Lynwood City Council
December 20, 2022

Table R8: Fixed Monthly Recycled Water Rate Derivation

Allocation Units Customer Meter Service Capacity
Allocation Unit of Measure ## E M U
Al l oca ti on Uni ts 348 3,892 3,892
Revenue Requi rement $4,171 $3,632 $50,329
Unit Cost $11.99 $0.93 $12.93
Monthly Fixed RW
Service Charge
Derivation
Meter
Equivalent
Ratios Customer
Meter
Service Capacity
Monthly Fixed RW
Service Charges
3/4 1.00 $11.99 $0.93 $12.93 $25.85
11 . 6 7 $11.99 $1.56 $21.59 $35.14
1 1/2 3.33 $11.99 $3.11 $43.06 $58.15
25 . 3 3 $11.99 $4.97 $68.92 $85.88
31 0 . 6 7 $11.99 $9.96 $137.97 $159.91
41 6 . 6 7 $11.99 $15.56 $215.55 $243.09
63 3 . 3 3 $11.99 $31.10 $430.97 $474.06
City Council Regular Meeting - Page 299 of 1385
Recycled Water Finances & Rates    96
Fallbrook PUD Water, Wastewater & Recycled Water Rate Study

17.2 Variable Service Charge Derivation
The variable recycled water revenue requirement is derived by adjusting the revenue requirement to account for the tax revenue applied to the youth sports parks, the fixed charge revenue, and contract revenues. The projected billed units were also adjusted to account for the recycled water contract customers.

The variable recycled water rate was derived by dividing the adjusted revenue requirement by the projected billed units.

Table R9: Variable Recycled Water Rate Derivation

RW Rate Derivation Amount
Rate Revenue Requirement
Revenue Requirement $1,253,265
SP&YB Tax Revenue $33,484
Fixed Charge Revenue ‐$58,132
Orange Grove Contract Fee ‐$5,000
Orange Grove Delay $1,152
Rate Revenue Requirement $1,224,768
Projected RW Billed Units (Kgal)
Orange Grove Take or Pay 14,670
RW Demand Less Orange Grove 180,000
Total RW Billed Units 194,670
RW Volumetric Rate ($/Kgal)
Rate Revenue Requirement $1,224,768
Total RW Billed Units 194,670
RW Volumetric Rate $6.29
City Council Regular Meeting - Page 300 of 1385
Recycled Water Finances & Rates    97
Fallbrook PUD Water, Wastewater & Recycled Water Rate Study

17.3 Proposed Recycled Water Rates
The following table shows the proposed water rates. Under Proposition 218, the rates shown below are the maximum rates that the District can enact each year. The District can implement rates that are lower than those shown based upon an annual review of the water utility’s finances to ensure that revenues are in line with expenses.

Table R10: Proposed Recycled Water Rates

Monthly Fixed Charges FY  21‐22
Effective
Jan. 1
2023
Effective
Jan. 1
2024
Effective
Jan. 1
2025
Effective
Jan. 1
2026
Effective
Jan. 1
2027
Meter Size Existing Proposed Proposed Proposed Proposed Proposed Monthly Fixed Service Charge
3/4" $25.22 $25.85 $26.50 $27.16 $27.84 $28.53
1" $34.15 $35.14 $36.02 $36.92 $37.84 $38.79
1 1/2" $56.46 $58.15 $59.60 $61.09 $62.62 $64.19
2" $83.23 $85.88 $88.03 $90.23 $92.48 $94.80
3" $154.65 $159.91 $163.91 $168.01 $172.21 $176.51
4" $235.00 $243.09 $249.17 $255.40 $261.78 $268.33
6" $458.16 $474.06 $485.91 $498.06 $510.51 $523.27
Volumetric Rates $/ Kgal
RW Sales $6.13 $6.29 $6.45 $6.61 $6.77 $6.94
Orange Grove
Jan ‐ June $6.19 $6.50 $6.67 $6.83 $7.00 $7.18
Jul ‐ Dec $6.50 $6.67 $6.83 $7.00 $7.18 $7.36
SP&YB
Apr ‐ Sep $3.30 $3.30 $3.30 $3.30 $3.39 $3.47
Oct ‐ Mar $1.61 $1.61 $1.61 $1.65 $1.69 $1.74
City Council Regular Meeting - Page 301 of 1385
Appendix A – Supporting Tables
Fallbrook PUD Water, Wastewater & Recycled Water Rate Study

APPENDIX A

Supporting Rate Study Tables

City Council Regular Meeting - Page 302 of 1385
Draft FPUD Rate Study
Water Enterprise
Revenues and Expenses
Escalation Factors 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 Salaries 7.0% 8.0% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Benefits 6.5% 7.0% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% CPI 5.0% 5.0% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR 5.5% 6.7% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR + 3% 8.5% 9.7% 7.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Property Tax 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Rent ‐ 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Interest 0.6% 1.0% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Growth 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% Revenue Category 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Operating Rev
Water Rate Revenue $25,399,500 $27,091,043 $28,895, 239 $30,819,590 $32,872,097 $34,806,614 $36, 601,765 $38,489,501 $40,474,597 $42,354,455 MWD RTS Charge $130,551 $0 $0 $0 $0 $0 $0 $0 $0 $0
SDCWD IAC Charge SDCWD  IAC Charge $603,768 $623,819 $667,487 $714,211 $764,206 $817,700 $874,939 $936,185 $1,001,718 $1,071,838 Sundry As  All Other $53,009 $53,009 $53,009 $53,009 $53, 009 $53,009 $53,009 $53,009 $53,009 $53,009 Non‐Operating Rev
Water Availability Charge Supply  Reliability $208,842 $208,842 $208,842 $208,842 $208,842 $208,842 $208,842 $208,842 $208,842 $208,842 1% Property tax As  All Other $520,031 $525,231 $530,484 $535,788 $541, 146 $546,558 $552,023 $557,543 $563,119 $568,750 Interest As  All Other $143,918 $230,625 $303,541 $305,351 $319, 865 $349,955 $392,088 $441,196 $489,132 $544,909 Water Capital Impr. Charge Capital $1,593,121 $1,747,881 $1,878,972 $2,010,500 $2,151,235 $2,301,821 $2,462,949 $2,635,355 $2,819,830 $3,017,218 Pumping Capital Impr. Charge Capital $16,378 $0 $0 $0 $0 $0 $0 $0 $0 $0 Facility Rent As  All Other $261,189 $266,413 $271,741 $277,176 $282, 720 $288,374 $294,142 $300,024 $306,025 $312,145 Gain/Loss on sale of assets/SDCWA Refund As  All O t h e r $ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0 Backflow Fee
Pumping Charge
Water Capacity Fees Capital $111,172 $111,172 $111,172 $111, 172 $111,172 $111,172 $111,172 $111,172 $111,172 $111,172__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Revenue $29,041,478 $30,858,035 $32,920,485 $35,035,639 $37,304,291 $39,484,045 $41,550,928 $43,732,827 $46,027,443 $48,242,338 % Change from Previous Year 0.1% 6.3% 6.7% 6.4% 6.5% 5.8% 5.2% 5.3% 5.2% 4.8% City Council Regular Meeting - Page 303 of 1385
Draft FPUD Rate Study
Water Enterprise
Revenues and Expenses
Escalation Factors 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 Salaries 7.0% 8.0% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Benefits 6.5% 7.0% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% CPI 5.0% 5.0% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR 5.5% 6.7% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR + 3% 8.5% 9.7% 7.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Property Tax 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Rent ‐ 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Interest 0.6% 1.0% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Growth 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% Expenses Category 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Purchased Water Costs N/A $12,521,359 $13,356,811 $12,126,347 $12,800, 383 $13,471,002 $14,079,894 $14,690,29 6 $15,337,194 $15,975,035 $16,672,48 6 Treatment
Salaries SMCUP   $237,424 $254,044 $270,556 $284,084 $298,288 $313,203 $328,863 $345,306 $362,571 $380,700 Contractor Services SMCUP   $80,000 $83,200 $86,944 $90,422 $94,039 $97,800 $101,712 $105,781 $110,012 $114,412 Equipment (Non Capital) SMCUP   $5,000 $5,200 $5,434 $5,651 $5,877 $6,113 $6,357 $6,611 $6,876 $7,151 Materials/Services/Supplies SMCUP   $278,498 $566,638 $592,137 $615,822 $640,455 $666,073 $692,716 $720,425 $749,242 $779,212 Memberships/Training/Permits SMCUP   $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Utilities SMCUP   $285,000 $825,000 $862,125 $896,610 $932,474 $969,773 $1,008,564 $1,048,907 $1,090,863 $1,134,498 Production & Dist.

Salaries Production  & Dist. $651,941 $704,097 $749,863 $787,356 $826,724 $868,060 $911,463 $957,036 $1,004,888 $1,055,132 Pumping Costs Production  & Dist.

Water Treatment Production  & Dist.

Other Services, Materials & Supplies Production  & Dist.

Contractor Services Production  & Dist. $101,000 $106,050 $110,822 $115,255 $119, 865 $124,660 $129,646 $134,832 $140,226 $145,835 Equipment (Non Capital) Production  & Dist. $20,000 $21,000 $21,945 $22,823 $23, 736 $24,685 $25,673 $26,699 $27,767 $28,878 Materials/Services/Supplies Production  & Dist. $224,000 $235,200 $245,784 $255,615 $265, 840 $276,474 $287,533 $299,034 $310,995 $323,435 Professional Services Production  & D i s t . $ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 0 Memberships/Training/Permits Production  & Dist. $80,000 $84,000 $87,780 $91,291 $94, 943 $98,741 $102,690 $106,798 $111,070 $115,512 Utilities Production  & Dist. $90,000 $94,500 $98,753 $102,703 $106, 811 $111,083 $115,526 $120,148 $124,953 $129,952 Pipeline Maint. & Const.

Salaries Pipeline  Maint. & Const. $439,956 $475,153 $506,038 $531,340 $557, 907 $585,802 $615,092 $645,847 $678,139 $712,046 Contractor Services Pipeline  Maint. & Const. $40,000 $42,000 $43,890 $45,646 $47, 471 $49,370 $51,345 $53,399 $55,535 $57,756 Equipment (Non Capital) Pipeline  Maint. & Const. $10,000 $10,500 $10,973 $11,411 $11, 868 $12,343 $12,836 $13,350 $13,884 $14,439 Materials/Services/Supplies Pipeline  Maint. & Const. $40,000 $42,000 $43,890 $45,646 $47, 471 $49,370 $51,345 $53,399 $55,535 $57,756 System Services
Salaries System  Services $479,262 $517,603 $551,247 $578,810 $607,750 $638,138 $670,045 $703,547 $738,724 $775,660 Contractor Services System  Services $106,000 $111,300 $116,309 $120,961 $125,799 $130,831 $136,064 $141,507 $147,167 $153,054 Equipment (Non Capital) System  Services $0
Materials/Services/Supplies System  Services $105,000 $110,250 $115,211 $119,820 $124,612 $129,597 $134,781 $140,172 $145,779 $151,610 Allocated Admin Expenses
Allocated Benefits Expenditures Benefits $1,214,646 $1,299,671 $1,371,153 $1, 439,710 $1,511,696 $1,587,280 $1,666, 645 $1,749,977 $1,837,476 $1,929,349 Allocation of Administrative Services Administration $4,690,063 $4,924,566 $5,146,171 $5, 352,018 $5,566,099 $5,788,743 $6,020, 293 $6,261,104 $6,511,549 $6,772,011__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Operating Expenses $21,699,149 $23,868,782 $23,163,371 $24,313,376 $25,480,728 $26,608,033 $27,759,486 $28,971,073 $30,198,285 $31,510,885 % Change from Previous Year 5.6% 10.0% ‐3.0% 5.0% 4.8% 4.4% 4.3% 4.4% 4.2% 4.3% City Council Regular Meeting - Page 304 of 1385
Draft FPUD Rate Study
Water Enterprise
Revenues and Expenses
Escalation Factors 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 Salaries 7.0% 8.0% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Benefits 6.5% 7.0% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% CPI 5.0% 5.0% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR 5.5% 6.7% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR + 3% 8.5% 9.7% 7.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Property Tax 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Rent ‐ 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Interest 0.6% 1.0% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Growth 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% Existing Debt Category 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Red Mountain SRF Water  System $395,851 $395,851 $395,851 $395,851 $395,851 $395,851 $395,851 $395,851 $395,851 $0 SMCUP SRF Supply  Reliability $1,081,968 $2,507,793 $2,507,793 $2,507,793 $2, 507,793 $2,507,793 $2,507,793 $2, 507,793 $2,507,793 $2,507,793__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Existing Debt $1,477,819 $2,903,644 $2,903,644 $2,903,644 $2,903,644 $2,903,644 $2,903,644 $2,903,644 $2,903,644 $2,507,793 % Change from Previous Year 7.9% 96.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% ‐13.6% Capital Category 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Inflated Capital
Equipment Water  System $0 $828,300 $532,956 $440,325 $569, 204 $288,069 $306,183 $325,436 $345,899 $367,650 Reservoirs   Water System $0 $549,685 $910,063 $776,693 $815, 839 $593,278 $630,583 $670,234 $712,379 $757,173 10+YR Pipeline Pipeline  Maint. & Const. $6,243,350 $3,847,257 $4,191,978 $4,863,295 $4,480, 837 $5,365,869 $5,703,275 $6, 061,897 $6,443,069 $6,848,209 District Yard‐Facilities Water  System $0 $53,891 $341,274 $0 $62,757 $0 $0 $72,146 $76,682 $81,504 Deluz District Pipeline Ext  Pipeline Maint. & Const. $0 $107,781 $113,758 $119,491 $125, 514 $131,840 $140,130 $148,941 $158,306 $168,261 Pressure Station Maint  Water System $0 $118,560 $22,752 $0 $0 $0 $0 $0 $0 $0 Santa Margarita Conjunctive Use  SMCUP  $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Santa Margarita Water Rights SMCUP   $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Pump Stations   Water System $0 $183,228 $56,879 $59,746 $62, 757 $65,920 $70,065 $571,979 $607,945 $646,173 Water Supply Facilities Water  System $0 $53,891 $56,879 $59,746 $62, 757 $131,840 $140,130 $148,941 $158,306 $168,261 Meter Service Replacement Pgm System  Services $0 $21,556 $22,752 $23,898 $25, 103 $26,368 $28,026 $29,788 $31,661 $33,652 Facility Upgrade‐Security  Water System $0 $91,614 $119,446 $125,466 $106, 687 $138,432 $147,136 $156,388 $166,222 $176,674 SMCUP R&R Supply  Reliability $0 $215,563 $227,516 $238,983 $251,027 $263,679 $280,259 $297,882 $316,613 $336,521 Administrative Upgrades Water  System $105,000 $458,071 $28,439 $29,873 $31, 378 $32,960 $35,032 $37,235 $39,577 $42,065 Engineering and Operations Information System Water System $30,000 $32,334 $34,127 $35,847 $37, 654 $39,552 $42,039 $44,682 $47,492 $50,478 Facility Improvements/Upgrades/Security Water  System $410,000 $350,290 $73,943 $77,669 $282, 406 $85,696 $91,084 $96,812 $102,899 $109,369 Enhanced Pipeline Replacement Pipeline  Maint. & Const. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Inflated Capital $6,788,350 $6,912,022 $6,732,761 $6,851,033 $6,913,919 $7,163,501 $7,613,942 $8,662,362 $9,207,051 $9,785,990 % Change from Previous Year 1.8% ‐2.6% 1.8% 0.9% 3.6% 6.3% 13.8% 6.3% 6.3% City Council Regular Meeting - Page 305 of 1385
Draft FPUD Rate Study
Wastewater Enterprise
Revenues and Expenses
Escalation Factors 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 Salaries 7.0% 8.0% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Benefits 6.5% 7.0% 5.5% 5.0% 5.0% 3.5% 3.5% 3.5% 3.5% 3.5% C P I 5 . 0 %5 . 0 %4 . 5 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 % E N R 5 . 5 %6 . 7 %4 . 5 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 % ENR + 3% 8.5% 9.7% 7.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Property T a x 1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 % Rent ‐ 2.0% 2.0% 2.0% 2.0% 2.0% 2. 0% 2.0% 2.0% 2.0% 2.0% 2.0% Interest 0.6% 1.0% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Growth 0.15% 0.15% 0.15% 0.1 5% 0.2% 0.2% 0.2% 0.2% 0.2% Revenue Allocation Escalation 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Operating Rev
WW Service Charges Growth $6,593,721 $6,933,792 $7,291,402 $7,667,456 $8,062,905 $8,396,030 $8,575,554 $8,674,301 $8,774,186 $8,875,221 Class A Biosolids Sales Non ‐inflated
Sundry As  All Other Non ‐inflated $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 Non‐Operating Rev
Wastewater Capital Improvement Charge Capital ENR $1,248,757 $1,332,602 $1,392,569 $1,448,272 $1,506,203 $1,566,451 $1,629,109 $1,694,274 $1,762,045 $1,832,526 WW Capacity fees Capital Growth $40,371 $40,431 $40,492 $40,553 $40,613 $40,674 $40,735 $40,796 $40,858 $40,919 1% property tax ‐ IDS As  All Other Property  Tax $1,085,974 $1,096,833 $1,107,802 $1,118,880 $1,130,068 $1,141,369 $1,152,783 $1,164,311 $1,175,954 $1,187,713 CSI rebate  Non‐inflated $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
WW SDGE offset Non ‐inflated $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Federal Interest Rate Subsidy Capital Non ‐inflated $84,516 $70,261 $55,178 $39,233 $22,388 $4,606 $0 $0 $0 $0 Other Non‐Op Revenue Non ‐inflated $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Interest Administration Interest $10,954 $11,064 $11,230 $11,398 $11,569 $11,743 $11,919 $12,097 $12,279 $12,463 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Revenue $9,065,292 $9,485,983 $9,899,673 $10,326,791 $10,774,747 $11,161,873 $11,411,100 $11,586,780 $11,766,321 $11,949,842 % Change from Previous Year 4.5% 4.6% 4.4% 4.3% 4. 3% 3.6% 2.2% 1.5% 1.5% 1.6% City Council Regular Meeting - Page 306 of 1385
Draft FPUD Rate Study
Wastewater Enterprise
Revenues and Expenses
Escalation Factors 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 Salaries 7.0% 8.0% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Benefits 6.5% 7.0% 5.5% 5.0% 5.0% 3.5% 3.5% 3.5% 3.5% 3.5% C P I 5 . 0 %5 . 0 %4 . 5 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 % E N R 5 . 5 %6 . 7 %4 . 5 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 % ENR + 3% 8.5% 9.7% 7.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Property T a x 1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 % Rent ‐ 2.0% 2.0% 2.0% 2.0% 2.0% 2. 0% 2.0% 2.0% 2.0% 2.0% 2.0% Interest 0.6% 1.0% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Growth 0.15% 0.15% 0.15% 0.1 5% 0.2% 0.2% 0.2% 0.2% 0.2% Revenue Allocation Escalation 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Expenses1
Allocation Escalation 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Collection/Flows
Salaries Collection/Flow Sal aries $479,842 $5 18,229 $551,914 $579,510 $608, 485 $638,909 $670,855 $704, 397 $739,617 $776,598 Contractor Services Collection/Flow CPI $75,000 $78,750 $82,294 $85,586 $89, 009 $92,569 $96,272 $100, 123 $104,128 $108,293 Equipment (Non Capital) Collection/Flow CPI $5,000 $5,250 $5,486 $5,706 $5,934 $6,171 $6,418 $6,675 $6,942 $7,220 Materials/Services/Supplies Collection/Flo w CPI $170,000 $178,500 $186,533 $193, 994 $201,754 $209,824 $218, 217 $226,945 $236,023 $245,464 Professional Services Collection/Flow CPI $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Memberships/Training/Permits Collection/Flow CPI $900 $945 $988 $1,027 $1,068 $1,11 1 $1,155 $1,201 $1,250 $1,300 Utilities Collection/Flow Electr icity $122,300 $128,415 $134,836 $14 1,578 $148,656 $156,089 $1 63,894 $172,088 $180, 693 $189,727 Treatment
Salaries Treatment Salaries $843,479 $910,958 $970,170 $1,018,678 $1,069,612 $1,123,093 $1,179,248 $1,238,210 $1,300,121 $1,365,127 Contractor Services Treatment CPI $353,000 $370,650 $387,329 $402,822 $418,935 $435,693 $453,120 $471,245 $490,095 $509,699 Equipment (Non Capital) Treatment CPI $7,000 $7,350 $7,681 $7,988 $8,307 $8,640 $8,985 $9,345 $9,719 $10,107 Materials/Services/Supplies Treatment C PI $297,500 $312,375 $326,432 $339,489 $353,069 $367,191 $3 81,879 $397,154 $413, 040 $429,562 Professional Services Treatment CPI $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Memberships/Training/Permits Treatment CPI $95,000 $99,750 $104,239 $108,408 $112,745 $117,254 $121,945 $126,822 $131,895 $137,171 Utilities Treatment Electricity $157,600 $165,480 $173,754 $182,442 $19 1,564 $201,142 $211,199 $221,759 $232,847 $244,489 Allocated Admin Expenses
Allocated Benefits Expenditures As  All Other Benefits $903,448 $966,689 $1,019,857 $1,070,850 $1,124,393 $1,163,747 $1,204,478 $1,246,634 $1,290,267 $1,335,426 Allocated Admin Expenditures Administration CPI $2,564,878 $2,693,122 $2,814,313 $2,926,885 $3,043,960 $3,165,719 $3,292,348 $3,424,041 $3,561,003 $3,703,4 43__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Operating Expenses $6,074,947 $6,436,463 $6,765,824 $7,064,962 $7,377,491 $7,687,152 $8,010,012 $8,346,642 $8,697,639 $9,063,626 % Change from Previous Year 6.9% 6.0% 5.1% 4.4% 4. 4% 4.2% 4.2% 4.2% 4.2% 4.2% City Council Regular Meeting - Page 307 of 1385
Draft FPUD Rate Study
Wastewater Enterprise
Revenues and Expenses
Escalation Factors 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 Salaries 7.0% 8.0% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Benefits 6.5% 7.0% 5.5% 5.0% 5.0% 3.5% 3.5% 3.5% 3.5% 3.5% C P I 5 . 0 %5 . 0 %4 . 5 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 % E N R 5 . 5 %6 . 7 %4 . 5 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 %4 . 0 % ENR + 3% 8.5% 9.7% 7.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Property T a x 1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 %1 . 0 % Rent ‐ 2.0% 2.0% 2.0% 2.0% 2.0% 2. 0% 2.0% 2.0% 2.0% 2.0% 2.0% Interest 0.6% 1.0% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Growth 0.15% 0.15% 0.15% 0.1 5% 0.2% 0.2% 0.2% 0.2% 0.2% Revenue Allocation Escalation 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Existing Debt Allocation Escalation 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Solar QECB  Collection/Flow Non ‐inflated $521,667 $521,690 $521,362 $520,665 $519,579 $261,515 $0 $0 $0 $0 WWTP SRF Treatment Non ‐inflated $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 WW Revenue Refunding Bonds Treatment Non ‐inflated $1,211,715 $1,211,522 $1,213,502 $1,210,954 $1,212,190 $1,209,880 $1,209,740 $1,211,630 $1,211,980 $1,210,790__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Existing Debt $1,733,383 $1,733,212 $1,734,864 $1,731,618 $1,731,769 $1,471,395 $1,209,740 $1,211,630 $1,211,980 $1,210,790 % Change from Previous Year 0.1% 0.0% 0.1% ‐0.2% 0.0% ‐15.0% ‐17.8% 0.2% 0.0% ‐0.1% Capital Allocation Escalation 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Inflated Capital
Collection/Flow System Improvements Collection/Flow ENR $540, 000 $395,558 $329,898 $346,525 $32 6,335 $342,783 $364,337 $387,246 $411,597 $437,478 WRP Improvements Treatment ENR $281,000 $215,563 $227,516 $477,965 $815,839 $725,117 $266,657 $277,323 $288,416 $299,953 Outfall Improvements Collection/Flow ENR $50, 000 $53,891 $56,879 $298,728 $13 8,065 $145,023 $146,661 $152,528 $158,629 $164,974 Lift Station Improvements Collection/Flow ENR $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Inflated Capital $871,000 $665,011 $614,293 $1,123,218 $1,280,239 $1,212,924 $777,655 $817,098 $858,642 $902,405 % Change from Previous Year ‐10.2% ‐23.6% ‐7.6% 82.8% 14.0% ‐5.3% ‐35.9% 5.1% 5.1% 5.1% City Council Regular Meeting - Page 308 of 1385
Draft FPUD Rate Study
Recycled Water Enterprise
Revenues and Expenses
Escalation Factors 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 Salaries 7.0% 8.0% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Benefits 6.5% 7.0% 5.5% 5.0% 5.0% 3.5% 3.5% 3.5% 3.5% 3.5% CPI 5.0% 5.0% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR 5.5% 6.7% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR + 3% 8.5% 9.7% 7.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Property Tax 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Rent ‐ 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Interest 0.6% 1.0% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Growth 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% Revenue Escalation 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Operating Rev
RW Rate Revenue $1,237,981 $1,270,834 $1,304, 559 $1,339,179 $1,374,717 $1,414,683 $1, 459,309 $1,505,343 $1,552,829 $1,586,032 MWD/CWA Incentive Calculated $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Sundry Non‐inflated $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 Non‐Operating Rev
1% Property tax Property  Tax $54,030 $54,300 $54,572 $54,844 $55, 393 $55,947 $56,506 $57,071 $57,642 $58,218 Interest Interest $2,304 $4,380 $7,193 $7,733 $9,152 $10,657 $12,276 $14,029 $15,940 $17,979__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Revenue $1,299,315 $1,334,514 $1,371,324 $1,406,756 $1,444,262 $1,486,287 $1,533,092 $1,581,443 $1,631,412 $1,667,230 % Change from Previous Year 9.1% 2.7% 2.8% 2.6% 2.7% 2.9% 3.1% 3.2% 3.2% 2.2% City Council Regular Meeting - Page 309 of 1385
Draft FPUD Rate Study
Recycled Water Enterprise
Revenues and Expenses
Escalation Factors 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 Salaries 7.0% 8.0% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Benefits 6.5% 7.0% 5.5% 5.0% 5.0% 3.5% 3.5% 3.5% 3.5% 3.5% CPI 5.0% 5.0% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR 5.5% 6.7% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR + 3% 8.5% 9.7% 7.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Property Tax 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Rent ‐ 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Interest 0.6% 1.0% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Growth 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% Expenses Escalation 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Production
Salaries Salaries $181,861 $196,410 $209,176 $219,635 $230,617 $242,148 $254,255 $266,968 $280,316 $294,332 Contractor Services CPI $36,000 $37,800 $39,501 $41, 081 $42,724 $44,433 $46,211 $48,059 $49,981 $51,981 Equipment (Non Capital) CPI $4,000 $4,200 $4,389 $4, 565 $4,747 $4,937 $5,135 $5,340 $5,553 $5,776 Materials/Services/Supplies CPI $89,500 $93, 975 $98,204 $102,132 $106,217 $110,466 $114,885 $119,480 $124,259 $129,230 Utilities CPI $68,000 $71,400 $74,613 $77,598 $80,701 $83,929 $87,287 $90,778 $94,409 $98,186 Distribution
Salaries Salaries $10,438 $11,273 $12,006 $12,606 $13,237 $13,898 $14,593 $15,323 $16,089 $16,894 Contractor Services Calculated
Equipment (Non Capital) Calculated
Materials/Services/Supplies CPI $25,000 $26, 250 $27,431 $28,529 $29,670 $30,856 $32,091 $33,374 $34,709 $36,098 Allocated Admin Expenses
Benefits Expenditures Benefits $123,921 $132,595 $139, 888 $146,882 $154,226 $159,624 $165,211 $170,993 $176,978 $183,172 Administrative Services CPI $73,282 $76,946 $80,409 $83, 625 $86,970 $90,449 $94,067 $97,830 $101,743 $105,813__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Operating Expenses $612,002 $650,849 $685,617 $716,652 $749,110 $780,741 $813,733 $848,145 $884,039 $921,480 % Change from Previous Year 25.5% 6.3% 5.3% 4.5% 4.5% 4.2% 4.2% 4.2% 4.2% 4.2% City Council Regular Meeting - Page 310 of 1385
Draft FPUD Rate Study
Recycled Water Enterprise
Revenues and Expenses
Escalation Factors 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 Salaries 7.0% 8.0% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Benefits 6.5% 7.0% 5.5% 5.0% 5.0% 3.5% 3.5% 3.5% 3.5% 3.5% CPI 5.0% 5.0% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR 5.5% 6.7% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
ENR + 3% 8.5% 9.7% 7.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Property Tax 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Rent ‐ 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Interest 0.6% 1.0% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Growth 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% Existing Debt Escalation 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected WW Revenue Refunding Bonds Non ‐inflated $519,307 $519,224 $520,072 $518,980 $519,510 $518,520 $518,460 $519,270 $519,420 $518,910__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Existing Debt $519,307 $519,224 $520,072 $518,980 $519,510 $518,520 $518,460 $519,270 $519,420 $518,910 % Change from Previous Year 0.1% 0.0% 0.2% ‐0.2% 0.1% ‐0.2% 0.0% 0.2% 0.0% ‐0.1% Capital Escalation 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 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Non‐Inflated Capital Inputs
Recycled Water Improvements $114,000 $115,140 $116,291 $65,939 $62,43 6 $63,061 $64,448 $63,810 $65,214 $66,648__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Non‐Inflated Capital $114,000 $115,140 $116,291 $65,939 $62,436 $63,061 $64,448 $63,810 $65,214 $66,648 % Change from Previous Year ‐65.2% 1.0% 1.0% ‐43.3% ‐5.3% 1.0% 2.2% ‐1.0% 2.2% 2.2% Total Inflated Capital ENR $114,000 $122,871 $129,684 $76,474 $75,308 $79,104 $84,078 $86,575 $92,019 $97,805 % Change from Previous Year ‐65.2% 7.8% 5.5% ‐41.0% ‐1.5% 5.0% 6.3% 3.0% 6.3% 6.3% City Council Regular Meeting - Page 311 of 1385
Draft FPUD Rate Study
Water Enterprise
Allocation Calculations
Customer Service and Billing Portion of Administrative
Expenses FY  22/23 Budget
Billing and CS
Allocation Billing  and CS Amount
Finance & Customer Service (CS)
Salaries 856,036 $                    50% 428,018$
Contractor Services 24,000                          90% 21,600 Equipment (Non Capital) 4,500                            90% 4,050 Materials/Services/Supplies 145,200                       95% 137,940 Professional Services 181,500                       20% 36,300 Memberships/Training/Permits 2,700                            ‐ Utilities ‐                                   ‐
Division Operating Total 1,213,936 $                 627,908$ Information Management 457,018$                    50% 228,509$ Billing and CS Total 1,670,954$                 856,417$ Administrative Services Operating Total 5,513,151$
Billing and CS Portion of Administrative Services 15.53% System Services  Portion of Administrative Services FY  22/23 Budget Portion of Operating
Costs
Portion of
Administrative
Services Less Billing
and CS
Administrative Services Less Billing and CS 84.47%
Operating Total $18,402,933 100.00% 84.47%
System Services $858,162 4.66% 3.94%
City Council Regular Meeting - Page 312 of 1385
Draft FPUD Rate Study
Water Enterprise
Allocation Calculations
Benefits Allocation Salaries Salary  %
Treatment $237,424 6.70%
Production & Distribution $651,941 18.39%
Pipeline Maintenance & Construction $439,956 12.41%
System Services $479,262 13.52%
Allocated Admin Expenses $1,736,326 48.98%
Total  $3,544,910 100.00%
Allocation Amounts Private  Fire Capacity Customer Water  Meter Service Water
Capacity All  Volume SMCUP Red  Mountain Conservation
SMCUP  0.0% 0.0% 0.0% 0.0% 0.0% 89.1% 10.9% 0.0%
Production & Distribution 0.07% 0.00% 0.00% 0.00% 94.93% 0.00% 5.00% 0.00% Pipeline Maintenance & Construction 0.07% 0.00% 0.00% 50.00% 49.93% 0.00% 0.00% 0.00% System Services 0.00% 0.00% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% Administration 0.07% 15.53% 3.94% 60.00% 18.46% 0.00% 0.00% 2.00% Salary Allocation $2,062 $269,651 $547,656 $1,261,774 $1,159,020 $211,460 $58,561 $34,727 Allocation Amounts 0.1% 7.6% 15.4% 35.6% 32.7% 6.0% 1.7% 1.0% Conservation  Portion of Administrative Services FY  22/23 Budget Conservation Conservation $$ %
1% Customer Service Salaries $2,584
40% Public Affairs Salary $44,237
Additional comm. Outreach $25,000
WaterSmart Software $22,000
Water Allocation of Administrative Services $4,690,063 $93,822 2.0% City Council Regular Meeting - Page 313 of 1385
Draft FPUD Rate Study
Water Enterprise
Allocation Calculations
Production & Distribution Allocation to Red Mountain  FY 22/23 Budget Red Mountain
Reservoir, Well, and
UV Portion
Red Mountain
Reservoir, Well, and
UV Portion
$% $
Salaries $651,941 5% $32,597
Contractor Services $101,000 45% $45,450
Equipment (Non Capital) $20,000 0% $0
Materials/Services/Supplies $224,000 18% $40,320
Professional Services $0 0% $0
Memberships/Training/Permits $80,000 63% $50,000
Utilities $90,000 55% $49,500
Total $1,166,941 $217,867
Production & Distribution Allocation to Red Mountain % 18.670% Pumping Charge Revenue Allocation
Pumping Charge
Revenue
FY 22/23 Pumping Charge Revenue $155,278
Pumping Charge Rate Increases 1.37
FY 26/27 Pumping Charge Revenue $212,744
City Council Regular Meeting - Page 314 of 1385
Draft FPUD Rate Study
Water Enterprise
Water Supplies and Variable Cost
Escalation Factors 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 MWD RTS Charge 3.8% 14.9% 13.1% 0.0% 0.0% 1.4% 6.4% 9.4% 7.9% 9.8% SDCWA IAC 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% MWD Capacity Charge 1.8% ‐1.5% 12.8% 12.2% 8.5% 11.3% 16.2% 12.3% 6.5% 5.7% Supply Reliability Charge 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Customer Service Charge 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Storage Charge 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Melded Treated Rate 9.5% 5.5% 5.5% 5.4% 3.9% 3.0% 3.0% 2.6% 2.8% 3.5% Special Ag Treated Rate (SAWR) 9.5% 5.5% 5.5% 5.4% 3.9% 3.0% 3.0% 2.6% 2.8% 3.5% SMCUP Water Variable 4.0% 5.0% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Growth 0.5% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% Water Volume Projections
(Acre Feet) Escalation 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 Water Supply Inputs Have Gray Fill Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Total Water Supply Volume Growth 8,000 8,012 8,024 8,036 8,048 8,060 8,072 8,084 8,097 8,109 FPUD Water Production
Red Mountain Well 85 85 85 85 85 85 85 85 85 85
SMCUP Water 1,300 1,300 3,100 3,100 3,100 3,100 3,100 3,100 3,100 3,100 Purchased Water Supply
MWD/CWA Water 6,615 6,627 4,839 4,851 4,863 4,875 4,887 4,899 4,912 4,924 Special Ag Treated Rate (SAWR) 1,474 1,474 1,474 1,474 1,474 1,474 1,474 1,474 1,474 1,474 Jul ‐ Dec 71% 1,052 1,052 1,052 1,052 1,052 1,052 1,052 1,052 1,052 1,052 Jan ‐ Jun 29% 422 422 422 422 422 422 422 422 422 422
Melded Treated Rate 5,141 5,153 3,365 3,377 3,389 3,401 3,413 3,425 3,437 3,449 Jul ‐ Dec 73% 3,737 3,745 2,446 2,454 2,463 2,472 2,481 2,490 2,498 2,507 Jan ‐ Jun 27% 1,404 1,407 919 922 926 929 932 935 939 942 City Council Regular Meeting - Page 315 of 1385
Draft FPUD Rate Study
Water Enterprise
Water Supplies and Variable Cost
Escalation Factors 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 MWD RTS Charge 3.8% 14.9% 13.1% 0.0% 0.0% 1.4% 6.4% 9.4% 7.9% 9.8% SDCWA IAC 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% MWD Capacity Charge 1.8% ‐1.5% 12.8% 12.2% 8.5% 11.3% 16.2% 12.3% 6.5% 5.7% Supply Reliability Charge 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Customer Service Charge 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Storage Charge 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Melded Treated Rate 9.5% 5.5% 5.5% 5.4% 3.9% 3.0% 3.0% 2.6% 2.8% 3.5% Special Ag Treated Rate (SAWR) 9.5% 5.5% 5.5% 5.4% 3.9% 3.0% 3.0% 2.6% 2.8% 3.5% SMCUP Water Variable 4.0% 5.0% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Growth 0.5% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% Water Supply Cost Projections Escalation 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 Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected SMCUP Camp Pendleton Charges
FPUD Variable O&M and CPEN OP& $/AF SMCUP  Water Variable $248 $260 $272 $282 $294 $306 $318 $330 $344 $357 R&R paid by FPUD $/AF SMCUP  Water Variable $138 $145 $152 $158 $164 $171 $178 $185 $192 $200 Total SMCUP Camp Pendleton Charges $501,592 $526,672 $1,312,425 $1,364,922 $1,419,519 $1,476,300 $1,535,352 $1,596,766 $1,660,636 $1,727,062 MWD Fixed Costs
MWD RTS Charge
Jul ‐ Dec $  / month MWD  RTS Charge $22,038 $25,319 $28,637 $28,637 $28,637 $29,028 $30,892 $33,796 $36,467 $40,033 Jan ‐ Jun $  / month MWD  RTS Charge $22,038 $25,319 $28,637 $28,637 $28,637 $29,028 $30,892 $33,796 $36,467 $40,033 Total MWD RTS Charge $  / year $264,456 $303,831 $343,644 $343,644 $343,644 $348,338 $370,699 $405,549 $437,601 $480,396 MWD Capacity Charge
Jul ‐ Dec $  / month MWD  Capacity Charge $22,647 $16,858 $16,609 $18,734 $21,013 $22,792 $25,367 $29,480 $33,121 $35,275 Jan ‐ Jun $  / month MWD  Capacity Charge $16,858 $16,609 $18,734 $21,013 $22,792 $25,367 $29,480 $33,121 $35,275 $37,299 Total MWD Capacity Charge $  / year $237,030 $200,804 $212,061 $238,483 $262,829 $288,951 $329,080 $375,605 $410,372 $435,439 SDCWA Fixed Costs
SDCWA IAC
Jul ‐ Dec $  / month SDCWA  IAC $50,401 $50,227 $53,743 $57,505 $61,530 $65,837 $70,446 $75,377 $80,654 $86,299 Jan ‐ Jun $  / month SDCWA  IAC $50,227 $53,743 $57,505 $61,530 $65,837 $70,446 $75,377 $80,654 $86,299 $92,340 Total SDCWA IAC $  / year $603,768 $623,819 $667,487 $714,211 $764,206 $817,700 $874,939 $936,185 $1,001,718 $1,071,838 Supply Reliability Charge
Jul ‐ Dec $  / month Supply  Reliability Charge $55,104 $58,928 $63,053 $67,467 $72,189 $77,243 $82,650 $88,435 $94,625 $101,249 Jan ‐ Jun $  / month Supply  Reliability Charge $58,928 $63,053 $67,467 $72,189 $77,243 $82,650 $88,435 $94,625 $101,249 $108,337 Total Supply Reliability Charge $  / year $684,192 $731,886 $783,118 $837,936 $896,592 $959,353 $1,026,508 $1,098,363 $1,175,249 $1,257,516 Customer Service Charge
Jul ‐ Dec $  / month Customer  Service Charge $46,806 $45,834 $48,126 $50,532 $53,059 $55,712 $58,497 $61,422 $64,493 $67,718 Jan ‐ Jun $  / month Customer  Service Charge $45,834 $48,126 $50,532 $53,059 $55,712 $58,497 $61,422 $64,493 $67,718 $71,104 Total Customer Service Charge $  / year $555,840 $563,758 $591,946 $621,543 $652,621 $685,252 $719,514 $755,490 $793,264 $832,928 Storage Charge
Jul ‐ Dec $  / month Storage  Charge $87,714 $87,034 $91,386 $95,955 $100,753 $105,790 $111,080 $116,634 $122,466 $128,589 Jan ‐ Jun $  / month Storage  Charge $87,034 $91,386 $95,955 $100,753 $105,790 $111,080 $116,634 $122,466 $128,589 $135,018 Total Storage Charge $  / year $1,048,488 $1,070,518 $1,124,044 $1,180,246 $1,239, 259 $1,301,222 $1,366,283 $1,434,597 $1,506,327 $1,581,643 City Council Regular Meeting - Page 316 of 1385
Draft FPUD Rate Study
Water Enterprise
Water Supplies and Variable Cost
Escalation Factors 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 MWD RTS Charge 3.8% 14.9% 13.1% 0.0% 0.0% 1.4% 6.4% 9.4% 7.9% 9.8% SDCWA IAC 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% MWD Capacity Charge 1.8% ‐1.5% 12.8% 12.2% 8.5% 11.3% 16.2% 12.3% 6.5% 5.7% Supply Reliability Charge 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Customer Service Charge 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Storage Charge 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Melded Treated Rate 9.5% 5.5% 5.5% 5.4% 3.9% 3.0% 3.0% 2.6% 2.8% 3.5% Special Ag Treated Rate (SAWR) 9.5% 5.5% 5.5% 5.4% 3.9% 3.0% 3.0% 2.6% 2.8% 3.5% SMCUP Water Variable 4.0% 5.0% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Growth 0.5% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% SDCWA Variable Costs
Special Ag Treated Rate (SAWR)
Jul ‐ Dec $/AF Special  Ag Treated Rate (SAWR) $1,109 $1,205 $1,271 $1,341 $1,413 $1,469 $1,512 $1,558 $1,598 $1,643 Jan ‐ Jun $/AF Special  Ag Treated Rate (SAWR) $1,205 $1,271 $1,341 $1,413 $1,469 $1,512 $1,558 $1,598 $1,643 $1,701 Total Special Ag Treated Rate (SAWR $ / year $1,675,702 $1,804,625 $1,903,792 $2,007,981 $2,107, 392 $2,184,372 $2,249,122 $2,313,843 $2,375,326 $2,447,289 Melded Treated Rate
Jul ‐ Dec $/AF Melded  Treated Rate $1,319 $1,440 $1,519 $1,603 $1,689 $1,756 $1,807 $1,862 $1,910 $1,964 Jan ‐ Jun $/AF Melded  Treated Rate $1,440 $1,519 $1,603 $1,689 $1,756 $1,807 $1,862 $1,910 $1,964 $2,033 Total Melded Treated Rate $  / year $6,950,291 $7,530,897 $5,187,830 $5,491,416 $5,784, 941 $6,018,407 $6,218,800 $6,420,798 $6,614,543 $6,838,376 City Council Regular Meeting - Page 317 of 1385
Draft FPUD Rate Study
Water Enterprise
Water Supplies and Variable Cost
Escalation Factors 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 MWD RTS Charge 3.8% 14.9% 13.1% 0.0% 0.0% 1.4% 6.4% 9.4% 7.9% 9.8% SDCWA IAC 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% MWD Capacity Charge 1.8% ‐1.5% 12.8% 12.2% 8.5% 11.3% 16.2% 12.3% 6.5% 5.7% Supply Reliability Charge 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Customer Service Charge 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Storage Charge 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Melded Treated Rate 9.5% 5.5% 5.5% 5.4% 3.9% 3.0% 3.0% 2.6% 2.8% 3.5% Special Ag Treated Rate (SAWR) 9.5% 5.5% 5.5% 5.4% 3.9% 3.0% 3.0% 2.6% 2.8% 3.5% SMCUP Water Variable 4.0% 5.0% 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Growth 0.5% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% Projected Water Purchase Cost
Summary 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 SMCUP Camp Pendleton Charges $501,592 $526,672 $1,312,425 $1,364,922 $1,419,519 $1,476,300 $1,535,352 $1,596,766 $1,660,636 $1,727,062 MWD Charges
MWD RTS Charge $264,456 $303,831 $343,644 $343,644 $343,644 $348,338 $370,699 $405,549 $437,601 $480,396 MWD Capacity Charge $237,030 $200,804 $212,061 $238,483 $262,829 $288,951 $329,080 $375,605 $410,372 $435,439 SDCWA Charges
Melded Treated Rate $6,950,291 $7,530,897 $5,187,830 $5,491,416 $5,784,941 $6,018,407 $6,218,800 $6,420,798 $6,614,543 $6,838,376 SDCWA IAC $603,768 $623,819 $667,487 $714,211 $764,206 $817,700 $874,939 $936,185 $1,001,718 $1,071,838 Supply Reliability Charge $684,192 $731,886 $783,118 $837,936 $896,592 $959,353 $1,026,508 $1,098,363 $1,175,249 $1,257,516 Customer Service Charge $555,840 $563,758 $591,946 $621,543 $652,621 $685,252 $719,514 $755,490 $793,264 $832,928 Storage Charge $1,048,488 $1,070,518 $1,124,044 $1,180,246 $1,239, 259 $1,301,222 $1,366,283 $1,434,597 $1,506,327 $1,581,643 Special Ag Treated Rate (SAWR) $1,675,702 $1,804,625 $1,903,792 $2,007,981 $2,107,392 $2,184,372 $2,249,122 $2,313,843 $2,375,326 $2,447,289 Water Purchase Costs $12,521,359 $13,356,811 $12,126,347 $12,800,383 $13,471,002 $14,079,894 $14,690,296 $15,337,194 $15,975,035 $16,672,486 City Council Regular Meeting - Page 318 of 1385
Appendix B
Fallbrook PUD Water, Wastewater & Recycled Water Rate Study APPENDIX B
Notice of Public Hearing on Proposed Water, Wastewater
and Recycled Water Rate Increases

City Council Regular Meeting - Page 319 of 1385

Notice of Public Hearing on Proposed Water, Wastewater
& Recycled Water Rate Increases

Dear Property Owner or Customer of Record,

The Fallbrook Public  Utility District (FPUD) is proposing to gradually phase in water, wastewater, and recycled water rate increases over the next five years to support operating and maintenance needs and provide adequate funding for capital improvements that will support safe  and  reliable  service.  The  rates  shown  in  this  notice  are  the proposed maximum rates to be authorized. Each year, as it has in the past,  FPUD  will  review  the  District’s  current  financial  position  to determine the necessary rate increase.

