As a matter of rate setting policy, the 2015 sewer rate study set Mobile Home Park sewer rates based on an allocation of 51 GPD, which is in line with both Single Family and Multiple Family flow data. This resulted in a rate for Mobile Home Park customers based on 114 GPD per dwelling unit (2.24 persons per unit) rather than 141 GPD per unit. Therefore, the City’s Mobile Home Park customers were paying a rate to the City of Milpitas that was lower than the costs allocated to those customers by the City of San José.
MFSG recommends aligning the City’s ra te calculation with the cost allocation made by the City of San José. That is, MFSG recommends that the City of Milpitas calculate Mobil Home Park rates using the 141 GPD per dwelling unit. This allocation results, as shown previously, in a significant increase in Mobile Home Park rates when compared with Single Family and Multiple Family rates.
MFSG was asked to consider mitigating the impact of the rate increases on Mobile Home Park customers via the use of a subsidy from unrestricted non-rate revenues. California’s Proposition 218 does not allow the subsidy of any rate class via charging other rate classes higher fees within the same fund. That is, in City Council Regular Meeting - Page 772 of 1385
Sewer Rate Study Version: DRAFT
6. Customer Bill Impacts November 2018
33 order to reduce the cost for any given rate payer, the City is only allowed to introduce the subsidy fro m unrestricted revenues, typically from the General Fund. MFSG considered a subsidy over the course of the five-year rate projection from the City’s general fund to reduce the rate impact on Mobile Home Park rate payers to equal the proposed rate impact on Single Family and Multiple Family users . This analysis is shown in Exhibit 6.2.1.
Exhibit 6.2.1 Mobile Home Park Subsidy Calculation
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
MFSG Calculated Mobile Home Park Rate $56.97 $76.03 $79.86 $86.53 $92.19 $96.71 % Increase 33% 5% 8% 7% 5%
Mobile Home Park Rate Subsidy $45,100 $47,400 $51,400 $54,800 $57,600 Subsidized Mobile Home Park Rate $61.61 $64.70 $70.08 $74.66 $78.28 8% 5% 8% 7% 5%
This subsidy brings the Mobile Home Park rate increases in line with those of SFR and MFR customers.
Exhibit 6.2.2 shows the subsidy graphically.
Exhibit 6.2.2 Percentage Change in Bi-Monthly Bills by Customer Class
The annual subsidy to the Sewer Fund would not impact the total revenue projections presented in this report, as the subsidy would be transferred into the Sewer Fund to compensate for the reduced revenue generated from Mobile Home Park customers each year. All other rates shown in MFSG’s recommended rate table remain unchanged under this scenario. While the total amount of the subsidy from the General Fund to offset mobile home park sewer costs would be $45, 100 in the first year of the plan, the subsidy would gradually increas e each year to account for the compounding nature of the proposed rate increases.
$56.97
$76.03
$79.86
$86.53
$92.19
$96.71
Annual Subsidy:
$45,100
$47,400
$51,400
$54,800
$57,600
$56.97
$61.61
$64.70
$70.08
$74.66
$78.28
$50.00
$55.00
$60.00
$65.00
$70.00
$75.00
$80.00
$85.00
$90.00
$95.00
$100.00
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
MFSG Calculated Mobile Home Park Rate Subsidized Mobile Home Park Rate City Council Regular Meeting - Page 773 of 1385
Sewer Rate Study Version: DRAFT
6. Customer Bill Impacts November 2018
34 6.3 Single Family Bi-Monthly Sewer Bill Comparison
Exhibit 6.3.2 shows the City’s current FY 2018 and recommended FY 2019 Single -Family bi-monthly rate as compared to several other wastewater agencies. In general, the wastewater agencies listed above meet two criteria:
1. Within 50 miles of the City of Milpitas
2. Have at least 100 miles of collection system and/or 5 MGD of treatment capacity.
Several notes should be made about the exhibit below. It is important to recognize the context of the chart. The bi-monthly cost shown is as of the latest available data, with all rates being currently effective as of the time of this report. That is, the chart does not reflect the individual financial performance of each agency’s sewer system.
