‐
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
5 Year Bill Difference ($)
Status Quo vs. Proposed: Sewer
• The sewer system is a public health and safety issue. Ensuring that we have appropriate reserves protects the health and safety of our residents. • NOTE: Sewer funds can ONLY be used for the for the acquisitio n, construction, reconstruction, maintenance, and operation of water facilities.
SFR Wastewater Rate Comparison
(Single Family Residential, 1 equivalent dwelling unit)
Sample Average SFR Bill
(Single Family Residential, 3/4” meter, 9 CCF = 6,732 gallons) • Average = 11.8% per year
Sample Average SFR Bill
(Single Family Residential, 3/4” meter, 9 CCF = 6,732 gallons) • Average = 11.8% per year
• MWDOC = 16.6% increase FY 2024-25
• Accounts for 40% of cost increase outside of our control
Recommended Action
• Adopt Resolution 2024-18 readopting and revising the
City’s Water Commodity Rates, per Section 14.12.040
of the HBMC
• Adopt Resolution 2024-20 adjusting water meter rates, including a capital surcharge and private fire line
service fee, per Section 14.12.040 of the HBMC
• Adopt Resolution 2024-19 adjusting sewer service
user charges per Section 14.54.020 of the HBMC
Questions?