FPUD’s  utilities  are  self‐supporting  and  rely  on  service  charge revenues to meet annual funding needs. As such, water, wastewater and recycled  water rates  need to be set at levels adequate  to fund each utility’s costs of providing service. The proposed rate increases are  phased  in  over  the  next  five  years,  with  the  first  rate  increases scheduled  to  become  effective  for  service  provided  on  and  after January 1, 2023. The proposed rates are based on a recently updated Water, Wastewater and Recycled Water Rate Study, developed by an independent utility rate consultant, and reflect substantial input from District staff and the District’s Fiscal Policy & Insurance Committee.

Members of the public are currently invited to attend the Public Hearing virtually or in person. If FPUD determines to hold the Public Hearing only virtually due to a state of emergency or public health concern pursuant to AB 361 or other applicable law, information will be posted on our website as soon as possible and included in the meeting agenda.

Over the past decade, FPUD has had substantial increases in  the cost  of  wholesale  water  supply  imported  from  the  San  Diego County Water Authority (SDCWA). In an effort to keep water rates as  low  as  possible,  FPUD  has  engaged  in  major  efforts  to  secure lower‐cost  water  supplies  for  our  customers.  Recent accomplishments include:
 Local  water  is  now  flowing  from  Fallbrook  taps!  After  seven decades of legal and bureaucratic hurdles, the Santa Margarita River  Conjunctive  Use  Project  (SMRCUP)  is  now  complete.  It provides FPUD with its own local water supply, reducing reliance on  imported  water,  and  improving  water  reliability.  We obtained  a  low‐interest  rate  loan  from  California’s  State Revolving  Fund  to  help  finance  the  project.  It  provides  a significant  portion  of  our  water  and  reduces  our  need  to  buy expensive imported water that increases in cost every year.  Expanded  our  recycled  water  distribution  system  to  increase our capacity to deliver highly treated recycled water produced at our Water Reclamation Plant for landscaping and irrigation.  FPUD is also engaged in  efforts to detach from  the  San Diego County  Water  Authority  to  buy  lower‐cost  water  and  save customers money (see next page).

JOIN US IN PERSON
Fallbrook Public Utility District
990 E. Mission Rd., Fallbrook, CA

JOIN US VIA ZOOM
https://bit.ly/3qEI80e

JOIN US VIA PHONE
Dial: (669) 444‐9171
Meeting ID:  826 6289 5501
Passcode:   720961

Date: November 16, 2022
Time: 9:00 am
Our state‐of‐the‐art treatment plant has been up and
running since November 2021.

Moving Forward to Secure Low‐Cost Water Supplies
City Council Regular Meeting - Page 320 of 1385

We’re working to save millions of dollars by switching water wholesalers

We’re  working  with  Rainbow  Municipal  Water
District to detach from the San Diego County Water
Authority and instead buy imported water at a lower
cost  from  Eastern  Municipal  Water  District.  The
savings to FPUD are currently estimated at $3 million
per year.

We’ve  held  three  town  hall  meetings  on  how  the
process  works,  drawing  large  crowds  of  more  than 130 people at each event. Our detachment must first
be  approved  by  the  Local  Agency  Formation
Commission,  or  LAFCO.  LAFCO  is  reviewing  our
applications to detach and will likely make a decision
later this year. If our application is approved, FPUD
voters would have the final say in a future election
held in the District’s service area.

Proactively replacing aging pipelines to prevent
breaks and reduce costly emergency repairs
FPUD has over 350 miles of water and sewer pipelines. Some of our buried pipelines are over 80 years old. When the pipes become weak, damaged or are simply old, they are in danger of  breaking  and  resulting  in  water  leaks  that  can  cause property  damage  and  are  expensive  to  fix.  Our  staff  is strategically identifying  pipelines  most in  need of repair or replacement  and  performing  scheduled  shutdowns  on  the pipes that need it most.

Community Input & Written Protest Procedures
Customers, property owners, and community members are invited to attend the Public Hearing to provide input.

Customers and property owners may also submit written protests against the proposed rate increases. Pursuant to California law, protests must be submitted in writing and must a) identify the affected property or properties, such as by service address or Assessor’s Parcel Number, b) include the name and original signature of the customer or property  owner  submitting  the  protest,  and  c)  indicate  opposition  to  the  proposed  water,  wastewater  and/or recycled  water  rate  increases.  Protests  or  comments  submitted  by  e‐mail,  fax  or  other  electronic  means  are  not counted as written protests. The proposed rates cannot be adopted if written protests are received from a majority (more than 50%) of affected parcels with one protest counted per parcel. Written protests can be mailed or hand delivered to: Fallbrook Public Utility District, 990 E. Mission Rd., Fallbrook, CA 92028. Hand delivered protests may be delivered to the District’s office or deposited in the drop box located in the District's parking lot, or may be hand‐ delivered to the Board Secretary at the Public Hearing. Written protests must be received by the Board Secretary before the close of the Public Hearing on November 16, 2022.

As a public utility, FPUD does not profit from charges for water, wastewater or recycled water services. Pursuant to California law, all funds collected are used to pay for the costs of operating, maintaining our utilities, and investing in  our  infrastructure.  We  understand  that  rate  increases place  additional  burden  on  our  customers,  particularly people on fixed incomes, and we plan to re‐evaluate our finances and  rates each year to ensure  rates continue to recover the costs of providing service without unnecessary increases.

FPUD is working to rehabilitate and replace old pipelines and other aging facilities.

Based  on  current  financial  projections  and  with  no  detachment exit fee imposed by LAFCO, FPUD anticipates that it will be able to pass through detachment savings to customers via lower overall rate  increases.  The  chart  above  shows  the  proposed  maximum rate revenue increases without detachment (gray) and potential and  estimated  reduction  after  detachment  from  SDCWA  (blue), based on currently available information.

FPUD turned 100 years old on June 5, 2022 and is now
using  local  water  from  the  Santa  Margarita  River.

City Council Regular Meeting - Page 321 of 1385

Proposed Maximum Water Rates
FPUD is proposing to phase in a series of annual water rate increases over the next five years with the maximum allowable increases as shown on the table below. Water rate increases are needed to support water system operating expenses, pay for increasing costs of wholesale water supply, provide adequate funding for maintenance of facilities and equipment, meet annual debt service funding requirements, keep up with cost inflation, and help ensure continued compliance with regulatory requirements. The proposed water rates also help support high‐priority capital improvements to FPUD’s aging water system infrastructure to support safe and reliable service. FPUD’s water rates include a number of components including:
 Fixed Monthly Service Charges: These charges are levied independently of water use and are based on the size of each customer’s water meter.
 Volumetric Charges: As proposed, Residential volumetric charges are billed in 2 Tiers, with a lower rate for the first 5,000 gallons of water use in Tier 1, and all additional water use billed at the Tier 2 rate. Commercial, Government and Irrigation customers are billed a uniform rate for all water use. Agricultural customers are billed as shown below with lower rates for customers who qualify for SDCWA’s Special Ag Water Program. Water volumetric charges are billed in units of 1,000 gallons (Kgal).
 In  addition,  FPUD  will  also  continue  to  levy  Capital  Improvement  Charges,  Pass‐Through  Charges  for  SDCWA Infrastructure Access Charges, Standby Charges, and Private Fire Service Charges as described later in this notice.

* Current Monthly Fixed Service Charges shown also include current MWD Readiness‐to‐Serve (RTS) Charges. RTS Charges will be included in the proposed Monthly Fixed Service Charges starting January 1, 2023. Residential Volumetric Charges are currently billed in 3 Tiers, but will transition to 2 Tiers starting January 1, 2023. During water shortages, volumetric rates with the exception of SAWR, are subject to water shortage emergency surcharges shown later in this notice.

Current
Water January  1J a n u a r y  1 January  1 January  1 January  1 Rates* 2023 2024 2025 2026 2027
Monthly Fixed Service Charges
Billed based on meter size.
3/4" $57.91 $60.60 $64.54 $68.74 $73.21 $77.97
1" 88.65 96.51 102.78 109.46 116.57 124.15
1‐1/2" 165.42 185.46 197.51 210.35 224.02 238.58
2" 257.59 292.64 311.66 331.92 353.49 376.47
3" 503.36 578.82 616.44 656.51 699.18 744.63
4" 779.84 900.36 958.88 1,021.21 1,087.59 1,158.28
6" 1,547.83 1,793.16 1,909.72 2,033.85 2,166.05 2,306.84 Volumetric Charges
Billed based on metered water use as measured in units of 1,000 gallons ($/Kgal).

Residential: Domestic (D), Large Lot Domestic (LD) & Multi Unit (M) Tier 1 :  0‐5 Kgal $7.17 $7.31 $7.79 $8.30 $8.84 $9.41

7.27 8.86
Commercial (C)  $7.38 $7.72 $8.22 $8.75 $9.32 $9.93
Government (G) 7.26 7.72 8.22 8.75 9.32 9.93
Irrigation Only (I) 7.39 7.72 8.22 8.75 9.32 9.93
Agriculture SAWR (AS) $5.31 $5.63 $6.00 $6.39 $6.81 $7.25 Commercial Ag (CA) 6.15 6.38 6.79 7.23 7.70 8.20
Agriculture Domestic (AT)
Tier 1 :  0‐5 Kgal $7.17 $7.31 $7.79 $8.30 $8.84 $9.41
Tier 2:  6‐17 Kgal 6.15 6.38 6.79 7.23 7.70 8.20
Tier 3:  >17 Kgal 5.31 5.63 6.00 6.39 6.81 7.25
Commercial Domestic Ag (CB)
Tier 1 :  0‐5 Kgal $7.17 $7.31 $7.79 $8.30 $8.84 $9.41
Tier 2:  >5 Kgal 6.15 6.38 6.79 7.23 7.70 8.20
Pumping Charges $0.88 $0.72 $0.77 $0.82 $0.87 $0.93
(Deluz & Toyon Service Areas)
Proposed Maximum Water Rates
Proposed Maximum Rates Effective On or After
Tier 2:  >5 Kgal 8.06 8.58 9.14 9.73 10.366‐30 Kgal:
>30 Kga l :

City Council Regular Meeting - Page 322 of 1385

Proposed Maximum Water Rates (continued)
Proposed  maximum  allowable  water  service  charges  are  shown  on  the  following  table.  The  proposed  charges  will  be reviewed and adopted each year and reflect the cost of service associated with each type of charge.  Water Capital Improvement Charges (CIC): These charges are billed based on meter size and help recover costs for repairing, replacing and upgrading FPUD’s aging water system to support safe and reliable operations. These charges may also help recover costs for debt service issued to fund water system improvements. Charges effective January 1, 2023 are shown below. FPUD is proposing to authorize automatic annual adjustments to these charges on January 1, 2024,  and  each  January  1  thereafter  through  and  including  January  1,  2027,  based  on  the  annual  change  in  the Engineering News‐Record Construction Cost Index for Los Angeles through February of the preceding year, plus 3%, subject to a maximum annual adjustment of 10%.
 SDCWA Infrastructure Access Charges (IAC): These charges are a direct pass‐through of charges levied by SDCWA.

Charges effective January 1, 2023 are shown below. FPUD is proposing to authorize automatic annual adjustments to these charges on any date through and including December 31, 2027, based on the actual charges levied by SDCWA, subject to a maximum annual adjustment of 10%.
 Monthly Fire Service Charges: These charges are only levied on customers with private fire service connections and are billed based on the size of each customer’s fire service connection.  Monthly Standby Fixed Service Charges: These charges are only levied on customers with inactive, standby service and are billed based on water meter size. Under the proposed rates, standby customers will also pay the same Water Capital Improvement Charges as all other water customers.

Current January  1 January  1J a n u a r y  1 January  1J a n u a r y  1 Charges 2023 2024 2025 2026 2027
Water Capital Improvement Charges (CIC)
Monthly charge billed based on meter size to all active water service accounts. 3/4" $10.10 $11.11
1" 16.82 18.50
1‐1/2" 33.66 37.03
2" 53.84 59.22
3" 107.68 118.45
4" 168.25 185.08
6" 336.50 370.15
SDCWA Infrastructure Access Charges (IAC)
Monthly charge billed based on meter size to all active water service accounts. 3/4" $4.00 $4.24
1" 6.69 7.08
1‐1/2" 13.33 14.12
2" 21.34 22.60
3" 42.75 45.24
4" 66.79 70.68
6" 133.53 141.32
Monthly Fire Service Charges
Billed based on service size to customers with private fire service connections. 2" $12.25 $7.66 $8.16 $8.69 $9.25 $9.85
3" 13.06 8.90 9.48 10.10 10.76 11.46
4" 14.47 11.03 11.75 12.51 13.32 14.19
6" 19.50 18.70 19.92 21.21 22.59 24.06
8" 28.18 31.92 33.99 36.20 38.55 41.06
Monthly Standby Fixed Service Charges
Billed based on meter size to customers with inactive, standby  service. 3/4" $25.22 $17.44 $18.57 $19.78 $21.07 $22.44
1" 34.15 24.43 26.02 27.71 29.51 31.43
1‐1/2" 56.46 41.75 44.46 47.35 50.43 53.71
2" 83.23 62.61 66.68 71.01 75.63 80.55
3" 154.65 118.30 125.99 134.18 142.90 152.19
4" 235.00 180.88 192.64 205.16 218.50 232.70
6" 458.16 354.65 377.70 402.25 428.40 456.25
Proposed Maximum Other Water Service Charges
Proposed Maximum Charges Effective On or After
Water CIC Charges will be adjusted each January 1 based on the annual change in the Engineering News‐Record
Construction Cost Index for Los Angeles through February of the preceding year, plus 3%, subject to a maximum
adjustment of 10% per year.

SDCWA IAC Charges will be adjusted each January 1 based on the IAC charges adopted by SDCWA in future years,
subject to a maximum adjustment of 10% per year.

City Council Regular Meeting - Page 323 of 1385

Proposed Maximum Recycled Water Rates
FPUD  is  proposing  to  phase  in  a  series  of  recycled  water  rate increases over the next five years with the maximum allowable rates as shown in the table below. Recycled water rate increases are  needed  to  support  recycled  water  system  operating expenses,  provide  adequate  funding  for  maintenance  of equipment,  meet  annual  debt‐service  funding  requirements, help ensure continued compliance with regulatory requirements, and fund capital improvements to FPUD’s recycled water system.

Recycled water rates include two components:
 Fixed  Monthly  Service  Charges:  These  charges  are  levied independently  of  recycled  water  use  and  are  based  on  the size of each customer’s recycled water meter.
 Volumetric  Charges:  Wastewater  volumetric  charges  are billed per 1,000 gallons (Kgal) of metered use as shown on the table below.

Note: Charges to customers who receive recycled water service pursuant to contracts with FPUD will continue to be based on the specific terms detailed in each contract.

Proposed Maximum Wastewater Rates
FPUD is proposing to phase in a series of annual wastewater rate increases over the next five years with the maximum allowable  rates  as  shown  on  the  table  below.  Wastewater  rate  increases  are  needed  to  support  wastewater  system operating  expenses, provide adequate  funding for  maintenance of facilities  and equipment, meet annual debt service funding requirements, and help ensure continued compliance with regulatory requirements. The proposed wastewater rates also help support high‐priority capital improvements to FPUD’s aging sewer collection system pipelines, sewer lift stations, and the District’s Water Reclamation Plant to support safe and reliable service. FPUD’s wastewater rates include a number of components including:

 Fixed  Monthly  Wastewater  Charges:  These  charges  are  billed  based  on  the  number  of  Equivalent  Dwelling  Units (EDUs) assigned to each account. An EDU is a single family household. Each EDU represents the wastewater demand and associated system capacity needed for serving a typical single family home or equivalent. EDUs are assigned to each account based on estimated wastewater flow and strength/density of flow as detailed in Article 11, Section 11.7 of the District’s Administrative Code, available at our offices or website: www.fpud.com. No changes to the District’s Schedule of EDUs are proposed other than a revision to the EDU assignment for Standby Customers. Schools are billed monthly charges based on the number of students and staff.

Current
Recycled January  1 January  1J a n u a r y  1J a n u a r y  1 January  1 Water Rates 2023 2024 2025 2026 2027
Monthly Fixed Service Charges
Billed based on meter size.
3/4" $25.22 $25.85 $26.50 $27.16 $27.84 $28.53
1" 34.15 35.14 36.02 36.92 37.84 38.79
1‐1/2" 56.46 58.15 59.60 61.09 62.62 64.19
2" 83.23 85.88 88.03 90.23 92.48 94.80
3" 154.65 159.91 163.91 168.01 172.21 176.51
4" 235.00 243.09 249.17 255.40 261.78 268.33
6" 458.16 474.06 485.91 498.06 510.51 523.27
Volumetric Charges
Billed based on metered water use as measured in units of 1,000 gallons ($/Kgal).

Recycled Water Sales $6.13 $6.29 $6.45 $6.61 $6.77 $6.94 Proposed Maximum Recycled Water Rates
Proposed Maximum Rates Effective On or After
We’ve  expanded  our  recycled  water  distribution
system  to  provide  highly  treated  recycled  water  to more customers within our service area. Our goal is to
reduce the need for imported water to improve local
supply reliability and save money.

City Council Regular Meeting - Page 324 of 1385

Proposed Maximum Wastewater Rates (continued)
 Volumetric Charges: Proposed volumetric charges for Residential / Domestic customers are billed based on average monthly winter water use from December through February, multiplied by a return‐to‐sewer factor of 80% (based on an  updated  analysis  of  wastewater  treatment  plant  flows)  to  determine  billable  flow  which  will  help  ensure  that wastewater  rates  only  pay  for  estimated  discharge  into  the  sewer  system  and  exclude  water  used  for  outdoor landscape irrigation (subject to a maximum billed flow of 16 Kgal). Commercial / Government customers pay rates that vary based on customer class and wastewater strength with bills based on metered water use in each billing period  multiplied  by  a  return‐to‐sewer  factor  of  90%.  Wastewater  volumetric  charges  are  billed  per  1,000  gallons (Kgal) of estimated wastewater discharge.

 Wastewater Capital Improvement Charges (CIC): These charges are billed based on the number of EDUs assigned to each  account  and  help  recover  costs  for  repairing,  replacing  and  upgrading  FPUD’s  aging  wastewater  system  to support  safe  and  reliable  operations.  These  charges  may  also  help  recover  costs  for  debt  service  issued  to  fund wastewater  system  improvements.  Wastewater  CIC  Charges  effective  January  1,  2023,  are  shown  below.  FPUD  is proposing to authorize automatic annual adjustments to the Wastewater CIC Charges on January 1, 2024, and each January 1 thereafter through and including January 1, 2027, based on the annual change in the Engineering News‐ Record Construction Cost Index for Los Angeles through February of the preceding year, subject to a maximum annual adjustment of 10%.

Proposed wastewater charges for each customer class are based on an updated cost‐of‐service analysis designed to ensure that  all  customers  continue  to  pay  their  proportionate  share  of  the  District’s  costs  of  providing  wastewater  service.

Proposed Residential wastewater rates account for a gradual five‐year transition to more revenue recovery from Fixed Wastewater Charges coupled with a reduction in volumetric charges. This transition is designed to reflect the District’s current cost of providing wastewater service while still providing customers significant control over their wastewater bills.

Current
Wastewater January  1 January  1 January  1 January  1 January  1 Rates 2023 2024 2025 2026 2027
Residential / Domestic
Includes Single Family (D), Single Family Large Lot (LD), Multi Family (M), Ag Domestic (AT), Commercial Ag (CB) Monthly Fixed Service Charges ($/EDU) $11.08 $18.88 $26.68 $34.48 $42.28 $50.08 Volumetric Charges ($/Kgal) 11.28 10.22 9.16 8.10 7.04 5.98 Commercial / Government
Monthly Fixed Service Charge ($/EDU) $11.08 $12.14 $12.75 $13.39 $14.06 $14.76 Volumetric Charges
Comm ‐ Low Strength (C_L) $11.20 $11.09 $11.64 $12.22 $12.83 $13.47 Comm ‐ Me di um Strength (C_M) 13.81 13.82 14.51 15.24 16.00 16.80 Comm‐ High Strength (C_H) 17.22 17.66 18.54 19.47 20.44 21.46 Government (G) 11.20 11.09 11.64 12.22 12.83 13.47
Schools
Monthly charge based on number of students and staff
Elementary Students ($ per student) $1.37 $1.39 $1.46 $1.53 $1.61 $1.69 Junior High Students ($ per student) 2.00 2.08 2.18 2.29 2.40 2.52 School Staff ($ per staff) 2.00 2.08 2.18 2.29 2.40 2.52 Wastewater Capital Improvement Charges (CIC)
Monthly charge per Equivalent Dwelling Unit (EDU) billed to all active wastewater accounts.

Monthly Wastewater CIC Charges $11.68 $12.66
Proposed Maximum Wastewater Rates
Proposed Maximum Rates Effective On or After
Wastewater CIC Charges will be adjusted each January 1
based on the annual change in the Engineering News‐
Record Construction Cost Index for Los Angeles through
February of the preceding year, subject to a maximum
adjustment of 10% per year.

City Council Regular Meeting - Page 325 of 1385

The following table shows a Schedule of Equivalent Dwelling Unit (EDUs). EDUs are assigned to each account based on estimated wastewater  flow and strength as detailed in  Article 11, Section  11.7 of FPUD’s Administrative Code.

Other than a revision to the EDU assignment for Standby Customers, no changes to the schedule are proposed.

Class Description EDUs
Class 1S i n g l e  Family Residence
Single family residence 1.0 0
M obile home on individual parcel 1.0 0
Class 2 Apartment/Condominium/Attached  Cottage‐Mobi le Home Per  detached  cottage  with  bathroom  and  kitchen  on  a  parcel  with  a single family   residence

0.80 Per mobile home on a parcel with a single family residence 0.8 0 Per apartment unit 0.8 0
Per condominium/duplex unit 0.8 0
Accessory Dwelling Unit (As defined by State Government Code.) 0.40 Class 3 M obile  Home Park
Per separate mobile home space 0.8 0
Motel/Hotel  with no restaurant
Class 4P e r  motel/hotel with kitchen unit 0.8 0
Class 41 Per  motel/hotel without kitchen unit 0.5 0
A  Separate  Business,  Retail  Shop  With  Office,  Or  Packing  House Equipped With Restroom Facilities, Or Not So Equipped But Located In A Building Or Complex With Common Restroom
Class 5F i r s t  3500 square feet (exterior building area) facilities 1.33 Class 55 Per  additional 1000 square feet (exterior building area) 0.38 Automotive Service Station
Class 64  pumps or less 2.0 0
Class 61 More  than 4 pumps 3.0 0
Class 62 Per  recreational vehicle holding tank disposal station 1.0 0 Class 7 Church,  Fraternal Lodge Or Similar Auditorium
Per 200 seating capacity 1.0 0
Class 8B a k e r y
Per 3500 square feet (exterior building area) 1.0 0
Class 9T h e a t e r
Per 150 seating capacity 1.33
Class 10 Hospital
Per bed 0.65
Class 11 Convalescent  or Boarding Home
Per bed 0.3 0
Class 13 Elementary  School / Daycare   Per 60 Students 1.0 0 Junior High School   Per 40 Students 1.0 0
Class 17 High  School    Per 30 Students 1.0 0
Class 14 Mortuary 1.00
Class 21 Car  Wash with water recovery system and public restroom 2.0 0 Class 23 Self  Service Laundry 2.0 0
Restaurants
Class 24 Restaurant  Under 2500 Square feet 3.0 0
Class 25 Restaurant  2501‐7000 Square feet 4.0 0
Class 26 Restaurant  Over 7000 Square feet 5.0 0
Grocery Stores
Class 32 Grocery  Stores Under 2500 feet 3.0 0
Class 33 Grocery  Stores 2501‐7000 Square feet 4.0 0
Class 34 Grocery  Stores Over 7000 Square feet 5.0 0
Class 88 Standby                    0.70
Schedule of Equivalent Dwelling Units (EDUs)
Users whose use is not classified in the above table are considered “unclassified users.” District staff shall determine the number of equivalent dwelling units for which a permit shall be issued to an unclassified user, including but not limited  to  commercial  and  industrial  users,  based  upon  the  estimated  volume  of  wastewater  to  be  discharged therefrom into the District’s sewer system. An unclassified user that is also an Industrial User may be required to obtain a Special Use Permit pursuant to Section 2.9 of FPUD’s Administrative Code.

City Council Regular Meeting - Page 326 of 1385

FPUD is in a Drought Level 2 Water Shortage Watch
Current  drought  conditions  throughout  the  western  United States  are  stressing  regional  water  supplies.  While  regional investments in storage and supply sources have secured water supplies  in  the  short  term,  continued  drought  conditions  may lead to regional water shortages in the coming year. In March, Governor  Newsom  signed  Executive  Order  N‐10‐22  declaring  a regional  drought  emergency  and  called  on  Californians  to voluntarily reduce water use by 20%. In response, FPUD’s board of  directors  declared  a  Drought  Level  2  which  encourages voluntary conservation, including:
 Avoid washing sidewalks, roadways and other hardscape with a hose.
 Use a positive shutoff nozzle when hand‐watering landscapes or washing a car.
 Eliminate runoff from irrigation and reduce irrigation during cooler weather. Avoid watering after measurable rain.
 Check water systems for leaks and make repairs promptly.  Limit spray irrigation to run between 6pm and 10am.

Proposed Maximum Water Shortage Emergency Surcharges
FPUD is proposing to authorize a series of Water Shortage Emergency Surcharges that could be implemented to support financial stability and help ensure adequate funding for water utility operations during periods of water shortages and reduced water sales. As proposed, these rates would be temporary surcharges, billed based on metered water use, that would  be  levied  in  addition  to  FPUD’s  regular  water  rates  during  water  shortage  emergencies.  The  proposed  rates correspond with the Water Shortage Response Levels identified in FPUD’s Urban Water Management Plan. No surcharges are proposed for Level 1 and Level 2 water shortages. FPUD is currently in a Drought Level 2, due to drought conditions throughout the western United States that are stressing regional water supplies.

The proposed water shortage emergency surcharges set forth in the table below represent the maximum rate that the District may charge in each year. However, the actual rate may be lower, and will be calculated based on the maximum surcharge percentage applied to each adopted rate. For example, a commercial water customer, in 2023, at a Level 3 Water Shortage Watch, will pay a water shortage emergency surcharge of $1.54 per Kgal ($7.72 x 20% = $1.54).

Additional Information
Pursuant  to  California  Government  Code  53759,  there  is  a  120‐day  statute  of  limitations  for  challenging  any  new, increased, or extended fees. This statute of limitations applies to the water and wastewater service charges proposed in the notice and future changes to water and wastewater rates and charges.

FPUD is committed to operating as cost‐effectively as possible while providing safe and reliable service! For questions or more information about FPUD or the proposed rates, please contact us at [email protected] or visit us at www.fpud.com.

GET
Level 1L e v e l  2L e v e l  3 Level  4L e v e l  5L e v e l  6 Water
Shortage
Notice
Water
Shortage
Watch
Water
Shortage
Alert
Water
Shortage
Warning
Critical
Condition
Emergency
Condition
Water Reduction Target Up to 10% Up  to 20% Up  to 30% Up  to 40% Up  to 50% >  50% Maximum Surcharge % 5.0% 12.0% 20.0% 32.0% 49.0% 74.0%
Proposed Maximum Surcharges Surcharges billed based on metered water use as measured in units of 1,000  gallons ($/Kgal). (Surcharge % x Residential Tier 2)
Effecti ve on or After
January 1, 2023 $0.40 $0.97 $1.61 $2.58 $3.95 $5.96
January 1, 2024 0.43 1.03 1.72 2.75 4.20 6.35
January 1, 2025 0.46 1.10 1.83 2.92 4.48 6.76
January 1, 2026 0.49 1.17 1.95 3.11 4.77 7.20
January 1, 2027 0.52 1.24 2.07 3.32 5.08 7.67
Proposed Maximum Water Shortage Emergency Surcharges
For  information  on  rebates  and  water  conservation, visit  us  at  www.fpud.com/conservation.  Our  staff  is available to help.

You  can  monitor  your  usage  online,  in  real  time.  Our “smart meters” let you track your water use and set up
leak  alerts  to  help  you  catch  leaks  long  before  your  bill arrives. You can get a text or an email letting you know if your water use spiked higher than usual. Or, you can log in and check how you’re doing throughout the month. It’s FREE.  All  you  have  to  do  is  create  an  account:
https://fpud.watersmart.com/index.php/welcome
City Council Regular Meeting - Page 327 of 1385

Water and Sewer Rate Study Cost Proposal
November 29, 2022
City Council Regular Meeting - Page 328 of 1385

City Council Regular Meeting - Page 329 of 1385

November 29, 2022

City of Lynwood
11330 Bullis Road
Lynwood, CA 90262

Attn: Kristan Lloyd

Re: Cost Proposal for Water and Sewer Rate Study

Bartle Wells Associates is pleased to submit this cost proposal to the City of Lynwood (City). BWA and the City can work together to finalize a scope of services and corresponding budget that meets the City’s objectives. Please contact us if you have any ques tions about this cost proposal or would like any additional information.

Sincerely,

Douglas Dove, PE, CIPMA Erik Helgeson, MBA
Principal/ President Vice President

2625 Alcatraz Ave, #602
Berkeley, CA 94705
Tel 510 653 3399
www.bartlewells.com
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Proposed Project Budget

This section presents a proposed budget. A final budget can be developed with input from the City to ensure the project cost is in line with City objectives and expectations.

D. Dove E. Helgeson A. Handlers Estimated Total
@ $270/hr @ $230/hr @ $270/hr Hours Cost
PROJECT INITIATION & DATA 81 8 2 28 $6,840
LONG-RANGE FINANCIAL PLAN 30 90 3 123 $29,610
COST OF SERVICE RATE ANALYSIS 35 90 7 132 $32,040
CAPACITY FEE UPDATE 25 70 7 102 $24,740
PRESENTATIONS, REPORT & 218 25 60 5 90 $21,900
ESTIMATED DIRECT EXPENSES $4,500
TOTAL PROJECT COSTS 123 328 24 475 $119,630
Water and Wastewater Rate Study
City Council Regular Meeting - Page 331 of 1385

Availability & Fees

1. Bartle Wells Associates is prepared to begin work upon authorization to proceed.

2. During the project development period, Bartle Wells Associates will be available at all reasonable times and on reasonable notice for meetings and for consultation with staff, attorneys, consulting engineers, and others as necessary.

3. Bartle Wells Associates will perform all work related to the assignment. Douglas Dove, a firm principal, will be assigned as principal-in-charge on this assignment. Erik Helgeson will serve as the project manager and lead contact person for BWA and will be involved with the project a day-to- day basis. Alex Handlers will provide high level review and input for the project. This project team may be assisted by other BWA analysts as needed.

4. The total project cost will not exceed $119,630. The fee is based on the following assumptions:
a. All necessary information will be provided by the City in a timely manner. b. Development of a draft, final draft, and final versions of tables, presentations, and reports.

Time and expenses involved in revising tables and assumptions may constitute additional services if not achievable within the budget.
c. Six in-person meetings and/or presentations. Additional meetings or presentations may constitute additional services if not achievable within the budget.

5. Progress payments and direct expenses are payable monthly on a time and materials basis as the work proceeds as provided in our Billing Rate Schedule 2022, which will remain in effect through the duration of this assignment.

6. Bartle Wells Associates will maintain in force, during the full term of the assignment, insurance as provided in the Certificate of Insurance attached.

7. If the project is terminated for any reason, we are to be reimbursed for professional services and direct expenses incurred up to the time we receive notification of such termination.

8. This proposal may be withdrawn or amended if not accepted within 90 days of its date.

9. We will not require a formal contract of employment and will consider a letter or e-mail from an appropriate official as sufficient authority to proceed.

City Council Regular Meeting - Page 332 of 1385

BARTLE WELLS ASSOCIATES
BILLING RATE SCHEDULE 2021
Rates Effective 1/1/2021

Professional Services
Financial Analyst I ................................................................................................. $110 per hour Financial Analyst II ................................................................................................ $140 per hour Consultant ............................................................................................................. $170 per hour Senior Consultant .................................................................................................. $200 per hour Senior Project Manager ........................................................................................ $230 per hour Principal Consultant .............................................................................................. $270 per hour

The hourly rates for professional services include all overhead and indirect expenses. Bartle Wells Associates does not charge for administrative support services. Expert witness, legal testimony, or other special limited assignments will be billed at one and one-half times the consultant’s hourly rate.

The above rates will be in effect through December 31, 2023 at which time they will be subject to change.

Direct Expenses
Subconsultants will be billed at cost plus ten percen t. Word processing and computer-assisted services related to official statement production are charged as direct expenses at $75 per hour. Other reimbursable direct expenses incurred on behalf of the agency will be billed at cost plus ten percent.

These reimbursable costs include, but are not limited to:

 Travel, meals, lodging  Automobile mileage
 Printing and photocopying  Messenger services and mailing costs  Special statistical analysis  Graphic design and photography  Outside computer services  Special legal services
 Bond ratings  Legal advertisements

Insurance
Bartle Wells Associates maintains insurance in the amounts and coverage as provided in the attached schedule of insurance. Additional or special insurance, licensing, or permit requirements beyond what is shown on the schedule of insurance are billed in addition to the contract amount.

Payment
Fees are typically billed monthly for the preceding month and will be payable within 30 days of the date of the invoice. A late charge of 1.0 percent per month may be applied to balances unpaid after 60 days.

City Council Regular Meeting - Page 333 of 1385

CLIENT NAME
RFQ NO.

PROPRIETARY AND CONFIDENTIAL INFORMATION

APRIL 12 2019

PROPOSAL FOR CITY OF LYNWOOD
NOVEMBER 29 , 202 2
Water and Sewer Rate Study
City Council Regular Meeting - Page 334 of 1385
Black & Veatch Management Consulting, LLC
550 S. Hope Street, Suite 2250, Los Angeles, CA 90071
P +1 913-458-4377 | E [email protected]
a. Cover Letter
November 29, 2022
City of Lynwood, Public Works Department
Kristan Lloyd
11330 Bullis Road
Lynwood, CA 90262
RE: Water and Sewer Rate Study
Dear Ms. Lloyd:

In response to the City of Lynwood’s (City) request for a Water and Sewer Rate Study, Black & Veatch Management Consulting, LLC (Black & Veatch) presents this proposal for your consideration.

Black & Veatch has extensive financial experience based on sound engineering principles in providing services as requested by the City to clients regionally and nationally. We base our plan for providing value to the City on a thorough understanding of the objectives, our first-hand knowledge of water and wastewater issues in Southern California, and our previous ratemaking experience with the City. We believe our solutions will continue to provide benefits to the City.

Black & Veatch team members have led successful studies for similar municipalities and special districts, as demonstrated in our resumes and project experience write-ups. We stand committed to providing the qualified staff identified in the Experience section of our proposal document. Our project team completed the City’s last approved rate study in 2016, and we are confident that we can assist the City again with similar services. We will work closely with the City staff and management throughout the project to promote input by utility representatives and City staff (including the City Manager, the Director of Finance, and City Council).

We are sincerely interested in providing these professional financial services and believe our overall experience and highly qualified personnel provide the best service value to the City. Please contact the Project Director, Ms. Ann Bui, at +1 949-302-6017 or [email protected] if you have any questions or require additional information.

Very truly yours,
Chris Klausner
Associate Vice President
Black & Veatch Management Consulting, LLC
City Council Regular Meeting - Page 335 of 1385
City Council Regular Meeting - Page 336 of 1385
City Council Regular Meeting - Page 337 of 1385
Chris Klausner
Associate Vice President11/22/2022
City Council Regular Meeting - Page 338 of 1385

BV.COM BLACK & VEATCH | TABLE OF CONTENTS i

Table of Contents
A. COVER LETTER ..............................................................................................................................

B. EXECUTIVE SUMMARY .............................................................................................................. 1 C. APPROACH TO THE PROJECT .................................................................................................... 4 D. EXPERIENCE ............................................................................................................................. 16 E. QUALIFICATIONS ...................................................................................................................... 23 F. REFERENCES ............................................................................................................................. 28 G. PROJECT SCHEDULE ................................................................................................................ 29 H. COST PROPOSAL ...................................................................................................................... 30 I. COPY OF A RATE STUDY. .......................................................................................................... 32 APPENDIX A. RESUMES ............................................................................................................... 33

City Council Regular Meeting - Page 339 of 1385

BV.COM BLACK & VEATCH | B. EXECUTIVE SUMMARY 1

b. Executive Summary

ABOUT BLACK & VEATCH
Black & Veatch Holding Company is a leading global engineering, construction, and consulting company specializing in developing energy, water, and telecommunications infrastructure. Our Mission sets the bar high - Building a World of Difference®. We live up to this ideal by delivering reliable and advanced infrastructure solutions to our clients’ most complex challenges, helping to improve and sustain the quality of life around the world.

Founded in 1915, Black & Veatch is an employee-owned company based in Overland Park, Kansas, that has over 9,000 professionals operating out of more than 120 offices worldwide. Through this network of collaboratively connected offices, we serve our clients and commit ourselves to professional excellence and innovation. As evidenced by our latest rankings in Engineering News Record (ENR), Black & Veatch serves as an industry leader.

In 2022, we were ranked No. 1 in Solar Power design, No. 2 in Power, and hold Top 10 spots for Telecommunications and Environment categories such as Sanitary and Storm Sewers, Water Supply, Water Treatment, and Sewer and Waste. We’re also leaders in more than 15 other categories. Our professionals earn this recognition by understanding our clients’ business needs and objectives. We have the financial and technical resources to execute projects expertly. Furthermore, we value long-lasting relationships and believe that rapport enables superior customer service and support.

Black & Veatch Management Consulting, LLC
Black & Veatch Management Consulting, LLC is a wholly owned subsidiary of Black & Veatch Holding Company that brings together more than 200 professionals. These professionals include experienced industry executives, senior analysts, and technology experts from the electric, water, oil, natural gas, and technology industries. This experience—combined with seamless access to the company’s world-class engineering, procurement, construction and operations capabilities, experienced senior executives, economists, senior policy experts and regulatory officials, engineers, and internationally respected subject-matter experts—makes Black & Veatch especially qualified to realize the goals of our clients. Black & Veatch’s diverse consulting service offerings span financial, process, and technology solutions. Our experienced professionals possess cross-functional skills, including asset management, cost of service/rate design, business process/workflow analysis, and implementation services.

City Council Regular Meeting - Page 340 of 1385

BV.COM BLACK & VEATCH | B. EXECUTIVE SUMMARY 2

PROJECT UNDERSTANDING
Like many utilities, the City of Lynwood (City) is facing the challenge of balancing the needs of maintaining and improving its infrastructure and operations and increasing resilience to environmental impacts – all while delivering safe, reliable, and affordable services to its customers in a fiscally responsible manner.

Located in Southern California, about 14 miles south of Los Angeles, the City has a service area of approximately 4.84 square miles in Los Angeles County.

The City provides drinking water and wastewater services to its residents through a complex above-ground and below-ground infrastructure network.

The drinking water system obtains water from groundwater pumped from the Central Groundwater Basin and through import water purchased from Metropolitan Water District via Central Basin Municipal Water District. The wastewater system is a collection-only system that collects sewage flow and directs it to Los Angeles County Sanitation District for treatment.

The COVID pandemic, increasing severity of drought, ongoing capital needs, and diminishing reserves are testing the City’s resiliency. As such, the City wishes to obtain a qualified consultant to conduct a Water and Sewer Rate Study.