While the comparison is re levant in terms of customer perception, it cannot be relied upon for the purposes of rate setting. Our report details the specific and unique financial and operational profile of the City of Milpitas’ sewer system, and MFSG has recommended rates that will raise the appropriate revenue to meet the City’s costs. The other service providers shown below may or may not be charging rates that fully fund the operating, capital and reserve needs of each system.
City Council Regular Meeting - Page 774 of 1385
Sewer Rate Study Version: DRAFT
6. Customer Bill Impacts November 2018
35 Exhibit 6.3.2 Single Family Bi-Monthly Sewer Bill Comparison
$39.67
$62.50
$66.17
$66.50
$67.85
$69.50
$77.32
$77.80
$81.60
$85.17
$85.82
$86.00
$86.42
$86.50
$88.33
$91.17
$91.50
$91.83
$92.50
$95.00
$98.50
$98.72
$106.83
$109.50
$110.67
$117.33
$123.17
$128.50
$133.14
$141.67
$142.67
$143.50
$153.33
$178.67
$186.50
$234.00
$90.27
$97.60
Average
$104.83
$- $50.00 $100.00 $150.00 $200.00 $250.00
Oro Loma Sanitary District
City of Hayward
Dublin San Ramon Services District
Castro Valley Sanitary District
Union Sanitary District
City of San Leandro
City of Palo Alto
City of San Jose
City of Mountain View
City of Antioch
City of Santa Clara
City of Brentwood
Cupertino Sanitary District
West County Wastewater District
Central Costa County Sanitary District
City of Milpitas (Current FY 2018)
City of Concord
City of Pleasanton
City of Pittsburg
West Valley Sanitation District
Santa Clara County District 2-3
City of Milpitas (Recommended FY 2019)
City of Livermore
City of Sunnyvale
Stege Sanitary District
North San Mateo County Sanitary District
City of South San Francisco
City of Alameda
City of San Mateo
City of Richmond
Burbank Sanitary District
City of Oakland
Ross Valley Sanitary District (#1)
San Rafael Sanitary District
City of Redwood City
West Bay Sanitary District
City of San Carlos
City of Berkely
City Council Regular Meeting - Page 775 of 1385
Sewer Rate Study Version: DRAFT
7. Findings, Conclusions and Recommendations November 2018
36 7. FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
The following findings, conclusions and recommendations were developed during the study.
7.1 Findings
The following findings were developed during the study:
• The City’s current (FY 2018) sewer rates are not sufficient to fully fund the operating, capital, and cash reserve needs of the City’s sewer system.
• The City’s current planned reinvestment in its buried sewer assets is insufficient to fully fund the cost of rehabilitation and replacement needs of its buried assets and will allow the continuing decline in the physical condition of its sewer collection system. • The City’s rate calculation methodology gen erally complies with the Water Environment Federations Manual of Practice 27 - Financing and Charges for Wastewater Systems. • The City currently collects 64% of its Personnel Services costs in its bi-monthly Flat Fee. • The City charges its Mobile Home Park customer class based on a per person flow assumption of 51 GPD and 2.24 persons per dwelling unit, resulting in a per dwelling unit flow assumption of 114 • The City’s Sewer Fund contains appropriate reserves given the operational and capital expenses of the City’s system and the City’s reserve policies.
7.2 Conclusions
Based on our findings, the following conclusions were drawn:
• The City needs to increase sewer rates over the five years of the planning period (FY 2019 to FY 2023) to increase projected revenues to match related expenses. • The City will need to increase investment in its buried sewer infrastructure over the short and long term.
• Given the City’s Sewer Fund balances (restricted for CIP and unassigned, unrestricted) rate increases can be phased-in over a number of years to mitigate the one-time impact on the City’s customers.
7.3 Recommendations
Based on our conclusions, MFSG recommends that:
• The City implement rate increases through a multi-year financial plan that utilizes both increased rate revenues and the use of a portion of current cash on hand. This will allow the City to smooth rate increases over the planning period and mitigate customer rate shock while meeting both its funding and cash reserve requirements.