The City hopes to address the following elements in this study: rising costs of providing water services, the need to improve infrastructure and meet future growth and demands. These elements have different impacts on the water and wastewater systems; therefore, the study will assess and evaluate the City’s current rates to support its goal of financial resilience and support its mission of enhancing the quality of life in the community with dependable water and wastewater services, equitable cost recovery across customer classes, and affordable rates.

AFFIRMATION STATEMENT
Black & Veatch affirms that we are able and willing to execute the City’s Professional Services Agreement attached in RFP as Attachment A. We previously entered into a contract with the City in February of 2013 and feel confident we can arrive at a similar agreement with the City.

LEGAL ISSUES
Black & Veatch Holding Company and its affiliates constitute a large, international engineering and construction firm. Like similarly sized firms, at any given point in time, we may be involved with claims and litigation. Black & Veatch maintains a program of insurance to protect against claims arising from its work. In the opinion of Black & Veatch management, no pending claim or litigation will have a material impact on Black & Veatch’s ability to execute this project.

DISCLOSURES
Black & Veatch and its principals are not and have not been the subject of any investigation by the County, State, and/or Federal agencies within the past five years.

Black & Veatch’s methodology
and approach are rigorous and
repeatable. We adhere to
industry guidelines and best
practices in setting rates. In the
Post – San Juan Capistrano era,
we work closely with your legal
counsel to affirm the legal
framework for the study and
build the Administrative Record
to demonstrate a clear nexus
between cost and the service
provided.

City Council Regular Meeting - Page 341 of 1385

BV.COM BLACK & VEATCH | B. EXECUTIVE SUMMARY 3

PROFESSIONAL SERVICES AGREEMENT
It is understood that upon notification of your award of the study to Black & Veatch, both parties agree to use reasonable diligence to negotiate a mutually acceptable definitive written contract with respect to the scope of work described in this proposal. Based on our experience working with the City and our December 2016 signed agreement, we are reasonably confident that the contract terms can be negotiated quickly and without any effect on the project schedule.

City Council Regular Meeting - Page 342 of 1385

BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 4

c. Approach to the Project
OUR PROJECT METHODOLOGY STARTS WITH THE LOGICAL PREMISE BEGINNING WITH THE “CRITICAL THINKING” OF ISSUES AND STRATEGIES AND FOLLOWING THROUGH WITH STRUCTURED AND

THOUGHTFUL EXECUTION THAT ENGAGES ALL STAKEHOLDERS
.

STUDY OBJECTIVES AND SUCCESS FACTORS
The City has a diverse set of obligations, including reliable service delivery, proactive infrastructure management, long- term financial resiliency, and customer equity and affordability.

With the recent confluence of challenges, including rising Operations and Maintenance (O&M) costs due to supply chain issues and inflationary pressure and the continued need for substantial capital improvement program (CIP) expenditures, it is imperative that the City continues to build financial stability in the short-term and provide a path for long-term fiscal strength and service excellence.

To methodically build a pathway to achieving the broader strategic goals, we understand that the City has defined a key set of measurable and achievable objectives for the rate study services. You desire the assistance of a highly experienced and qualified firm that can assist with a full range of financial, business process, technical, and stakeholder engagement services, to achieve the following key objectives:
i.

RELIABLE CAPITAL AND OPERATIONS REVENUE REQUIREMENT FORECAST: A multi-year forecast that balances operational needs, capital expenditures and associated timing, compliance obligations, and fiscal viability. ii. PRUDENT FINANCIAL POLICIES: Financial policies on capital financing, reserves, and other key financial performance metrics that not only reflect industry financial best practices but also consider the City’s local factors, including local economic conditions, market conditions, COVID-19/supply chain impacts, and customer demographics.
iii. CUSTOMER EQUITY AND FAIRNESS: Cost of service analytical principles that enhance customer equity in cost recovery and uphold the defensibility of the nexus between costs incurred and cost recovery mechanisms. iv. CUSTOMER AFFORDABILITY: Innovative rate structure mechanisms that pragmatically balance multiple factors, including affordability, ease of understanding and administration, and enabling resources. v. STAKEHOLDER ENGAGEMENT AND OUTREACH: Effective collaboration to communicate and solicit input to help support informed decision-making and consensus for timely immediate actions and meeting long-term plans and support rate case filings.

To achieve these stated objectives through our rate study services, we understand that there needs to be clear alignment between – (i) the study objectives and (ii) our project delivery methodology.

FIGURE 1 STUDY SUCCESS FACTORS
City Council Regular Meeting - Page 343 of 1385

BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 5

KEY PRINCIPLES OF PROJECT DELIVERY
Black & Veatch’s approach to formulating a legal framework for designing water and wastewater rates that meet Proposition 218 requirements is simple: Begin with the End in Mind. We start by understanding that we need to establish an Administrative Record from the start. Since we are not attorneys, we recommend working with the City’s legal counsel to vet strategies and review rate design rationales from the project's onset.

Using the three-part process depicted in Figure 2, the Black & Veatch team will utilize the following principles and analytical approaches:

Rigorous and Repeatable Methodology
 Use Industry accepted and defensible cost allocation and rate-setting principles based on the American Water Works Association (AWWA) Principles of Water Rates, Fees, and Charges, Manual M1 and Water Environment Federation (WEF), Financing and Charges for Wastewater Systems, Manual of Practice No. 27 (MoP 27).
 Reflect the City’s specific financial practices and policies, including policies on capital program financing, debt service, reserve requirements, and incorporating industry financial best-practice principles and metrics.  Develop a balanced series of revenue adjustments, as required, based on defensible cost allocations and a practical approach to rate change recommendations that balance revenue adequacy, equity of cost recovery, bill impact, and ease of understanding and administration.

Multi-Faceted Integrated Work Structure
In alignment with the study’s objectives, Black & Veatch has defined an integrated work structure that translates the three-stage process into executable steps and answers the questions: “How Much?”, “From Who?” and “What’s the Price?” as illustrated in Figure 3.

FIGURE 3 INTEGRATED WORK STRUCTURE

FIGURE 2 COST OF SERVICE THREE-PART PROCESS
City Council Regular Meeting - Page 344 of 1385

BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 6

The key components of our methodology consist of the following:
 Financial Planning. Rates and charges should generate adequate revenues to meet the operating and capital costs and provide financial stability. Our approach seeks to understand the annual cost requirements of the system over each year of the planning period. The revenue potential of the system will be assessed to get a “baseline” understanding of the ability of revenues to meet costs. Different scenarios to reflect different prioritization of CIP and financing limits may be developed to help determine the maximum and minimum revenue adjustments required to meet different funding capacities. The financial plan should also provide sufficient cash reserves to meet working capital requirements and a reserve to address emergency requirements.

 Cost of Service. Here, we develop data-based cost allocations to provide service to different customers.

The cost developed in the financial planning process on an annual basis is the foundation and the cost to be analyzed. We use asset information that functionally represents the system's characteristics and current water and wastewater system operations information. New customer classes or consolidation of classes may also be identified at this point. The goal of this stage is to distribute the cost components of O&M and capital to customer classes based on the level of service rendered.  Rate Design. Rates do more than recover costs. Within the Proposition 218 framework and industry standards, properly designed rates should support the City’s objectives, such as conservation, affordability, and revenue stability. During our analysis, we will review the effectiveness of the existing rate structure in meeting the City’s objectives and for compliance with the outcomes from court decisions since the City’s rates were adopted. The methodology used in our prior study is industry-standard; we believe that changes will focus on considering how to move towards a tiered structure and how each tier would be priced.

For tiered rates, Black & Veatch proposes to demonstrate the nexus between the cost of each tier and the price charged by breaking down the tiered rates into their unit cost components. These components could include water supply, system delivery costs, peaking costs, and others. We have found that showing the cost drivers for each tier in this manner is a more readily understood approach for ratepayers and establishes the required cost nexus.

We have over 80 years of experience with rate development and more than 30 years of California rate-setting experience. This experience base will be available to the City in developing rates and charges that are fair, equitable, and legally defensible.

City Council Regular Meeting - Page 345 of 1385

BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 7

Robust Financial Modeling and Training
You cannot prepare a cost-of-service rate study without a robust model. As shown in Figure 4, our rate models take our integrated work structure approach and translate methodology into results.

We are proud to say that many of our clients have used Black & Veatch models for decades for their rate-setting plans. And we support these models when clients move to different programs (e.g., Lotus to Excel) and operating systems (e.g., Windows 7 to Windows 10).

When working with complex models, we believe people learn better through hands-on activities and effective knowledge transfer. To that end, we have our clients review the models that we develop as we develop them, so you trust the results generated. Our models have centralized inputs and dashboards to help manage and present data and analyses. Issues logs are included to support the Administrative Record.

Compelling Case for Action
How do you make a compelling case for action? By proactively engaging with stakeholders at all levels early in the rate-setting process.

As illustrated in Figure 5
, we emphasize the “Four E’s” in our communication –
Evaluate needs; Educate stakeholders on issues/solutions; Engage to solicit feedback/ ideas; and Embrace their input, to the extent practical, in final solutions. We have used this proven approach at utilities of all sizes, including California cities such as San Diego, Long Beach, Simi Valley, Santa Ana, and Banning, to achieve successful study outcomes. Early in the study, we will collaborate with City staff to understand each stakeholder group’s characteristics and communication style/need. This will help align the style of technical and non- technical messaging to the levels of understanding and communication needs of these diverse stakeholders.

FIGURE 5 OUR “FOUR E’S PRINCIPLES”
FIGURE 4 TRANSLATING METHODOLOGY INTO RESULTS
City Council Regular Meeting - Page 346 of 1385

BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 8

PROJECT APPROACH
BLACK & VEATCH’S APPROACH FOCUSES ON USING ENGINEERING-BASED ANALYSES TO SUPPORT FAIR COST ALLOCATIONS.

In California’s increasingly litigious environment, rate studies have come under more scrutiny than ever. We believe that clients should be prepared for this increased examination. Our approach is proactive and wholly focused on establishing usage characteristics and determining the nexus between costs incurred and customer service level. Below is a discussion of key study objectives and how we will achieve them.

OBJECTIVE ISSUES APPROACHES HOW WE EXECUTE
Develop five-year and 10-year
financial plans for water and
wastewater to meet operating,
capital, debt service, and reserve
requirements.
 Increased
operating costs
due to water
supply contracts
 Inflation issues
driving costs up
 Need for
replacement of
infrastructure
 Historical usage and
billing determinants
assessment.
 A careful review of
cost inflation factors
 Capital planning and
financial scenarios

Benefit to the City: An integrated financial plan that helps you understand the impacts of operating and capital needs on existing rates

Perform a cost-based rate
analysis that assigns
proportionality to the customer
classes and meets statutory
requirements.
 Detailed cost
allocations to
support Prop 218
requirements
 Update customer
classes, if needed
 Data-driven,
engineering-based
cost allocations.

Keystone to the
Study.
 Defensible cost-of-
service principles
Benefit to the City: A defensible cost allocation approach across the customer groups served

Develop rate and reserve
recommendations considering
the impact on the community’s
economic well-being.
 Incorporate
mandated water
conservation
targets
 Affordability and
fixed income
 Cost nexus for all
rate components
 Examine the existing
rate structures
 A clear buildup of
rates to demonstrate
cost nexus and meet
Prop 218
requirements
Benefit to the City: The design of fair rates based on informed decisions consistent with operating, capital, and stakeholder requirements

City Council Regular Meeting - Page 347 of 1385

BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 9

SCOPE OF WORK
Task 1. Project Management
Black & Veatch will incorporate general project management to ensure the study drives towards the goals and objectives. Specific subtask includes:

Coordinate project activities among Black & Veatch and the City staff. This includes providing direction as required to meet project objectives and deadlines, maintaining adequate levels of staff throughout the project, reviewing all study-related work, and providing quality assurance on the work executed.

Perform general administrative duties, including client correspondence, invoicing, budget/scope management, project documentation, and administer project controls using our proprietary internal project tracking system.

Prepare a data request for financial and/or operating data necessary to complete the study. It is anticipated that data will be available promptly to support the study timeline.

Task 2. Financial Plan
Black & Veatch will develop a ten-year financial plan for water and wastewater between July 1, 2023, and June 30, 2033. Specific subtasks include:
 Conduct a historical billing data analysis to update billing determinants, establish consumptive patterns, evaluate system peaking demands, and identify potential new customer classifications.

Black & Veatch recommends using a three-year historical period for which audited revenues exist. If detailed hourly data are unavailable, we will use the AWWA-accepted approach as outlined in Appendix A of Manual M-1: Principles of Water Rates, Fees, and Charges.

A water demand analysis is included as a part of this subtask. In our experience, establishing or confirming the tier breaks is a major contention in recent Prop 218 litigation matters. Looking at not the level of consumption but also when and who is peaking in the system will be important.  Forecast potential growth in customers, water consumption, and sewage flow by incorporating the City’s 2020 Water Master Plan, 2020 Sewer System Management Plan, 2020 Urban Water Management Plan, and General Plan growth in City.
 Project existing revenues by applying the existing rates to projected customers, water consumption, and sewage flows. Revenue determined will form the basis to assess revenues under existing rates for all customer classes.
 Incorporate revenues from other sources, including late charges, new services, delinquent fees, interest earnings, and other miscellaneous revenues. These revenue sources are important for determining the net level of future revenue needed from rates.  Evaluate both water and wastewater’s CIP. The objective of the CIP review is to gain an understanding of the types of projects scheduled - the timing associated with such projects, changes City Council Regular Meeting - Page 348 of 1385

BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 10

from prior years’ capital budgets, anticipated sources of financing, and anticipated timing of proposed revenue bond issues.
 Project water and wastewater capital outlays tend to recur on an annual basis. Such costs generally consist of expenditures for the normal and ongoing replacement of worn-out or obsolete equipment.

Current year requirements are typically financed directly from the utility operating revenues. As part of this subtask, Black & Veatch will work with City staff to determine normal repair and rehabilitation (R&R) projections for the study period.
 Review and understand the City’s reserve
policy and other financial policies. We will
review the existing reserve fund
requirements and balances for adequacy.

Adequate reserve levels will be
recommended based on a review of both
reserve funding requirements, industry
standards, and state regulations. Applicable
bond ordinance requirements will be
reviewed along with any relevant utility
policies.
 Prepare a five-year and ten-year financial
plan for water and wastewater, summarizing the revenues and revenue requirements projections to determine revenues' adequacy under existing rate levels to meet operating and capital needs.

Forecasted revenue will include revenue under existing water and wastewater service rates, funds generated from other operating income, and interest income. Revenue requirements will include operation and maintenance expenses, routine capital expenditures, the revenue financed portion of major capital improvements, and any applicable debt service costs or other anticipated obligations.

Adjustments will be made to allow any required revenue increases to meet revenue requirements over the study period and to minimize the impact of rate increases on the City’s customers to the extent possible.

Utilizing the scenario builder in our rate models, we will work with the City to prepare cash flow scenarios reflecting changes in different assumptions such as customer consumption, operating expenses, capital costs, and capital funding options. Each scenario will evaluate the ability of each system to fund revenue requirements under the current rates and the level of future revenue adjustments needed to meet obligations, including reserve requirements.

Task 3. Benchmarking
Black & Veatch will compare current water and wastewater system costs (operations, capital improvements, bonded debt) against appropriate industry benchmarks and comparable municipal entities in Southern California.

Data will be obtained from two sources: 1) AWWA’s Utility Benchmarking: Performance Management for Water and Wastewater, and 2) publicly available financial documents from comparable municipalities. A mailed survey is not part of this task but can be added as an optional item.

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BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 11

Task 4. Cost of Service Analysis
Black & Veatch will perform a cost-of-service analysis for both water and wastewater. The approach to be utilized follows AWWA and WEF principles. Specific subtasks include:
 Identify and determine each utility functional service parameter to allocate cost between customer classes. This step recognizes system service requirements typically cause costs incurred by the utility.

These requirements generally include the number of customers, water consumption, meters and billing, fire protection for water and billed sewage flow, strengths, and customer services for sewer.  Develop an estimate of the units of service associated with each of the cost-causative elements for service. The units of service will be estimated based on service characteristics defined for each customer class. These units of service will be developed recognizing the customer usage analysis, available data, and engineering judgment about customer class service requirements. Figure 6 shows a sample overview of the methodology that will be used to allocate water costs of service to customer classes. A similar approach for wastewater will be used with the appropriate operational cost centers.

FIGURE 6 THE MULTI-LEVEL WATER COST-OF-SERVICE ALLOCATION PROCESS  Determine the unit cost of service resulting from aligning functional cost allocation with the estimated units of service. The calculated unit cost of service establishes the basis for understanding the cost-based functional unit value of services provided by the City.  Distribute cost responsibility to each customer class by applying unit costs of service to each customer class’s unit of service. Each customer class's relative responsibility will be determined based on each class's estimated service requirements.

Task 5. Rate Design
Black & Veatch will design rates for water and wastewater over ten years. In accordance with Proposition 218 requirements, we will only submit rate schedules for a maximum of 5 years.

Our approach to the rate design is to establish a reasonable nexus between costs incurred in providing service and the designed rates and charges. We recognize the need to balance the cost-of-service rates and the City’s objectives. Therefore, the rate design process will be an interactive dialogue and exchange Test Year Revenue Requirements Per Financial Plan
O&MCash Basis
(Budget Basis) Debt Service Cash Funded Capital Reserve Requirement Supply Pumping Treatment Customer
Meters Customer
Operational Cost
Centers T&D
FirePeakingVolume
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BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 12

of ideas with City staff and General Counsel that thoroughly assesses social and economic benefits to customers served.

Black & Veatch’s approach to rate studies is to develop a comprehensive Administrative Record that can withstand legal scrutiny. To this end, we take time to ensure that the designed rates satisfy Prop 218 requirements, including recent litigation trends and City policies.

Water Rates. Examine three (3) alternative water rate structures if feasible. The first step is to update the existing water rates based on a monthly readiness-to-service charge by meter size and water consumption charges based on a uniform charge. Possible alternatives could be:
a. Tiered consumption charges
b. Rates by customer class
c. Fixed capital improvement charge
If the City wishes to examine budget-based water rates, Black & Veatch would be happy to do this as an optional task. A scope and fee for this task would be developed upon consulting with the City.

We also understand that the City is interested in potentially developing a new water resource fee.

Black & Veatch has included this charge in its scope and level of effort. How the City wishes to impose this fee (via a capital charge or an on-going O&M charge) will impact its feasibility under Proposition 218 or Proposition 26. We will work with the City and its General Counsel to help determine the viability of implementing this fee.

Wastewater Rates. Examine three (3) alternative wastewater rate structures if feasible. The first step is to update the existing wastewater rates, which are currently based on a flat monthly rate for residential and non-residential. Possible alternatives could be:
a. Equivalent dwelling unit-based rates for all customers b. Rates by customer class
c. Flat rate for residential and fixed monthly plus consumption charge rates for non-residential Drought Rates. Develop water drought surcharges that will help the City generate revenue associated with the loss of water sales and increase in water purchased costs due to drought conditions. The drought surcharges will mimic the City’s Water Shortage Contingency Plan stages.

Develop typical residential and commercial bills to show the potential impact of the recommended water and wastewater rates on the customers.

Obtain water and wastewater rates for neighboring agencies and benchmark the typical bills for existing and proposed rates to neighboring municipalities. Specifically, the benchmark will incorporate Liberty Utilities, serving about 10 percent of the City’s boundary.

Task 6. Overhead Allocation Review
Black & Veatch will evaluate the existing overhead distribution formulas and make recommendations as needed. Specifically, we will examine the overhead allocations to water and wastewater from other City departments. Overhead allocations consist of indirect costs incurred by other departments for services they provide water and wastewater. The evaluation will consist of a review but not a full overhead cost allocation study.

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BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 13

Task 7. Miscellaneous Fees
Black & Veatch will update the City's miscellaneous fees based on the actual costs the City incurs to provide the service. The costs will be based on a combination of labor, materials, equipment, and external costs. The anticipated miscellaneous fees to be updated are:
a. Hydrant
b. Returned Check Charge
c. Late Payment Fee
d. Reconnection Charges
e. Turn-On Fees
As part of this task, Black & Veatch will develop a spreadsheet template that allows the calculation of each fee based on specific inputs. This spreadsheet will be delivered to the City for their use in updating the fees.

Task 8. Connection Fees
Black & Veatch will evaluate water and wastewater's existing connection fees (system development charges). The connection fees analysis will include the following subtasks:
 Evaluate the existing methodology used to calculate the connection charges. Methodologies can consist of buy-in, incremental, and combined.
 Determine the existing water and wastewater fixed assets valuation through an analysis of the fixed asset inventories. These assets serve as the basis for the buy-in methodology.  Assess the capital improvement program to identify additional facilities needed, by type, for new development or redevelopment. These new facilities serve as the basis for the incremental methodology.
 Identify credits, if any, to be incorporated into the analysis. The credits might be associated with contributed capital and/or the debt that a future customer will pay through rates.  Determine the appropriate service units. The service units serve as a standardized unit measure that the connection fees will be based on and equitably applied to customers.  Combine the fixed assets, capital costs, and service units to determine the connection fee. The calculated fee will be the maximum justifiable capital facilities fee the City can charge.

Task 9. Meetings
Black & Veatch will attend the following meetings. These meetings are expected to be throughout the study, and except for the progress sessions, they will be in-person as requested by the City.  A kick-off meeting with City staff to review the goals and objectives, scope and strategies, and receive direction from the City’s project manager regarding official communication.  Attend two (2) meetings with City Council at a Council Meeting to present the study results and obtain their input.

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BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 14

 Attend and present at two (2) community meetings to discuss proposed water and sewer rates in a public format.
 Attend two (2) public hearings on the proposed water and sewer rates.  Attend bi-weekly meetings via Zoom with City staff to discuss progress and other minor issues. It is recommended that bi-weekly meetings be substituted for the suggested weekly meetings.

Task 10. Reports
Black & Veatch has identified the following deliverables to the City.

A preliminary report will be prepared that only shows the proposed five-year rate schedule for three (3) alternative rate structures for water and wastewater. The preliminary financial model will be provided for review.
 A draft report will be submitted to City staff and legal counsel for review and comment. The draft report shall include, at minimum, the following sections:
i) Executive Summary
ii) Introduction
iii) Methodology
iv) Overview of Current Financial Conditions
v) Capital Improvement Program
vi) Ten-Year Financial Plan
vii) Cost of Service Analysis
viii) Rate Design and Proposed Rate Schedules
 As identified in the RFP, other important discussions will be incorporated into the report within the main section.
 A final report incorporating comments from the City staff, legal counsel, and City Council.  A draft and final connection fee report will be prepared to identify the recommended updated connection fees.
 A technical memorandum indicating changes, if any, to the miscellaneous fees.

Task 11. Proposition 218 Support
Black & Veatch will prepare the Proposition 218 public notice that will be sent to the recorded owner and customer. In addition, public outreach materials will be developed to be published in the City’s newsletter and website. The public outreach materials can range from Frequently Asked Questions to Bill Inserts. Our scope includes developing one (1) FAQ and one (1) Bill Insert. Printing, mailing, and postage costs are not included in this proposal.

Task 12. Rate Model Development and Training
Black & Veatch will develop a Microsoft Excel-based rate model for each utility and provide training.

The rate model will be developed to encompass financial planning, cost of service, and rate design. The model will contain the following features:

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BV.COM BLACK & VEATCH | C. APPROACH TO THE PROJECT 15

a. Specifically tailored and designed to recognize the City’s utility’s unique needs, characteristics, and information base, including matching the City’s budgetary and accounting structures. b. Conduct “what-if” analyses reflecting the impact of changes in significant system variables such as water conservation, droughts, revised budgeted revenues and expenditures, changes in capital improvement program schedules, and policy decisions.
c. Incorporation of user-friendly features, including fully automated preprogrammed print and navigation menus, customized icons for specific model functions, and other features. d. General Navigation: A system of links that allows the user to switch between sections using simple navigation links.
e. Dashboard: A dashboard system allows users to create scenarios for financial planning and rate revenue increases.

Provide the City staff with training on the rate models to allow City staff to run different scenarios. During the study, Black & Veatch provides working versions of the rate models to City staff to familiarize them with the rate models.

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BV.COM BLACK & VEATCH | D. EXPERIENCE 16

d. Experience

FIRM EXPERIENCE
National and Regional Experience
Black & Veatch has provided financial, rate-setting, and operations management services for over 80 years. Regulatory bodies recognize our team members as subject matter experts in the areas of financial planning, rate-setting; affordability; and customer information systems, to name a few. Black & Veatch brings proven expertise and experience with conducting water and wastewater cost-of-service studies and achieving successful financial plan and rate approvals gained through our work with hundreds of municipal utilities.

When we say that we have
“done this before,” we mean
that we have conducted more
than 5,000 financial
evaluations, including cost of
service studies, over the past
decade. As a testament to our
work, Black & Veatch has
successfully provided financial
advisory services to 31 of the
nation's top 50 largest
metropolitan service areas
over the past 15 years, as
shown in Figure 7.

In California, Black & Veatch has been providing continuous service to water and wastewater agencies since 1975. Our clients benefit from our unique pedigree of highly respected business professionals and national practice leaders that work across all water and wastewater sectors.

Over the last 20 years in California, Black & Veatch has worked for over 100 public agencies and utilities, performing more than 250 financial analyses, cost of service, and rate studies. We have worked with utilities to successfully help defend against Proposition 218 challenges and helped others redesign structures to comply with the proposition.

Thought Leadership
Black & Veatch financial specialists and rate experts are recognized thought leaders in the organizations that set the guidelines for the water and wastewater industry practices around financial planning and rate making.

FIGURE 7 NATIONAL EXPERIENCE IN THE UNITED STATES
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BV.COM BLACK & VEATCH | D. EXPERIENCE 17

Key members of the Black & Veatch team designated for
the City’s project have contributed to the rate-making and financial guidelines for the water and wastewater utility industry in these diverse roles:

Past Chair of the American Water Works Association‘s
(AWWA’s) Finance, Accounting, and Management
Controls Committee;
Primary Authors and Co-authors for the Water
Environment Federation (WEF) Manual of Practice 27
updates and WEF’s User Fee-Funded Stormwater
Program special publication;
Editor of the update to AWWA’s M29 Water Capital
Financing;
Assigned Authors of the eighth edition update to AWWA’s M1 Rates and Charges Manual
Our team members have actively participated in
preparing AWWA and WEF financial and rate-setting
manuals, which provide the defensible industry guidelines and best financial practices and principles pertinent to financial planning, cost of service analysis, and rate
development.

Black & Veatch is not only actively involved in leadership positions with our industry’s professional organizations, but we advance its forward progress with publications,
such as our 2021 Strategic Directions in the US Water
Industry report and our 2021 50 Largest Cities Water and Wastewater Rate Survey.

At Black & Veatch, thought leadership means a strong
dedication to research. It’s a vital element of our culture and central to our client commitment. We strive for
innovations that work on paper and off, with smart ideas translating into practical applications.

Helping you keep in front of the curve is important, and Black & Veatch’s leadership role in many engineering and rate-setting areas benefits you. We invite you to scan the QR Code and read about the latest trends impacting us in the Water Industry.

Black & Veatch has a long legacy of
leading the industry in the
development of rate-setting and
financial principles and guidelines.
• Authorship and Editorial Review -
every edition of the AWWA M-1
Manual
• Authorship and Editorial Review -
every edition of the AWWA M-29
Manual
• Authorship and Editorial Review -
every edition of the AWWA M-54
Manual
• Authorship and Editorial Review -
every edition of WEF’s Financing
for Charges for Wastewater
Systems, Manual of Practice 27
• Authorship and Editorial Review
of WEF’s User-Fee Funded
Stormwater Program
• Editor of AWWA’s Finance
Management for Water Utilities
• Past Chair of AWWA Finance,
Accounting, and Management
Controls committee
• On AWWA Rates & Charges
Subcommittees for:
• Cost Allocations
• Rate Design (Vice-Chair)
• Publications (Co-Chair)
• Vice-Chair of AWWA Strategic
Management Practices
committee

THOUGHT LEADERSHIP
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BV.COM BLACK & VEATCH | D. EXPERIENCE 18

RELEVANT EXPERIENCE
THE BEST TESTAMENT TO OUR WORK'S QUALITY IS THAT MORE THAN 80 PERCENT OF OUR WORK COMES FROM REPEAT CLIENTS AND ENGAGEMENTS.

Black & Veatch has served numerous clients in completing water and wastewater cost-of-service analyses. In addition to the reference projects below, we are currently engaged in rate studies for the following utilities:
 City of Oakland, CA – Wastewater Rate Study (as part of Master Planning study)  City of Manhattan Beach, CA – Wastewater Rate Study
 City of Newport Beach, CA – Water and Wastewater Rate Study  LA Sanitation (LASAN), CA – Clean Water System Rate Action and Outreach (Starting January 2023) All these additional projects include financial planning, cost-of-service analyses, and rate design elements.

They also include public workshops, meetings, and assistance with Proposition 218 public notices.

Detailed herein is a summary of a few projects completed by Black & Veatch that align with your scope of services. More project experience write-ups and details can be provided upon request.

Black & Veatch assisted Santa Clara, CA, with water, recycled water, and sewer financial consulting services. The City sets rates annually; therefore, between 2017 and 2022, we have assisted with financial planning, cost of service, rate design, system development charges, and City Council proceedings. The most recent revenue analysis covers a 3-year forecast period. The work items involved the following:

 Operating Fund Financial Plan: Black & Veatch developed a multi-year financial plan for the City’s water, recycled water, and sewer system operating fund to determine the revenue adjustments needed for a 3-year forecast period.
 Capital Fund Financial Plan: Black & Veatch developed a capital cash flow analysis defining the sources and uses of funding for the water, recycled water, and sewer capital program. The plan outlined $50M in new debt proceeds for wastewater due to treatment plant improvements.  System Development Charges: Black & Veatch updated the City’s existing capital connection charges for sewer, developed a new connection charge for water, and reviewed the storm drain fee to determine the existing charges’ appropriateness and determine the maximum allowable charge.  Stakeholder Engagement: Black & Veatch team assisted the City in presentations to City Management and City Council.

CITY OF SANTA CLARA, CA
Water, Recycled Water and Wastewater Rate Study and
System Development Charges
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BV.COM BLACK & VEATCH | D. EXPERIENCE 19

Black & Veatch is assisted the City of Menlo Park, CA, with water financial consulting services. From 2019 through 2021, we provided the City with financial planning, cost of service, rate design, and system development charges. In March 2020, COVID-19 abruptly halted the study. The study was at a stage where it was ready to be presented to City Council. In the Fall of 2020, the City extended the contract with Black & Veatch to update the study, and it was finalized in 2021. The work items involved the following:
 Financial Plan: Black & Veatch developed a multi-year financial plan for the City's water utility fund to determine the revenue adjustments needed for a five-year forecast period.  Capital Financing Plan: Black & Veatch developed a capital financing plan defining the sources and uses of funding for the water capital improvement program. The City had no debt and evaluated debt instruments as an alternative to cash funding the CIP. The debt instruments examined were short- term loans from the General Fund, state revolving loans, and revenue bonds.  Rate Structure: Black & Veatch developed a multi-year rate schedule that met the water utility’s financial needs. The rate structure included a monthly fixed charge based on meter size and a three- tier consumption charge. Due to California's limited water resources, we designed drought rates to match the City's different conservation stages.

 System Development Charges: Black & Veatch updated the City's existing capital connection charges, based on meter size, to determine the appropriateness of the existing charges and the maximum allowable charge that the City could implement.

Black & Veatch assisted the City of Banning, CA, with water, recycled water, and wastewater financial consulting services. The City engaged Black & Veatch in 2021 to assist with financial planning, cost of service, rate design, and City Council proceedings. The City performed a rate study in 2017 but failed to implement the fully identified revenue adjustments. Therefore, the City desperately needed to amend its rates, given increased operating and capital costs. The work items involved the following:

CITY OF MENLO PARK, CA
Water Rate Study and System Development Charges
ANN/ALBERTO - …APPRECIATE THE GOOD WORK YOU’VE DONE EACH AND EVERY YEAR,

YOU HAVE BEEN ROCK-SOLID IN SUPPORTING THE CITY OF SANTA CLARA WITH ITS RATE MODELING AND EVERYTHING TO DO WITH RATES. MUCH APPRECIATED!

GARY WELLING
Director of Water & Sewer Utilities, City of Santa Clara

CITY OF BANNING, CA
Water, Recycled Water, and Wastewater Rate Study
City Council Regular Meeting - Page 358 of 1385

BV.COM BLACK & VEATCH | D. EXPERIENCE 20

 Financial Plan: Black & Veatch developed a multi-year financial plan for the City's water and wastewater utility fund to determine the revenue adjustments needed for a five-year forecast period.

The City did not have full recycled water revenue and revenue requirement details to separate recycled water as a standalone utility fully.
 Capital Financing Plan: Black & Veatch developed a capital financing plan defining the sources and uses of funding for the water and wastewater capital improvement program. The City evaluated debt instruments as an alternative to cash funding the CIP. Given the extensive improvements needed at the wastewater treatment plant, the City anticipates using state-revolving loans and/or revenue bonds.
 Rate Structure: Black & Veatch developed a multi-year schedule that met the financial needs of water and wastewater utilities. The rate structure included a monthly fixed charge based on meter size and a three-tier consumption charge. The tier breakpoints were assessed and adjusted to reflect better water conservation messaging. In addition, we designed drought rates to match the City's different conservation stages.

 Stakeholder Engagement: Black & Veatch team assisted the City in presentations to the Budget & Finance Committee and City Council.

Black & Veatch assisted the County of San Diego, Sanitation District, CA, with water and wastewater financial consulting services. The District engaged Black & Veatch in 2012 to assist with wastewater financial planning, cost of service, and rate design for their eight wastewater County Service Areas (CSAs).

The District provides wastewater services to unincorporated areas in San Diego County.

In 2020, the District engaged Black & Veatch to perform a water rate study for an acquired private water company. The water company provided services to an unincorporated area within the County but could not manage to operate the water utility. The work items involved the following:
 Operating Fund Financial Plan: Black & Veatch developed a multi-year financial plan for the newly acquired water system. The financial plan developed an operating fund to determine the revenue adjustments needed for a 5-year forecast period.
 Capital Fund Financial Plan: Black & Veatch developed a capital cash flow analysis forecasting defining the sources and uses of funding for the water capital program. The County developed a three-year program to replace all infrastructure within the service area. The County plans to use a combination of rate revenue and County funds to make upgrades.
 Rate Structure: Black & Veatch developed a multi-year rate schedule that met the water enterprise’s financial needs. The rate structure included a fixed charge and consumption charges for all.

COUNTY OF SAN DIEGO, CA
Water and Wastewater Rate Study and
Capacity/Annexation Fees
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BV.COM BLACK & VEATCH | D. EXPERIENCE 21

In 2021-2022, Black & Veatch assisted the County with a wastewater rate and system development charges study. The study updated wastewater service rates for the eight-county service areas in unincorporated San Diego County. The County relies on the City of San Diego for treatment services but incorporates treatment charges are part of their rates. In addition, Black & Veatch updated the County’s capacity and annexation fees, which are imposed on new customers connecting to the County’s wastewater system. These charges are intended to help offset capital costs associated with future expansion.

Black & Veatch assisted the City of Napa, CA, with water financial consulting services. The City engaged Black & Veatch in 2011 to assist with financial planning, cost of service, rate design, and City Council proceedings. In 2016, the City engaged Black & Veatch to assist with updating the capacity fees. In 2021, the City engaged Black & Veatch to update the water rate study due to increased operating and capital costs and updated the capacity fees. The work items involved the following:
 Financial Plan: Black & Veatch developed a multi-year financial plan for the City's water utility fund to determine the revenue adjustments needed for a five-year forecast period.  Capital Financing Plan: Black & Veatch developed a capital financing plan defining the sources and uses of funding for the water capital improvement program. The City evaluated debt instruments as an alternative to cash funding the CIP but ultimately decided to cash finance.  Rate Structure: Black & Veatch developed a multi-year schedule that met the financial needs of the water utility. The rate structure included a monthly fixed charge based on meter size and a three-tier consumption charge. The tier breakpoints were assessed and adjusted to reflect better water conservation messaging. In addition, we designed drought rates to match the City's different conservation stages.

 Capacity Fees: Black & Veatch assisted the City in updating the capacity fees imposed on new customers connected to the water system. The City had seen an increase in new development and wanted to ensure that new customers helped pay their fair share of the capital costs associated with expanding the system to serve them.

CITY OF NAPA, CA
Water Rate Study
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BV.COM BLACK & VEATCH | D. EXPERIENCE 22

Black & Veatch assisted the Camrosa Water District in Camarillo, CA, with water, recycled water, and wastewater financial consulting services. The District t engaged Black & Veatch in 2012 to assist with financial planning, cost of service, rate design, and the Board of Director's proceedings. At that time, it was the District's first comprehensive cost-of-service analysis. In 2016, the District sought our services again to update the rate study due to drought-mandated conditions. The work items involved the following:
 Financial Plan: Black & Veatch developed a multi-year financial plan for the District's drinking water, non-potable water, and wastewater funds to determine the revenue adjustments needed for a five- year forecast period. The District did not have non-potable water fully separated from water and wastewater; therefore, we assisted in developing revenue and revenue requirements to create a new standalone fund.
 Capital Financing Plan: Black & Veatch developed a capital financing plan defining the sources and uses of funding for the water, non-potable, and wastewater capital improvement program. The District had spent considerable capital financing developing the non-potable water infrastructure and was seeking to reimburse the other utilities for past capital investments. The primary funding source was cash financing, but long-term debt was also evaluated.  Rate Structure: Black & Veatch developed a multi-year schedule that met the financial needs of water, non-potable water, and wastewater utilities. The rate structure included a monthly fixed charge based on meter size and consumption charges for water and non-potable water. The wastewater charges were based on equivalent dwelling units for residential and consumption charges for non-residential.
 Stakeholder Engagement: Black & Veatch team assisted the District in presentations to the Board of Directors.

As part of the range of services, Black & Veatch examined and updated the miscellaneous charges in accordance with Proposition 26. The miscellaneous were updated to reflect the actual cost of miscellaneous services such as turn-on/off, late fees, etc. Another service provided to the District was system development charges. The District anticipated continued growth and demand for potable and non-potable systems and therefore sought the development of updated water connection fees in accordance with Government Code §66000 et seq requirements.

CAMROSA WATER DISTRICT, CA
Water, Non-Potable Water, and Wastewater Rate Study │
Water Connection and Miscellaneous Fees Update

BLACK & VEATCH PROVIDED US WITH A TOP-NOTCH TEAM THAT WAS EASY TO WORK WITH, VERY KNOWLEDGEABLE, AND INCREDIBLY RESPONSIVE TO OUR NEEDS.

TAMARA SEXTON
Finance Manager, Camrosa Water District

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BV.COM BLACK & VEATCH | E. QUALIFICATIONS 23

e. Qualifications

PROJECT TEAM

KEY MEMBERS OF OUR DEDICATED PROJECT TEAM ARE LOCALLY BASED AND BRING THE SYNERGY OF

HAVING WORKING TOGETHER, ENGINEERING KNOWLEDGE OF WATER AND WASTEWATER SYSTEMS,

INDUSTRY BEST PRACTICE RATE-SETTING EXPERTISE, AND CALIFORNIA-SPECIFIC EXPERIENCE TO HELP THE CITY ACHIEVE ITS STUDY OBJECTIVES.

Our people are the most important part of our organization. Our cohesive Team will perform under the Project Manager's leadership, who will be responsive, diligent, and available to serve the City effectively during this study.

Based on our experience in providing financial planning services and management consulting services, we’ve selected a team specifically for this project that includes the following critical attributes:
 Exceptional Project Management and Thought
Leadership to address the City's cost-of-service study objectives and provide pragmatic data-driven rate
recommendations.
 Synergistic Team that has Delivered Similar Projects
working together. Our Project Team will be led by Alberto Morales, the Project Manager, and supported by Ms. Ann
Bui, the Project Director.

They are based in Southern California and have the
knowledge and skillset to execute rate studies under
Proposition 218 requirements.

They maintain a strong
track record of working together and cohesively
leading project teams to deliver project results on
schedule and budget successfully.

Together, they have supported over 100
municipalities in building long-term financial resilience plans and policies, defensible cost of service analysis, and alternate rate structures while balancing customer
equity and affordability considerations
.

The project team is identified in the organizational chart. Our team is excited to assist the City with this study and is strongly committed to working collaboratively with the City.

FIGURE 8 ORGANIZATIONAL CHART
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BV.COM BLACK & VEATCH | E. QUALIFICATIONS 24

Our Value Proposition
The Project Team will bring value to the City through its experience, trust, thought leadership, accessibility, and collaboration, as noted in Figure 9.

FIGURE 9 BLACK & VEATCH'S VALUE PROPOSITION
Black & Veatch has been solely focused on utility ratemaking for over 80 years. We will bring national perspectives on new cost-of-service approaches, financial best practices, and couple it with recent project experience in Southern California. Our team will leverage lessons learned in the post-SJC rate-making era so the City can avoid common rate-setting pitfalls.

BLACK & VEATCH’S
VALUE

PROPOSITION
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BV.COM BLACK & VEATCH | E. QUALIFICATIONS 25

Key Personnel
Mr. Alberto Morales provides over 20 years of extensive water, wastewater, and recycled water ratemaking and consulting experience for various public and special district agencies throughout California and across the nation. He provides practical, proven, and cost-effective solutions when assisting agencies in developing their operating and capital financing plans. In addition, his utility knowledge covers a wide range of utility management and operating issues, including financial planning, cost of service and rate analysis, capital financing, capital prioritizing, business case analysis, and technical due diligence.

Mr. Morales has supported and led public outreach efforts for all his clients. He has developed and communicated to staff and outside stakeholders about the purpose and value of developing long-term financial plans and performing a cost-of-service analysis. In addition, he is well versed in Proposition 218 requirements affecting all California municipal agencies.

Selected Project Experience
 City of Banning – Water, Recycled Water, and Wastewater Rate Study  City of San Diego – Cost of Service Studies and Related Financial Support  City of Lynwood – Water and Sewer Rate Study
 City of Long Beach – Water and Wastewater Cost of Service Studies  County of San Diego – Wastewater Rate Studies and Water Rate Study  Los Angeles Bureau of Sanitation – Revenue Studies, Wastewater Cost of Service Study  City of Santa Ana – Water and Wastewater Rate Study
 City of Simi Valley – Wastewater Rate Study
 City of Burbank – Wastewater Cost of Service Study
 City of Oxnard – Water, Recycled Water, and Wastewater Rate Studies  Camrosa Water District – Water and Wastewater Rate Studies  City of Santa Clara – Water, Recycled Water, and Wastewater Rate  City of Oakland – Wastewater Rate Study
ALBERTO MORALES Project Manager
ROLE: Mr. Alberto Morales will serve as the Project Manager on this project with the responsibility of managing the day-to-day execution and operations, leading the execution of all aspects of the project, and achieving the agreed upon milestones and deliverables.
 Masters Business Administration, Finance, University of California - Los Angeles  Over 20 years providing Financial Planning and Cost of Service Analysis  Experienced project manager and project leader
 Served on similar projects for San Diego, CA; Long Beach, CA; Santa Clara, CA; Oxnard, CA; Sewerage and Water Board of New Orleans, LA; and Washington Suburban Sanitary Commission, MD

HIGHLIGHTS
City Council Regular Meeting - Page 364 of 1385

BV.COM BLACK & VEATCH | E. QUALIFICATIONS 26

Ms. Ann Bui is a Sr. Managing Director with Black & Veatch’s Global Advisory business. Besides providing clients with strategic financial management strategies, her responsibilities include driving growth and innovation to utilities in financial and advisory planning, climate solutions, resiliency and sustainability issues, and asset integrity.

She has over 30 years of experience with clients over four continents gained through more than 450 engagements, providing financial and business planning services for public and investor-owned utilities.

Her recent assignments have focused on supporting alternative funding needs (including over $1 billion in grants), water insecurity, addressing affordability and assistance program needs, and quantifying the financial impact of deferred asset maintenance.

Ms. Bui brings recent and relevant experience developing new overhead cost allocation frameworks via her work with Washington Suburban Sanitary Commission. She has reviewed cost allocations from the General Fund to Enterprise Funds for the City of Palo Alto, CA, and worked in corporate finance developing cost allocation schedules.

ANN BUI Project Director
ROLE: Ms. Ann Bui will serve as the Project Director on this study to provide the technical guidance and leadership, work with the District to achieve the objectives, and ensure the quality of the analysis and deliverables.  Masters Business Administration, Finance, University of California – Davis  Over 30 years providing Financial Advisory Services
 Nationally recognized leader in Ratemaking Industry
 Experienced with building stakeholder consensus for complex cost-of-service studies  Served on similar projects for the Cities of San Diego, CA; Santa Ana, CA; Long Beach, CA; Santa Clara, CA; Menlo Park, CA; Simi Valley, CA; Napa, CA; Burbank Wastewater Division, CA; Oakland, CA; Central Contra Costa Sanitation District, Sewerage and Water Board of New Orleans, LA; Philadelphia Water Department, PA; and Washington Suburban Sanitary

HIGHLIGHTS
Ms. Bui is recognized as a thought leader in the Industry’s Rate-Making community. Her contributions to shaping financial and rate-setting include authorship in the following manuals of practice:
 AWWA M1 – 6th, 7th, and 8th (upcoming) editions
 AWWA M29, Water Utility Capital Financing – 3rd, 4th, and 5th (upcoming) editions  WEF, Financing and Charges for Wastewater Systems – 4th edition  WEF, Unser Fee-Funded Stormwater Programs
 AWWA Financial Management for Water Utilities, Editor In addition, she has served in leader roles at AWWA:

Chair: FAMC, M29 Updates, AWRF Project (Water Reuse Cost Allocations & Pricing Co-Chair: Publications Subcommittee
Vice-Chair: Water Rate Design Subcommittee
City Council Regular Meeting - Page 365 of 1385

BV.COM BLACK & VEATCH | E. QUALIFICATIONS 27

RUPA JHA Miscellaneous Fees
ROLE: Ms. Rupa Jha will lead the Miscellaneous Fees analysis for the City that will meet Prop 26 requirements.

Ms. Jha provides consulting experience in utility rate studies, business process and workflow analysis, benchmarking, miscellaneous fee studies, indirect cost allocation studies, system development charges, and impact fee studies. She is also experienced in fund review studies, infrastructure asset management, change management, performing AWWA water audits, consumption and meter read analytics, and financial modeling.

JORGE VILLALOBOS Financial Analyst Lead
ROLE: Mr. Jorge Villalobos will serve as the Financial Analyst Lead in performing the cost-of-service analysis portion of the project and assisting with the rate design elements.

Mr. Villalobos provides consulting expertise in financial analysis for bond feasibility, revenue requirements, cost of service, rate design, capital prioritization, and business process evaluation for water, wastewater, and stormwater utilities.

His experience includes working as a consultant for investors in the securities and real estate investment industries. This diverse professional background allows him to combine his engineering and financial background with an understanding of the different points of view of multiple stakeholders in each engagement, which allows him to provide effective and actionable solutions.

Key Support Staff
The Project Team will be supported by a deep bench of experts in the subject areas critical to executing the City’s study. Specifically, we will use a team of financial analysts and engineers as junior staff in the analysis.

City Council Regular Meeting - Page 366 of 1385

BV.COM BLACK & VEATCH | F. REFERENCES 28

f. References
Black & Veatch presents three (3) client references that illustrate our prior experience in providing water and wastewater utility financial planning, cost of service analysis, rate design, stakeholder engagement workshops and presentations, benchmarking, and other rate study-related services to utilities in California.

The projects represent our work experience, similar to what the City requested in the RFP, and our project team members have played key roles in these projects. The project descriptions are included in the proposal under the Experience section.

TABLE 1 REFERENCES

CLIENT REFERENCE PROJECT MEMBERS
City of Santa Clara, CA MR. GARY WELLING
Director of Water & Sewer
1500 Warburton Ave
Santa Clara, CA 95050
☎ +1 408-615-2018
✉ [email protected]
Project Director: Ms. Ann Bui
Project Manager: Mr. Alberto Morales
City of Banning, CA MR. ARTURO VELA
Director of Public Works
99 E. Ramsey Street
Banning, CA 92220
☎ +1 951-922-3134
✉ [email protected]
Project Director: Ms. Ann Bui
Project Manager: Mr. Alberto Morales
Camrosa Water
District, CA
MS. TAMARA SEXTON
Finance Manager
7385 Santa Rosa Road
Camarillo, CA 93012
☎ +1 805-482-8214
✉ [email protected]
Project Director: Ms. Ann Bui
Project Manager: Mr. Alberto Morales

City Council Regular Meeting - Page 367 of 1385

BV.COM BLACK & VEATCH | G. PROJECT SCHEDULE 29

g. Project Schedule
Based on the scope of work, the schedule was designed with the assumption that the receipt of notice to proceed will occur on December 20, 2022. The City wishes to complete the study in time to allow for the approval of rates on May 16, 2023. Considering the process associated with Proposition 218, the draft rate study report will need to be completed by March 31, 2023, to allow for meetings with City Council and the community. Black & Veatch can meet the proposed deadlines under the following assumptions:
 Timely receipt of requested data.
 No major changes to existing rate structures. Under the tight timeframe, significant changes will delay the recommendations.
 Timely turn-around on materials submitted for review.  Access to the City’s staff, City Council, and other stakeholders for meetings.

If the City cannot adopt rates by May 16, 2023, it can still adopt by June 6, 2023.

TASK DESCRIPTION 2022 2023

DEC JAN FEB MAR APR MAY JUN
Task 1. Project Management
Task 2. Financial Plan
Task 3. Benchmarking
Task 4. Cost of Service Analysis
Task 5. Rate Design
Task 6. Overhead Allocation Review
Task 7. Miscellaneous Fees
Task 8. Connections Fees
Task 9. Meetings        

 

 
Task 10. Reports   
Task 11. Proposition 218 Support
Task 12. Rate Model Development
and Training

 Kick-off Meeting  Staff Meeting (Zoom)  City Council Workshop  Community Meeting  Public Hearing Meeting  Report  Training City Council Regular Meeting - Page 368 of 1385

BV.COM BLACK & VEATCH | H. COST PROPOSAL 30

h. Cost Proposal
Based on the scope of services, Black & Veatch proposes to perform the scope on a time-and-materials basis for a not-to-exceed amount of $101,940 inclusive of anticipated direct expenses. Direct expenses include but are not limited to mileage, car rental, hotels, meals, and reproduction costs. Table 2 provides a detailed breakdown of the hours and cost by task.

TABLE 2 PROJECT COSTS

TASK DESCRIPTION PROJECT

DIRECTOR

PROJECT

MANAGER

FINANCIAL

ANALYST
LEAD

MISCELLANEOU
S FEES

FINANCIAL

ANALYST

GRAPHIC

SUPPORT TOTAL COST
Team Member Bui Morales Villalobos Jha Staff Staff
Hourly Rate $365 $275 $240 $275 $185 $160
Task 1. Project Management 0 13 3 2 10 0 $6,695
Task 2. Financial Plan 2 10 9 0 56 0 $16,100
Task 3. Benchmarking 0 4 2 0 16 0 $4,540
Task 4. Cost of Service Analysis 1 10 8 0 34 0 $11,375 Task 5. Rate Design 3 9 12 0 42 0 $14,220
Task 4. Overhead Allocation Review 1 2 0 4 4 0 $2,765 Task 7. Miscellaneous Fees 0 1 0 6 20 0 $5,625
Task 8. Connections Fees 0 4 0 0 24 0 $5,540
Task 9. Meetings 4 20 5 0 0 4 $8,800
Task 10. Reports 4 5 8 2 38 0 $12,335
Task 11. Proposition 218 Support 0 4 2 0 4 16 $4,540 Task 12. Rate Model Development
and Training 0 4 2 0 16 0 $4,540
Total Hours 15 86 51 14 264 20 $97,255
Direct Expenses $1,500
Total Fee $98,755
City Council Regular Meeting - Page 369 of 1385

BV.COM BLACK & VEATCH | H. COST PROPOSAL 31

ADDITIONAL PROFESSIONAL SERVICES
Upon request and authorization by the City via an addendum to the agreement, any additional services or meetings not identified in the services plan's scope will be billed hourly according to the hourly rates schedule. Direct expenses are charged at direct out-of-pocket costs. Payment terms are net 30.

TABLE 3 HOURLY BILLING RATES
STAFF CLASSIFICATION HOURLY BILLING RATES*
Administrative/Graphic Support $160
Financial Analyst $185
Task Lead (Financial Analyst) $240
Task Lead (Misc. Fees) $275
Project Manager $275
Project Director $365

* The above rates for additional services are fixed for 2023 and are subject to increase after January 1 of each subsequent year.

City Council Regular Meeting - Page 370 of 1385
BV.COM BLACK & VEATCH | I. COPY OF A RATE STUDY 32

i. Copy of a Rate Study
A copy of the City of Banning Water and Wastewater Rate Study report is attached.

City Council Regular Meeting - Page 371 of 1385

DRAFT FINAL

WATER AND WASTEWATER RATE
STUDY

B&V PROJECT NO. 409534.0100

PREPARED FOR
City of Banning, CA
AUGUST 30, 2022

.

©Black & Veatch Holding Company 2022. All rights reserved.

City Council Regular Meeting - Page 372 of 1385
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City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Table of Contents i
Table of Contents
Table of Contents ................................ ................................ ................................ .............................. i List of Tables ................................ ................................ ................................ ................................ ... iv Table of Figures ................................ ................................ ................................ ............................... v Acronyms ................................ ................................ ................................ ................................ .......vii Disclaimer ................................ ................................ ................................ ................................ ...... viii 1 Executive Summary ................................ ................................ ................................ .................. 1

1.1 Financial Plan ....................................................................................................................................... 1

1.1.1 Water Utility .......................................................................................................................... 1

1.1.2 Wastewater Utility ................................................................................................................ 2

1.2 Adequacy of Existing Rates to Meet Costs of Service .......................................................................... 3

1.3 Cost-of-Service Analysis ....................................................................................................................... 3

1.4 Rate Design .......................................................................................................................................... 4

1.4.1 Water Utility .......................................................................................................................... 4

1.4.2 Wastewater Utility ................................................................................................................ 5

1.4.3 Typical Bill.............................................................................................................................. 5 2 Introduction ................................ ................................ ................................ ............................. 7

2.1 Purpose ................................................................................................................................................ 7

2.2 Water System....................................................................................................................................... 7

2.3 Wastewater System ............................................................................................................................. 7

2.4 Methodology ....................................................................................................................................... 8

2.4.1 Financial Planning ................................................................................................................. 8

2.4.2 Cost of Service Analysis ......................................................................................................... 8

2.4.3 Rate Design ........................................................................................................................... 8

2.4.4 Rate Adoption ....................................................................................................................... 8 Water Rate Study ................................ ................................ ................................ ........................... 10 3 Revenue and Revenue Requirements ................................ ................................ ...................... 10

3.1 Customer and Water Consumption Projections ................................................................................10

3.1.1 Customer Connections and Bills .........................................................................................10

3.1.2 Water Consumption ............................................................................................................10

3.2 Revenue Under Existing Rates ...........................................................................................................12

3.3 Other Revenue ...................................................................................................................................13

3.4 Operating and Maintenance Expenses ..............................................................................................13

3.5 Long-Term Debt .................................................................................................................................13

3.6 Capital Improvement Program ..........................................................................................................14 City Council Regular Meeting - Page 374 of 1385
Water and Wastewater Rate Study | City of Banning, CA

ii B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022

3.6.1 Capital Improvement Financing Plan ..................................................................................15

3.7 Transfers ............................................................................................................................................16

3.8 Reserves .............................................................................................................................................16

3.9 Projected Operating Results ..............................................................................................................16 4 Cost of Service Analysis ................................ ................................ ................................ .......... 21

4.1 Functional Cost Components .............................................................................................................22

4.2 Allocation to Cost Components .........................................................................................................22

4.2.1 System Base, Max Day, and Max Hour Allocations .............................................................22

4.2.2 Allocation of Operating and Maintenance Expenses ..........................................................23

4.2.3 Allocation of Capital Investments .......................................................................................24

4.3 Units of Service ..................................................................................................................................29

4.4 Cost of Service Allocations .................................................................................................................29

4.4.1 Units Costs of Service ..........................................................................................................29

4.4.2 Distribution of Costs of Service to Customer Classes .........................................................29 5 Rate Design ................................ ................................ ................................ ............................ 33

5.1 Existing Rates .....................................................................................................................................33

5.2 Proposed Rates ..................................................................................................................................33

5.2.1 Service Charge .....................................................................................................................33

5.2.2 Private Fire Service ..............................................................................................................34

5.2.3 Commodity Charge .............................................................................................................35

5.3 Drought Conditions ............................................................................................................................39

5.3.1 Water Shortage Contingency Plan ......................................................................................39

5.3.2 Drought Surcharges .............................................................................................................39

5.4 Typical Monthly Costs Under Proposed Charges ...............................................................................41

5.5 Neighboring Water Utilities ...............................................................................................................41 Wastewater Rate Study................................ ................................ ................................ .................. 43 6 Revenue and Revenue Requirements ................................ ................................ ...................... 43

6.1 Customer Projections ........................................................................................................................43

6.1.1 Equivalent Dwelling Units ...................................................................................................43

6.2 Revenue Under Existing Rates ...........................................................................................................43

6.3 Other Revenue ...................................................................................................................................44

6.4 Operating and Maintenance Expenses ..............................................................................................44

6.5 Long-Term Debt .................................................................................................................................45

6.6 Capital Improvement Program ..........................................................................................................45

6.6.1 Capital Improvement Financing Plan ..................................................................................46

6.7 Transfers ............................................................................................................................................47 City Council Regular Meeting - Page 375 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Table of Contents iii

6.8 Reserves .............................................................................................................................................47

6.9 Projected Operating Results ..............................................................................................................48 7 Cost of Service Analysis ................................ ................................ ................................ .......... 52

7.1 Functional Cost Components .............................................................................................................53

7.2 Allocation to Cost Components .........................................................................................................53

7.2.1 Volume, Capacity, and Strength Allocations .......................................................................53

7.2.2 Allocation of Operating and Maintenance Expenses ..........................................................54

7.2.3 Allocation of Capital Investments .......................................................................................55

7.3 Units of Service ..................................................................................................................................59

7.4 Cost of Service Allocations .................................................................................................................60

7.4.1 Units Costs of Service ..........................................................................................................60

7.4.2 Distribution of Costs of Service to Customer Classes .........................................................60 8 Rate Design ................................ ................................ ................................ ............................ 63

8.1 Existing Rates .....................................................................................................................................63

8.2 Proposed Rates ..................................................................................................................................63

8.2.1 Fixed Charge ........................................................................................................................63

8.3 Typical Monthly Costs Under Proposed Charges ...............................................................................64

8.4 Neighboring Wastewater Utilities .....................................................................................................64 9 Appendix A – Detailed Capital Improvement Program ................................ ............................. 65 10 Appendix B – Long Term Financial Plan ................................ ................................ ................... 69

City Council Regular Meeting - Page 376 of 1385
Water and Wastewater Rate Study | City of Banning, CA

iv B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 List of Tables
Table 1-1 Proposed Revenue Adjustments ............................................................... 3 Table 1-2 Proposed Five-Year Water Rate Schedule ................................................ 5 Table 1-3 Proposed Five-Year Wastewater Rate Schedules ..................................... 5 Table 3-1 Customer Bills ......................................................................................... 10 Table 3-2 Billed Water Consumption ...................................................................... 11 Table 3-3 Existing Water Rates ............................................................................... 12 Table 3-4 Projected Revenue under Existing Rates ................................................ 12 Table 3-5 O&M Expenses ........................................................................................ 13 Table 3-6 Debt Service ............................................................................................ 14 Table 3-7 Capital Improvement Projects ................................................................ 15 Table 3-8 Capital Facilities Fund Financing Plan ..................................................... 15 Table 3-9 Operating Fund ....................................................................................... 19 Table 4-1 Cost of Service Revenue from Rates ....................................................... 21 Table 4-2 Allocation Basis for O&M Expenditures .................................................. 25 Table 4-3 Allocation of O&M Expenditures ............................................................ 26 Table 4-4 Allocation Basis for Capital Costs ............................................................ 27 Table 4-5 Allocation of Capital Costs ...................................................................... 28 Table 4-6 Units of Service ....................................................................................... 31 Table 4-7 Units Cost of Service ............................................................................... 31 Table 4-8 Distribution of Costs to Customer Classes .............................................. 32 Table 5-1 Costs within the Service Charge for FY 2023 .......................................... 33 Table 5-2 Proposed Service Charge ........................................................................ 34 Table 5-3 Costs within the Fire Service Charge for FY 2023 ................................... 34 Table 5-4 Proposed Fire Service Charge ................................................................. 35 Table 5-5 Base Unit Charge ..................................................................................... 36 Table 5-6 Peaking Factors ....................................................................................... 36 Table 5-7 Peaking Units of Service .......................................................................... 36 Table 5-8 Peaking Unit Charge ................................................................................ 37 Table 5-9 Conservation Units of Service ................................................................. 37 Table 5-10 Conservation Unit Charge ..................................................................... 37 Table 5-11 Water Supply Units of Service ............................................................... 38 Table 5-12 Water Supply Unit Charge ..................................................................... 38 Table 5-13 Total Unit Charge, FY 2023 .................................................................... 38 Table 5-14 Proposed Commodity Charges .............................................................. 39 Table 5-15 Stages of Water Shortages Contingency Plan ....................................... 39 City Council Regular Meeting - Page 377 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Table of Contents v
Table 5-16 Proposed First Year Drought Charges, FY 2023 .................................... 40 Table 5-17 Proposed Five-Year Drought Charges ................................................... 40 Table 5-18 Typical Monthly Bill ............................................................................... 41 Table 6-1 Equivalent Dwelling Units ....................................................................... 43 Table 6-2 Existing Wastewater Rates ...................................................................... 44 Table 6-3 Revenue under Existing Rates ................................................................. 44 Table 6-4 O&M Expenses ........................................................................................ 45 Table 6-5 Long-Term Debt Service .......................................................................... 45 Table 6-6 Capital Improvement Projects ................................................................ 46 Table 6-7 Capital Facilities Fund Financing Plan ..................................................... 47 Table 6-8 Wastewater Tertiary Fund Financing Plan .............................................. 47 Table 6-9 Operating Fund ....................................................................................... 50 Table 7-1 Cost of Service Revenue from Rates ....................................................... 52 Table 7-2 Allocation Basis for O&M Expenditures .................................................. 56 Table 7-3 Allocation of O&M Expenditures ............................................................ 57 Table 7-4 Allocation Basis for Capital Costs ............................................................ 58 Table 7-5 Allocation of Capital Costs ...................................................................... 58 Table 7-6 Units of Service ....................................................................................... 61 Table 7-7 Units Cost of Service ............................................................................... 62 Table 7-8 Distribution of Costs to Customer Classes .............................................. 62 Table 8-1 Proposed Fixed Charge ........................................................................... 63 Table 8-2 Typical Monthly Bill ................................................................................. 64 Table 9-1 Water Capital Improvement Projects ..................................................... 65 Table 9-2 Wastewater Capital Improvement Projects ............................................ 67 Table 10-1 Long-Term Water Operating Fund ........................................................ 69 Table 10-2 Long-Term Wastewater Operating Fund .............................................. 71 Table of Figures
Figure 1-1 Water Operating Cash Flow ..................................................................... 2 Figure 1-2 Wastewater Operating Cash Flow ........................................................... 3 Figure 1-3 Single Family Residential Combined Typical Bill ...................................... 6 Figure 3-1 Water Sold and Number of Customers .................................................. 11 Figure 3-2 Status Quo Operating Cash Flow ........................................................... 17 Figure 3-3 Water Operating Cash Flow ................................................................... 20 Figure 5-1 Comparison to Neighboring Water Utilities .......................................... 42 Figure 6-1 Status Quo Operating Cash Flow ........................................................... 48 City Council Regular Meeting - Page 378 of 1385
Water and Wastewater Rate Study | City of Banning, CA

vi B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Figure 6-2 Operating Cash Flow .............................................................................. 51 Figure 8-1 Comparison to Neighboring Wastewater Utilities ................................. 64 Figure 10-1 Long-Term Water Operating Cash Flow .............................................. 70 Figure 10-2 Long-Term Wastewater Operating Cash Flow ..................................... 72

City Council Regular Meeting - Page 379 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Table of Contents vii
Acronyms
AB Assembly Bill
ADD Average Daily Demand
AWWA American Water Works Association
Black & Veatch Black & Veatch Management Consulting LLC BOD Biochemical Oxygen Demand
CIP Capital Improvement Program
City City of Banning
EDU Equivalent Dwelling Unit
FY Fiscal Year (July 1 to June 30)
gpcd gallons per capita per day
gpm gallons per minute
HCF Hundred Cubic Feet
M Million
M1 AWWA Manual - Principles of Water Rates, Fees, and Charges Max Day Maximum Day
Max Hour Maximum Hour
MGD Million Gallons per Day
O&M Operation and Maintenance
SB Senate Bill
SBx7-7 Senate Bill X7-7 (State of California in the Water Conservation Act of 2009) SGPWA San Gorgonio Pass Water Agency
Study Water and Wastewater Rate Study
TSS Total Suspended Solids
TY Test Year
UWMP Urban Water Management Plan
WEF Water Environment Federation
WWTP Wastewater Treatment Plant
City Council Regular Meeting - Page 380 of 1385
Water and Wastewater Rate Study | City of Banning, CA

viii B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Disclaimer
This report was prepared for the City of Banning by Black & Veatch Management Consulting, LLC Black & Veatch) and is based on information provided by the City, not within the control of Black & Veatch. While it is believed that the information, data, and opinions contained herein will be reliable under the conditions and subject to the limitations set forth in this report, Black & Veatch does not guarantee the accuracy thereof. Black & Veatch has assumed that the information provided by others, both verbal and written, is complete and correct. The projections set forth in this report are intended as "forward-looking statements." In formulating these projections, Black & Veatch has made certain assumptions with respect to conditions, events, and circumstances that may occur in the future. While Black & Veatch believes the assumptions are reasonable, actual results may differ materially from those projected, as influenced by the conditions, events, and circumstances that occur. As such, Black & Veatch does not take responsibility for the accuracy of data or projections provided by or prepared on behalf of the City, nor does Black & Veatch have any responsibility for updating this report for events occurring after the date of this report.

Use of this report or any information contained therein by any party other than the City shall constitute a waiver and release by such third party of Black & Veatch from and against all claims and liability, including but not limited to liability for special, incidental, indirect, or consequential damages in connection with such use. Such use of this report by a third party shall constitute agreement by the third-party user that its rights, if any, arising from this report shall be subject to the terms of this Report Limitations, and in no event shall the third party’s rights, if any, exceed those of the City under its contract with Black & Veatch. The benefit of such releases, waivers, or limitations of liability shall extend to the related companies and subcontractors of any tier of Black & Veatch, and the shareholders, directors, officers, partners, employees, and agents of all released or indemnified parties.

City Council Regular Meeting - Page 381 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Executive Summary 1
1 Executive Summary
The City of Banning (City) commissioned Black & Veatch Management Consulting, LLC (Black & Veatch) to perform a Water and Wastewater Rate Study (Study) for its Water and Wastewater Utilities.

The Study included the development of a five-year financial plan, a cost-of-service analysis, and the design of rates. The specific objectives of the Study were to:
◼ Evaluate the adequacy of projected revenues under existing rates to meet projected revenue requirements.
◼ Develop sound financial plans for the utilities covering five years for ongoing operations and planned capital improvements.
◼ Allocate the utilities’ projected revenue requirements to the various customer classes in accordance with their respective service requirements.
◼ Develop a suitable rate schedule that produces revenues adequate to meet financial needs while recognizing customer costs of service and regulatory considerations such as Proposition 218 and applicable judicial decisions.

1.1 FINANCIAL PLAN
The City owns and manages both a water utility and wastewater utility as individual self- supporting enterprises. Therefore, the utilities must develop financial plans that provide sufficient revenues to meet all operation and maintenance expenses, water purchases, wastewater treatment, debt service requirements, capital improvements funded from current revenues, and other expenditures.

The Study develops financial plans that project operating revenue, expenses, and capital financing costs for the utilities over a five-year planning period beginning July 1, 2022 and ending June 30, 2027.

The financial plans project future rate revenues under existing rates, operation and maintenance (O&M) expenses, principal and interest expense on debt, transfers, and capital improvement program (CIP) requirements. In the projection of rate revenues, annual projections of customers and water consumption rely upon the City’s historical data and estimates of growth. In addition, the Water Utility’s forecast incorporates efforts to continue to meet the conservation goals as established by the State of California under Senate Bill 7x-7 (SB7x-7) and the City’s Water Shortage Contingency Plan (WSCP) identified in the 2020 Urban Water Management Plan (UWMP) and codified in the City of Banning Municipal Code, Chapter 13.16.

1.1.1 Water Utility
The Water Utility’s revenue requirements are summarized below:
◼ Operation and Maintenance Expenses: The O&M expenses increase from $7.9M in FY 2023 to $10.0M in FY 2027. Salaries and benefits represent an average of 38% of O&M expenses. ◼ Debt Service: There is an existing revenue bond with an annual payment of $2.0M. There is no future debt planned.

City Council Regular Meeting - Page 382 of 1385
Water and Wastewater Rate Study | City of Banning, CA

2 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 ◼ Capital Improvements: The CIP identified an average of $6.2M per year in capital projects from FY 2023 to FY 2027.
◼ Reserves: Continue to maintain the operating fund reserve level. The operating fund reserve is designed to help cover fluctuations in day-to-day expenses. The new target, consistent with industry reserve guidelines, will be 90 days of O&M expenses, a change from the existing 10% of O&M expenses and debt service payments.

The Water Utility is proposing revenue adjustments and drawing down on reserves to allow it to operate on a revenue-neutral basis and meet reserve targets, as shown in Figure 1-1.

Figure 1-1 Water Operating Cash Flow

1.1.2 Wastewater Utility
The Wastewater Utility’s revenue requirements are summarized below:
◼ Operation and Maintenance Expenses: The O&M expenses increase from $3.7M in FY 2023 to $4.6M in FY 2027. Salaries and benefits represent an average of 36% of O&M expenses. ◼ Debt Service: There is an existing revenue bond with an annual payment of $290k. The City anticipates a net debt issuance of $25.0M in FY 2025, which will add an annual payment of $1.9M starting in FY 2025.
◼ Capital Improvements: The CIP identified an average of $12.1M per year in capital projects from FY 2023 to FY 2027.
◼ Reserves: Continue to maintain the operating fund reserve level. The operating fund reserve is to help cover fluctuations in day-to-day expenses. The scheduled target will be 90 days of O&M expenses, a change from the existing 10% of O&M expenses and debt service payment.

The Wastewater Utility is proposing revenue adjustments to allow it to operate on a revenue- neutral basis and meet reserve targets, as shown in Figure 1-2.

City Council Regular Meeting - Page 383 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Executive Summary 3
Figure 1-2 Wastewater Operating Cash Flow

1.2 ADEQUACY OF EXISTING RATES TO MEET COSTS OF SERVICE Based on the financial plans, Black & Veatch recommends the revenue adjustments shown in Table 1-1 to meet the projected revenue requirements for FY 2023 to FY 2027. These do not represent proposed rate increases to customers. Rather, these represent the overall revenue increases the utilities need to meet their obligations and maintain current service levels.

Table 1-1 Proposed Revenue Adjustments

1.3 COST-OF-SERVICE ANALYSIS
The cost-of-service analysis allocates the costs to the various customer classes of service in a fair and equitable manner. The methodologies used in the Study are specific to the respective utility operations. The following is a brief description of the methodologies.

The water cost-of-service allocation performed in this Study uses the Base-Extra Capacity Method endorsed by the American Water Works Association (AWWA) Principles of Water Rates, Fees, and Charges, M1 (M1) manual. Under cost-of-service principles, costs are allocated to the different customer classes in proportion to their water system use. As recommended by AWWA, Black & Veatch distributed functional costs to the base (average load conditions), extra capacity (peaking), and customer-related parameters. This allocation methodology produces unit costs for allocation to individual customer classes based on the projected customer service requirements.

FY 2023 January 10.75% 40.00%
FY 2024 July 0.00% 25.00%
FY 2024 January 10.75% 25.00%
FY 2025 January 10.75% 3.00%
FY 2026 January 10.75% 3.00%
FY 2027 January 10.75% 3.00%
Wastewater
UtilityFiscal Year
Water
Utility
Effective
Month
City Council Regular Meeting - Page 384 of 1385
Water and Wastewater Rate Study | City of Banning, CA

4 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 The wastewater cost-of-service allocation performed in this Study follows the Functional Cost Allocation Method endorsed by the Water Environment Federation (WEF) Financing and Charges for Wastewater Systems, Manual of Practice 27 (MoP27) manual. Like the methodology used for water systems, the sewer cost of service analysis allocates costs to the different customer classes in proportion to their use of the wastewater system. As recommended by WEF, Black & Veatch distributed functional costs to volume, capacity, strength, and customer-related parameters. This allocation methodology produces unit costs for allocation to individual customer classes based on the projected customer service requirements.

1.4 RATE DESIGN
The Right to Vote on Taxes Act, also known as Proposition 218, was passed by California voters in 1996 and added Article XIIIC and Article XIIID to the California Constitution. These articles provide the regulatory framework that guides and informs the rate-setting process. The cost-of-service analyses provide the cost nexus for the proposed rate structures. The regulatory framework helps ensure cost recovery is proportionate to the cost of providing the service.

1.4.1 Water Utility
To minimize impacts, retain simplicity, and ensure the reasonable stability of revenue, Black & Veatch recommends the following rate structure for the Water Utility. ◼ Service Charge: Retain the monthly service charge based on meter sizes for all customers. The monthly service charge recovers portions of fixed cost elements such as meter maintenance and services, meter reading, issuing bills, and maintenance and capacity costs associated with public fire protection.
◼ Fire Service Charge: Implement a new monthly fire service charge based on meter size for private fire service connections. The fire service charge will recover maintenance and capacity costs associated with private fire protection costs.
◼ Commodity Charge: Maintain the three-tier commodity charge for all customers and amend the brekapoints to Tier 1 (0-7 HCF), Tier 2 (8-15 HCF) and Tier 3 (16+ HCF). The commodity charge recovers costs associated with the base and extra capacity demands. Treat parks and City customers in the same manner as all other customers, subject to the three-tier rate structure.

Table 1-2summarizes the recommended five-year rate schedules for all Water Utility components.

Rates become effective every January 1st.

City Council Regular Meeting - Page 385 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Executive Summary 5
Table 1-2 Proposed Five-Year Water Rate Schedule

1.4.2 Wastewater Utility
To minimize impacts, retain simplicity, and ensure the reasonable stability of revenue, Black & Veatch recommends the following rate structure for the Wastewater Utility. ◼ Fixed Charge: Retain the monthly fixed charge based on equivalent dwelling units (EDUs) for all customers. Residential and commercial customers have independent rates.

Table 1-3 summarizes the recommended five-year rate schedules for the Wastewater Utility.

Rates become effective every January 1st, except in FY 2024, where there is an increase on July 1st and January 1st.

Table 1-3 Proposed Five-Year Wastewater Rate Schedules

1.4.3 Typical Bill
To understand the impact on the rate increases, a typical bill for a single-family residential is shown in Figure 1-3. For water, a single-family residential account represents a customer with a ¾” Fiscal Year Ending June 30,
Customer Class FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Service Charge ($/Month)
5/8" 25.74 27.75 30.92 33.64 35.66 3/4" 25.74 27.75 30.92 33.64 35.66 1" 38.36 41.08 44.84 48.97 51.91 1-1/2" 69.90 74.39 79.63 87.31 92.53 2" 107.75 114.37 121.38 133.31 141.27 3" 208.68 220.97 232.72 255.98 271.25 4" 322.23 340.91 357.97 393.98 417.48 6" 637.64 674.05 705.90 777.33 823.68 8" 1,016.14 1,073.82 1,123.41 1,237.34 1,311.11 Fire Service ($/Month)
2" 24.25 25.45 25.56 28.78 30.69 4" 38.79 40.72 40.89 46.05 49.10 6" 77.59 81.43 81.78 92.09 98.21 8" 121.23 127.24 127.79 143.89 153.45 10" 242.46 254.48 255.57 287.79 306.90 12" 387.94 407.16 408.91 460.46 491.04 Commodity Charges ($/HCF)
Tier 1 (0-7 HCF) 2.42 2.76 3.10 3.48 3.96 Tier 2 (8-15 HCF) 2.62 2.97 3.31 3.72 4.23 Tier 3 (16+ HCF) 3.15 3.52 3.88 4.31 4.83 Fiscal Year Ending June 30,
Customer Class FY 2023 FY 2024 FY 2024 FY 2025 FY 2026 FY 2027 Fixed Charge ($/Month/EDU)
Effective Date 1/1/2023 7/1/2023 1/1/2024 1/1/2025 1/1/2026 1/1/2027 Residential 30.20 37.75 47.12 49.01 49.69 51.35
Commercial 32.81 41.01 51.57 51.03 56.06 56.98
Tertiary Surcharge 2.32 2.32 2.32 2.32 2.32 2.32
City Council Regular Meeting - Page 386 of 1385
Water and Wastewater Rate Study | City of Banning, CA

6 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 meter connection consuming 15 HCF per month. For wastewater, a single-family residential account represents a customer with one EDU or a customer returning 12 HCF per month of wastewater flow.

Figure 1-3 Single Family Residential Combined Typical Bill

City Council Regular Meeting - Page 387 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 7 2 Introduction

2.1 PURPOSE
The purpose of this report is (1) to project the future revenues of the water and wastewater utilities under existing rates and charges, as well as the operating expenses and capital financing revenue requirements of the two utilities, and to examine the adequacy of projected revenues to meet these revenue requirements through FY 2027; (2) to allocate these revenue requirements, or costs of service, for a representative test year to the various customer classes in accordance with the respective service requirements that each class places on the systems; and (3) to develop a suitable schedule of water and wastewater rates that will produce revenues adequate to meet the financial needs of the utility on a basis that recognizes customer costs of service and practical bill impact considerations.

2.2 WATER SYSTEM
The Water Utility provides water services to about 10,820 residential, commercial, irrigation, institutional, and fire service customers. The water infrastructure system consists of 19 groundwater wells, 165 miles of transmission and distribution mains, eight storage tanks totaling 19.55 million gallons of storage capacity, two booster pump stations, five pressure reducing valve stations, and six pressure zones.

The primary water supply source for the City comes from groundwater wells that extract water from five groundwater basins in the area. The groundwater basins consist of West Banning Storage Unit, Banning Bench Storage Unit, Cabazon Storage Unit, Beaumont Storage Unit (Beaumont Basin) and the Banning Water Canyon Storage Unit. The Beaumont Basin which is the primary source of water supply for the City accounting for 70% of the water supply, is the only adjudicated basin with a Watermaster Committee that monitors the basin from overdraft. The 19 wells have a total capacity of 14,950 gallons per minute (gpm). However, three wells are considered non-potable wells; therefore, the actual potable well capacity is 11,500 gpm.

In addition to groundwater, the City imports State Water Project (SWP) water through the San Gorgonio Pass Water Agency (SGPWA). SGPWA is one of the 29 water agencies with a SWP Water Supply Contract. Water purchased from SGPWA is used to recharge the Beaumont Basin at SGPWA’s Brookside Recharge Facility.

2.3 WASTEWATER SYSTEM
The Wastewater Utility provides wastewater services to about 13,400 residential and commercial equivalent dwelling units. Services include collecting and treating wastewater flow and constructing and maintaining the wastewater infrastructure system. Wastewater flows throughout the City are collected and transported through more than 112 miles of wastewater mains and four lift stations to the City- owned Wastewater Treatment Plant (WWTP). The WWTP has a rated capacity of 3.5 million gallons a day (MGD) but averages a daily flow of about 2.0 MGD.

City Council Regular Meeting - Page 388 of 1385
Water and Wastewater Rate Study | City of Banning, CA

8 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022

2.4 METHODOLOGY
The rate setting methodology employed by Black & Veatch is consistent with industry guidelines established by AWWA and WEF in their national industry manuals. The manuals make recommendations on generally accepted practices in the water and wastewater industries. An overview of the methodology is outlined in below.

The key components of our methodology consist of the following:

2.4.1 Financial Planning
Financial planning compares the
projected revenues of the utility under
existing conditions to its projected
operating expenses and capital
expenditures. This step tests the
adequacy of the existing rates to
recover the utility’s forecasted costs. If
there are shortfalls, increases to
revenue are recommended until the
utility is financial stable.

2.4.2 Cost of Service Analysis
Cost-of-service analysis builds a
link between the utility’s cost of service
and the proposed rates for each
customer. This process takes individual
budget cost item and allocates them
based on the function that is serves.

Organizing the budget in terms of end
function allows the creation of a nexus
between the budget cost item and the
rate.

2.4.3 Rate Design
Rate design involves developing a rate structure that equitably and proportionately recovers costs from the customers. Rate equity is inherently built upon each customer’s relative use of the system. The rate structure must be tailored to customer account and demand profiles and should be resilient and flexible enough to handle changing cost and demand scenarios. By designing different rate components, the utility can balance affordability and equity.

2.4.4 Rate Adoption
In California ratemaking, public utilities are required to meet procedural requirements for adoption of new or increased rates for property-related fees under Proposition 218. Proposition 218 states that the utility must hold a public hearing to consider the proposed rates and must provide written notice to all customers at least 45 days in advance of said hearing. Any property owner or tenant City Council Regular Meeting - Page 389 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 9 that is directly liable to the public agency for payment of the property-related fees may submit a written protest against the new or increased rates at any time until the close of the public hearing. The City Council may not adopt the proposed new or increased rates if property owners or tenants directly liable for payment submit written protests on behalf of more than 50 percent of the properties upon which the proposed rates may be imposed.

City Council Regular Meeting - Page 390 of 1385
Water and Wastewater Rate Study | City of Banning, CA

10 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Water Rate Study
3 Revenue and Revenue Requirements
To meet the costs associated with providing water services to its customers, the Water Utility derives revenue from a variety of sources, including water user charges (rates), capital facilities fees, special programs, interest earned from the investment of available funds, and other miscellaneous revenues. The City is constantly looking for other sources of revenue, such as grants, to fund infrastructure investments. Black & Veatch has projected the level of future revenue generated in the Study through an analysis of historical and future system growth in terms of the number of bills and water consumption. This section also projects the expenses or revenue requirements necessary to operate and maintain the system, invest in capital improvements, make debt service payments, and cover other water system costs.

3.1 CUSTOMER AND WATER CONSUMPTION PROJECTIONS

3.1.1 Customer Connections and Bills
The Water Utility provides water service to about 10,820 residential and non-residential customer connections, grouped into All Customers or Fire Service customer types. All Customers are connected to the water system through a metered connection. Fire Service customers are connected to the water system but are not metered as water through the connection is only for emergency conditions. All connections are billed monthly; therefore, there is an average of 12 bills per year per customer.

The number of bills is used in this analysis to determine the service charge. The projected total number of bills is expected to have minimal growth over the five-year Study period at 0.5% per year. In evaluating the City's General Plan, large potential developments were identified throughout the City.

Recently, the City experienced growth associated with new residential development at Atwell. While there is a potential for the Ranch San Gorgonio master-planned community development, the analysis only projects growth associated with Atwell and the associated commercial.

Table 3-1 summarizes the projected number of bills for the utility.

Table 3-1 Customer Bills

3.1.2 Water Consumption
Table 3-2 shows the projected water consumption for the Study period. In determining the projected water consumption, Black & Veatch analyzed historical water consumption patterns in conjunction with future water conservation requirements set by the City’s Water Shortage Contingency Plan (WSCP) and the requirement of SB 7x-7. In 2022 after another three years of dry weather, Governor Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
(Bills) (Bills) (Bills) (Bills) (Bills)
Number of Bills
1 All Customers 128,726 129,338 129,952 130,569 131,190 2 Total 128,726 129,338 129,952 130,569 131,190 3 Estimated Accounts 10,727 10,778 10,829 10,881 10,933 Line No. Description
City Council Regular Meeting - Page 391 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 11 Newsom issued Executive Order N-7-22, which called for local water suppliers to move to Level 2 of their WSCPs to drive water conservation. The City moved to Level 2 on June 10, 2022. The State of California and its Governor continue to monitor drought conditions which can lead to further water cutbacks and conservation measures for water consumption.

Based on the City’s WSCP, a Level 2 declaration means an additional 10% water conservation must be targeted on top of the 10% expected in Level 1. While the utility has seen a reduced overall consumption since 2016, the utility has experienced new customers, which have placed a greater demand on the water system, as shown in Figure 3-1. The primary conservation restrictions can be found in the WSCP described in the City of Banning Municipal Code, Chapter 13.16. To mitigate water demand, the City plans to expand the use of recycled water to new customers. Recycled water would come from the existing Wastewater Treatment Plant (WWTP) after upgrading to tertiary treatment.

Overall, City customers have done well to increase efficiency in the use of water resources.

Figure 3-1 Water Sold and Number of Customers

The analysis conducted herein incorporates a reduction of 10% in FY 2023 followed by a steady rebound of 2.3% per year, as shown in Table 3-2. The utility currently bills water consumption in hundred cubic feet (HCF). The utility has met and will continue to meet the SB 7x-7 requirements set for by the State of California.