• The City collect 100% of its Personnel Services costs in its bi-monthly Flat Fee. • The City allocate costs to its Mobile Home Park customer class based on the same flow assumption used by the City of San José to allocate operating costs to the City of Milpitas, which is 63 GPD per person and 2.24 persons per dwelling unit, which equals 141 GPD per dwelling unit. • Adopt the following rates for the next five fiscal years:
City Council Regular Meeting - Page 776 of 1385
Sewer Rate Study Version: DRAFT
7. Findings, Conclusions and Recommendations November 2018
37 Exhibit 7.3.1 Recommended Bi-Monthly Sewer Rates
Current
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Sewer User Rate Revenue Increase 4.0% 8.0% 8.0% 7.0% 6.0% Month of Implementation February July July July July
Residential (per Dwelling Unit)
Single-Family $90.27 $97.60 $102.52 $111.07 $118.34 $124.14 Mobile Home Parks $56.97 $76.03 $79.86 $86.53 $92.19 $96.71 Multiple-Family $69.32 $74.96 $78.73 $85.30 $90.88 $95.34
Non-Residential Fixed Flat Fee (per bill) $15.27 $24.30 $25.03 $25.78 $26.55 $27.35
Commercial (per HCF)
Motels and Hotels $4.36 $4.36 $4.58 $4.97 $5.37 $5.75
General Office $4.67 $4.67 $5.44 $5.67 $6.14 $6.84
City of Milpitas $4.18 $4.18 $4.61 $4.91 $5.31 $5.80
Service Stations $4.34 $4.34 $4.54 $4.93 $5.32 $5.70
Eat/Drink Establishments $7.49 $7.49 $7.49 $8.11 $8.73 $9.06 Convalescent Hosp/Daycare $4.23 $4.23 $4.46 $4.84 $5.23 $5.60 Personal Services, Laundries $3.95 $3.95 $4.23 $4.56 $4.92 $5.31 Electrical/Electronics $4.59 $4.59 $5.35 $5.58 $6.04 $6.72 Machinery Manufacture $6.08 $6.08 $6.70 $7.12 $7.70 $8.43
Monitored Sites (per HCF)
RockTenn (Jefferson Smurfit) $4.67 $8.35 $8.35 $9.39 $10.11 $10.46 T. Marzetti Co. $8.34 $9.16 $9.63 $10.65 $11.48 $12.09
Prudential Overall Supply $6.70 $6.70 $6.70 $7.08 $7.66 $8.42 Siemens Water Tech $4.91 $4.91 $5.61 $5.87 $6.36 $7.06
Elmwood Rehabilitation $5.49 $5.49 $5.49 $5.89 $6.35 $6.69 Linear Technology $4.59 $4.59 $5.47 $5.71 $6.18 $6.88
DS W $4.59 $4.59 $4.80 $4.92 $5.34 $6.04
Magic Tech & Headway Tech $4.53 $4.62 $5.82 $6.07 $6.57 $7.32
Non-Monitored Sites (per HCF)
Lucky Pure Water $3.94 $3.94 $4.21 $4.54 $4.91 $5.29
Milpitas Materials $3.94 $3.94 $4.21 $4.54 $4.91 $5.29
Union Pacific Railroad $5.11 $5.11 $5.84 $6.12 $6.63 $7.35 Cisco $4.59 $4.59 $5.35 $5.58 $6.04 $6.72
Lifescan $4.59 $4.59 $5.35 $5.58 $6.04 $6.72
Institutional (per HCF)
Schools/Colleges $6.31 $6.31 $7.94 $8.05 $8.73 $9.99
• The City review rates and charges on an annual basis and revise as needed and consider a full cost of service study for all rates and charges every five years.
City Council Regular Meeting - Page 777 of 1385
MFSG 911-A Commerce Road Annapolis, MD 21401 410.266.9101 mfsgllc.com City Council Regular Meeting - Page 778 of 1385
THANK YOU!