Table 3-2 Billed Water Consumption

10,560
10,580
10,600
10,620
10,640
10,660
10,680
10,700
0 1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2012 2013 2014 2015 2016 2017 2018 2019 2020
No. of Customers
Water Sold (HCF)
Water Consumption (HCF) No. of Customers
Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
(HCF) (HCF) (HCF) (HCF) (HCF)
Billed Water Sold
1 All Customers 2,742,522 2,806,356 2,871,854 2,939,060 3,008,023 2 Total Usage (HCF) 2,742,522 2,806,356 2,871,854 2,939,060 3,008,023 3 Total Usage (Acre-Feet) 6,296 6,443 6,593 6,747 6,905 Line No. Description
City Council Regular Meeting - Page 392 of 1385
Water and Wastewater Rate Study | City of Banning, CA

12 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022

3.2 REVENUE UNDER EXISTING RATES
Water rates serve as the primary source of revenue for the Water Utility. Therefore, the level of future rate revenue is important in developing a long-range financial plan. To determine rate revenue, the projected system growth in terms of the number of bills and billed water consumption is multiplied by the applicable rates to determine water rate revenue.

Table 3-3 shows the current water rate schedule. Typical customers are charged a monthly service charge based on meter size and a commodity charge based on consumption.

Table 3-3 Existing Water Rates

Table 3-4 summarizes projected water rate revenue under existing rates. As shown, the revenue generated is projected to increase over the Study period in conjunction with the increase in the number of bills and water consumption. The projected revenues increase from $10.7M in FY 2023 to $11.5M in FY 2027, representing an overall increase of 6.6% over the Study period.

Table 3-4 Projected Revenue under Existing Rates

Fiscal Year
2023
Service Charge ($/Month)
5/8" 24.28
3/4" 24.28
1" 36.81
1-1/2" 68.10
2" 105.66
3" 193.33
4" 318.60
6" 631.56
8" 1,007.21
Monthly Commodity Charges ($/HCF)
All Customers
Tier 1 (0-12 HCF) 2.13
Tier 2 (13-25 HCF) 2.71
Tier 3 (26+ HCF) 3.06
City/Parks [a] 0.67
a. The City does not charge City/Parks a
fixed monthly charge and does not impose
tier structure on these customers.

Description
Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Revenue
1 All Customers 10,742,200 10,903,100 11,083,200 11,267,800 11,456,500 2 Total 10,742,200$ 10,903,100$ 11,083,200$ 11,267,800$ 11,456,500$ Line No. Description
City Council Regular Meeting - Page 393 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 13

3.3 OTHER REVENUE
The Water Utility generates other sources of operating revenue from charges for backflow tests, turn-on/off, water installation and connection, interest on investments, and other miscellaneous revenues. In total, other operating revenues represent an average of 1.5% of the total revenue. It is expected that these revenues will remain relatively constant for the duration of the Study period.

3.4 OPERATING AND MAINTENANCE EXPENSES
Table 3-5 summarizes the Water Utility’s projected O&M expense for the Study period. These expenses include costs related to salaries and benefits, supplies and services, water supply costs, repair & maintenance, and transfers. The following provides a brief overview of the O&M expenses:
◼ Salaries and Benefits - These costs are associated with salaries and fringe benefits paid to employees. The utility has about 16.49 full-time equivalents (FTEs) employees dedicated to operating and maintaining the water system. It plans to add 10 FTEs over the Study period to increase field operations staff that can handle meter replacement, leaks, flushing, valve turning, etc.
◼ Supplies and Services - These costs are associated with materials and supplies, contract services, utilities, special programs, and routine capital outlay. The largest cost element is associated with purchased power from the City’s Electric Utility and Southern California Edison.

The utility relies heavily on power to pump water from the 19 groundwater wells. ◼ Water Supply Costs - These costs are associated with purchasing import water from the San Gorgonio Water Pass Agency (SGPWA) used to recharge the Beaumont Basin. ◼ Repair & Maintenance - These costs are associated with repairs and maintenance of buildings, equipment, software, etc., throughout the water system. ◼ Transfers - These costs are associated with interfund services provided to the utility by other departments in the City such as legal, finance, human resources, etc.

Table 3-5 O&M Expenses

Table 3-5 shows O&M expenses increase from $7.9M in FY 2023 to $10.0M in FY 2027. That represents a total increase of 26.7% over the Study period.

3.5 LONG-TERM DEBT
Table 3-6 summarizes the Water Utility’s existing and proposed debt service obligations over the Study period. Existing debt is associated with a 2015 Revenue Bond. It is common practice for utilities to Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Operation & Maintenance
1 Salaries & Benefits 2,710,900 2,974,200 3,510,500 3,744,200 3,984,600 2 Supplies & Services 2,363,800 2,477,000 2,581,400 2,690,500 2,804,100 3 Water Supply Costs 616,500 634,500 654,000 673,500 693,000 4 Repair & Maintenance 136,100 143,000 150,300 158,000 166,100 5 Transfers Out 2,063,500 2,130,300 2,200,000 2,272,700 2,348,500 6 Total 7,890,800$ 8,359,000$ 9,096,200$ 9,538,900$ 9,996,300$ Line No. Description
City Council Regular Meeting - Page 394 of 1385
Water and Wastewater Rate Study | City of Banning, CA

14 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 utilize debt to finance large multi-year capital improvement projects, but financing options depend on the utility’s financial conditions. By financing the cost of the capital improvements, the utility can fund major projects immediately and spread the payment over a specified time frame, thereby providing a better match between the age of the asset and paying for the asset. The utility will not issue new debt financing for the Study period.

Table 3-6 Debt Service

3.6 CAPITAL IMPROVEMENT PROGRAM
The Water Utility developed a five-year Capital Improvement Plan annually to identify water system needs, including assessments, inspections, maintenance, and rehabilitation and replacement requirements.

The CIP was developed based on the City’s Capital Improvement Budget between FY 21-25 and amended to add new identified capital projects. Table 3-7 summarizes the CIP for FY 2023 through FY 2027 with a total cost of $31.0M in CIP over the Study period. The detailed CIP by project is shown in Appendix A, Table 9-1. The following provides a brief overview of key CIP projects:
◼ Wells and Pumping Equipment - These projects are related to repairing and rehabilitating the 19 groundwater wells and ancillary equipment adjacent to the wells throughout the City. ◼ Water Mains - These projects are related to the annual replacement of mains, the addition of new mains to service future expansion, and fire flow improvements. ◼ Treatment - These projects are related to taking the WWTP to tertiary treatment. By having the WWTP treat to tertiary standards, the Water Utility will be able to obtain recycled water to help offset potable water demands.

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Long-Term Debt
1 Existing Loan/Bonds 1,979,600 1,976,300 1,975,200 1,976,100 1,976,100 2 Proposed Loan/Bonds 0 0 0 0 0 3 Total 1,979,600$ 1,976,300$ 1,975,200$ 1,976,100$ 1,976,100$ Line No. Description
City Council Regular Meeting - Page 395 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 15 Table 3-7 Capital Improvement Projects

3.6.1 Capital Improvement Financing Plan
The Water Utility funds annual expenditures for the CIP from a combination of revenue derived from user rates, capital facilities fees, interest earnings, grants, and available funds. The utility funds CIP through the Operating Fund and the Capital Facilities Fund. Shown in Table 3-8 is the capital financing plan for projects in the Capital Facilities Fund. The average annual CIP expenditure is $1.9M, and the utility plans on obtaining a grant for 20% of the total costs associated with the WWTP project. The capital financing for projects in the Operating Fund is shown in Table 3-9.

Table 3-8 Capital Facilities Fund Financing Plan

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Capital Improvement Program
1 Property Acquisition 0 317,000 0 0 286,900 2 Fencing Improvements 0 52,800 0 55,800 0 3 Building Construction 154,200 686,800 543,100 0 0 4 Automotive Equipment 0 0 0 0 0 5 Machinery/Equipment 452,300 824,200 505,100 591,800 74,600 6 Planning/Design-Capital 488,300 422,700 325,900 335,000 344,300 7 Wells/Pumping Equipment 1,786,500 2,127,900 750,200 1,544,500 1,223,300 8 Reservoirs 36,000 237,800 0 39,100 269,700 9 Water Mains 1,927,400 1,717,100 1,900,900 279,100 3,816,300 10 Water Reg. Valves, Etc 539,700 554,800 570,300 0 0 11 SCADA/Telemetry 30,800 31,700 32,600 0 0 12 Smart Meter Project 0 0 0 0 0 13 Treatment 0 0 353,000 3,266,000 1,492,100 14 Total 5,415,200$ 6,972,800$ 4,981,100$ 6,111,300$ 7,507,200$ Line No. Description
Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Source of Funds
1 Trsf from/(to) Water Ops (660) 0 0 325,000 2,925,000 1,300,000 2 Grant Funding 0 0 70,600 653,200 298,400 3 Other Revenue 1,500 1,500 1,500 1,500 1,500 4 Interest Income 47,600 29,800 16,200 15,400 17,700 5 Total Sources 49,100$ 31,300$ 413,300$ 3,595,100$ 1,617,600$ Use of Funds
6 Capital Improvements Projects 1,362,000 2,271,900 896,100 3,266,000 1,492,100 7 Total Uses 1,362,000$ 2,271,900$ 896,100$ 3,266,000$ 1,492,100$ 8 Net Annual Cash Balance (1,312,900) (2,240,600) (482,800) 329,100 125,500 9 Beginning Fund Balance 5,415,920 4,103,020 1,862,420 1,379,620 1,708,720 10 Net Cumulative Fund Balance 4,103,020$ 1,862,420$ 1,379,620$ 1,708,720$ 1,834,220$ Line No. Description
City Council Regular Meeting - Page 396 of 1385
Water and Wastewater Rate Study | City of Banning, CA

16 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022

3.7 TRANSFERS
The Water Utility will transfer funds to the Capital Facilities Fund over the Study period for projects that are growth related. Table 3-9, Line 24 summarizes the associated amounts. The Capital Facilities Fund transfers represent money to cover planned CIP project expenditures. These transfers do not represent direct operating expenses for either fund; therefore, Black & Veatch includes these costs as “below-the-line” cash flow items and does not include them as O&M expenses.

3.8 RESERVES
A water utility typically establishes reserves for several reasons, such as covering shortfalls in operating revenues, maintaining strong bond ratings, covering day-to-day operating costs, and easing the burden on ratepayers associated with large rate increases. Per the reserve level recommendations by the City, the Water Utility will maintain the following reserve:
◼ Operating Reserve represents working capital maintained by the Operating Fund to cover day- to-day expenses in case of issues with delays in accounts receivables, periods of lower-than- expected water sales, or unforeseen cost increases. The reserve will change to a minimum balance of 90 days of operating expenses from the existing 10% of operating expenses and debt service payment.

Appropriate reserve levels help the utility with liquidity, provide operational flexibility, and demonstrate fiscal responsibility to the rating agencies, which allows the City to access lower-cost funds.

3.9 PROJECTED OPERATING RESULTS
To fully understand the current condition of the Water Utility, it is important to examine the cash flow projections under the status quo scenario. As shown in Figure 3-2, the status quo conditions would project that the utility would operate from an annual deficit position, thus requiring the use of reserves to keep operating until FY 2025, when the utility will no longer have sufficient revenues to meet expenses and financial obligations associated with debt service. In the status quo scenario, the utility would not impose any revenue increases over the Study Period yet continue to incur O&M expenses, pay for the execution of the planned CIP, and meet reserve targets.

City Council Regular Meeting - Page 397 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 17 Figure 3-2 Status Quo Operating Cash Flow

Understanding that the status quo scenario is unsustainable for the utility to meet its goals and objectives, the analyses performed in the Study indicate that the utility should implement the proposed revenue increases shown in Table 3-9 if it wishes to keep the utility in a balanced financial condition. The revenue increases represent the total revenue adjustment needed to meet revenue requirements. The revenue adjustment does not represent adjustments to the individual rates but reflects the overall level of revenue needed to meet the utility’s obligations.

The suggested revenue increases help the Water Utility meet the following goals:
◼ Meet budgeted operating obligations and capital investments in the five FYs. ◼ Maintain an operating reserve of 90 days of operating expenses.

Table 3-9 summarizes the proposed Operating Fund for the Study Period. The 10-year long-term Operating Fund is shown in Appendix B, Table 10-1 and Figure 10-1 Long-Term Water Operating Cash FlowThe Operating Fund consists of 1) Revenue and 2) Revenue Requirements.

Revenue
◼ Line 1 is the revenue under existing rates.
◼ Lines 2 through 7 are the additional revenues generated from the required annual revenue increases. The additional revenue generated is a direct reflection of the number of months the increase is effective for, and therefore amount might calculate at less than that stated amount. ◼ Line 8 is the total revenue generated from the existing rates and additional revenues. ◼ Line 11 is the other operating revenues.
◼ Line 12 represents total revenues for the utility.

Revenue Requirements
◼ Line 14 is the total O&M expenses.

City Council Regular Meeting - Page 398 of 1385
Water and Wastewater Rate Study | City of Banning, CA

18 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 ◼ Line 17 is the long-term debt service payments.
◼ Line 19 is the CIP that the Operating Fund funds.
◼ Line 20 is the transfer to the Capital Facilities Fund to help fund CIP projects. ◼ Line 22 represents the total revenue requirements for the utility.

Line 25 represents the net cumulative cash balance within the Operating Fund. The net cumulative cash balance intends to match, to the extent possible, Line 26. The cash balance reserve is required to ensure the Operation Fund can continue in the event of a supplier interruption, market price fluctuations of critical equipment or supplies, or an abrupt drop in account receivables. The reserve target minimum is 90 days of O&M expenses.

Line 27 represents the debt service coverage. Currently, the debt coverage requirement is 1.20x.

Since the Water Utility will not issue new debt financing, the requirement will remain unchanged.

City Council Regular Meeting - Page 399 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 19 Table 3-9 Operating Fund

Figure 3-3 presents the proposed Operating Fund.

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Revenue
Rate Revenue
1 Revenue from Existing Rates 10,730,400 10,906,600 11,086,900 11,271,500 11,460,400 Year Months Rate Adj
2 2023 6 10.75% 576,800 1,172,500 1,191,800 1,211,700 1,232,000 3 2024 6 10.75% 649,300 1,320,000 1,341,900 1,364,400 4 2025 6 10.75% 730,900 743,100 755,600 5 2026 6 10.75% 783,000 796,200
6 2027 6 10.75% 839,000
7 Increased Rev Due to Adj's 576,800 1,821,800 3,242,700 4,079,700 4,987,200 8 Subtotal Rate Revenue 11,307,200$ 12,728,400$ 14,329,600$ 15,351,200$ 16,447,600$ Other Operating Revenue
9 Other Income 137,100 137,100 137,100 137,100 137,100 10 Interest Income 116,600 94,400 79,300 66,000 44,000 11 Subtotal Other Operating Rev 253,700$ 231,500$ 216,400$ 203,100$ 181,100$ 12 Total Revenue 11,560,900$ 12,959,900$ 14,546,000$ 15,554,300$ 16,628,700$ Revenue Requirements
Operating & Maintenance
13 O&M Expenses 7,890,800 8,359,000 9,096,200 9,538,900 9,996,300 14 Subtotal O&M 7,890,800$ 8,359,000$ 9,096,200$ 9,538,900$ 9,996,300$ Debt Service
Senior Debt
15 Existing Revenue Bonds 1,979,600 1,976,300 1,975,200 1,976,100 1,976,100 16 Proposed Revenue Bonds 0 0 0 0 0 17 Total Debt Service 1,979,600$ 1,976,300$ 1,975,200$ 1,976,100$ 1,976,100$ Capital Projects
18 Capital Improvement Program 4,053,200 4,700,900 4,084,900 2,845,300 6,015,300 19 Total Capital Projects 4,053,200$ 4,700,900$ 4,084,900$ 2,845,300$ 6,015,300$ Transfers
20 Trsf to/(from) Wtr Cap Fund 0 0 325,000 2,925,000 1,300,000 21 Total Transfers 0$ 0$ 325,000$ 2,925,000$ 1,300,000$ 22 Total Revenue Requirements 13,923,600$ 15,036,200$ 15,481,300$ 17,285,300$ 19,287,700$ 23 Net Annual Cash Balance (2,362,700) (2,076,300) (935,300) (1,731,000) (2,659,000) 24 Beginning Fund Balance 12,839,280 10,476,580 8,400,280 7,464,980 5,733,980 25 Net Cumulative Fund Balance 10,476,580$ 8,400,280$ 7,464,980$ 5,733,980$ 3,074,980$ 26 Min. Operating Resvs (90 Days) 1,945,700 2,061,100 2,242,900 2,352,100 2,464,800 27 Debt Service Coverage (1.2x) 1.85 2.33 2.76 3.04 3.36 Line No. Description
City Council Regular Meeting - Page 400 of 1385
Water and Wastewater Rate Study | City of Banning, CA

20 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Figure 3-3 Water Operating Cash Flow

City Council Regular Meeting - Page 401 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Cost of Service Analysis 21 4 Cost of Service Analysis
The cost-of-service analysis requires recovery of the Water Utility’s needed revenues from water service rates, allocated to customer classes according to the service rendered. An equitable rate structure allocates the capture of revenue requirements to customer classes based on the quantity of water consumed, peak flows, the number of customer bills, and other relevant factors.

In analyzing the utility’s cost of service for allocation to its customer classes, Black & Veatch selected the annual revenue requirements for FY 2023 as the Test Year (TY) requirements to demonstrate the development of cost-of-service water rates. Table 4-1 summarizes the total costs of service that need to be recovered from water rates. The table represents TY 2023.

Table 4-1 Cost of Service Revenue from Rates

The total revenue requirement is shown in Line 5, which corresponds with Table 3-9, Line 22. As shown in Line 13, we deduct revenues from other sources to derive the net revenue requirement recovered through rates, which correspond with Table 3-9, Line 11.

Line 14 represents the net annual cash balance during the TY. This number is positive if the enterprise is drawing down funds already in the Operating Fund. The number will be negative if the enterprise is replacing funds. Line 15 represents the additional revenues generated if the revenue Operating Capital Total
Expense Cost Cost
($) ($) ($)
Revenue Requirements
1 O&M Expenses 7,890,800 0 7,890,800 2 Debt Service 0 1,979,600 1,979,600 3 Capital Projects 0 4,053,200 4,053,200 4 Transfers 0 0 0 5 Subtotal 7,890,800$ 6,032,800$ 13,923,600$
Less Revenue Requirements Met from Other Sources
6 Other Income 0 0 0 7 Other Intergov't Revenues 29,200 0 29,200 8 Utility Funds 92,900 0 92,900 9 Miscellaneous 15,000 0 15,000 10 Interfund Transfers 0 0 0 11 Interest 116,600 0 116,600 12 Debt Financing 0 0 0 13 Subtotal 253,700$ 0$ 253,700$ Adjustments
14 Adj for Annual Cash Balance 2,362,700 0 2,362,700 15 Adj to Annualize Rate Increase (576,700) 0 (576,700) 16 Subtotal 1,786,000$ 0$ 1,786,000$ 17 COS to be Recovered from Rates 5,851,100$ 6,032,800$ 11,883,900$ Line No. Description
City Council Regular Meeting - Page 402 of 1385
Water and Wastewater Rate Study | City of Banning, CA

22 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 increase was effective for a full year versus only 6 months. In the utility’s case, the $2.4M figure indicates that the forecast is projecting a negative cash balance for the year.

4.1 FUNCTIONAL COST COMPONENTS
The first step in conducting a cost-of-service analysis involves analyzing the cost of providing water service by system function to properly allocate the costs to the various customer classes and, subsequently, design rates. As a basis for allocating costs of service among customer classes, the Study separates costs into the following four basic functional cost components: (1) Base; (2) Extra Capacity; (3) Customer; and (4) Direct Assignment, described as follows:
◼ Base costs represent operating and capital costs of the system associated with service to customers to the extent required under constant or average annual load conditions without the elements necessary to meet water consumption variations or peak demands. ◼ Extra Capacity costs represent those operating and capital costs incurred in meeting peaking demands. Peaking demands represent water consumption in excess of the average rate of use. ◼ Customer costs are those expenditures that tend to vary in proportion to the number of customers connected to the system. These include meter reading, billing, collecting, accounting, maintenance, and capital costs associated with meters and services. ◼ Directly assigned costs are specifically identified as those incurred to serve specific customers.

These costs include conservation, SGPWA, and fire protection.

4.2 ALLOCATION TO COST COMPONENTS
The next step of the cost-of-service process involves allocating each cost element to functional cost components based on the parameter or parameters having the most significant influence on the magnitude of that cost element. O&M expenses are allocated directly to appropriate cost components.

A detailed allocation of related capital investment is used as a proxy for allocating capital and replacement costs. The separation of costs into functional components provides a means for distributing such costs to the various customer classes based on their responsibilities for each type of service.

4.2.1 System Base, Max Day, and Max Hour Allocations
The water system consists of various facilities designed and operated to fulfill a given function.

For the systems to provide adequate service to its customers, it must be capable of meeting the annual volume requirements and the maximum demand rates placed on the system. Because not all customers and types of customers exert maximum demand simultaneously, the capacities of the various facilities must meet the maximum coincidental demand of all customers. Each water service facility within the system has an underlying average demand exerted by the customers for whom the base cost component applies. 100% of the costs go to the base cost component for those facilities designed solely to meet average day demand. Extra capacity requirements associated with coincidental demands in excess of average use consist of maximum daily and maximum hourly demand subcomponents.

The first step in determining the allocation percentages for volume-related cost allocations is to assign system peaking factors. The base element is equal to the average daily demand (ADD) and assigned a value of 1.0. Based on the 2018 Integrated Master Plan, the Water Utility’s maximum day City Council Regular Meeting - Page 403 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Cost of Service Analysis 23 (max day) demand is 1.7 times the ADD, and the maximum hourly (max hour) demand is 3.0 times the ADD.

The costs associated with facilities required to meet maximum day demand are allocable to base and maximum day extra capacity, as shown below.
◼ Base = (1.0/1.7) x 100 = 58.8%
◼ Max Day = (1.7 – 1.0)/1.7 x 100 = 41.2%
These calculations indicate that the average or base use requires 58.8% of the capacity of facilities designed and generated to meet maximum day demand, and the remaining 41.2% meets maximum day extra capacity requirements.

The costs associated with facilities required to meet maximum hour demand are allocable to base, maximum day extra capacity and maximum hour extra capacity as follows:
◼ Base = (1.0/3.0) x 100 = 33.3%
◼ Max Day = (1.7 – 1.0)/3.0 x 100 = 23.3%
◼ Max Hour = (3.0 – 1.7)/3.0 x 100 = 43.3%

4.2.2 Allocation of Operating and Maintenance Expenses
In allocating O&M expenses for TY 2023, costs are directly allocated to the cost components to the extent possible. The Water Utility book does not record operating costs by functional categories such as water supply, pumping, treatment, transmission and distribution, meters, and hydrants.

Therefore, Black & Veatch allocated O&M expenses to the cost factors noted in Section 3.1 based on engineering experience. Table 4-2 identifies the allocation basis used and the associated percentage in each cost component for the utility.

City Council Regular Meeting - Page 404 of 1385
Water and Wastewater Rate Study | City of Banning, CA

24 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 4-3 represents the dollar allocation of O&M expenses to the cost components. Next, revenues are subtracted from other sources, as shown in Table 4-1, Lines 13 and 16. The analysis deducts any drawdown of available cash balances and normalizes the rate adjustments for a full year to determine the net O&M costs for the utility.

4.2.3 Allocation of Capital Investments
In allocating the capital investment for TY 2023, the existing fixed assets (which serve as a proxy for the current capital investments) are allocated directly to cost components to the extent possible. The allocation of costs in this manner provides a basis for annual investment in water system facilities. Plan capital costs can be allocated using the total net system investment distribution across the functional cost components. Table 4-4 identifies the allocation basis used and the associated percentage in each cost component for the utility.

Table 4-5 shows the allocation of existing system investment serving water customers. The total net system investment of $35.8M shown on Line 14 represents the Test Year original cost less accumulated depreciation of the system in service. The total net system investment reflects the Water Utility fixed asset listing ending June 30, 2021. This value represents the original cost (book value) of the assets.

City Council Regular Meeting - Page 405 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY
BLACK & VEATCH CORPORATION | Cost of Service Analysis 25 Table 4-2 Allocation Basis for O&M Expenditures

Common to All Customers SGWPA
Base Extra Capacity Customer Water Fire Allocation
Base Max. Day Max. Hour Meters Cust/Bill. Conservation Supply Protection Basis (%) (%) (%) (%) (%) (%) (%) (%)
Operating Expenses
1 Salary & Wages 46% 16% 7% 12% 15% 2% 0% 0% Average O&M 2 Fringe Benefits 46% 16% 7% 12% 15% 2% 0% 0% Average O&M 3 Contractural Services 47% 17% 7% 13% 16% 0% 0% 0% Average O&M (less Cons) 4 Contract Services-Employee SPC 47% 17% 7% 13% 16% 0% 0% 0% Average O&M (less Cons) 5 Contract Services-Utilities 47% 17% 7% 13% 16% 0% 0% 0% Average O&M (less Cons) 6 Utilities-Banning 58% 41% 0% 0% 0% 0% 0% 1% Pumping
7 Electricity-Edison 58% 41% 0% 0% 0% 0% 0% 1% Pumping
8 Contract Services-Rental 47% 17% 7% 13% 16% 0% 0% 0% Average O&M (less Cons) 9 Contract Services-Professional 47% 17% 7% 13% 16% 0% 0% 0% Average O&M (less Cons) 10 Departmental Supplies 47% 17% 7% 13% 16% 0% 0% 0% Average O&M (less Cons) 11 Special Programs 0% 0% 0% 0% 100% 0% 0% 0% Customer
12 Conservation Programs 0% 0% 0% 0% 0% 100% 0% 0% Conservation 13 Special Utility Costs 39% 10% 47% 3% 0% 0% 0% 1% Average Net Plant 14 Wells/Pump Equip Expense 99% 0% 0% 0% 0% 0% 0% 1% Wells 15 Reservoir Expenses 10% 0% 89% 0% 0% 0% 0% 1% Reservoirs 16 Wtr Distribution Sys Exp 32% 23% 43% 0% 0% 0% 0% 1% T&D 17 Meters Expense 0% 0% 0% 100% 0% 0% 0% 0% Meters & Services 18 Water Reg, Valves, Etc. 0% 0% 0% 100% 0% 0% 0% 0% Meters & Services 19 Non-Capitalized 39% 10% 47% 3% 0% 0% 0% 1% Average Net Plant 20 Cost of Goods 0% 0% 0% 0% 0% 0% 100% 0% Purchased Water 21 Contract Services-Repair 39% 10% 47% 3% 0% 0% 0% 1% Average Net Plant 22 Bad Debt 47% 17% 7% 13% 16% 0% 0% 0% Average O&M (less Cons) 23 Interfund Service Payments 47% 17% 7% 13% 16% 0% 0% 0% Average O&M (less Cons) 24 Interfund Svc-Bill/Coll 0% 0% 0% 0% 100% 0% 0% 0% Customer 25 Interfund Svc-Mtr Read Svc 0% 0% 0% 100% 0% 0% 0% 0% Meters & Services 26 Interfund Transfers 47% 17% 7% 13% 16% 0% 0% 0% Average O&M (less Cons) 27 Contra Expenditure 47% 17% 7% 13% 16% 0% 0% 0% Average O&M (less Cons) Line No. Description
City Council Regular Meeting - Page 406 of 1385
Water and Wastewater Rate Study | City of Banning, CA
26 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 4-3 Allocation of O&M Expenditures

Common to All Customers SGWPA
Base Extra Capacity Customer Water Fire
Base Max. Day Max. Hour Meters Cust/Bill. Conservation Supply Protection ($) ($) ($) ($) ($) ($) ($) ($) ($)
Operating Expenses
1 Salary & Wages 1,321,900 611,400 212,800 96,600 164,500 199,800 31,200 0 5,600 2 Fringe Benefits 1,389,000 642,600 223,600 101,500 172,800 209,900 32,700 0 5,900 3 Contractural Services 128,000 60,500 21,100 9,600 16,300 19,900 0 0 600 4 Contract Services-Employee SPC 13,300 6,200 2,200 1,000 1,700 2,100 0 0 100 5 Contract Services-Utilities 37,400 17,600 6,200 2,800 4,800 5,800 0 0 200 6 Utilities-Banning 1,063,600 615,000 438,000 0 0 0 0 0 10,600 7 Electricity-Edison 22,600 13,100 9,300 0 0 0 0 0 200 8 Contract Services-Rental 41,600 19,600 6,900 3,100 5,300 6,500 0 0 200 9 Contract Services-Professional 189,500 89,600 31,300 14,200 24,200 29,400 0 0 800 10 Departmental Supplies 47,600 22,400 7,900 3,600 6,100 7,400 0 0 200 11 Special Programs 158,900 0 0 0 0 158,900 0 0 0 12 Conservation Programs 83,300 0 0 0 0 0 83,300 0 0 13 Special Utility Costs 68,000 26,900 6,600 31,800 2,100 0 0 0 600 14 Wells/Pump Equip Expense 82,200 81,400 0 0 0 0 0 0 800 15 Reservoir Expenses 25,700 2,500 0 22,900 0 0 0 0 300 16 Wtr Distribution Sys Exp 231,300 74,800 54,000 100,200 0 0 0 0 2,300 17 Meters Expense 102,800 0 0 0 102,800 0 0 0 0 18 Water Reg, Valves, Etc. 25,700 0 0 0 25,700 0 0 0 0 19 Non-Capitalized 42,300 16,700 4,100 19,800 1,300 0 0 0 400 20 Cost of Goods 616,500 0 0 0 0 0 0 616,500 0 21 Contract Services-Repair 136,100 53,700 13,300 63,700 4,200 0 0 0 1,200 22 Bad Debt 0 0 0 0 0 0 0 0 0 23 Interfund Service Payments 989,300 467,700 163,400 74,200 126,300 153,400 0 0 4,300 24 Interfund Svc-Bill/Coll 334,300 0 0 0 0 334,300 0 0 0 25 Interfund Svc-Mtr Read Svc 269,900 0 0 0 269,900 0 0 0 0 26 Interfund Transfers 470,000 222,300 77,600 35,200 60,000 72,900 0 0 2,000 27 Contra Expenditure 0 0 0 0 0 0 0 0 0 28 Total O&M Expenses 7,890,800$ 3,044,000$ 1,278,300$ 580,200$ 988,000$ 1,200,300$ 147,200$ 616,500$ 36,300$ Less Other Revenue
29 Miscellaneous Revenues 253,700 117,400 40,800 18,500 31,600 38,300 6,000 0 1,100 30 Other Adjustments 1,786,000 844,400 295,000 133,900 228,000 277,000 0 0 7,700 31 Net Operating Expenses 5,851,100$ 2,082,200$ 942,500$ 427,800$ 728,400$ 885,000$ 141,200$ 616,500$ 27,500$ Line No. Description Total Costs
City Council Regular Meeting - Page 407 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY
BLACK & VEATCH CORPORATION | Cost of Service Analysis 27 Table 4-4 Allocation Basis for Capital Costs

Common to All Customers
Base Extra Capacity Customer Fire
Base Max. Day Max. Hour Meters Cust/Bill. Protection
(%) (%) (%) (%) (%) (%)
Plant Assets
1 Land 39% 10% 47% 3% 0% 1% Average Net Plant
2 Wells 99% 0% 0% 0% 0% 1% Wells
3 Pumping 58% 41% 0% 0% 0% 1% Pumping
4 Reservoirs 10% 0% 89% 0% 0% 1% Reservoirs
5 Treatment 58% 41% 0% 0% 0% 1% Treatment
6 Transmission & Distribution 32% 23% 43% 0% 0% 1% T&D
7 Meters & Services 0% 0% 0% 100% 0% 0% Meters & Services 8 Hydrants 0% 0% 0% 0% 0% 100% Hydrants
9 Flume 100% 0% 0% 0% 0% 0% Flume
10 General Plant 39% 10% 47% 3% 0% 1% Average Net Plant Allocation BasisLine No. Description
City Council Regular Meeting - Page 408 of 1385
Water and Wastewater Rate Study | City of Banning, CA
28 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 4-5 Allocation of Capital Costs

Common to All Customers
Base Extra Capacity Customer Fire
Base Max. Day Max. Hour Meters Cust/Bill. Protection
($) ($) ($) ($) ($) ($) ($)
Plant Assets
1 Land 2,679,800 1,055,400 261,400 1,255,000 83,500 0 24,500 2 Wells 5,162,300 5,110,700 0 0 0 0 51,600 3 Pumping 96,500 55,800 39,700 0 0 0 1,000 4 Reservoirs 9,655,800 965,500 0 8,593,700 0 0 96,600 5 Treatment 0 0 0 0 0 0 0 6 Transmission & Distribution 12,230,300 3,954,500 2,853,700 5,299,800 0 0 122,300 7 Meters & Services 924,400 0 0 0 924,400 0 0 8 Hydrants 0 0 0 0 0 0 0 9 Flume 1,597,800 1,597,800 0 0 0 0 0 10 General Plant 3,452,900 1,359,900 336,800 1,617,000 107,600 0 31,600 11 Total Plant Assets 35,799,800$ 14,099,600$ 3,491,600$ 16,765,500$ 1,115,500$ 0$ 327,600$ Less Other Revenue
12 Miscellaneous Revenues 0 0 0 0 0 0 0 13 Other Adjustments 0 0 0 0 0 0 0 14 Net Capital Expenses 35,799,800$ 14,099,600$ 3,491,600$ 16,765,500$ 1,115,500$ 0$ 327,600$ Line No. Description Total Costs
City Council Regular Meeting - Page 409 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Cost of Service Analysis 29

4.3 UNITS OF SERVICE
To properly recognize the cost of service, each customer class receives its share of base, maximum day, peak hour, and customer costs. Following the allocation of costs, the total cost responsibility for each customer class is developed using unit costs of service for each cost function and subsequently assigning those costs to the customer classes based on their respective service requirements. The number of units of service required by each customer class provides a means for the proportionate distribution of costs previously allocated to respective cost categories. ◼ Base costs vary with consumption of water and distributed to the customers on that basis. ◼ Extra Capacity costs are related with meeting peak demand rates of water use and distributed to the customers based on the respective class capacity requirements in excess of average rates of use. Black & Veatch followed the capacity factor methodology outlined in Appendix A of the AWWA M1 Manual to derive peak consumption information from the monthly consumption records in the City’s billing system, which helps estimate maximum day and peak hour ratios. ◼ Customer costs related to meter services are allocated on an equivalent meter basis for each customer. The estimated number of equivalent meters for each customer relies on the total number of meters serving respective classes and the hydraulic capacity ratio of the meters to the 5/8 x 3/4-inch meter. The equivalent meter ratios adopted in this analysis are consistent with the AWWA M1 Manual. Customer costs related to generating and distributing customer bills are based on the number of bills.
◼ Private fire-protection costs allocations use equivalent meters similar to meter services.

Table 4-6 summarizes the estimated TY 2023 units of service for the various customers.

4.4 COST OF SERVICE ALLOCATIONS
The Study applies the unit costs of service to each customer class’ respective service requirements to determine the cost of service for each customer class. The total unit costs of service applied to the respective requirements for each customer class results in the total cost of service for each customer class.

4.4.1 Units Costs of Service
The TY 2023 unit cost of service for each functional cost component is simply the total cost divided by the applicable units of service, as shown in Table 4-7. On Line 3, the total costs represent the cost that rates need to recover, as demonstrated in Table 4-1, Line 17. The net O&M cost includes O&M (including water purchase) less revenue from other sources and adjustments. The total capital cost includes debt service payments and transfers to the Capital Facilities Fund. Line 5 represents the unit costs for the entire water system regardless of customer classes. After that, the unit costs are used to allocate the costs to the specific customer classes.

4.4.2 Distribution of Costs of Service to Customer Classes Applying the unit costs to each customer class’ number of units produces the customer class costs.

This process is illustrated in Table 4-8, in which unit costs are applied to the customer class units of service City Council Regular Meeting - Page 410 of 1385
Water and Wastewater Rate Study | City of Banning, CA

30 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 for T Y 2023 . The costs attributable to each customer class reflect the functional cost components described in Section 4.1. Each customer class places a burden on the system in differ ent ways; thus, the allocation of the units is representative of this burden.

An example of the application of unit costs is shown below for illustrative purposes.

Base Component
Unit Cost (Table 4-7, Line 5) 1.63$ per HCF All Customer Consumption (Table 4-8, Line 1) 2,742,522 HCF Total Allocated Cost 4,458,200$
Please note that the numbers within the tables are rounded, yet the calculations are done based on non-rounded values; therefore, results might vary.

City Council Regular Meeting - Page 411 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY
BLACK & VEATCH CORPORATION | Cost of Service Analysis 31 Table 4-6 Units of Service

Table 4-7 Units Cost of Service

Consumption Maximum Day Maximum Day Fire
Annual Avg. Day Factor Total Extra Factor Total Extra Meters Cust/Bills Protection Column Reference (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Units of Measure (HCF) (HCF/day) (HCF/day) (HCF/day) (HCF/day) (HCF/day) (EMs) (bills) (EMs) 1 All Customers 2,742,522 7,514 174% 13,074 5,560 247% 18,559 5,485 13,030 128,726 2 Subtotal 2,742,522 7,514 13,074 5,560 18,559 5,485 13,030 128,726 Fire Service
3 Public Fire 1,234 1,234 7,407 6,172 0 0 7,695 4 Private Fire 49 49 294 245 0 1,128 305 5 Subtotal 0 0 1,283 1,283 7,701 6,417 0 1,128 8,000 6 Total Water System 2,742,522 7,514 14,357 6,844 26,260 11,902 13,030 129,854 8,000 DescriptionLine No.

Common to All Customers
Base Extra Capacity Customer SGPWA Fire
Base Max. Day Max. Hour Meters Cust/Bill. Conservation Water Supply Protection ($) ($) ($) ($) ($) ($) ($) ($) ($)
Water Utility
1 Net Operating Expense 5,851,100 2,082,200 942,500 427,800 728,400 885,000 141,200 616,500 27,500 2 Capital Costs 6,032,800 2,376,000 588,400 2,825,200 188,000 0 0 0 55,200 3 Total Cost of Service 11,883,900$ 4,458,200$ 1,530,900$ 3,253,000$ 916,400$ 885,000$ 141,200$ 616,500$ 82,700$ 4 Units of Service (Total) 2,742,522 6,844 11,902 13,030 129,854 2,742,522 2,742,522 8,000 HCF HCF/Day HCF/Day Eq. Meters Bills HCF HCF Eq. Meters 5 Cost per Unit 1.63$ 223.70$ 273.31$ 70.33$ 6.82$ 0.05$ 0.22$ 10.34$ per HCF per HCF/Day per HCF/Day per Eq. Meter per Bill per HCF per HCF per Eq. Meter Line No. Description Total Costs
City Council Regular Meeting - Page 412 of 1385
Water and Wastewater Rate Study | City of Banning, CA
32 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 4-8 Distribution of Costs to Customer Classes

Common to All Customers
Base Extra Capacity Customer SGPWA Fire
Base Max. Day Max. Hour Meters Cust/Bill. Conservation Water Supply Protection ($) ($) ($) ($) ($) ($) ($) ($) ($)
All Customers
1 Units 2,742,522 5,560 5,485 13,030 128,726 2,742,522 2,742,522 0 2 Allocation of costs of service 9,752,500 4,458,200 1,243,800 1,499,100 916,400 877,300 141,200 616,500 0 Fire Service
Public Fire
3 Units 1,234 6,172 7,695
4 Allocation of costs of service 2,042,600 276,100 1,687,000 79,500 Private Fire Service
5 Units 49 245 1,128 305 6 Allocation of costs of service 88,800 11,000 66,900 7,700 3,200 7 TOTAL COSTS OF SERVICE 11,883,900$ 4,458,200$ 1,530,900$ 3,253,000$ 916,400$ 885,000$ 141,200$ 616,500$ 82,700$ Line No. Description Total Costs
City Council Regular Meeting - Page 413 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Rate Design 33
5 Rate Design
The initial consideration in deriving rate schedules for water service is establishing equitable charges to the customers commensurate with the cost of providing that service. While the cost-of- service allocations to customer classes should not be construed as literal or exact determinations, they offer a guide to the necessity for, and the extent of, rate adjustments. Practical considerations sometimes modify rate adjustments by considering additional factors such as the extent of bill impacts, existing contracts, and historical local policies and practices.

5.1 EXISTING RATES
The existing rates for the Water Utility consist of a fixed component in the form of a monthly service charge and a variable component in the form of a commodity charge. The monthly service charge is based on meter size and applied regardless of consumption. The commodity charge is based on units of consumption (1 unit = 1 HCF = 748 gallons). Table 3-3, presented earlier in this report, summarizes the existing water rates.

5.2 PROPOSED RATES
The cost-of-service analysis described in the preceding sections of this report provides a basis for the design of water rates.

5.2.1 Service Charge
The monthly service charge recovers costs associated with meter maintenance and services, meter reading, customer billing, and maintenance and capacity costs associated with public fire protection regardless of the water consumed. Black & Veatch used meter ratios based on maximum operating capacities by meter size as shown in AWWA M1, Table B-1, which recognizes that as meter size increases, so does the capacity. For example, customers with a 4” meter expect to be able to use more water (at a higher flow capacity) than customers with a ¾” meter. Consequently, the City’s water system must maintain assets sized accordingly and capable of providing customers the level of service expected from their meter connection when the tap turns on.

Table 5-1 demonstrates the water cost elements incorporated into the monthly service charge for FY 2023. Table 5-2 shows the five-year fixed service charge rate schedule.

Table 5-1 Costs within the Service Charge for FY 2023

Meter & Public Fire Protection Billing
Meter Mtr Unit FP Unit Meter Adjusted Adjusted Total Service Size Cost Cost Ratio Unit Cost Unit Cost Bill Ratio Unit Cost Charge per EM per EM $ per Bill $ $/Month
5/8" x 3/4" 5.86 13.06 1.00 18.92 6.82 1.00 6.82 25.74 1" 5.86 13.06 1.00 18.92 6.82 1.00 6.82 25.74 1-1/2" 5.86 13.06 1.67 31.54 6.82 1.00 6.82 38.36 2" 5.86 13.06 3.33 63.08 6.82 1.00 6.82 69.90 3" 5.86 13.06 5.33 100.93 6.82 1.00 6.82 107.75 4" 5.86 13.06 10.67 201.86 6.82 1.00 6.82 208.68 6" 5.86 13.06 16.67 315.41 6.82 1.00 6.82 322.23 8" 5.86 13.06 33.33 630.83 6.82 1.00 6.82 637.64 10" 5.86 13.06 53.33 1,009.32 6.82 1.00 6.82 1,016.14 City Council Regular Meeting - Page 414 of 1385
Water and Wastewater Rate Study | City of Banning, CA

34 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 5-2 Proposed Service Charge

5.2.2 Private Fire Service
The study determined that a fixed charge should be imposed on private fire service connections.

The water system is sized to deal with public and private fire demands. Public fire demand costs are recovered through the service charge, while the fire service charge is designed to recover private fire demand costs. Customers with private fire connections have the expectation and guarantee that water will be available at the connection in case of an emergency. By having a dedicated private fire connection, these customers benefit from reduced insurance costs. The Water Utility provides private fire service to approximately 94 private fire service customers.

Private fire service connections do not have a meter at the point of connection therefore the charge is based on the connection size to the water system. The fire service charge will increase as pipeline diameter size increases. Table 5-3 demonstrates the costs incorporated into the private fire service charge, and Table 5-4 shows the five-year rate schedule.

Table 5-3 Costs within the Fire Service Charge for FY 2023

Fiscal Year Ending June 30,
Customer Class FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Service Charge ($/Month)
5/8" 25.74 27.75 30.92 33.64 35.66 3/4" 25.74 27.75 30.92 33.64 35.66 1" 38.36 41.08 44.84 48.97 51.91 1-1/2" 69.90 74.39 79.63 87.31 92.53 2" 107.75 114.37 121.38 133.31 141.27 3" 208.68 220.97 232.72 255.98 271.25 4" 322.23 340.91 357.97 393.98 417.48 6" 637.64 674.05 705.90 777.33 823.68 8" 1,016.14 1,073.82 1,123.41 1,237.34 1,311.11 Private Fire Protection Total
Meter Unit Meter Adjusted Service
Size Cost Ratio Unit Cost Charge
per EM $/Month
2" 24.25 1.00 24.25 24.25 4" 24.25 1.60 38.79 38.79 6" 24.25 3.20 77.59 77.59 8" 24.25 5.00 121.23 121.23 10" 24.25 10.00 242.46 242.46 12" 24.25 16.00 387.94 387.94 City Council Regular Meeting - Page 415 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Rate Design 35
Table 5-4 Proposed Fire Service Charge

5.2.3 Commodity Charge
The commodity charge which is based on consumption is designed to recover costs associated with the base, extra capacity demands, conservation, and water supply.

5.2.3.1 Tiers
The commodity charge is determined based on an inclining three-tier structure. The existing rate structure consist of Tier 1 (0-12 HCF), Tier 2 (13-25 HCF) and Tier 3 (26 and greater HCF). In the rate analysis, the tier breakpoints were revised to Tier 1 (0-7 HCF), Tier 2 (8-15 HCF) and Tier 3 (16 and greater HCF). The derivation of the new tier breakpoints are described below:
◼ Tier 1: The breakpoint of 7 HCF was determined by using 3.3 people per household1 times 55 gallons2 per capital per day times 30.4 days per month. ◼ Tier 2: The breakpoint of 15 HCF was determined by analyzing th aveareg typical usage for a single family residential account.
◼ Tier 3: All consumption above 15 HCF is captured in Tier 3.

The following process was followed to determine the cost of each tier.

5.2.3.2 Base Cost
Base costs are associated with extracting groundwater water supply and delivering water through the infrastructure system to the customers during average day demand. The unit cost is derived in Table 5-5.

1 Based on U.S. Census Bureau, Quickfacts for San Bernardino County, California. 2 Based on Senate Bill 606 and Assembly Bill 1668 which established standards for indoor residential water use.

Fiscal Year Ending June 30,
Customer Class FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Fire Service ($/Month)
2" 24.25 25.45 25.56 28.78 30.69 4" 38.79 40.72 40.89 46.05 49.10 6" 77.59 81.43 81.78 92.09 98.21 8" 121.23 127.24 127.79 143.89 153.45 10" 242.46 254.48 255.57 287.79 306.90 12" 387.94 407.16 408.91 460.46 491.04 City Council Regular Meeting - Page 416 of 1385
Water and Wastewater Rate Study | City of Banning, CA

36 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 5-5 Base Unit Charge

5.2.3.3 Peaking Cost
Peaking costs are associated with providing water during peak demands such as maximum day and maximum hours. Customers peak the water system differently, therefore the utility needs to ensure that the system can handle high water demands as well as fire flow demands. To determine the peaking factors, an analysis of maximum month consumption by tier for the previous completed FY 2021 and dividing it by the average monthly consumption by tier is performed as shown in Table 5-6. As water demand increases in the higher tiers, the greater demand it places on the system and thus the greater peaking.

Using the total TY 2023 consumption and the derived peaking factors in Table 5-6, the total peaking consumption is determined as shown in Table 5-7. The unit cost is derived in Table 5-8.

Table 5-6 Peaking Factors

Table 5-7 Peaking Units of Service

FY 2023
Base
Costs
1 Allocated Costs 4,458,200$ (Table 4-7, Line 3)
2 Units of Service (HCF) 2,742,522 (Table 4-6, Line 6) 3 Unit Cost of Service 1.63$
ReferenceLine No. Description
FY 2021 FY 2021 FY 2021 FY 2021
Max Month Annual Avg Monthly Peaking
Use Use Use Factor
Column Reference (a) (b) (c) = (b)/30.4 (d) = (a)/(c)
(HCF) (HCF) (HCF)
All Customers
1 Tier 1 66,192 762,055 63,505 1.04 2 Tier 2 56,861 529,380 44,115 1.29 3 Tier 3 265,467 2,271,850 189,321 1.40 Line No. Description
FY 2023 FY 2023
Annual Peaking Peaking
Use Factor Use
Column Reference (a) (b) (c) = (a)*(b)
(HCF) (HCF)
All Customers
1 Tier 1 621,865 1.04 646,740
2 Tier 2 430,957 1.29 555,472
3 Tier 3 1,689,699 1.40 2,369,308
Line No. Description
City Council Regular Meeting - Page 417 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Rate Design 37
Table 5-8 Peaking Unit Charge

5.2.3.4 Conservation Cost
The conservation unit cost recovers conservation program-related costs. The utility manages water conservation programs to help promote water savings and participates in the Beaumont Basin Wastemaster to ensure that the basin isn’t over-drafted. These current water savings program consists of smart irrigation rebates, which provide rebates for customers to install weather-based irrigation controllers. The conservation factor shown in Table 5-9 allocates all costs to Tier 3 since the conservation programs are designed to promote water conservation by reducing inefficient water use.

The unit cost is derived Table 5-10.

Table 5-9 Conservation Units of Service

Table 5-10 Conservation Unit Charge

5.2.3.5 Water Supply Cost
The water supply unit cost recovers water supply costs associated with purchased water from SGPWA. Every year the utility can purchase import water from SGPWA to help recharge the Beaumont Basin at the Brookside Recharge Facility. By recharging the Beaumont Basin, the City can secure future water supply by banking it as groundwater for future growth and drought conditions. The water supply factor shown in Table 5-11 allocates all costs to Tier 3 since purchased water is designed to ensure water supply as demand increases and drought conditions occur. The unit cost is derived in Table 5-12.

FY 2023
Peaking
Costs
1 Allocated Costs 2,742,900$ (Table 4-8, Line 2, MD&MH) 2 Units of Service (HCF) 3,571,519 (Table 5-7, Sum of Column c) 3 Unit Cost of Service 0.77$
ReferenceLine No. Description
FY 2023 Water FY 2023
Annual Conservation Conservation
Use Factor Use
Column Reference (a) (b) (c) = (a)*(b)
(HCF) (HCF)
All Customers
1 Tier 1 621,865 0.0 0
2 Tier 2 430,957 0.0 0
3 Tier 3 1,689,699 1.0 1,689,699
Line No. Description
FY 2023
Conservation
Costs
1 Allocated Costs 141,200$ (Table 4-7, Line 3)
2 Units of Service (HCF) 1,689,699 (Table 5-9, Sum of Column c) 3 Unit Cost of Service 0.08$
Line No. Description Reference
City Council Regular Meeting - Page 418 of 1385
Water and Wastewater Rate Study | City of Banning, CA

38 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 5-11 Water Supply Units of Service

The SGPWA water supply factor allocates all costs to Tier 3. The intent of purchasing water supply from SGPWA is to help ensure water supply for future demands and during drought conditions.

Table 5-12 Water Supply Unit Charge

5.2.3.6 Total Commodity Cost
Table 5-13 shows the combination of unit costs to arrive at the commodity rates for FY 2023.

Table 5-13 Total Unit Charge, FY 2023

Table 5-14 shows the five-year rate schedule for the utility.

FY 2023 SGWPA FY 2023
Annual Water Supply Water Supply
Use Factor Use
Column Reference (a) (b) (c) = (a)*(b)
(HCF) (HCF)
All Customers
1 Tier 1 621,865 0.0 0
2 Tier 2 430,957 0.0 0
3 Tier 3 1,689,699 1.0 1,689,699
DescriptionLine No.

FY 2023
SGWPA
Water Supply
Costs
1 Allocated Costs 616,500$ (Table 4-7, Line 3)
2 Units of Service (HCF) 1,689,699 (Table 5-11, Sum of Column c) 3 Unit Cost of Service 0.36$
Line No. Description Reference
FY 2023
Base Peaking Conservation Water Supply Total
Costs Costs Costs Costs Costs
Column Reference (a) (b) (c) (d) (a)+(b)+(c)+(d)
($/HCF) ($/HCF) ($/HCF) ($/HCF) ($/HCF)
1 Unit Cost ($/HCF) 1.63$ 0.77$ 0.08$ 0.36$ All Customers
2 Tier 1 1.63 0.80 0 0 2.42 3 Tier 2 1.63 0.99 0 0 2.62 4 Tier 3 1.63 1.08 0.08 0.36 3.15 (a) Base unit cost derived in Table 5-5. Applied to all tiers. (b) Peaking unit cost derived in Table 5-8. Multiply unit cost to factors in Table 5-6, Column d. (c) Conservation unit cost derived in Table 5-10. Multiply unit cost to factors in Table 5-9, Column b. (d) Water supply unit cost derived in Table 5-12. Multiply unit cost to factors in Table 5-11, Column b.

Line No. Description
City Council Regular Meeting - Page 419 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Rate Design 39
Table 5-14 Proposed Commodity Charges

5.3 DROUGHT CONDITIONS

5.3.1 Water Shortage Contingency Plan
The City developed a six-stage Water Shortage Contingency Plan in the 2020 Urban Water Management Plan that is codified in the City of Banning Municipal Code, Chapter 13.16, which complies with the State of California’s regulations. Table 5-15 shows that the plan includes the percent supply reduction and water supply condition for the different stages within the WSCP.

Table 5-15 Stages of Water Shortages Contingency Plan
STAGES

PERCENT
SUPPLY

REDUCTION DROUGHT RESPONSE
1 ≤10% Mandatory Conservation Measures. Warnings Issued. 2 11-20% Mandatory Conservation Measures. Penalties Enforced. 3 21-30% Mandatory and Restrictive Conservation Measures. Penalties Enforced. 4 31-40% Mandatory and Restrictive Conservation Measures. Penalties Enforced. 5 41-50% Health & Sanitation Water Use Only. City Water Staff Actions. 6 >50% Health & Sanitation Water Use Only. City Water Staff Actions.

Source: 2020 Urban Water Management Plan, Figure 8.5

5.3.2 Drought Surcharges
For this Study, current conditions represent the projected baseline consumption for each fiscal year. The projected baseline provides an expected revenue for the fiscal year. Under drought conditions, consumption decreases, and thus additional revenue is required for recovery via a drought surcharge.

The drought surcharge is calculated by dividing the revenue loss by the reduced usage after accounting for the reduction in water supply costs associated with SGPWA water purchases. Table 5-16 shows the drought surcharges that have been developed for each 10 percent water supply reduction associated with transitioning through the stages in the WSCP.

Fiscal Year Ending June 30,
Customer Class FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Commodity Charges ($/HCF)
All Customers
Tier 1 (0-7 HCF) 2.42 2.76 3.10 3.48 3.96 Tier 2 (8-15 HCF) 2.62 2.97 3.31 3.72 4.23 Tier 3 (16+ HCF) 3.15 3.52 3.88 4.31 4.83 City Council Regular Meeting - Page 420 of 1385
Water and Wastewater Rate Study | City of Banning, CA

40 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 5-16 Proposed First Year Drought Charges, FY 2023

Using the same methodology per fiscal year, Table 5-17 shows the proposed five-year drought surcharges for each additional percentage of savings.

Table 5-17 Proposed Five-Year Drought Charges

Additional Conservation compared to Baseline
Description Baseline 10% 20% 30% 40% 50% 60%
Shift in Consumption by Tier
Tier 1 (0-7 HCF) 0.0% 0.3% 0.5% 0.8% 1.0% 1.3%
Tier 2 (8-15 HCF) 1.0% 1.3% 1.5% 1.8% 2.0% 2.5%
Tier 3 (16+ HCF) -1.0% -1.5% -2.0% -2.5% -3.0% -3.8%
Reduction in Consumption by Tier
Tier 1 (0-7 HCF) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Tier 2 (8-15 HCF) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Tier 3 (16+ HCF) 16.5% 32.9% 49.3% 65.6% 82.0% 98.5%
Projected Consumption (HCF) 2,742,522 2,742,522 2,742,522 2,742,522 2,742,522 2,742,522 2,742,522 Reduction in Consumption (HCF) 274,252 548,504 822,757 1,097,009 1,371,261 1,645,513 Net Consumption (HCF) 2,742,522 2,468,270 2,194,018 1,919,765 1,645,513 1,371,261 1,097,009 Projected Consumption by Tier (HCF)
Tier 1 (0-7 HCF) 621,865 621,865 623,420 624,975 626,529 628,084 629,639 Tier 2 (8-15 HCF) 430,957 435,267 436,344 437,422 438,499 439,576 441,731 Tier 3 (16+ HCF) 1,689,700 1,411,138 1,134,254 857,368 580,485 303,601 25,639 Total Consumption 2,742,522 2,468,270 2,194,018 1,919,765 1,645,513 1,371,261 1,097,009 Projected Consumption Rates ($/HCF)
Tier 1 (0-7 HCF) $2.42 $2.42 $2.42 $2.42 $2.42 $2.42 $2.42 Tier 2 (8-15 HCF) $2.62 $2.62 $2.62 $2.62 $2.62 $2.62 $2.62 Tier 3 (16+ HCF) $3.15 $3.15 $3.15 $3.15 $3.15 $3.15 $3.15 Projected Consumption Revenue
Tier 1 (0-7 HCF) $1,507,586 $1,507,585 $1,511,355 $1,515,125 $1,518,892 $1,522,662 $1,526,431 Tier 2 (8-15 HCF) $1,127,156 $1,138,428 $1,141,245 $1,144,064 $1,146,881 $1,149,698 $1,155,334 Tier 3 (16+ HCF) $5,324,060 $4,446,343 $3,573,911 $2,701,473 $1,829,045 $956,614 $80,786 Total Revenue $7,958,801 $7,092,355 $6,226,511 $5,360,662 $4,494,818 $3,628,973 $2,762,551 Revenue Lost $866,446 $1,732,291 $2,598,139 $3,463,983 $4,329,828 $5,196,250 Reduced Water Sold + Water Loss 309,905 619,810 929,715 1,239,620 1,549,525 1,859,430 Production/Purchased Water Costs $1.33 $1.33 $1.33 $1.33 $1.33 $1.33 Reduced Cost of Water Production/Purchased ($410,600) ($821,300) ($1,231,900) ($1,642,600) ($2,053,200) ($2,463,800) Revenue Lost due to Reduction $866,446 $1,732,291 $2,598,139 $3,463,983 $4,329,828 $5,196,250 Less Reduction of Water Production/Purchased ($410,600) ($821,300) ($1,231,900) ($1,642,600) ($2,053,200) ($2,463,800) Revenue to be recovered by drought surcharges $455,846 $910,991 $1,366,239 $1,821,383 $2,276,628 $2,732,450 Drought Surcharge on Consumption ($/HCF) $0.18 $0.42 $0.71 $1.11 $1.66 $2.49 Additional Conservation compared to Baseline
Description 10% 20% 30% 40% 50%
Greater than
50%1
FY 2023 $0.18 $0.42 $0.71 $1.11 $1.66 $2.49
FY 2024 $0.22 $0.49 $0.84 $1.30 $1.95 $2.93
FY 2025 $0.25 $0.57 $0.98 $1.52 $2.28 $3.43
FY 2026 $0.30 $0.66 $1.14 $1.77 $2.65 $3.98
FY 2027 $0.34 $0.77 $1.32 $2.05 $3.07 $4.61

1. Greater than 50% represents surcharge up to 60%. Anything larger will need to be calculated.

City Council Regular Meeting - Page 421 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Rate Design 41

5.4 TYPICAL MONTHLY COSTS UNDER PROPOSED CHARGES
Table 5-18 compares typical monthly costs under existing rates and the proposed schedule of water user rates derived in this Study.

Table 5-18 Typical Monthly Bill

5.5 NEIGHBORING WATER UTILITIES
Presented in Figure 5-1 are the proposed rates compared to rates of neighboring utilities for a single-family residential customer with a ¾” meter consuming 15 HCF of water. Based on the comparison, the City’s typical bill is currently in the middle of the water providers in the area. With the proposed rate increases for FY 2023, the City remains in the middle. When the City implements the FY 2027 increase, it will trend towards the higher end of the water providers if none of the neighboring utilities increase their rates. The likelihood of any neighboring utilities freezing rates for five years is highly improbable. All surveyed neighboring utility rates are current as of June 2022.

FY 2023 FY 2023
Monthly Existing Proposed
Usage Rates Rates Difference
(HCF) ($) ($) ($)
Typical Bill by Consumption
0 $24.28 $25.74 $1.46
3 $30.67 $33.01 $2.34
5 $34.93 $37.86 $2.93
10 $45.58 $50.56 $4.98
15 $57.97 $63.63 $5.66
20 $71.52 $76.77 $5.25
30 $97.66 $108.28 $10.62
40 $128.26 $139.79 $11.53
50 $158.86 $171.30 $12.44
City Council Regular Meeting - Page 422 of 1385
Water and Wastewater Rate Study | City of Banning, CA

42 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Figure 5-1 Comparison to Neighboring Water Utilities

City Council Regular Meeting - Page 423 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 43 Wastewater Rate Study
6 Revenue and Revenue Requirements
To meet the costs associated with providing wastewater services to its customers, the Wastewater Utility derives revenue from various sources, including wastewater user charges (rates), capital facilities fees, interest earned from the investment of available funds, and other miscellaneous revenues. The utility is constantly looking for other sources of revenue, such as loans, bonds, and grants.

Black & Veatch has projected the level of future revenue generated in the Study through an analysis of historical and future system growth in terms of the number of equivalent dwelling units. This section also projects the expenses, or revenue requirements, necessary to operate and maintain the system, invest in capital improvements, make debt service payments, and cover other wastewater system expenses.

6.1 CUSTOMER PROJECTIONS

6.1.1 Equivalent Dwelling Units
The Wastewater Utility provides wastewater service to about 13,400 residential and commercial equivalent dwelling units. The utility identifies customers into two types: Residential and Commercial yet are considered one customer class. All customers are billed monthly based on equivalent dwelling units (EDU). An EDU represents a single-family residential customer equivalent with a flow of 225 gallons per day. Based on their wastewater discharge, a non-residential customer may be equal to several EDUs.

The number of EDUs is used in the analysis to determine the fixed charge. The projected total number of EDUs is expected to have a minimal growth rate of 0.4% per year over the five-year Study period. Like the Water Utility, the City's General Plan identified large potential developments. Recently, the utility has experienced growth associated with new residential development at Atwell, and there is the potential for the Ranch San Gorgonio master-planned community development. For the analysis, the new growth projected is only associated with Atwell and the associated commercial.

Table 6-1 summarizes the projected number of EDUs for the utility.

Table 6-1 Equivalent Dwelling Units

6.2 REVENUE UNDER EXISTING RATES
Wastewater user rates serve as the primary source of revenue for the Wastewater Utility.

Therefore, the level of future rate revenue is important in developing a long-range financial plan. Rate revenue is determined by multiplying the projected system growth (number of EDUs) by the applicable rates to determine wastewater rate revenue.

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
(EDUs) (EDUs) (EDUs) (EDUs) (EDUs)
Equivalent Dwelling Units
1 Residential 131,921 132,581 133,244 133,910 134,580 2 Commercial 30,027 30,087 30,147 30,207 30,267 3 Total 161,948 162,668 163,391 164,117 164,847 Line No. Description
City Council Regular Meeting - Page 424 of 1385
Water and Wastewater Rate Study | City of Banning, CA

44 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 6-2 shows the current schedule of charges. In the schedule of charges, the utility applies a tertiary surcharge per EDU to fund improvements associated with taking the WWTP from secondary to tertiary treatment.

Table 6-2 Existing Wastewater Rates

Table 6-3 summarizes projected wastewater rate revenue under existing rates. As shown, the revenue generated stays relatively stable over the Study period in conjunction with the number of EDUs.

The projected utility revenues increase from $3.55M in FY 2023 to $3.61M in FY 2027.

Table 6-3 Revenue under Existing Rates

6.3 OTHER REVENUE
The Wastewater Utility generates other operating sources, including charges for revenue from capital facilities fees, interest on investments, and other miscellaneous revenues. In total, other operating revenues represent 0.3% of the total revenue. It is expected that these revenues will remain relatively constant for the duration of the Study period.

6.4 OPERATING AND MAINTENANCE EXPENSES
Table 6-4 summarizes the Wastewater Utility’s projected O&M expense for the Study period.

These expenses include costs related to salaries and benefits, supplies and services, repair & maintenance, and transfers. The following provides a brief overview of the O&M expenses:
◼ Salaries and Benefits - These costs are associated with salaries and fringe benefits paid to employees. The utility has about 5.86 full-time employees (FTEs) dedicated to operating and maintaining the wastewater system. It plans to add 4 FTEs over the Study period to assist with field operations and to perform technical analysis and execute capital projects. ◼ Supplies and Services - These costs are associated with materials and supplies, contract services, utilities, special programs, and routine capital outlay. The largest cost element is contract services with Veolia to operate and maintain the WWTP. ◼ Repair & Maintenance - These costs are associated with repairs and maintenance of buildings, equipment, software, radios, etc., throughout the wastewater system.

Fiscal Year
2023
Fixed Charge ($/Month/EDU)
Residential 21.42
Commercial 21.42
Tertiary Surcharge 2.32
Description
Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Revenue
1 Residential 2,891,200 2,905,600 2,920,200 2,934,800 2,949,400 2 Commercial 658,100 659,400 660,700 662,000 663,300 3 Total 3,549,300$ 3,565,000$ 3,580,900$ 3,596,800$ 3,612,700$ Line No. Description
City Council Regular Meeting - Page 425 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 45 ◼ Transfers - These costs are associated with interfund services provided to the utility by other departments in the City such as legal, finance, human resources, etc.

Table 6-4 O&M Expenses

As shown in Table 6-4, the O&M expenses increase from $3.7M in FY 2023 to $4.6M in FY 2027.

That represents a total increase of 23.6% over the Study period.

6.5 LONG-TERM DEBT
Table 6-5 represents the Wastewater Utility’s existing and proposed debt service obligations over the Study period. Existing debt is associated with a 2019 Refunding Revenue Bond. It is common practice for utilities to utilize debt to finance large multi-year capital improvement projects, but financing options depend on the utility’s financial conditions. By financing the cost of the capital improvements, the utility can fund major projects immediately and spread the payment over a specified time frame. The utility plans to issue a new Revenue Bond in 2025. The City estimates debt financing terms reflecting an interest rate of 5.5% for a 30-year term, with 1% issuance costs, and a debt service coverage requirement of 1.25x.

Table 6-5 Long-Term Debt Service

6.6 CAPITAL IMPROVEMENT PROGRAM
The Wastewater Utility annually develops a five-year Capital Improvement Plan to identify sewer system needs, including ongoing assessments, maintenance, and renewal and replacement requirements.

The CIP was developed based on the City’s Capital Improvement Budget between FY 21-25 and amended to add new identified capital projects. Table 6-6 summarizes the CIP for FY 2023 through FY 2027. The total CIP is projected at $59.2M in CIP over the Study period. The detailed CIP by project is shown in Appendix A, Table 9-2. The following provides a brief overview of key CIP projects:
◼ Treatment Plant - These projects are associated with upgrading the WWTP. The WWTP requires upgrades to comply with nitrogen removal regulations and to allow the WWTP to achieve Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Operation and Maintenance
1 Salaries & Benefits 1,241,600 1,463,100 1,640,500 1,681,600 1,723,700 2 Supplies & Services 1,559,900 1,646,000 1,701,600 1,759,200 1,818,700 3 Repair & Maintenance 131,300 137,900 145,000 152,400 160,200 4 Transfers Out 803,000 829,000 856,200 884,600 914,200 5 Total 3,735,800$ 4,076,000$ 4,343,300$ 4,477,800$ 4,616,800$ Line No. Description
Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Long-Term Debt
1 Existing Loan/Bonds 286,740 287,630 288,430 289,140 289,760 2 Proposed Loan/Bonds 0 0 1,089,258 1,867,300 1,867,300 3 Total 286,740$ 287,630$ 1,377,688$ 2,156,440$ 2,157,060$ Line No. Description
City Council Regular Meeting - Page 426 of 1385
Water and Wastewater Rate Study | City of Banning, CA

46 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 tertiary treatment. As a tertiary treatment plant, the WWTP can produce Title 22 recycled water to be used to offset potable water demands.
◼ Sewer Mains & Collection System - These projects are associated with the annual replacement of mains, sewer main lining, and the addition of new mains to service future expansion.

Table 6-6 Capital Improvement Projects

The capital projects shown in Table 6-6 exclude the CIP associated with the BUA WW Capital Project Bond Fund as those already have an identified funding source and are therefore not shown.

6.6.1 Capital Improvement Financing Plan
The Wastewater Utility funds annual expenditures for the CIP from revenue derived from user rates, capital facilities fee, interest earnings, grants, and available funds on hand. The utility funds CIP through three funds, the Operating Fund, Capital Facilities Fund, and the Wastewater Tertiary Fund. The capital financing for projects in the Operating Fund is shown in Table 6-9. Table 6-7 shows the capital financing for projects in the Capital Facilities Fund. The Capital Facilities Fund will lend $3.0M to the Operating Fund to minimize rate impacts in FY 2023 and will be repaid in FY 2025 after Revenue Bonds are issued. Table 6-8 shows the capital financing for projects in the Wastewater Tertiary Fund. The average annual CIP expenditure is $3.8M in the Capital Facilities Fund and $1.8M in the Wastewater Tertiary Fund. The utility plans on obtaining a grant for 20% of the total costs associated with taking the WWTP to help offset the upgrade costs.

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Capital Improvement Program
1 Building Improvements 51,400 237,800 162,900 0 0 2 Fencing Improvements 0 31,700 0 33,500 0 3 Vehicles 118,200 121,500 124,900 128,400 132,000 4 Machinery/Equipment 102,800 31,700 0 55,800 0 5 Planning/Design-Capital 462,500 1,299,700 1,254,500 1,016,100 149,200 6 Treatment Plant
Improvement 812,100 1,014,400 309,600 33,748,300 15,460,400 7 Sewer Mains & Collection
System 102,800 951,000 108,600 228,900 935,400 8 Total 1,649,800$ 3,687,800$ 1,960,500$ 35,211,000$ 16,677,000$ Line No. Description
City Council Regular Meeting - Page 427 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 47 Table 6-7 Capital Facilities Fund Financing Plan

Table 6-8 Wastewater Tertiary Fund Financing Plan

6.7 TRANSFERS
The Wastewater Utility will perform transfers from the Operating Fund to the Capital Facilities Fund over the Study period for projects that are growth related. The Capital Facilities Fund transfers represent money to cover planned CIP project expenditures. All these transfers do not represent direct operating expenses for the enterprise. Therefore Black & Veatch includes these costs as “below-the- line” cash flow items and not as O&M expenses. Table 6-9, Line 24 for the utility reflects these associated amounts.

6.8 RESERVES
A wastewater utility typically establishes reserves for several reasons, such as covering shortfalls in operating revenues, maintaining strong bond ratings, covering day-to-day operating costs, and easing Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Source of Funds
1 Trsf from/(to) WW Ops (680) (3,000,000) 0 8,000,000 0 0 2 Grant Funding 26,700 137,400 141,200 2,678,100 846,000 3 Other Revenue 7,300 7,300 7,300 7,300 7,300 4 Interest Income 88,400 71,000 106,400 91,000 21,200 5 Total Sources (2,877,600)$ 215,700$ 8,254,900$ 2,776,400$ 874,500$ Use of Funds
6 Capital Improvements Projects 133,600 686,800 706,000 13,390,400 4,230,100 7 Total Uses 133,600$ 686,800$ 706,000$ 13,390,400$ 4,230,100$ 8 Net Annual Cash Balance (3,011,200) (471,100) 7,548,900 (10,614,000) (3,355,600) 9 Beginning Fund Balance 10,343,100 7,331,900 6,860,800 14,409,700 3,795,700 10 Net Cumulative Fund Balance 7,331,900$ 6,860,800$ 14,409,700$ 3,795,700$ 440,100$ Line No. Description
Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Source of Funds
1 Tertiary Revenue 366,100 367,600 369,200 370,900 372,600 2 Grant Funding 13,700 72,600 76,700 1,012,900 796,300 3 Interest Income 73,400 75,900 77,600 58,300 32,600 4 Total Sources 453,200$ 516,100$ 523,500$ 1,442,100$ 1,201,500$ Use of Funds
5 Capital Improvements Projects 66,800 343,400 353,000 4,536,100 3,469,100 6 Total Uses 66,800$ 343,400$ 353,000$ 4,536,100$ 3,469,100$ 7 Net Annual Cash Balance 386,400 172,700 170,500 (3,094,000) (2,267,600) 8 Beginning Fund Balance 7,153,500 7,539,900 7,712,600 7,883,100 4,789,100 9 Net Cumulative Fund Balance 7,539,900$ 7,712,600$ 7,883,100$ 4,789,100$ 2,521,500$ Line No. Description
City Council Regular Meeting - Page 428 of 1385
Water and Wastewater Rate Study | City of Banning, CA

48 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 the burden on ratepayers associated with large rate increases. Per the City’s reserve policy, the Wastewater Utility will maintain the following reserve:
◼ Operating Reserve represents working capital maintained by the Operating Fund to cover day- to-day expenses and maintain enough funds to cover delayed accounts receivables, periods of lower-than-expected wastewater revenues, or unforeseen cost increases. The reserve will change to a minimum balance of 90 days of operating expenses from the existing 10% of operating expenses and debt service payment.

Appropriate reserve levels help the utility maintain liquidity and demonstrate to the rating agencies that the City’s financial policies and practices are focused on maintaining a balanced financial position.

6.9 PROJECTED OPERATING RESULTS
It is important to examine the cash flow projections of the Wastewater Utility under the status quo scenario to fully understand the current condition of the utility and the need for revenue adjustments. As shown in Figure 6-1, the status quo conditions would project that the utility would operate from an annual deficit position, thus requiring the use of reserves to keep operating until FY 2024, when the utility will no longer have sufficient revenues to meet expenses and financial obligations associated with debt service. In this scenario, the utility would not impose any revenue increases over the Study Period and continue to incur O&M expenses, pay for the execution of the planned CIP, and meet reserve targets.

Figure 6-1 Status Quo Operating Cash Flow

Understanding that the status quo scenario is unsustainable for the utility to meet its goals and objectives, the analyses performed in the Study indicate that the utility should implement the proposed revenue increases shown in Table 6-9 if it wishes to keep the utility in a balanced financial position. The revenue increases represent the overall total revenue adjustment needed to meet revenue requirements. The revenue adjustment does not represent adjustments to the individual rates but reflects the overall level of revenue needed to meet the utility’s obligations.

City Council Regular Meeting - Page 429 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 49 The suggested revenue increases help the utility meet the following goals:
◼ Meet budgeted operating obligations and capital investment in the five FYs. ◼ Maintain an operating reserve of 90 days of operating expenses.

Shown in Table 6-9 is a summary of the proposed Operating Fund for the Study Period. The 10- year long-term Operating Fund is shown in Appendix B, Table 10-2 and Figure 10-2. The Operating Fund consists of 1) Revenue and 2) Revenue Requirements.

Revenue
◼ Line 1 is the revenue under existing rates.
◼ Lines 2 through 8 are the additional revenue generated from the required annual revenue increases. The additional revenue generated is a direct reflection of the number of months the increase is effective for, and therefore amount might calculate at less than that stated amount. ◼ Line 9 is the total revenue generated from user charges. ◼ Line 12 is the other operating revenues.
◼ Line 15 is the capital financing for CIP.
◼ Line 16 represents total revenues for the enterprises.

Revenue Requirements
◼ Line 17 is the O&M expenses.
◼ Line 21 is the existing and proposed debt service payments. ◼ Line 22 is the Capital Improvement Program.
◼ Line 24 is the interfund transfer. The transfer reflects the funding of the Capital Facilities Fund. ◼ Line 26 represents total revenue requirements.

Line 29 represents the net cumulative cash balance within the Operating Fund. The net cumulative cash balance intends to match, to the extent possible, Line 30. The cash balance reserve is required to ensure the Operation Fund can continue in the event of a supplier interruption, market price fluctuations of critical equipment or supplies, or an abrupt drop in account receivables. The reserve target minimum is 90 days of O&M expenses.

Line 31 represents the debt service coverage. The City currently has a debt coverage requirement of 1.15x, but the operating cash flow is designed to achieve a debt service coverage of 1.25x in all years.

The new requirement will become effective when new long-term debt is issued in FY 2025. The lending financial institution sets the debt service coverage ratio through rate covenants that obligate the City to increase revenues to meet the minimum debt service coverage requirement City Council Regular Meeting - Page 430 of 1385
Water and Wastewater Rate Study | City of Banning, CA

50 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 6-9 Operating Fund

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Revenue
Rate Revenue
1 Revenue from Existing Rates 3,549,300 3,565,000 3,580,900 3,596,800 3,612,700 Year
Months
Effective Rate Adj
2 2023 6 40.00% 709,900 1,426,000 1,432,400 1,438,700 1,445,100 3 2024 12 25.00% 1,247,800 1,253,300 1,258,900 1,264,500 4 2024 6 25.00% 779,900 1,566,700 1,573,600 1,580,600 5 2025 6 3.00% 117,500 118,000 118,500 6 2026 6 3.00% 119,800 120,300
7 2027 6 3.00% 122,100
8 Increased Revenue Due to Adj 709,900 3,453,700 4,369,900 4,509,000 4,651,100 9 Subtotal Rate Revenue 4,259,200$ 7,018,700$ 7,950,800$ 8,105,800$ 8,263,800$ Other Operating Revenue
10 Other Income 0 0 0 0 0 11 Interest Income 0 9,600 0 122,800 50,900 12 Subtotal Other Operating Rev 0$ 9,600$ 0$ 122,800$ 50,900$ Capital Financing
13 Grant Funding 26,700 27,500 28,200 3,222,400 1,399,600 14 Revenue Bonds 0 0 25,000,000 0 0 15 Subtotal Capital Financing 26,700$ 27,500$ 25,028,200$ 3,222,400$ 1,399,600$ 16 Total Revenue 4,285,900$ 7,055,800$ 32,979,000$ 11,451,000$ 9,714,300$ Revenue Requirements
Operating & Maintenance
17 O&M Expenses 3,735,800 4,076,000 4,343,300 4,477,800 4,616,800 18 Subtotal O&M 3,735,800$ 4,076,000$ 4,343,300$ 4,477,800$ 4,616,800$ Debt Service
19 Existing Revenue Bonds 286,700 287,600 288,400 289,100 289,800 20 Proposed Revenue Bonds 0 0 1,089,300 1,867,300 1,867,300 21 Total Debt Service 286,700$ 287,600$ 1,377,700$ 2,156,400$ 2,157,100$ Capital Projects
22 Capital Improvement Projects 1,449,400 2,585,300 853,200 15,912,600 8,040,600 23 Total Capital Projects 1,449,400$ 2,585,300$ 853,200$ 15,912,600$ 8,040,600$ Transfers
24 Trsf to/(from) WW Cap Fund (3,000,000) 0 8,000,000 0 0 25 Total Transfers (3,000,000)$ 0$ 8,000,000$ 0$ 0$ 26 Total Revenue Requirements 2,471,900$ 6,948,900$ 14,574,200$ 22,546,800$ 14,814,500$ 27 Net Annual Cash Balance 1,814,000 106,900 18,404,800 (11,095,800) (5,100,200) 28 Beginning Fund Balance (891,000) 923,000 1,029,900 19,434,700 8,338,900 29 Net Cumulative Fund Balance 923,000$ 1,029,900$ 19,434,700$ 8,338,900$ 3,238,700$ 30 Min Operating Reserves (90 Days) 921,200$ 1,005,000$ 1,071,000$ 1,104,100$ 1,138,400$ 31 Debt Service Coverage (1.25x) 1.83 10.27 2.62 1.74 1.71 Line No. Description
City Council Regular Meeting - Page 431 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Revenue and Revenue Requirements 51 Figure 6-2 presents the proposed Operating Fund.

Figure 6-2 Operating Cash Flow

City Council Regular Meeting - Page 432 of 1385
Water and Wastewater Rate Study | City of Banning, CA

52 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 7 Cost of Service Analysis
The cost-of-service analysis requires that the utility recover needed revenues from rates for wastewater service, which are allocated to customer classes according to the service rendered. An equitable rate structure allocates the capture of revenue requirements to customer classes based on contributed sewage volume, capacity, strengths, number of customer connections, and other relevant factors.

In analyzing the Wastewater Utility’s cost of service for allocation to its customer classes, Black & Veatch selected the annual revenue requirements for FY 2023 as the Test Year requirements to demonstrate the development of cost-of-service wastewater rates. Table 7-1 summarizes the total costs of service that need to be recovered from wastewater user rates. The table represents TY 2023.

Table 7-1 Cost of Service Revenue from Rates

It is necessary to deduct revenues from other sources, as shown in Line 11, which corresponds with Table 6-9, Lines 12 and 15, to derive the net revenue requirements recovered from rate revenue properly. Shown in Line 5 is the total revenue requirement that corresponds with Table 6-9, Line 26. Line 12 represents the net annual cash balance during the TY. This number is positive if the enterprise is drawing down funds already in the Operating Fund. The number will be negative if the enterprise is replacing funds. In the case of the Wastewater Utility, the $1.8M figure indicates that the forecast is projecting a positive cash balance for the year. Line 13 represents the additional revenues generated if the revenue increase was effective for a full year versus only 6 months.

Operating Capital Total
Expense Cost Cost
($) ($) ($)
Revenue Requirements
1 O&M Expense 3,735,800 0 3,735,800 2 Debt Service Requirements 0 286,700 286,700 3 Capital Projects 0 1,449,400 1,449,400 4 Transfers 0 (3,000,000) (3,000,000) 5 Subtotal 3,735,800$ (1,263,900)$ 2,471,900$
Less Revenue Requirements Met from Other Sources
6 Miscellaneous 0 0 0 7 Interfund Transfers 0 0 0 8 Other Income 0 0 0 9 Interest 0 0 0 10 Capital Financing 0 26,700 26,700 11 Subtotal 0$ 26,700$ 26,700$ Adjustments
12 Adj for Annual Cash Balance (1,814,000) 0 (1,814,000) 13 Adj to Annualize Rate Increase (709,800) 0 (709,800) 14 Subtotal (2,523,800)$ 0$ (2,523,800)$ 15 COS to be Recovered from Rates 6,259,600$ (1,290,600)$ 4,969,000$ Line No. Description
City Council Regular Meeting - Page 433 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Cost of Service Analysis 53

7.1 FUNCTIONAL COST COMPONENTS
The first step in conducting a cost-of-service analysis involves analyzing the cost of providing sewer service by system function to properly allocate the costs to the various customer classes and, subsequently, design rates. As a basis for allocating costs of service among customer classes, costs are separated into the following four basic functional cost components: (1) Base; (2) Capacity; (3) Strength; (4) Customer; and (5) Direct Assignment, described as follows:
◼ Base costs represent operating and capital costs of the system associated with collection. The collection costs vary directly with the quantity of sewage flow. ◼ Capacity costs represent capital costs related to investment in system facilities which are sized based on, or required because of, maximum rates of sewage flow and the operation and maintenance expense related to those facilities.
◼ Strength costs represent those operating and capital costs associated with treatment. The treatment costs are specifically related to strength parameters such as Biological Oxygen Demand, and Total Suspended Solids.
◼ Customer costs are those expenditures that tend to vary in proportion to the number of customers connected to the system. These include billing, collecting, accounting and capital costs associated with services.
◼ Directly assigned costs are specifically identified as those incurred to serve specific customers.

The Wastewater Utility has no directly assigned categories.

7.2 ALLOCATION TO COST COMPONENTS
The next step of the cost-of-service process involves allocating each cost element to functional cost components based on the parameter or parameters having the most significant influence on the magnitude of that cost element. O&M expense items are allocated directly to appropriate cost components. A detailed allocation of related capital investment is used as a proxy for allocating capital and replacement costs. The separation of costs into functional components provides a means for distributing such costs to the various customer classes based on their responsibilities for each type of service.

7.2.1 Volume, Capacity, and Strength Allocations
The wastewater system consists of various facilities designed and operated to fulfill a given function. For the system to provide adequate service to its customers, it must be capable of meeting not only the annual volume requirements but also the strength loading demands placed on the system.

Because not all customers and types of customers exert volume and strength loading demands similarly, the capacities of the various facilities must be designed to accommodate the demands of all classes of customers. Each wastewater service facility within the system has an underlying volume demand exerted by all customers for whom the base cost component applies. 100% of the costs go to the base cost component for those facilities designed solely to meet volume demand. Specific facilities are designed to meet maximum flow, including infiltration and inflow (I/I); therefore, these facilities are allocated 100% to capacity. For facilities designed to meet strength loading demands, the percentage of the costs is allocated to the different strength cost components based on their specific function.

City Council Regular Meeting - Page 434 of 1385
Water and Wastewater Rate Study | City of Banning, CA

54 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022

7.2.2 Allocation of Operating and Maintenance Expenses
In allocating O&M expenses for TY 2023, costs are directly allocated to the cost components to the extent possible. The Wastewater Utility book does not record operating costs by functional categories such as collection, lift stations, WWTP, solids handling, and disposal. Therefore, Black & Veatch allocated O&M expenses to the cost factors noted in Section 5.1 based on discussions with City staff and engineering experience observed with other wastewater systems. Table 7-2 identifies the allocation basis used and the associated percentage in each cost component for the utility.

City Council Regular Meeting - Page 435 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Cost of Service Analysis 55 Table 7-3 represents the dollar allocation of O&M expenses to the cost components. Next, revenues are subtracted from other sources as shown in Table 7-1, Lines 11 and 14. The analysis deducts any drawdown of available cash balances and normalizes the rate adjustments for a full year to determine the net O&M costs for the utility.

7.2.3 Allocation of Capital Investments
In allocating the capital investment for TY 2023, the existing fixed assets (which serve as a proxy for the current capital investments) are allocated directly to cost components to the extent possible. The allocation of costs in this manner provides a basis for annual investment in wastewater system facilities.

Plan capital costs can be allocated using the total net system investment distribution across the functional cost components. Table 7-4 identifies the allocation basis used and the associated percentage in each cost component for the utility.

Table 7-5 shows the allocation of existing system investment serving wastewater customers. The total net system investment of $5.7M shown on Line 9 represents the Test Year original cost less accumulated depreciation of the system in service. The total net system investment reflects the Wastewater Utility fixed asset listing ending June 30, 2021. This value represents the original cost (book value) of the assets.