911-A Commerce Road, Annapolis, MD 21401
Phone: 443-951-4207
Email: [email protected]
www.newgenstrategies.net
City Council Regular Meeting - Page 779 of 1385
Callocchia Maker Wright Carnes Oates Admin
$235 $250 $210 $155 $150 $110
Task 1 In-Person Kickoff Meeting and Weekly Status Meetings 12 8 8 8 12 8 56 $ 10,420 Task 2 Develop Water and Sewer Ten-Year Financial Plan 8 2 8 8 24 50 $ 8,900 Task 3 Prepare a Cost of Service Analysis 8 2 8 8 12 38 $ 7,100 Task 4 Provide a Comparitive Analysis 8 2 8 8 12 38 $ 7,100 Task 5 Recommend Rate and Fee Structure 8 2 8 8 24 50 $ 8,900 Task 6 Review Development Impact Fees 8 2 8 8 12 38 $ 7,100 Task 7 Prepare Sample Bills 8 8 12 28 $ 4,920 Task 8 Prepare a Draft and Final Report 8 8 8 8 12 8 52 $ 9,480 Task 9 Council Meetings (2) 24 8 8 4 44 $ 8,520 Task 10 Develop Proposition 218 Notices 8 2 2 8 20 $ 3,370 Task 11 Community Meetings (2) and Public Hearings (2) 24 24 $ 5,640 Labor Hours 124 26 56 74 130 28 438
Labor Cost $29,140 $6,500 $11,760 $11,470 $19,500 $3,080 81,450$
17,500$
98,950$
* Task 1 assumes an in-person kickoff meeting with the Project Manager * Task 9 assumes 2 in-person meetings with the Project Manager * Task 10 assumes 4 in-person meetings with the Project Manager Water and Wastewater Rate Study
Out-of-Pocket Expenses
Labor Subtotal
Total Proposed Budget
Total
Hours
City Council Regular Meeting - Page 780 of 1385
City of Lynwood
Water and Sewer Rate Study
PROPOSAL / NOVEMBER 29, 2022
City Council Regular Meeting - Page 781 of 1385
Table of
Contents
01 Cover Letter
06 Executive Summary
10 Approach to the Project
19 Experience
25 Qualifications
65 References
66 Project Schedule
67 Cost Proposal
69 Copy of a Rate Study
Raftelis is registered with
the U.S. Securities and
Exchange Commission
(SEC) and the Municipal
Securities Rulemaking
Board (MSRB) as a
Municipal Advisor.
Registration as a Municipal Advisor is a
requirement under the Dodd-Frank Wall
Street Reform and Consumer Protection Act.
All firms that provide financial forecasts that
include assumptions about the size, timing,
and terms for possible future debt issues, as
well as debt issuance support services for
specific proposed bond issues, including
bond feasibility studies and coverage
forecasts, must be registered with the SEC
and MSRB to legally provide financial
opinions and advice. Raftelis’ registration as
a Municipal Advisor means our clients can be
confident that Raftelis is fully qualified and
capable of providing financial advice related
to all aspects of financial planning in
compliance with the applicable regulations of
the SEC and the MSRB.
Diversity and inclusion
are an integral part of
Raftelis’ core values.
We are committed to doing our part to fight
prejudice, racism, and discrimination by
becoming more informed, disengaging with
business partners that do not share this
commitment, and encouraging our employees
to use their skills to work toward a more just
society that has no barriers to opportunity.
City Council Regular Meeting - Page 782 of 1385
RAFTELIS 1
445 S. Figueroa Street, Suite 1925 , Los Angeles, CA 90071 www.raftelis.com
November 29, 2022
Mr. Ernie Hernandez
City Manager
City of Lynwood
11330 Bullis Road
Lynwood, CA 90262
Subject: Proposal for Water and Sewer Rate Study
Dear Mr. Hernandez:
We are excited to submit this proposal to conduct a water and sewer rate study for the City of Lynwood (City). Raftelis provides management consulting expertise to help transform local governments and utilities - more than 600 in the last year alone. Our financial consultants have conducted thousands of water, wastewater, and other utility rate studies across the U.S., including hundreds in California.
Why Raftelis?