City Council Regular Meeting - Page 436 of 1385
Water and Wastewater Rate Study | City of Banning, CA
56 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 7-2 Allocation Basis for O&M Expenditures

Line Common to All Customers Allocation
No. Description Volume Capacity BOD TSS Customer Basis
(%) (%) (%) (%) (%)
Operation & Maintenance
1 Salary & Wages-Fringe Benefits 0% 100% 0% 0% 0% Collection 2 Contractual Services 0% 100% 0% 0% 0% Collection
3 Laboratory Services 20% 0% 40% 40% 0% Strengths
4 Sludge Hauling 0% 0% 52% 48% 0% Sludge
5 Contracted Wwtr Plant Svc 34% 0% 33% 33% 0% Treatment 6 Contract Services-Employee SPC 17% 47% 13% 13% 10% Average O&M 7 Contract Services-Utilities 100% 0% 0% 0% 0% Volume
8 Contract Services-Rental 17% 47% 13% 13% 10% Average O&M 9 Contract Services-Professional 17% 47% 13% 13% 10% Average O&M 10 Departmental Supplies 0% 100% 0% 0% 0% Collection
11 Laboratory Supplies 20% 0% 40% 40% 0% Strengths
12 Special Programs 0% 0% 0% 0% 100% Customer
13 Special Utility Costs 0% 100% 0% 0% 0% Collection
14 Non-Capitalized 16% 54% 15% 15% 0% Average Net Plant 15 Contract Services-Repair 16% 54% 15% 15% 0% Average Net Plant 16 Bad Debt 17% 47% 13% 13% 10% Average O&M
17 Interfund Service Payments 17% 47% 13% 13% 10% Average O&M 18 Interfund Svc-Bill/Coll 0% 0% 0% 0% 100% Customer
19 Interfund Transfers 17% 47% 13% 13% 10% Average O&M
20 Contra Expenditure 17% 47% 13% 13% 10% Average O&M
City Council Regular Meeting - Page 437 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY
BLACK & VEATCH CORPORATION | Cost of Service Analysis 57 Table 7-3 Allocation of O&M Expenditures

Line Total Common to All Customers
No. Description Cost Volume Capacity BOD TSS Customer
($) ($) ($) ($) ($) ($)
Operation & Maintenance
1 Salary & Wages-Fringe Benefits 1,241,600 0 1,241,600 0 0 0 2 Contractual Services 33,700 0 33,700 0 0 0 3 Laboratory Services 26,000 5,200 0 10,400 10,400 0 4 Sludge Hauling 26,000 0 0 13,500 12,500 0 5 Contracted Wwtr Plant Svc 1,055,200 358,800 0 348,200 348,200 0 6 Contract Services-Employee SPC 3,100 500 1,500 400 400 300 7 Contract Services-Utilities 134,400 134,400 0 0 0 0 8 Contract Services-Rental 10,400 1,900 4,900 1,300 1,300 1,000 9 Contract Services-Professional 113,900 19,700 53,400 14,700 14,700 11,400 10 Departmental Supplies 22,000 0 22,000 0 0 0 11 Laboratory Supplies 5,200 1,000 0 2,100 2,100 0 12 Special Programs 71,400 0 0 0 0 71,400 13 Special Utility Costs 57,600 0 57,600 0 0 0 14 Non-Capitalized 1,000 100 500 200 200 0 15 Contract Services-Repair 131,300 20,700 70,600 20,000 20,000 0 16 Bad Debt 0 0 0 0 0 0 17 Interfund Service Payments 404,600 69,900 189,700 52,400 52,200 40,400 18 Interfund Svc-Bill/Coll 217,400 0 0 0 0 217,400 19 Interfund Transfers 181,000 31,300 84,800 23,400 23,400 18,100 20 Contra Expenditure 0 0 0 0 0 0 21 Total O&M Expenses 3,735,800$ 643,500$ 1,760,300$ 486,600$ 485,400$ 360,000$ Less Other Revenue
22 Miscellaneous Revenues 0 0 0 0 0 0 23 Other Adjustments (2,523,800) (436,000) (1,183,000) (326,700) (325,900) (252,200) 24 Net Operating Expenses 6,259,600$ 1,079,500$ 2,943,300$ 813,300$ 811,300$ 612,200$ City Council Regular Meeting - Page 438 of 1385
Water and Wastewater Rate Study | City of Banning, CA
58 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022 Table 7-4 Allocation Basis for Capital Costs

Table 7-5 Allocation of Capital Costs

Line Common to All Customers Allocation
No. Description Volume Capacity BOD TSS Customer Basis
(%) (%) (%) (%) (%)
Plant Assets
1 Land 34% 0% 33% 33% 0% Treatment
2 Collection 0% 100% 0% 0% 0% Collection
3 Pumping 0% 100% 0% 0% 0% Pumping
4 Treatment 34% 0% 33% 33% 0% Treatment
5 General Plant 16% 54% 15% 15% 0% Average Net Plant
Line Total Common to All Customers
No. Description Cost Volume Capacity BOD TSS Customer
($) ($) ($) ($) ($) ($)
Plant Assets
1 Land 677,800 230,400 0 223,700 223,700 0 2 Collection 2,905,800 0 2,905,800 0 0 0 3 Pumping 101,900 0 101,900 0 0 0 4 Treatment 1,908,900 649,100 0 629,900 629,900 0 5 General Plant 114,700 18,000 61,700 17,500 17,500 0 6 Total Plant Assets 5,709,100$ 897,500$ 3,069,400$ 871,100$ 871,100$ 0$ Less Other Revenue
7 Miscellaneous Revenues 26,700 4,100 4,100 4,100 0 0 8 Other Adjustments 0 0 0 0 0 0 9 Net Plant Assets 5,682,400$ 893,400$ 3,065,300$ 867,000$ 871,100$ 0$ City Council Regular Meeting - Page 439 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Cost of Service Analysis 59

7.3 UNITS OF SERVICE
To properly recognize the cost of service, each customer class receives its share of base, capacity, strength, and customer costs. Following the allocation of costs, the total cost responsibility for each customer class is developed using unit costs of service for each cost function and subsequently assigning those costs to the customer classes based on the respective service requirements. The number of units of service required by each customer class provides a means for the proportionate distribution of costs previously allocated to respective cost categories.
◼ Volume costs vary with the volume of wastewater and I/I flow contributed to the wastewater system and distributed to customer classes on that basis. Since the utility does not use wastewater flow information for billing, estimates were incorporated for flow based on the number of people in a household, the amount of water consumed, and estimated return factors.

To determine I/I flow, an analysis of available historical treatment plant influent volume data was performed. It is estimated that the amount of flow entering the wastewater system through I/I averages approximately 2.5% of the total wastewater flow reaching the treatment plant.

Each customer class should bear its proportionate share of the costs associated with I/I in an equitable manner. Recognizing that the major cost responsibility for I/I is typically allocable on an individual connection basis, two-thirds of the total I/I volume projected for customers is allocated to customer classes based on the number of individual connections, with the remaining one-third allocated based on customer wastewater flow. ◼ Capacity costs are associated with providing maximum capacity for wastewater and I/I flows and are distributed to customer classes based on the estimated maximum rates of flow.

Wastewater system capacity requirements are predicated on estimated peak wastewater and I/I rates of flow. The total peak sanitary and I/I rate of flow is based on the 2018 Integrated Master Plan and the presumed benefits accruing from the I/I reduction program. The cumulative peak rate of wastewater flow is estimated based on a peak rate of wastewater flow of 1.25 times the average, and a peak rate of I/I of 5.4 times the average. ◼ Strength costs are associated with wastewater and I/I flow. Wastewater flow pollutant characteristics are based on a system average BOD concentration of 277 milligram per liter (mg/L) and an average TSS concentration of 258 mg/L. I/I flow pollutant characteristics are based on average I/I concentration of 50 mg/L for both BOD and TSS. These wastewater and I/I strength concentrations are obtained from a review of plant inflow data.

Individually a BOD concentration of 250 mg/L and TSS concentration of 250 mg/L was assigned to residential based on California Revenue Program Guidelines and a BOD concentration of 396 mg/L and TSS concentration of 293 mg/L was assigned to commercial based on a mass balance analysis. Using volume and concentrations, loadings are calculated in pounds (lbs.) which are used to allocate costs to customer classes.
◼ Customer costs related to generating and distributing customer bills are based on the number of bills.

Table 7-6 summarizes the estimated TY units of service for the various customer classes.

City Council Regular Meeting - Page 440 of 1385
Water and Wastewater Rate Study | City of Banning, CA

60 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022

7.4 COST OF SERVICE ALLOCATIONS
Unit costs of service are applied to each customer class’ respective service requirements to determine the cost of service for each customer class. The total unit costs of service applied to the respective requirements for each customer class results in the total cost of service for each customer class.

7.4.1 Units Costs of Service
The TY 2023 unit cost of service for each functional cost component is simply the total cost divided by the applicable units of service, as shown in Table 7-7. On Line 3, the total costs represent the cost that rates need to recover, as demonstrated in Table 7-1, Line 15. The net O&M cost includes O&M less revenue from other sources and adjustments. The total capital cost includes debt service payments and transfers to the Capital Facilities Fund. Line 5 represents the unit costs for the entire wastewater system regardless of customer classes. After that, these unit costs are applied in allocating the costs to the specific customer classes.

7.4.2 Distribution of Costs of Service to Customer Classes Applying the unit costs to the units for each customer class produces the customer class costs.

This process is illustrated in Table 7-8, in which the analysis applies the unit costs to the customer class units of service. The costs attributable to each customer class are based on the functional cost components described in Section 6.1. Each customer class places a burden on the system in different ways; thus, the allocation of the units is representative of this burden.

An example of the application of unit costs to the commercial customer class is shown below for illustrative purposes.

Vol Component
Unit Cost (Table 7-7, Line 5) 0.90$ per HCF Consumption (Table 7-8, Line 2) 181,901 HCF
Total Allocated Cost 163,100$
Please note that the numbers within the tables are rounded, yet the calculations are done based on non-rounded values; therefore, results might vary.

City Council Regular Meeting - Page 441 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY
BLACK & VEATCH CORPORATION | Cost of Service Analysis 61 Table 7-6 Units of Service

Line Contributed Contributed Total Loadings
No. Description Units Volume Volume Capacity BOD TSS Bills Units of Measure (EDUs) (HCF) (HCF) (HCF/day) (lbs) (lbs) (bills) 1 Residential 10,993 779,186 799,165 2,964 1,352,766 1,260,405 131,921 2 Commercial 2,502 177,353 181,901 674 307,908 286,886 30,027 3 Total 13,496 956,539 981,066 3,638 1,660,674 1,547,291 161,948 City Council Regular Meeting - Page 442 of 1385
Water and Wastewater Rate Study | City of Banning, CA

62 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022
Table 7-7 Units Cost of Service

Table 7-8 Distribution of Costs to Customer Classes
Line Total Common to All Customers
No. Description Cost Volume Capacity BOD TSS Customer
1 Net Operating Expense 6,259,600 1,079,500 2,943,300 813,300 811,300 612,200 2 Capital Costs (1,290,600) (199,700) (697,100) (196,900) (196,900) 0 3 Total Cost of Service 4,969,000$ 879,800$ 2,246,200$ 616,400$ 614,400$ 612,200$ 4 Units of Service 981,066 3,638 1,660,674 1,547,291 161,948 HCF per HCF/Day lbs lbs bills
5 Cost per Unit 0.90$ 617.43$ 0.37$ 0.40$ 3.78$ per HCF per HCF/Day per lbs per lbs per bill
Line Total Common to All Customers
No. Description Cost Volume Capacity BOD TSS Customer
1 Cost per Unit 0.90$ 617.43$ 0.37$ 0.40$ 3.78$ per HCF per HCF/Day per lbs per lbs per bill
Residential
2 Units 799,165 2,964 1,221,516 1,221,516 131,921 3 Allocation of costs of service 3,983,800 716,700 1,830,100 453,200 485,100 498,700 Commercial
4 Units 181,901 674 439,577 325,612 30,027 5 Allocation of costs of service 985,200 163,100 416,100 163,200 129,300 113,500 6 TOTAL COSTS OF SERVICE 4,969,000$ 879,800$ 2,246,200$ 616,400$ 614,400$ 612,200$ City Council Regular Meeting - Page 443 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY

BLACK & VEATCH CORPORATION | Rate Design 63
8 Rate Design
The initial consideration in deriving rate schedules for wastewater service is establishing equitable charges to the customers commensurate with the cost of providing that service. While the cost-of- service allocations to customer classes should not be construed as literal or exact determinations, they offer a guide to the necessity for, and the extent of, rate adjustments. Practical considerations sometimes modify rate adjustments by considering additional factors such as the extent of bill impacts, existing contracts, and historical local policies and practices.

8.1 EXISTING RATES
The Wastewater Utility’s existing rates consist of a fixed component in the form of a monthly fixed charge. The fixed charge is a flat fee based on EDUs and is applied to residential and commercial customers. Table 6-2, presented earlier in this report, summarizes the current wastewater rates.

8.2 PROPOSED RATES
The costs of service analysis described in the preceding sections of this report provide a basis for designing wastewater rates.

8.2.1 Fixed Charge
The monthly fixed charge is designed to recover all costs associated with contributed sewage flow, capacity, strength loadings, billing, collecting, accounting, and maintenance and capital costs. The charge is a fixed monthly fee based on EDUs and by customer class. An EDU is defined in Section 5.1. In addition, the utility will continue to impose a tertiary surcharge based on EDUs.3 The analysis performed herein validated that the existing tertiary surcharge is expected to generate sufficient revenue to fund the capital costs allocated to the Wastewater Tertiary Fund; therefore, it will remain unchanged during the Study period.

Table 8-1 shows the forecasted proposed five-year fixed charge rate schedule.

Table 8-1 Proposed Fixed Charge

3 The tertiary surcharge was last updated in the 2018 Rate Study performed by Willdan Financial Consultants.

Fiscal Year Ending June 30,
Customer Class FY 2023 FY 2024 FY 2024 FY 2025 FY 2026 FY 2027 Fixed Charge ($/Month/EDU)
Effective Date 1/1/2023 7/1/2023 1/1/2024 1/1/2025 1/1/2026 1/1/2027 Residential 30.20 37.75 47.12 49.01 49.69 51.35
Commercial 32.81 41.01 51.57 51.03 56.06 56.98
Tertiary Surcharge 2.32 2.32 2.32 2.32 2.32 2.32
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Water and Wastewater Rate Study | City of Banning, CA

64 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022

8.3 TYPICAL MONTHLY COSTS UNDER PROPOSED CHARGES
Table 8-2 compares typical monthly costs under existing rates and the proposed schedule of sewer user rates derived in this Study for residential and non-residential customers. The total typical bill includes the tertiary surcharge that remains unchanged.

Table 8-2 Typical Monthly Bill

8.4 NEIGHBORING WASTEWATER UTILITIES
Presented in Figure 8-1 are the proposed rates compared to rates of neighboring utilities for a single-family residential customer representing one EDU or using returning wastewater flow of 12 HCF.

Based on the comparison, the City’s typical bill is currently on the lower end of the wastewater providers in the area. With the proposed rate increases for FY 2023, the City remains on the lower end.

When the City implements the FY 2027, it will trend towards the higher end of the wastewater providers. Like the situation for the Water Utility, Black & Veatch fully expects that neighboring utilities will increase rates sometime over the next five years. All surveyed neighboring utility rates are current as of June 2022.

Figure 8-1 Comparison to Neighboring Wastewater Utilities

FY 2023 FY 2023
Existing Proposed
Customer Class Rates Rates Difference
($/EDU) ($/EDU) ($/EDU)
Typical Bill
Residential 21.42 30.20 8.78
Commercial 21.42 32.81 11.39
Teritary Surcharge 2.32 2.32 0 City Council Regular Meeting - Page 445 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY
BLACK & VEATCH CORPORATION | Appendix A – Detailed Capital Improvement Program 65 9 Appendix A – Detailed Capital Improvement Program
Table 9-1 Water Capital Improvement Projects

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Capital Improvement Program
1 Reservoir entrance fencing, M-Wells, new and additional fencing Fencing Improvements 0 52,800 0 55,800 0 2 Backhoe and Valve Machine Machinery/Equipment 128,500 0 162,900 0 0 3 Pipeline Rehab Asset Study Planning/Design-Capital 0 105,700 0 0 0 4 Professional and Technical Service for San Gorgonio Flume Planning/Design-Capital 308,400 317,000 325,900 335,000 344,300 5 Well Rehab and Upgrades Wells/Pumping Equipment 282,700 305,200 329,300 355,400 383,700 6 Emergency Power and Safety Retrofits Machinery/Equipment 36,000 264,200 38,000 279,100 40,200 7 Reservoir Rehabilitation Reservoirs 36,000 237,800 0 39,100 269,700 8 Hargrave/Ramsey Intersection Water Mains 0 0 0 0 0 9 Fire Flow Improvements Water Mains 128,500 1,585,000 0 139,600 1,807,700 10 Annual Water Main Replacement Water Mains 1,798,900 132,100 1,900,900 139,600 2,008,600 11 Replacement and Repairs of PRVs to split Main Zone Water Reg. Valves, Etc 25,700 26,400 27,200 0 0 12 Add one new site per year, PRV stations, Canyon Wells SCADA/Telemetry 30,800 31,700 32,600 0 0 13 AMI/AMR Project Smart Meter Project 0 0 0 0 0 14 City Share of Flume Restoration Flume Restoration Project 0 0 0 0 0 15 Mountain Booster Pump Station Wells/Pumping Equipment 0 89,800 0 993,700 0 16 C-6 VFD Wells/Pumping Equipment 179,900 0 0 0 0 17 Re-Zoning PRV Water Reg. Valves, Etc 514,000 528,300 543,100 0 0 18 Well Site Upgrades Wells/Pumping Equipment 219,000 0 86,900 27,900 739,200 19 Computer Info System (ERP) Machinery/Equipment 0 264,200 271,600 279,100 0 20 Lower Main Zone Reservoir (Prop Acq, Design, Const) Property Acquisition 0 317,000 0 0 286,900 21 New Admin Building (Shared cost with WW) Building Construction 0 0 0 0 0 22 Water Truck (Shared cost with WW) Machinery/Equipment 102,800 0 0 0 0 23 Machinery/Equipment Machinery/Equipment 30,800 31,700 32,600 33,500 34,400 24 Dump Truck (Shared with WW) Machinery/Equipment 0 105,700 0 0 0 25 Generator at Well Sites Wells/Pumping Equipment 0 0 89,600 0 100,400 CategoryLine No. Description
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66 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Capital Improvement Program
26 Well Look Down to VFD Wells/Pumping Equipment 77,100 79,300 81,500 83,700 0 27 Lower Well M3 Wells/Pumping Equipment 0 0 81,500 83,700 0 28 Dozer D6H Machinery/Equipment 154,200 158,500 0 0 0 29 Well 4 Electric Pump Wells/Pumping Equipment 0 68,700 81,500 0 0 30 Properties for reservoirs, wells, booster stations Property Acquisition 0 0 0 0 0 31 PWW-1_Well C8 Planning/Design (PS&E) Planning/Design-Capital 179,900 0 0 0 0 32 PWW-1_Equip Well C8 Wells/Pumping Equipment 0 1,585,000 0 0 0 33 PWW-1_Pilot and Drill Well C8 Wells/Pumping Equipment 1,027,900 0 0 0 0 34 PWV-1_Altitude Valve Retrofits at San Gorgonio Reservoirs Reservoirs 0 0 0 0 0 35 PWP-1_New Water Main to Connect C8 Water Mains 0 0 0 0 0 36 WWTP Treatment Upgrades - 3.6 MGD (Const) Treatment 0 0 353,000 3,266,000 1,492,100 37 New Admin Building (Shared cost with WW) Building Construction 154,200 686,800 543,100 0 0 38 Total 5,415,300$ 6,972,900$ 4,981,200$ 6,111,200$ 7,507,200$ CategoryLine No. Description
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City of Banning, CA | WATER AND WASTEWATER RATE STUDY
BLACK & VEATCH CORPORATION | Appendix A – Detailed Capital Improvement Program 67 Table 9-2 Wastewater Capital Improvement Projects

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Capital Improvement Program
1 Buildings Building Improvements 0 0 0 0 0 2 New gate at WWTP, New Fencing at Westward LS, annual fencing improvements Fencing Improvements 0 31,700 0 33,500 0 3 New PLCs (SCADA Hardware) Computer Hardware 0 0 0 0 0 4 Vactor truck lease Vehicles 118,200 121,500 124,900 128,400 132,000 5 6-inch pump replacement of collections which was used to replace broken one at WWTP, ongoing equipment replacement anticipated with new O&M contract Machinery/Equipment 0 0 0 0 0 6 SCADA Programming at WWTP Planning/Design-Capital 77,100 79,300 54,300 0 0 7 WW20B3_Digesters Cleaning, combined with Digesters Re-coating Treatment Plant
Improvement 771,000 792,500 0 725,800 860,800 8 PVC Digester Gas Piping
Treatment Plant
Improvement 0 26,400 0 0 0 9 Iron Sponge Media Replacement, biannual
Treatment Plant
Improvement 41,100 0 43,400 0 51,600 10 WWTP-2_Repairs to Heat Exchanger (WWTP)
Treatment Plant
Improvement 0 37,000 0 0 0 11 Repairs to Boiler Gas Control Valves
Treatment Plant
Improvement 0 0 48,900 0 0 12 WWO-1_rollover SCADA project
Sewer Mains & Collection
System 0 0 0 0 0 13 Annual sewer lining projects
Sewer Mains & Collection
System 0 105,700 108,600 111,700 0 14 Gravity Main Improvements
Sewer Mains & Collection
System 102,800 845,300 0 117,200 935,400 15 Digest Cleaning and Coating
Treatment Plant
Improvement 0 158,500 217,200 0 0 Line No. Description Category
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68 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
($) ($) ($) ($) ($)
Capital Improvement Program
16 I&I Study Planning/Design-Capital 51,400 52,800 0 0 0 17 WWTP Treatment Upgrades - 3.6 MGD (Design) Planning/Design-Capital 133,600 137,400 141,200 145,200 149,200 18 WWTP Treatment Upgrades - 3.6 MGD (Const)
Treatment Plant
Improvement 0 0 0 15,966,900 6,848,800 19 Machinery/Equipment Machinery/Equipment 41,100 0 0 55,800 0 20 Water Truck (Shared cost with W) Machinery/Equipment 20,600 0 0 0 0 21 New Admin Building (Shared cost with W) Building Improvements 51,400 237,800 162,900 0 0 22 Dump Truck (Shared with W) Machinery/Equipment 0 31,700 0 0 0 23 Sewer video crawler Machinery/Equipment 41,100 0 0 0 0 24 WWTP Treatment Upgrades - 3.6 MGD (Design) Planning/Design-Capital 133,600 686,800 706,000 689,500 0 25 WWTP Treatment Upgrades - 3.6 MGD (Const)
Treatment Plant
Improvement 0 0 0 12,701,000 4,230,100 26 WWTP Treatment Upgrades - 3.6 MGD (Design) Planning/Design-Capital 66,800 343,400 353,000 181,400 0 27 WWTP Treatment Upgrades - 3.6 MGD (Const)
Treatment Plant
Improvement 0 0 0 4,354,600 3,469,100 28 Total 1,649,800$ 3,687,800$ 1,960,400$ 35,211,000$ 16,677,000$ Line No. Description Category
City Council Regular Meeting - Page 449 of 1385
City of Banning, CA | WATER AND WASTEWATER RATE STUDY
BLACK & VEATCH CORPORATION | Appendix B – Long Term Financial Plan 69 10 Appendix B – Long Term Financial Plan
Table 10-1 Long-Term Water Operating Fund

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 Revenue
Rate Revenue
1 Revenue from Existing Rates 10,730,400 10,906,600 11,086,900 11,271,500 11,460,400 11,653,900 11,852,000 12,055,000 12,262,900 12,475,800 2 Increased Rev Due to Adj's 576,800 1,821,800 3,242,700 4,079,700 4,987,200 5,071,300 5,157,600 5,245,900 5,336,400 5,428,900 3 Subtotal Rate Revenue 11,307,200$ 12,728,400$ 14,329,600$ 15,351,200$ 16,447,600$ 16,725,200$ 17,009,600$ 17,300,900$ 17,599,300$ 17,904,700$ Other Operating Revenue
4 Other Income 137,100 137,100 137,100 137,100 137,100 137,100 137,100 137,100 137,100 137,100 5 Interest Income 116,600 94,400 79,300 66,000 44,000 48,800 61,500 49,100 44,000 46,500 6 Subtotal Other Operating Rev 253,700$ 231,500$ 216,400$ 203,100$ 181,100$ 185,900$ 198,600$ 186,200$ 181,100$ 183,600$ 7 Total Revenue 11,560,900$ 12,959,900$ 14,546,000$ 15,554,300$ 16,628,700$ 16,911,100$ 17,208,200$ 17,487,100$ 17,780,400$ 18,088,300$ Revenue Requirements
Operating & Maintenance
8 O&M Expenses 7,890,800 8,359,000 9,096,200 9,538,900 9,996,300 10,289,600 10,592,600 10,906,500 11,229,800 11,565,500 9 Subtotal O&M 7,890,800$ 8,359,000$ 9,096,200$ 9,538,900$ 9,996,300$ 10,289,600$ 10,592,600$ 10,906,500$ 11,229,800$ 11,565,500$ Debt Service
Senior Debt
10 Existing Revenue Bonds 1,979,600 1,976,300 1,975,200 1,976,100 1,976,100 1,979,500 1,973,300 1,978,700 1,974,000 1,976,900 11 Proposed Revenue Bonds 0 0 0 0 0 0 0 0 0 0 12 Total Debt Service 1,979,600$ 1,976,300$ 1,975,200$ 1,976,100$ 1,976,100$ 1,979,500$ 1,973,300$ 1,978,700$ 1,974,000$ 1,976,900$ Capital Projects
13 Capital Improvement Program 4,053,200 4,700,900 4,084,900 2,845,300 6,015,300 1,033,500 5,716,700 6,005,500 4,186,000 4,435,100 14 Total Capital Projects 4,053,200$ 4,700,900$ 4,084,900$ 2,845,300$ 6,015,300$ 1,033,500$ 5,716,700$ 6,005,500$ 4,186,000$ 4,435,100$ Transfers
15 Trsf to/(from) Wtr Cap Fund 0 0 325,000 2,925,000 1,300,000 0 0 0 0 0 16 Total Transfers 0$ 0$ 325,000$ 2,925,000$ 1,300,000$ 0$ 0$ 0$ 0$ 0$ 17 Total Revenue Requirements 13,923,600$ 15,036,200$ 15,481,300$ 17,285,300$ 19,287,700$ 13,302,600$ 18,282,600$ 18,890,700$ 17,389,800$ 17,977,500$ 18 Net Annual Cash Balance (2,362,700) (2,076,300) (935,300) (1,731,000) (2,659,000) 3,608,500 (1,074,400) (1,403,600) 390,600 110,800 19 Beginning Fund Balance 12,839,280 10,476,580 8,400,280 7,464,980 5,733,980 3,074,980 6,683,480 5,609,080 4,205,480 4,596,080 20 Net Cumulative Fund Balance 10,476,580$ 8,400,280$ 7,464,980$ 5,733,980$ 3,074,980$ 6,683,480$ 5,609,080$ 4,205,480$ 4,596,080$ 4,706,880$ 21 Min. Operating Resvs (90 Days) 1,945,700 2,061,100 2,242,900 2,352,100 2,464,800 2,537,200 2,611,900 2,689,300 2,769,000 2,851,800 22 Debt Service Coverage (1.2x) 1.85 2.33 2.76 3.04 3.36 3.35 3.35 3.33 3.32 3.30 Line No. Description
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Water and Wastewater Rate Study | City of Banning, CA

70 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022
Figure 10-1 Long-Term Water Operating Cash Flow

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City of Banning, CA | WATER AND WASTEWATER RATE STUDY
BLACK & VEATCH CORPORATION | Appendix B – Long Term Financial Plan 71 Table 10-2 Long-Term Wastewater Operating Fund

Fiscal Year Ending June 30,
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 Revenue
Rate Revenue
1 Revenue from Existing Rates 3,549,300 3,565,000 3,580,900 3,596,800 3,612,700 3,628,800 3,645,000 3,661,200 3,677,500 3,693,900 2 Increased Revenue Due to Adj 709,900 3,453,700 4,369,900 4,509,000 4,651,100 4,796,400 4,944,700 5,096,000 5,250,700 5,408,600 3 Subtotal Rate Revenue 4,259,200$ 7,018,700$ 7,950,800$ 8,105,800$ 8,263,800$ 8,425,200$ 8,589,700$ 8,757,200$ 8,928,200$ 9,102,500$ Other Operating Revenue
4 Other Income 0 0 0 0 0 0 0 0 0 0 5 Interest Income 0 9,600 0 122,800 50,900 34,700 38,500 38,600 39,800 44,900 6 Subtotal Other Operating Rev 0$ 9,600$ 0$ 122,800$ 50,900$ 34,700$ 38,500$ 38,600$ 39,800$ 44,900$ Capital Financing
7 Grant Funding 26,700 27,500 28,200 3,222,400 1,399,600 0 0 0 0 0 8 Revenue Bonds 0 0 25,000,000 0 0 0 0 0 0 0 9 Subtotal Capital Financing 26,700$ 27,500$ 25,028,200$ 3,222,400$ 1,399,600$ 0$ 0$ 0$ 0$ 0$ 10 Total Revenue 4,285,900$ 7,055,800$ 32,979,000$ 11,451,000$ 9,714,300$ 8,459,900$ 8,628,200$ 8,795,800$ 8,968,000$ 9,147,400$ Revenue Requirements
Operating & Maintenance
11 O&M Expenses 3,735,800 4,076,000 4,343,300 4,477,800 4,616,800 4,782,500 4,916,700 5,055,100 5,197,500 5,344,200 12 Subtotal O&M 3,735,800$ 4,076,000$ 4,343,300$ 4,477,800$ 4,616,800$ 4,782,500$ 4,916,700$ 5,055,100$ 5,197,500$ 5,344,200$ Debt Service
13 Existing Revenue Bonds 286,700 287,600 288,400 289,100 289,800 290,300 290,700 291,100 286,400 286,700 14 Proposed Revenue Bonds 0 0 1,089,300 1,867,300 1,867,300 1,867,300 1,867,300 1,867,300 1,867,300 1,867,300 15 Total Debt Service 286,700$ 287,600$ 1,377,700$ 2,156,400$ 2,157,100$ 2,157,600$ 2,158,000$ 2,158,400$ 2,153,700$ 2,154,000$ Capital Projects
16 Capital Improvement Projects 1,449,400 2,585,300 853,200 15,912,600 8,040,600 1,058,800 1,249,000 1,876,000 1,084,500 1,146,200 17 Total Capital Projects 1,449,400$ 2,585,300$ 853,200$ 15,912,600$ 8,040,600$ 1,058,800$ 1,249,000$ 1,876,000$ 1,084,500$ 1,146,200$ Transfers
18 Trsf to/(from) WW Cap Fund (3,000,000) 0 8,000,000 0 0 0 0 0 0 0 19 Total Transfers (3,000,000)$ 0$ 8,000,000$ 0$ 0$ 0$ 0$ 0$ 0$ 0$ 20 Total Revenue Requirements 2,471,900$ 6,948,900$ 14,574,200$ 22,546,800$ 14,814,500$ 7,998,900$ 8,323,700$ 9,089,500$ 8,435,700$ 8,644,400$ 21 Net Annual Cash Balance 1,814,000 106,900 18,404,800 (11,095,800) (5,100,200) 461,000 304,500 (293,700) 532,300 503,000 22 Beginning Fund Balance (891,000) 923,000 1,029,900 19,434,700 8,338,900 3,238,700 3,699,700 4,004,200 3,710,500 4,242,800 23 Net Cumulative Fund Balance 923,000$ 1,029,900$ 19,434,700$ 8,338,900$ 3,238,700$ 3,699,700$ 4,004,200$ 3,710,500$ 4,242,800$ 4,745,800$ 24 Min Operating Reserves (90 Days) 921,200$ 1,005,000$ 1,071,000$ 1,104,100$ 1,138,400$ 1,179,200$ 1,212,300$ 1,246,500$ 1,281,600$ 1,317,700$ 25 Debt Service Coverage (1.25x) 1.83 10.27 2.62 1.74 1.71 1.70 1.72 1.73 1.75 1.77 Line No. Description
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Water and Wastewater Rate Study | City of Banning, CA

72 B&V PROJECT NO. 409534.0100 | AUGUST 30, 2022
Figure 10-2 Long-Term Wastewater Operating Cash Flow

City Council Regular Meeting - Page 453 of 1385

BV.COM BLACK & VEATCH | APPENDIX A. RESUMES 33

Appendix A. Resumes

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BV.COM BLACK & VEATCH | APPENDIX A. RESUMES 34

Ann Bui
Project Director
Ms. Ann Bui is a Senior Managing Director with Black & Veatch’s Global Advisory business. Besides providing clients with strategic financial management strategies, her responsibilities include driving growth and innovation to utilities in financial and advisory planning, climate solutions, resiliency and sustainability issues, and asset integrity.

Ms. Bui has more than 30 years of experience with clients in North and South America, Europe, and Asia, gained through more than 450 engagements, providing financial and business planning services for public and investor-owned utilities of all sizes. Her recent assignments have focused on reducing carbon footprints for energy-intensive activities, water insecurity, addressing affordability and assistance program needs, and developing innovative approaches for structuring alternative delivery projects using private and public financing instruments.

She has prepared financial feasibility reports supporting more than $15 billion of revenue bond sales, $8 billion in state revolving fund loans, and over $1 billion in grant applications. Her work on due diligence engagements has supported the successful buy-side/sell-side of water and wastewater assets totaling over $10 billion.

Over the past two decades, Ms. Bui has provided expert witness testimony in front of the California Public Utilities Commission, the Indiana Utilities Regulatory Commission, and the Kentucky Public Service Commission.

An active proponent of advancing the water industry, Ms. Bui is a long-standing member of several industry associations. She is a past Chair of the American Water Works Association (AWWA) Finance, Accounting, and Management Controls Committee and is involved with AWWA’s Rates and Charges Committee, the National Association of Clean Water Agency’s Utility Management Committee, and with the Water Environment Federation (WEF).

Ms. Bui serves as an author, editor, and peer reviewer for many of the rate-making industry’s manuals of practice, including AWWA’s M1 – Principles of Water Rates, Fees and Charges, the current update to M1, the current update of WEF’s Manual of Practice 27, Financing and Charges for Wastewater Systems, and WEF’s User-Fee Funded Stormwater Program. She is the lead author and editor of AWWA’s book Financial Management for Water Utilities: Principles of Finance, Accounting and Management Controls.

EDUCATION
Masters, Business Administration,
Finance, University of California –
Davis, 1995
MS, Chemical Engineering,
University of California Los Angeles,
1989
BS, Chemical Engineering,
University of British Columbia,
1986, Canada

YEARS EXPERIENCE
32 PROFESSIONAL REGISTRATION
License, Engineer-In-Training,
#XE094654, California, 1995

PROFESSIONAL ASSOCIATIONS
AWWA
Past Chair - AWWA’s Finance,
Accounting & Management
Controls Committee
Member – AWWA’s Rates &
Charges
WEF
NACWA’s Utility Management
Committee

RELEVANT EXPERTISE
Financial & Management Consulting
Services; Debt Issuance Support;
Elasticity Studies; Cost of Service &
Rate Design; Institutional &
Organizational Studies; Alternative
Financing; Valuations/M&A
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BV.COM BLACK & VEATCH | APPENDIX A. RESUMES 35

REPRESENTATIVE NATIONAL EXPERIENCE
Philadelphia Water Department , PA │ Water, Wastewater and Stormwater Cost of Service Studies │ 2003 – 2006; 2017 -Present
Project Director. Ms. Bui has worked with the City of Philadelphia since 2003 and currently serves as the Project Director for Black & Veatch’s multi-utility cost of service work with the PWD. Comprehensive services include grants, loans, revenue bond financing, the first municipal rate rider for the tiered customer assistance program, developing an impervious area-based stormwater fee, revenue audits, and expert witness testimony.

Washington Suburban Sanitary Commission , MD │ Comprehensive Water and Wastewater Rate Study │ 201 6-Present
Project Director. Ms. Bui is the project director responsible for Black & Veatch’s engagement with WSSC Water. Since 2016, we have completed numerous assignments with WSSC Water, including conducting a comprehensive water and wastewater rate study, analyzing and developing a new overhead cost allocation methodology, creating miscellaneous fees, and providing litigation support to WSSC on rate- setting matters in front of the Maryland PSC.

Sewerage and Water Board of New Orleans , LA │ Operations Reports, Comprehensive Financial Plann ing & Cost of Service Studies & Customer Assistance Program │ 2017 -Present Project Director. Ms. Bui serves as the Project Director for Black & Veatch’s ongoing engagement with SWBNO. Our work for SWBNO has been continual for over 50 years. Services provided include the annual report on operations for water, wastewater, and storm drainage utilities, including evaluation of management, operations, financing and compliance with bond covenants; engineering bond reports; rate studies, and the development of SWBNO’s first comprehensive customer assistance program.

REPRESENTATIVE CALIFORNIA PROJECT EXPERIENCE
County of San Dieg o, CA │ Wastewater & Water Rate Studies │ 2015 -Present Project Director. Ms. Bui serves as the Project Director for Black & Veatch’s ongoing engagement with the County of San Diego’s Department of Public Works. The engagement with the County has included comprehensive water and wastewater rate studies and specialized studies. Recently, we performed a rate study focused on creating a water rate for the Live Oaks area, which the County was taking over from a private water utility. New rates were approved via the Prop 218 process. Immediately following this study, we updated the County’s wastewater rate study.

City of Santa Clara, CA │ Water and Wastewater Rate Study │ 2017 - Present Project Director. Ms. Bui serves as the Project Director for Black & Veatch’s continuing work for the City of Santa Clara. The City performs a cost-of-service study yearly. The City dealt with Covid-19 changes in consumption at the end of fiscal year 2020; therefore, the study incorporated changes to the expect possible in the development of their yearly rates.

Project Director. Since 2012, Ms. Bui has served as the Project Director for Black & Veatch’s engagements with the City of Napa. These projects have included developing financial plans, conducting cost-of-service analyses, and evaluating alternative rate structures to support numerous water and recycled water rate studies. As part of the last rate study and the current one, we are examining drought impacts and the City of Napa , CA │Water Rate Stud ies │ 2012 -2014, 2016 -2017 , 2019, & 2022 -Present City Council Regular Meeting - Page 456 of 1385

BV.COM BLACK & VEATCH | APPENDIX A. RESUMES 36

impact of mandatory water restrictions. Ms. Bui’s team prepared Prop 218 notices, developed stakeholder outreach presentations, and supported the City throughout the Prop 218 process. Finally, the Black & Veatch team also conducted evaluations of the City’s capacity fees to incorporate planned growth and development needs.

City of Burbank , CA │ Wastewater Cost of Service & Connection Fee Study │ 2012 -2013 and 2020 -Present
Project Director. Ms. Bui leads this wastewater cost of service study. In this role, she oversaw the team’s work in performing a cost-of-service analysis of the City’s wastewater utility. The result updated the rate structure for all customer classes. In addition, we assisted the City in reviewing and updating their connection fee for new connections to align methodologies and fee structures with those charged by Burbank Water and Power.

City of Menlo Park , CA │ Water Rate & System Development Charges Study │ 2019-2021 Project Director. Ms. Bui is the Project Director for this water rate study, working with Public Works to develop water rates. The study includes a financial plan, cost of service, and rate design. The rate design component incorporates drought charges based on the City’s four drought phases. The study is also developing system development charges for new connections to the water system.

Central Contra Costa Sanitation District, CA │ Special Facility System Development Charges Study │ 2019
Project Director. The District retained the Black & Veatch team led by Ms. Bui to review its system development charges. Specifically, the District requested us to look at approaches for handling the growth of outdoor dining areas. The District’s current capacity fee methodology does not contemplate how to address this phenomenon. Black & Veatch worked with District staff, water agencies, and cities within the District’s service area to develop a system development charge approach that captures this incremental expansion.

City of Simi Valley, CA │ Wastewater Rate Study │ 2019 Project Director. Ms. Bui served as the Project Director for the City’s sanitary sewer rate study. The study included a multi-year financial plan, cost of service analysis, and rate design. The conclusion was a final report that satisfied Proposition 218 requirements. In addition, Ms. Bui led the effort in developing system development charges for the sanitation district.

City of Santa Ana, CA │ Asset Management and Water/Wastewater Rate Study │ 201 2-2014 and 2015 -2016
Project Director. Ms. Bui served as the Project Director for the City of Santa Ana’s asset management and water/wastewater rate study. This study involves developing a program for the City that provides the basis for long-term asset management and development of the City’s repair and replacement schedule.

Black & Veatch then fed these inputs into the City’s water and wastewater rate study. Black & Veatch completed the initial development of an asset review using its iCIP program. Black & Veatch used the outputs from the iCIP program to develop several cost-benefit scenarios illustrating the economic impact to the community through deferring CIP projects, the rate impact to the utilities and the compromised service levels.

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Western US - Water, Wastewater, Stormwater, & Solid Waste Utility Enterprise Financial Planning, Rate & Cost-of-Service Studies, Indirect Cost Allocations, Management Audits /Organizational Assessment Studies, & Business Planning Activities
 Glendale, AZ
 Phoenix, AZ
 Tucson, AZ
 Flagstaff, AZ
 Scottsdale, AZ
 Henderson, NV
 Las Vegas, NV
 Santa Monica, CA
 Los Angeles Bureau of
Sanitation
 Long Beach, CA
 Orange, CA
 Palo Alto, CA
 Napa, CA
 South Gate, CA
 San Diego, CA
 County of San Diego, CA
 Cambria Community
Services District, CA
 Marin Municipal Water
District, CA
 Helix Water District, CA
 Rancho California Water
District, CA
 Indio Water Authority, CA
 San Clemente, CA
 Soledad, CA
 San Joaquin County, CA
 Port Hueneme, CA
 Santa Ynez River Water
Conservation District, CA
 Guam Waterworks
Authority
 Salem, OR
 Oxnard, CA
 Los Angeles, Stormwater
Division
 San Juan Capistrano, CA
 Downey, CA
 Camrosa Water District,
CA
 Pico Rivera, CA
 Leucadia Water District,
CA
 Soquel Creek Water
District, CA
 Yuba City, CA
 Antioch, CA
 Encinitas Wastewater
Authority, CA
 Escondido, CA
 Dublin San Ramon Service
District, CA
 Padre Dam Municipal
Water District, CA
 Sweetwater Authority, CA
 Western Municipal Water
District, CA
 Cucamonga Valley Water
District, CA
 Patterson, CA
 Chino Hills, CA
 Riverside Public Utilities,
CA
 Vallecitos Water District,
CA
 Fountain Valley, CA
 Westminster, CA
 Santa Ana, CA
 Lomita, CA
 Atascadero Mutual Water
Company, CA
 Golden States Water
Company
 California American
Water
 Ontario, CA
 San Jose, CA
 County of San Bernardino,
CA
 Goleta Water District
 Burbank Water & Power,
CA
 Metropolitan Water
District of Southern
California
 Vallejo Flood Control
District, CA
 Central Contra Costa
Sanitation District, CA
 LA DWP, CA
 Santa Clara, CA
 Menlo Park, CA
 Olivenhain Municipal
Water District, CA
 Port of San Diego, CA
 Simi Valley Sanitation, CA
 Banning, CA
 Manhattan Beach, CA
 Newport Beach, CA
 Tacoma, WA
 Cherry Hills Sanitation
District, CO
 Parker Water and
Sanitation District, CO
 Waste Management Inc.,
CO
 Southeastern Colorado
Water Conservancy
District, CO
 Las Campanas Water &
Sewer Cooperative, NM
 Suez Water, ID
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PUBLICATIONS & PRESENTATIONS
“The Conundrum of Water Affordability. What’s at Stake,” Lead story, Water Finance & Management, February 2021.
“Customer-centricity for Utilities” Zyprme Webinar, October 29, 2020. “Can’t Pay; Won’t Pay: COVID Implications for Water Utility Funding” Water Online, September 16, 2020 “How Much is it Worth? An Overview of Valuing Water Utilities” Journal AWWA, August 2020. “Municipal Water and Privatization” Bank of America Merrill Lynch Water Investors Conference, December 2019
“Water Reuse Cost Allocations and Pricing” Journal AWWA, November 2019. “A Smoother Road to AMI: Leveraging applicable lessons from the Power Industry” Journal AWWA, September 2017.
“What is a World-Class Utility and How Does Yours Become One?” Water Online, July 25, 2017 “Where are We Heading Next? Strategic Directions in the Water Industry”, presented at the Conference of Infrastructure Financing Agencies, Federal Policy Meeting in Washington, D.C., April 2017. “What’s in Your Wallet? Ways to Address Aging Infrastructure and Lack of Money.” Annual Utility Management Conference. June 2016
“No More Sacred Cows”, published in Journal AWWA, January 2016. “Business Risks to the Capital Financing Process”, published in AWWA’s Opflow magazine, September 2015.
“Securing Solid Revenues Streams for Water Utilities is Crucial for Financial Resilience”, published in Breaking Energy, September 10, 2015.
“Revenues and Expenses and Ratios, Oh My! A Finance Primer for Non-Finance Professionals”, presented at the Annual Utility Management Conference in Glendale, AZ., March 2013.

Bui, Ann T., Editor, Financial Management for Water Utilities: Principles of Finance, Accounting and Management Controls, 2012, published by AWWA, Denver, CO. “Checks and Balances: An Overview of the New Financial Management for Water Utilities Handbook”, presented at the Annual AWWA Conference in Dallas, TX., June 2012. “Introduction to Financial Planning” presented at the Pacific Northwest Section of the Clean Water Association Winter Short Course University, Portland, OR., February 2010. “Money Makes the World Go ‘Round: An Overview of the New Financial Management for Water Utilities Handbook,” presented at the Annual AWWA Conference in San Diego, CA., June 2009. “Key Performance Indicators” presented at the Annual AWWA Conference in San Diego, CA., June 2009. “Everything You Ever Wanted to Know About Finance Management but were Afraid to Ask: An Overview of the New Financial Management for Water Utilities Manual”, presented at the Annual AWWA Conference in Atlanta, GA., June 2008.

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“Alternative Funding Sources” presented at the Regional Water Authority Conference in Rancho Cordova, CA., April 2007.
“Financial Benchmarks” presented at the Annual AWWA Conference in San Francisco, CA., June 2005. “Maximize Debt Market Options – Minimize Revenue Adjustments” presented at the Kentucky/Tennessee AWWA/WEF Conference in Nashville, TN., August 2004.
“Quantification and Reduction of Risk from Hazardous Air Emissions - Keynote address,” presented at the AIChE Annual Conference in San Francisco, CA., November 1994.

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Alberto J. Morales
Project Manager
Mr. Alberto Morales is a manager and serves as a project manager on financial planning, cost of service analyses, capacity fees, miscellaneous fees, capital prioritization, business processes, technical due diligence and market valuations for projects involving water, recycled water, wastewater, and stormwater utilities.

Prior to joining the management consulting business of Black & Veatch, Mr.

Morales worked as a civil engineer specializing in the design, construction management and operations for water and wastewater utilities. Mr. Morales combines his technical engineering background with his financial experience to provide effective solutions for clients.

REPRESENTATIVE PROJECT EXPERIENCE
City of Newport Beach ; Water and Wastewater Rate S tudy; Newport Beach, California ; 202 2-2023
Project Manager. Mr. Morales serves as the project manager for a wastewater rate study. In this role he is working closely with City staff to perform a water and wastewater rate study. Newport Beach has seen an increase in operating costs associated with inflation and drought conditions which have required the City to examine their water and wastewater rates. The study includes a five- year financial plan, cost of service analysis, and rate design that will satisfy Proposition 218 requirements.

City of Manhattan Beach; Wastewater Rate Study; Manhattan Beach, California ; 202 2-2023
Project Manager. Mr. Morales serves as the project manager for a wastewater rate study. In this role he is working closely with City staff to perform a cost-of- service analysis and rate design for the wastewater utility. Manhattan Beach is a collection only system that directs wastewater flow to the Los Angeles County Sanitation District for treatment service. The study includes a five-year financial plan, cost of service analysis, and rate design that will satisfy Proposition 218 requirements.

Veolia Water Idaho ; Water Cost of Service Study; Boise, Idaho ; 202 2 Project Manager. Mr. Morales served as the project manager for a water cost of service study. In this role he worked closely with staff to perform a cost-of-service analysis for an Investor-Owned Utility. Veolia Water provides water services to the City of Boise and surrounding areas and the Idaho Public Commission (PUC) provides oversight with regards to rate adjustments. The study included a water cost of service analysis and rate design that will satisfy Idaho PUC requirements.

EDUCATION
Masters, Business Administration,
University of California, Los
Angeles, 2005
MS, Civil Engineering, University of
California, Los Angeles, 2000
BS, Civil Engineering, University of
California, Los Angeles, 1999

YEARS OF EXPERIENCE
22 PROFESSIONAL REGISTRATIONS
License, Engineer-In-Training,
#106878, California, 1999

PROFESSIONAL ASSOCIATIONS
AWWA

LANGUAGES
Spanish

RELEVANT EXPERTISE
Capital Prioritization; Cost of
Service Analyses; Financial
Planning; Project Management;
Technical Due Diligence
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City of Napa; Water Rate Study; Napa, California; 20 22 Project Manager. Mr. Morales served as the project manager in a water rate study. In this role, he worked closely with the Water General Manager to develop a rate structure that would meet Proposition 218 requirements while meeting the financial needs of the Water Division. The City has seen an increase in operating costs due inflation and drought impacts, therefore they sought to update their water rates. A rate model was developed that incorporated financial planning, cost of service analysis and rate design that recovered costs equally among its customer classes.

County of San Diego; Sewer Rate Study; San Diego , California; 202 1 Project Manager. Mr. Morales served as the project manager for a sewer rate study. In this role he worked closely with County Sanitation District staff to develop rates for eight County Service Areas (CSAs) throughout unincorporated areas in the County. The County provides collection and treatment services to the CSA’s. While the County has smaller regional treatment plants, the County primarily sends its wastewater flow to the City of San Diego through a regional agreement. The study included a five-year financial plan, cost of service analysis, and rate design that will satisfy Proposition 218 requirements.

City of Aurora; Water and Wastewater Rate Study; Aurora , Illinois ; 2020 -2021 Project Manager. Mr. Morales served as the project manager for a water and wastewater rate study update. In this role he worked closely with City staff to update rates, review of customer classification, incorporate a new residential affordability rate and new lead service line replacement fee. The customer classification review entailed a review of City and County GIS data to compare the customer classifications. Any misalignment was identified and addressed by the City. The rate study a financial plan, cost of service analysis, and rate design.

City of Burbank; Wastewater Rate Study; B urbank, California; 2020 -2022 Project Manager. Mr. Morales served as the project manager for a wastewater cost of service study and capacity fees. In this role he worked closely with the Assistant City Manager to perform a cost-of-service analysis on the City’s wastewater utility. The results identified any necessary realignment needed to the rate structure for all customer classes. In addition, Mr. Morales assisted the City in reviewing and updating their capacity fee for new connections. The analysis incorporated the impacts of new State of California regulations for accessory dwelling units and alternative fee structures.

County of San Diego; Water Rate Study; Live Oak Springs, California; 2020 Project Manager. Mr. Morales served as the project manager for a water rate study. In this role he worked closely with staff to develop a new rate structure for a County Service Area (CSA) that has been recently acquired by the County. The County owns and manages a various wastewater CSAs, but Live Oak Springs CSA is their first water utility. The study included a three-year financial plan, cost of service analysis, and rate design that will satisfy Proposition 218 requirements. The County Board of Directors approval to move forward with Proposition 218 requirements in late 2020.

City of Santa Clara; Water and Wastewater Rate Study; Santa Clara, California; 2020 -2021 Project Manager. Mr. Morales served as the project manager for an update to a water and wastewater rate study. Mr. Morales worked with the Director of Public Utilities and Management Analyst to update their water and wastewater rates. The City dealt with Covid-19 changes in consumption at the end of fiscal year 2020, therefore the study incorporated changes to the expect possible in the development of their yearly rates. The City performs a cost-of-service study on a yearly basis.

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City of Menlo Park; Water Rate and System Development Charges Study; Menlo Park, California; 2020 -2021
Project Manager. Mr. Morales served as the project manager for a water rate study. Mr. Morales worked with Public Works to develop water rates. The study includes a financial plan, cost of service and rate design. The rate design component incorporates drought charges based on the City’s four drought phases. The study also developed system development charges for new connections to the water system.

The study temporarily placed on hold in early 2020 as the City dealt with Covid-19 but was completed in early 2021.

City of Goodyear ; Stormwater Program Assessment and Cost Projections; Goodyear , Arizona ; 2020
Financial Analyst. Mr. Morales served as the financial analyst for a stormwater program assessment and cost projection study. In this role he served as the primary modeler and worked closely with engineering staff to develop program cost delineations and aggregations and a five-year projection of stormwater costs. The analysis included a review of the City’s existing key activities, the roles and responsibilities of multiple departments involved in delivering services, delineation of O&M costs by stormwater cost centers, projection of capital expenditures, and a holistic program cost summary based on capital program financing alternatives. The financing alternatives focused on cash and bond financing that would allow the City to minimize rate impacts to its customers while being able to fully fund stormwater operating and capital needs.

City of Phoenix; Water Efficiency Study; Phoenix, Arizona; 2 020 Project Manager. Mr. Morales served as the project manager for a water efficiency study. In this role he worked close with Water Service Department staff to perform a cost analysis on the various preventative and reactive maintenance activities for the water utility. The Department handles production and distribution functions for the water system. The intent of the cost analysis was to determine the actual cost that is required by the Department to perform activities such as water main repairs, valves and hydrant maintenance and benchmark these activities to third-party providers.

Unified Government Wyandotte County; Wastewater Rate Study; Kansas City, Kansas; 2020 - 2021
Manager. Mr. Morales served as a manager for a wastewater rate study. Mr. Morales worked with Finance and Water Pollution Control staff to perform a cost-of-service analysis and rate design study. The Unified Government (UG) had previously developed a multi-year financial plan that would help meet consent decree requirements. Using the financial plan, Black & Veatch developed rates that recover the forecasted revenue while meeting cost of service principles. 50 Largest Cities Rate Survey; United States; 2012 -202 1 Project Manager. Mr. Morales served as a project manager for updating an internal water and sewer rate survey of the 50 largest cities in the United States. The survey focused on comparing typical bills for various customer classes at different consumption intervals. The survey has been conducted by Black & Veatch since 2001 and is updated every 18 to 24 months. The survey provided utilities the ability to see how they compare to the largest water and sewer utilities in the across the country.

Florida Government Utility Autho rity; Consulting Engineer; Florida; 2019 Project Manager. Mr. Morales served as a project manager in analyzing the level of cost related to Florida Government Utility Authority’s (FGUA) operating contract with a third-party provider. The contract is for operation and maintenance and customer services such a billing. The study focused on assessing the City Council Regular Meeting - Page 463 of 1385

BV.COM BLACK & VEATCH | APPENDIX A. RESUMES 43

pricing model by the third-party provider and benchmarking the costs to regional and national benchmarks.

Sewerage and Water Board of New Orleans; Consulting Engineer; Louisiana; 2019 -2020 Manager. Mr. Morales served as a lead manager on a team preparing a Consulting Engineers Report for $75,000,000 Sewerage Revenue Bond for the Board. The bond feasibility study investigated the principal facets of the sewerage utility system which impact the security of the proposed bond issue, provided an independent analysis for review by bond rating agencies, and provided comfort to potential investors that the utility has enough means to repay outstanding debt and meet all bond covenants. The study included a review of existing facilities records, reporting records for regulatory compliance, proposed CIP, the organizational structure, and the ability of the staff to appropriately manage, operate and maintain the existing systems such that regulatory requirements are met and quality, reliable service is provided to the Board’s customers.

Las Campanas Water and Sewer Coop; Water and Sewer Rate Study; Santa Fe, New Mexico; 2019
Project Manager. Mr. Morales served as the project manager for a water and sewer rate study. Mr.

Morales worked with staff and Board of Directors to develop a multi-year financial plan. The Coop was in the process of renegotiating contract service terms with its third-party operating partner and therefore sought an interactive rate model that could be used in the negotiations. Mr. Morales led the effort in the cost of service and rate design for the Coop. In addition, Mr. Morales lead in an additional reserve study which provided the Coop a benchmark for setting reserve requirements for both operating and capital.

City of Simi Valley; Simi Valley, California; 2019
Project Manager. Mr. Morales served as the project manager for a sanitation (sewer) rate study. In this role he is worked closely with City staff and an independent rate consultant who was performing a water rate study. The study included a multi-year financial plan, cost of service analysis, and rate design. The conclusion was a final report that satisfied Proposition 218 requirements. In addition, Mr. Morales lead the effort in developing system development charges for the sanitation district.

Olivenhain Municipal Water District; Review of Recycled Water Charges; Encinitas, California; 2019
Project Manager. Mr. Morales served as a project manager in a review of Olivenhain Municipal Water District’s (OMWD) recycled water charges. OMWD purchased recycled water from Vallecitos Water District (Vallecitos) through an agreement that was established in 2003. Over the years, Vallecitos has expanded recycled water production while OMWD has reduced recycled water demand. As part of the review, Black & Veatch reviewed and validated the cost components included in the charge and made recommendations for future changes to the agreement.

City of Topeka; Topeka, Kansas; 2018 -2019
Lead Financial Analyst. Mr. Morales served as the lead financial analyst in a water, wastewater, and stormwater rate study. In this role he is worked closely with City staff to develop a rate model that could be used to develop rate recommendations. In the previous 5 years, the City sought to increase revenues but were defeated by City Council, therefore Black & Veatch was brought in to conduct a thorough analysis and assist in customer outreach. Through Black & Veatch’s effort, City Council approved rate increases for the next six fiscal years.

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City of Atlanta; Water and Wastewater Rate Study; Atlanta, Georgia; 2018 -2019 Financial Analyst. Mr. Morales served as a financial analyst in a water and wastewater rate study. In this role he is worked closely with Black & Veatch and City staff to develop a rate model that could be used to develop rate recommendations. Of specific interest to the City, there was a wholesale customer that is seeking clarification of their rates, therefore specific interest consideration was applied to the customers.

City of St. Helena; Water Cost of Service Analysis; St. Helena, California; 2018 Project Manager. Mr. Morales is served as the project manager for water cost of service analysis study.

Mr. Morales is worked with the Director of Public Works and Finance to perform an engineering analysis that provided a nexus for the existing and future water rate structure. The City has a few customers that consume a significant amount of water, therefore the City wanted to examine the equity between customer classes.

City of Santa Clara; Water and Wastewater Rate Study and System Development Charges; Santa Clara, California; 2017 -2018
Project Manager. Mr. Morales served as the project manager for water and wastewater rate and system development charge study. Mr. Morales worked with the Director of Public Utilities and Management Analyst to develop their water and wastewater rates and wastewater and storm drain system development charge. In addition, Mr. Morales developed a new water system development charge and updated the existing sewer system development charge.

Central Contra Costa Sanitation District; Capacity Fee Review and Survey; Alameda, California; 2017
Project Manager. Mr. Morales served as the project manager for wastewater capacity fee review and survey study. Mr. Morales worked with the General Manager and Department heads to review their existing capacity fee methodology and provide recommendations on any weaknesses. In addition, Mr.

Morales lead the effort in surveying neighboring utilities regarding their capacity fees and methodologies.

City of Napa; Water Rate Study; Napa, California; 2016 -2017 Project Manager. Mr. Morales served as the project manager in a water rate study. In this role, he worked closely with the water manager and director of Public Works to develop a rate structure that would meet Proposition 218 requirements while meeting the financial needs of the Water Division. He developed a customized rate model that would serve the city in updating rates on an annual basis. The rate model incorporated revenue requirements and cost of service components to assist the city in distributing costs equally among its customer classes. The City is in the process of adopting a five-year schedule of rates as it undergoes the Prop 218 process.

Washington Suburban Sanitary Commission; Water and Sewer Rate Study; Maryland; 2016 - 2017
Manager. Mr. Morales served as the Manager for a water and sewer rate study. Mr. Morales worked with WSSC to develop a comprehensive rate model that incorporates financial planning, cost of service and rate design. In addition, Black & Veatch assisted WSSC with stakeholder workshops and bi-county workshops to examine alternative rate structures. WSSC has a quasi-inclining rate structure but is evaluating alternative structures such as uniform and inclining by customer class.

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Rupa Jha
Miscellaneous Fees
Ms. Rupa Jha is a manager in Black & Veatch’s management consulting business. She is experienced in utility rate study, business process optimization, miscellaneous fee study, indirect cost allocation study and system development charges and impact fee studies.

She has participated in a wide range of utility management services including fund review studies, infrastructure asset management, change management, American Water Association (AWWA) water audits and financial modeling.

REPRESENTATIVE PROJECT EXPERIENCE
City of Wilmington; General Consulting Services; Wilmington, Delaware; 2012 -In-Progress
Consultant. Ms. Jha has been working on several projects for the city of Wilmington’s Public Works Department. These include Non-Revenue Management, Storm water Advisory Services, a Water Utility Rate study, Wholesale Sewage Treatment Pricing and Stakeholder Engagement.

Ms. Jha manages the Storm water Monthly Billing task which involves monthly maintenance of the city’s storm water database. It entails the processing of monthly parcel data and tracking of storm water credits and appeals to generate the storm water bill for approximately 26,000 accounts.

Ms. Jha is assisting in the annual Rate Study task which encompasses developing a six-year financial plan for the water sewer enterprise fund of the city of Wilmington. The financial plan is based on the analysis of operations and maintenance as well as debt service for the capital program and the projected revenue requirements. This plan is used to perform a cost-of-service analysis, rate design, and the rate adjustments needed to meet the utility’s financial objectives.

Ms. Jha manages the Non-Revenue Water Management task which involves processing monthly meter reads and tracking of key performance indicators like missed reads, zero usage and negative reads. The task also encompasses assisting Wilmington in completing the AWWA annual water audit required by the Delaware River Basin Commission.

Ms. Jha leads the wholesale wastewater treatment cost allocation task which involves the allocation of costs for the City of Wilmington’s only wholesale wastewater treatment customer. This task involves developing the annual fee estimate and reconciliation of actual costs incurred for wastewater treatment by the City’s wastewater treatment plant operator and other operating and capital costs.

EDUCATI ON
Masters, Management,
International Business, Indian
Institute of Foreign Trade, 1999,
India
Bachelor of Engineering, Electrical
Engineering, Microprocessors, Birla
Institute of Technology, 1996, India

YEARS OF EXPERIENCE
20 PROFESSIONAL ASSOCIATIONS
American Water Works Association
Water Environment Federation

LANGUAGES
English; Hindi

RELEVANT EXPERTISE
Financial Plan; Water Loss
Management; Utility Management;
Asset Management; Benchmarking;
Change Management; Due
Diligence; Independent
Engineering;
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The Wilmington Utility has monthly presentations on various topics concerning the Utility to its Citizens Advisory Board. Black & Veatch assists the public works department with the preparation of the agenda, presenting the topics, and taking meeting minutes for the Board meetings.

City of Baton Rouge ; Parish of East Baton Rouge ; Procurement of Wastew ater Treatment Operations and Maintenance Services ; Baton Rouge , Louisiana; 202 2-In Progress Project Manager. Black & Veatch is assisting the City of Baton Rouge in the Parish of East Baton Rouge (City-Parish) in the procurement of contract operations and maintenance services for the two wastewater treatment facilities owned by the City-Parish. This project involves the development of the technical scope, cost section, appendix, and attachments to be included in the Request for Proposal (RFP). It also involves facilitating pre-proposal meeting, reviewing the proposer’s questions, addendums and assisting the City-Parish in evaluation of the proposals.

Washington Suburban S anitary Commission; Miscellaneous Fee Study ; Laurel , Maryland ; 2020 -In Progress
Project Manager. Ms. Jha is the project manager for the Washington Suburban Sanitary Commission (WSSC Water) miscellaneous fee study. This study involved a comprehensive review of various miscellaneous fees charged by WSSC Water. The review encompassed the existing process for conducting the activities associated with the fees, as well as recommendations for changes. The fees are calculated based on the total cost of providing the service including labor, material, equipment, and overhead costs.

The study also included documentation of the existing process, benchmarking with similar utilities and analysis of potential revenues from the updated fees.

Philadelphia Water Department; Miscellaneous Fee Study; Philadelphia, Pennsylvania; 2017 , 2020, 2022 -In Progress
Task Lead. Ms. Jha is the task lead for the ongoing Miscellaneous Fee Study for the Philadelphia Water Department’s (PWD). The 2017 study was performed as a cost-of-service study for PWD’s 26 categories of water and sewer miscellaneous charges. The study involved interviews with PWD’s staff and calculation of the labor, material and equipment costs incurred to complete a miscellaneous task under regular business hours as well non-business hours. It also led to the identification of new services and hence creation of new miscellaneous charges. The 2020 study involved an update to the unit costs for labor, material and equipment to determine the cost of service-based rates for the all the existing miscellaneous charges.

City of Fayetteville ; Water and Sewer Comprehensive Rate Study ; Fayetteville , Arkansas ; 2020 -In Progress
Task Lead. Ms. Jha is assisting with the water and sewer financial plan, cost of service and rate design for the City of Fayetteville’s water utility. This involves the analysis of the usage and flow data from the inside and outside city retail customers and the multiple wholesale customers to determine the allocation of costs to each customer class and development of alternate rates structures.

Town of Clayton; Water Sewer Rate Study; Clayton, North Carolina; 201 7-In Progress Task Lead. Ms. Jha is leading the Water Sewer financial plan and cost of service study for the Town of Clayton. This involves determining the revenues and revenue requirements including large capital projects. The Town has been experiencing significant growth and is planning a 6 MGD wastewater treatment plant to be finished by end of 2023. During the 2019 cost of service study, Ms. Jha is assisted with the update of financial plan, asset values, plant flows and the rate design and bill impact for water and sewer customers. During the 2017 study, in addition to developing the revenue and revenue City Council Regular Meeting - Page 467 of 1385

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requirements for the financial plan, she assisted with the rate design which led to the transition of the flow based fixed charge to meter based charge in 2018.

Charleston Water System ; Financial Services ; Charleston, South Carolina; 202 1-In Progr ess Consultant. Ms. Jha is assisting with the variety of financial services that Black & Veatch provides to Charleston Water System. These include water and wastewater financial plan, cost of service, impact fees and bond feasibility study. The water and wastewater cost of service was performed in 2021 to determine the revenue adjustments and water and sewer rates for the three years from 2022 to 2024. The impact fee study was also performed in 2021 to determine the water and sewer impact fees for the three years from 2022 to 2024. Ms. Jha also assisted with the revenue bond feasibility report for the 2022 series revenue bonds for water and wastewater capital improvements.

City of Tulsa; Stormwater Financial Plan; Tulsa, Oklahoma; 2020 -2022 Task Lead. Ms. Jha assisted with the development of a stormwater ten-year financial plan for the City of Tulsa. This involves the development of revenues from impervious area based Equivalent Stormwater units, and revenue requirements of operations and maintenance, capital program and debt service to determine the revenue increases needed over the next ten years. It also involved scenario analysis at various levels of operations and capital costs to determine a balanced financial plan that meets the utility’s needs while keeping rates affordable.

Corix Utilities ; Capital Improvement Program Review and Roadmap ; Charlotte , North Carolina; 2022
Consultant. Ms. Jha assisted with the review and documentation of Corix Utilities’ CIP based on industry best practices. The project involved analyzing the CIP by rate groups and developing a CIP workpaper for the rate filing. The workpaper provided insights into the CIP program and amount of spending envisioned over the period of three years for the rate filing.

City of Minneapolis ; Stormwater Use r Fee Billing and Credits Program Management Review ; Minneapolis , Minnesota ; 2021 -202 2
Project Manager. Ms. Jha managed the comprehensive review of the City of Minneapolis’ revised stormwater credit program that went into effect on January 1, 2022, and billing and impervious area management activities. This involved conducting workshops to understand the gaps between existing and desired processes and documenting the desired process in detail for internal and external use. The project involved the development of separate customer guides and staff manuals and a stakeholder outreach plan for the revised credit program. It also involved developing separate customer guide and staff manual for account review process, development of a stormwater billing and credits fact sheet and a recommendations memorandum for impervious area data management process.

City of Greensboro; Water and Sewer Rate Adequacy; Greensboro, North Carolina; 2019 - 2020
Task Lead. Ms. Jha assisted in the development of a water sewer ten-year financial plan for the City of Greensboro. This involved the analysis of revenues and revenue requirements in conjunction with the water sewer capacity fee study to determine the adequacy of the water sewer rates over the next ten years.

City of Wilmi ngton; Indirect Cost Allocation Study; Wilmington, Delaware; 2019 -2020 Task Lead. Ms. Jha assisted with the Indirect Cost Allocation study for the City of Wilmington. The 2013 study involved a review of the citywide cost allocation practices, and developing a plan based on cost drivers for apportioning the indirect costs to the departments benefitting from central services. She City Council Regular Meeting - Page 468 of 1385

BV.COM BLACK & VEATCH | APPENDIX A. RESUMES 48

assisted with the development of a user-friendly model for use by the City’s staff and training. In 2020, she helped with the update of the 2013 Study, when the City created a Department of Information Technology (DOIT) that was previously a division under Mayor’s Office. This resulted in the transition of the costs of the six divisions of DOIT from Internal services to Indirect Costs. The Human Resources Department was also re-organized to create two new divisions. The update required in-depth interviews of the staff from the DOIT divisions and an enhancement of the Indirect Cost Study Model for the City Town of Clayton; Support Servi ces Cost Allocation Study; Clayton, North Carolina; 2019 Task Lead. Ms. Jha led the support services cost allocation for the Town of Clayton. The study was driven by the acquisition of a new regional wastewater pre-treatment facility by the Town, resulting in the creation of a new enterprise fund. This required the identification of the direct and the support services cost centers throughout the Town and determination of the cost drivers associated with the support services cost centers. The task involved interviewing heads of departments of all of Town’s departments, and the development of a user-friendly support services cost allocation model.

City of Wilmington; Wastewater Treatment Plant Contract Procurement; Wilmington, Delaware; 2019
Consultant. Ms. Jha assisted with the evaluation process of RFQ (Request for Qualification) for the City’s contract operator selection for its Wastewater Treatment Plant. She coordinated the gathering of responses for the proposer questions, resulting in timely responses to the proposers via addendums to the RFP.

City of Atlanta ; Water and Wastewater Differential Study ; Atlanta , Georgia ; 201 8-2019 Consultant. Ms. Jha assisted with the development of the Water, Sewer cost of service model for the City of Atlanta’s Department of Watershed Management (DWM). The purpose of the study was to determine the appropriate differential between inside City and outside City rates for water and sewer services provided by DWM.

Town of Clayton; Impact Fee Study; Clayton, North Caro lina; 2018 Consultant. Ms. Jha assisted with the development of the Water and Sewer impact fee model for the Town of Clayton’s impact fee study in 2018.

Beaufort Jasper Water Sewer Authority; Water Sewer Impact Fee Study; Okatie, South Carolina; 2017 -2018
Consultant. Ms. Jha was the lead analyst for the Impact Fee Project, analyzed the fixed assets data, capital improvement program and the calculated the water sewer impact fee.

Philadelphia Water Department; Cost of Service Study; Philadelphia, Pe nnsylvania; 201 3- 2020
Consultant. Ms. Jha assisted in various tasks involving the Philadelphia Water Department’s cost of service study. These responsibilities involved parcel data (impervious area, gross area, credits and appeals) analysis for various customer classes and developing projections for billable Storm water Units of Service.

She also assisted with developing the financial plan and cost of service analysis for the water and wastewater utility and assisted with the rate filing process and interrogatory responses. In 2018, she assisted with long term impact of stormwater credit program and created a model to analyze impact under various scenarios.

City Council Regular Meeting - Page 469 of 1385

BV.COM BLACK & VEATCH | APPENDIX A. RESUMES 49

Jorge Mauricio Villalobos,

MS, MBA
Financial Analyst Lead
Mr. Jorge Villalobos provides consulting expertise in the areas of financial analysis for bond feasibility, cost of service, rate design as well as capital prioritization and business process evaluation for water, wastewater, and electric utilities.

Mr. Villalobos’s experience also includes his work as a consultant for investors in the securities and real estate investment industries. This diverse professional background allows him to combine his engineering and financial background with an understanding from the different points of view of multiple stakeholders in each engagement, which allows him to provide effective and actionable solutions for his clients.

REPRESENTATIVE PROJECT EXPERIENCE
City of Delray Beach, Florida; Stormwater Rate Study; 2022 Consultant. Mr. Villalobos is currently assisting in the development of a comprehensive study to determine rate adjustments to impervious area fees; necessary to recover costs associated with the City’s Stormwater Utility. The study includes the development of a detailed stormwater financial and rate model, projecting revenue requirements and required financial metrics.

Anticipated system-wide revenue increase requirements were developed along with the associated rate schedules to reflect the City’s stormwater operational and capital program needs to address growth, climate change and water quality issues. Among the program needs, the study analyses the city’s current well as projected incremental costs and expenses related to increased staffing necessary to provide an adequate level of service. The study includes modeling of alternative rate structures. The intended result of the study is to provide decision-makers with a reliable and defensible estimation of the level of fees required to operate, maintain, and renew the City’s stormwater infrastructure.

City of Baton Rouge, Parish of East Baton Rouge; Stormwater Utility Feasibility Study; 2022 Consultant. Mr. Villalobos assisted in the development of a study to evaluate the feasibility of implementing a new Stormwater Utility that would allow the City-Parish to achieve appropriate funding through user fees, and other sources, to comply with is MS4 permit requirements. Work includes the development of a stormwater financial and rate model, projecting detailed revenue requirements, modeling the impact of the level of service alternatives, developing capital financing mix, and required financial metrics. The study analyses a proposed level of staffing for the new utility, projected revenues

EDUCATION
Other, Masters in Commercial Real
Estate (MiCP), Lipsey Company,
2017, United States
Certificate, Certified Real Estate
Investment Fund Manager, CAFI,
2011, Costa Rica
Master of Business Administration,
Business Administration, Rockhurst
University, 2005, United States
Master of Science, Engineering
Management, The University of
Kansas, 1997, United States
Bachelor of Science, Architectural
Engineering, Kansas State
University, 1993, United States

YEARS OF EXPERIENCE
28 PROFESSIONAL REGISTRATIONS
Certification, Intern Engineer,
Kansas, United States, 1993

LANGUAGES
English; Spanish

RELEVANT EXPERTISE
Bond Feasibility; Cost of Service;
Financial Planning; Rate Design;
Wastewater; Water
City Council Regular Meeting - Page 470 of 1385

BV.COM BLACK & VEATCH | APPENDIX A. RESUMES 50

from fees and funding from grants, transfers from general funds and proposed debt issuance to fund the new Utility. The intended result of the study is to provide decision-makers with a reliable and defensible estimation of the cost of providing and operating a separate Stormwater Utility and to recover these costs from individual properties based on Impervious Area as a parameter of contributed volume into the system.

City of Lee’s Summit, Missouri; Stormwater Utility Feasibility Study; 2022 Consultant. Mr. Villalobos is currently assisting in the development of a study to evaluate the feasibility of implementing a new Stormwater Utility. Work includes the creation of stormwater financial and rate model, projecting detailed revenue requirements, modeling the impact of level of service alternatives, developing capital financing mix, and required financial metrics. The study analyses a mechanism to recover appropriate funding from charges based on Impervious Area. The study analyses a proposed level of staffing, projected revenues from fees and funding from multiple other sources to fund the new Utility.

The intended result of the study is to provide decision-makers with a reliable and defensible estimation of the cost of providing and operating a separate Stormwater Utility and outline a mechanism appropriate to recover these costs from individual properties.

Beaufort Jasper Water & Sewer Authority, Okatie, South Carolina; Water and Sewer Capacity Fees Report; 2022
Consultant. Mr. Villalobos was the lead analyst in a study to review its water and sewer capacity fees.

Capacity Fees are one-time fees assessed to customers that seek to connect to the water and sewer systems such that these customers pay their appropriate share of costs to join the system. The study used a Combined Systems Approach, which reflects a combination of the System Buy-in and Incremental Cost Pricing approaches, requires more robust information pertaining to planning, estimate of future conditions, and accurate record keeping to calculate a Maximum Allowable Capacity Fee appropriately.

This methodology results in the recognition of investment in the system by existing customers and the incremental capacity, additions necessary to serve new growth, a defensible and consistent methodology that utilizes industry best practice principles and complies with applicable legal requirements; and Flexibility for the utility to consider policies in defining Capacity Fees that are lower than the Maximum Allowable Capacity Fee. The study resulted in a recommendation to increase Capacity Fees to reflect the increased costs experienced by the authority.

Gulf Coast Water Authority (GCWA), Texas City, TX; System Development Fees; 2021 Consultant. Mr. Villalobos served as lead analyst in a study that identified the cost that a new customer should contribute in order to “buy-in” to the existing infrastructure; depending on which canal and volume capacity new customer will require. GCWA operates a network of over 300 miles of canals that provide raw water to private and municipal customers; spanning Fort Bend, Brazoria and Galveston Counties. This infrastructure also includes pumping stations, reservoirs, and many operational assets. The study resulted in a defensible calculation of the cost that a new customer should contribute.

Public Service Enterprises Group (PSEG); Cost -Benefit Analysis of Electric and Natural Gas Capital Investments; 2021
Consultant. Mr. Villalobos was the lead analyst in the development of a cost-benefit study to evaluate the feasibility of the utility’s proposed Infrastructure Advancement Program (IAP). The program proposed an accelerated deployment and recovery of the costs associated with hardening, reliability and resiliency of the electrical grid and gas metering stations in Newark, New Jersey. The study required the analysis of Value of Lost Load, avoided Capital and Labor expected from the accelerated deployment of City Council Regular Meeting - Page 471 of 1385

BV.COM BLACK & VEATCH | APPENDIX A. RESUMES 51

infrastructure. The study provided a technical standing for the utility to present its case and was awarded $351 million in accelerated recovery for the program.

Metropolitan Sewer District of Greater Cincinnati (MSD); Wet Weather Impervious Surface Charge Feasibility St udy; 2021
Consultant. Mr. Villalobos assisted in the development of a study to evaluate the feasibility of implementing a new Stormwater Utility by bifurcating the costs currently recovered by the Metropolitan Sewer District under its sewer rates. The study included a series of community outreach sessions with key stakeholders that provided valuable feedback into the scope and fairness expected from a new stormwater utility fee structure. The study is to provided decision-makers with a reliable and defensible estimation of the cost of providing and operating wet weather infrastructure as well as how it could be attributed to individual properties based on Impervious Area as a parameter of contributed volume into the system.

Metropolitan Sewer District of Gre ater Cincinnati (MSD); Rate Study and Consent Decree Support Services
Consultant. Mr. Villalobos is currently assisting in the development of a study to determine rate adjustments necessary to recover the costs associated with the collection and treatment systems through base and volume charges. The study requires analysis of MSD’s investment related to a Consent Decree to solve Combined Sewer Overflows from their system.

City of Wilmington, Delaware; Financial Planning and Rate Study; 2021 Consultant. Mr. Villalobos is currently assisting in the development of a Rate Study which encompasses developing a financial plan for the Water/sewer Enterprise Fund of the city of Wilmington. The financial plan is based on the analysis of operations and maintenance as well as debt service for the capital program and the projected revenue requirements. This plan is used to perform a cost-of-service analysis, rate design, and the rate adjustments needed to meet the utility’s financial objectives.

Puerto Rico Electric Power Authority; Economic Feasibility Report; San Juan, Puerto Rico; 2021
Consultant. Mr. Villalobos is currently serving as a Consultant to the Puerto Rico Electric Power Authority in the evaluation of reinvestment in 10 Hydroelectric power generation plants in different locations around the island. The project includes improving four plants currently generating and rehabilitation for use of six others. The total investment will be determined based on the best use of capital for the utility, on proposed investments that could reach up to $180 million dollars. The analysis will consider the Net Present Value (NPV) of each investment and select those which have a positive NPV, the greatest impact for the company or that have strategic value as water supply to other facilities downstream.

City Council Regular Meeting - Page 472 of 1385

CLIENT NAME
RFQ NO.

PROPRIETARY AND CONFIDENTIAL INFORMATION

APRIL 12 2019

COST PROPOSAL FOR CITY OF LYNWOOD
NOVEMBER 29 , 202 2
Water and Sewer Rate Study
City Council Regular Meeting - Page 473 of 1385
BV.COM BLACK & VEATCH | H. COST PROPOSAL 1

h. Cost Proposal
Based on the scope of services, Black & Veatch proposes to perform the scope on a time-and-materials basis for a not-to-exceed amount of $101,940 inclusive of anticipated direct expenses. Direct expenses include but are not limited to mileage, car rental, hotels, meals, and reproduction costs. Table 2 provides a detailed breakdown of the hours and cost by task.

TABLE 1 PROJECT COSTS

TASK DESCRIPTION PROJECT

DIRECTOR

PROJECT

MANAGER

FINANCIAL

ANALYST
LEAD

MISCELLANEOU
S FEES

FINANCIAL

ANALYST

GRAPHIC

SUPPORT TOTAL COST
Team Member Bui Morales Villalobos Jha Staff Staff
Hourly Rate $365 $275 $240 $275 $185 $160
Task 1. Project Management 0 13 3 2 10 0 $6,695
Task 2. Financial Plan 2 10 9 0 56 0 $16,100
Task 3. Benchmarking 0 4 2 0 16 0 $4,540
Task 4. Cost of Service Analysis 1 10 8 0 34 0 $11,375 Task 5. Rate Design 3 9 12 0 42 0 $14,220
Task 4. Overhead Allocation Review 1 2 0 4 4 0 $2,765 Task 7. Miscellaneous Fees 0 1 0 6 20 0 $5,625
Task 8. Connections Fees 0 4 0 0 24 0 $5,540
Task 9. Meetings 4 20 5 0 0 4 $8,800
Task 10. Reports 4 5 8 2 38 0 $12,335
Task 11. Proposition 218 Support 0 4 2 0 4 16 $4,540 Task 12. Rate Model Development
and Training 0 4 2 0 16 0 $4,540
Total Hours 15 86 51 14 264 20 $97,255
Direct Expenses $1,500
Total Fee $98,755
City Council Regular Meeting - Page 474 of 1385
BV.COM BLACK & VEATCH | H. COST PROPOSAL 2

ADDITIONAL PROFESSIONAL SERVICES
Upon request and authorization by the City via an addendum to the agreement, any additional services or meetings not identified in the services plan's scope will be billed hourly according to the hourly rates schedule. Direct expenses are charged at direct out-of-pocket costs. Payment terms are net 30.

TABLE 2 HOURLY BILLING RATES
STAFF CLASSIFICATION HOURLY BILLING RATES*
Administrative/Graphic Support $160
Financial Analyst $185
Task Lead (Financial Analyst) $240
Task Lead (Misc. Fees) $275
Project Manager $275
Project Director $365

* The above rates for additional services are fixed for 2023 and are subject to increase after January 1 of each subsequent year.

City Council Regular Meeting - Page 475 of 1385
November 29, 2022
City of Lynwood
Water and Sewer
Rate Study
City Council Regular Meeting - Page 476 of 1385
City Council Regular Meeting - Page 477 of 1385

CITY OF LYNWOOD
11750 Alameda Street
Lynwood, CA 90262

WATER AND SEWER RATE STUDY

PROPOSAL

HF&H CONSULTANTS, LLC
© HF&H CONSULTANTS, LLCAll rights reserved
City Council Regular Meeting - Page 478 of 1385
This document is formatted for doublesided printing
City Council Regular Meeting - Page 479 of 1385
Managing Resources Today
201 N. Civic Drive, Suite 230 Robert D. Hilton, Emeritus Walnut Creek, California 94596 John W. Farnkopf, PE
Telephone: 925/9776950 Laith B. Ezzet, CMC
www.hfhconsultants.com Richard J. Simonson
Marva M. Sheehan, CPA
Robert C. Hilton, CMC
November 29, 2022
Kristan Lloyd
Department of Public Works
11750 Alameda Street
Lynwood, CA 90262
Subject: Proposal: Water and Sewer Rate Study
Dear Kristan Lloyd:

HF&H Consultants, LLC (HF&H) is pleased to submit this proposal in response to the City of Request for Proposals (RFP) for the preparation of a Water and Sewer Rate Study. Our proposal follows the format prescribed in the RFP.

We have reviewed the RFP and answers to questions submitted by interested parties, which have provided a clear understanding of therequirements. It is our intent to provide the required services as described in our proposal in conformance with the sample Professional Services Agreement.

The City can depend on a partnership with HF&H to obtain their desired results. From our previous engagements for similar jurisdictions throughout California, HF&H is prepared to provide the City with defensible, Proposition 218compliant rates, generated from wellthought out and welldocumented analyses. We are conscientious of creating an administrative record that is easy to follow. To promote customer comprehension, we prepare our presentations with the layperson in mind.

Setting You Up for the Future
While there may be other consultants that also provide water rate studies, none are as qualified as HF&H to assist the City. In light of the San Juan Capistrano decision and the longstanding Propositions 26 and 218, it is crucial for water rates (tiered or otherwise) to be costbased, reasonable, and equitable for all customer classes. We are particularly mindful of the administrative record that is called for in litigious ratemaking environment. The costofservice analysis will clearly indicate how the revenue requirement is apportioned among the customer classes, which is a requirement under Proposition 218 in meeting the burden of proof.

HF&H has the industry
expertise to perform all of
the tasks that will be
necessary for this utility
rate studies engagement
and does not require the
assistance of
subconsultants.

City Council Regular Meeting - Page 480 of 1385
Managing Resources Today
Kristan Lloyd
November 29, 2022