1) We have worked for many water or wastewater purveyors in Southern California. In your area, our clients include the cities of El Segundo, Compton, Torrance, Long Beach, Lakewood, Pico Rivera, El Monte, Industry, Westminster, Seal Beach, Huntington Beach, and La Puente Valley County Water District. 2) We have the expertise. All of our rate study work must culminate in persuading the public and City Council that your water and wastewater enterprises need additional revenue. Our strategic communications lead, Gina DePinto, APR, has 34+ years of experience and will review our presentations for simplicity and clarity, and assist with materials and logistics for two community meetings and the Prop 218 notice. Raftelis staff is also on the AWWA Benchmarking Committee – benchmarking is one of the tasks requested in the RFP. 3) We are familiar with the City. Raftelis valued the water and wastewater systems in 2019 and is familiar with the water and wastewater assets that will be used in allocating capital costs as part of this rate study.
Project Staff
I, Steve Gagnon, PE (AZ) will be the Project Director to provide insight and direction and will work closely with our Project Manager. I have 24+ years of consulting experience and am a registered environmental engineer in Arizona and registered with the SEC as a Municipal Advisor, and currently serve as Chair of the CA/NV AWWA Financial Management Committee. I lead a staff of seven consultants based in our California offices.
Brian Bass will be the Project Manager and manage the day-to-day aspects of the project ensuring it is within budget and on schedule who will serve as the City’s main point of contact. Brian will also lead the consulting staff in conducting analyses and preparing deliverables for the project.
COVER LETTER
City Council Regular Meeting - Page 783 of 1385
RAFTELIS 2
We have read the City’s RFP and look forward to using our expertise to assist the City with this important project. We prepared the scope based on our understanding of the RFP. The City can remove certain tasks at its discretion. We also assumed five in-person meetings which would require flights for the project manager. Should meetings be virtual we could reduce our travel costs/time. Should you have any questions please contact me.
Steve Gagnon, PE, Senior Manager
Phone: 213.262.9308 / Email: [email protected]
Sincerely,
Steve Gagnon
Senior Manager
City Council Regular Meeting - Page 784 of 1385
RAFTELIS 3
City Council Regular Meeting - Page 785 of 1385
RAFTELIS 4
City Council Regular Meeting - Page 786 of 1385
RAFTELIS 5
City Council Regular Meeting - Page 787 of 1385
RAFTELIS 6
WHO IS
Raftelis
HELPING LOCAL GOVERNMENTS AND UTILITIES THRIVE
Local government and utility leaders partner with Raftelis to transform their organizations by enhancing performance, planning for the future, identifying top talent, improving their financial condition, and telling their story. We’ve helped more than 600 organizations in the last year alone. We provide trusted advice, and our experts include former municipal and utility leaders with decades of hands-on experience running successful organizations. People who lead local governments and utilities are innovators—constantly seeking ways to provide better service to the communities that rely on them. Raftelis provides management consulting expertise and insights that help bring about the change that our clients seek.
+ VISIT RAFTELIS.COM TO LEARN MORE
EXECUTIVE SUMMARY
City Council Regular Meeting - Page 788 of 1385
RAFTELIS 7
Executive Summary
Raftelis assists public water, wastewater, stormwater, solid waste, electric, and gas utilities, along with other local government agencies, with the following services:
Finance
• Affordability
• Debt issuance support
• Financial and capital planning
• Rate, charge, and fee studies
Management
• Executive recruitment
• Organizational & operational assessments
• Program development & implementation support
• Strategic planning
Technology
• Billing, permitting, and customer information audits
• Business process development
• Data management, analytics, and visualization
• Performance measurement and dashboarding
• Software solutions
Communication
• Strategic communication planning
• Public involvement and community outreach
• Risk and crisis communication
• Social media strategy
• Media and spokesperson training
• Graphic design and creative services
We have read the RFP and understand the City is looking for a water and sewer rate study that incorporates the considerations shown in the table on the following page. The Scope of Work discussed in this proposal details the tasks that will incorporate these considerations.
City Council Regular Meeting - Page 789 of 1385
RAFTELIS 8
Financial
Considerations
Operational
Considerations Cost of Service Rates/Fees Excel Rate Model Bond covenants Benchmarks
Cost Component
Identification (Billing
& Collection, Meter
Service etc.)
Prop 218 and other
regulations Training
Reserve funding Master plan projects Overhead cost
distribution Tiered rates User friendly
dashboard
Current & future
capital needs Equity Miscellaneous fees Scenario Analysis Customer class
review
Connection/Capacity
Fees
Fire charges
Simple rates
Rate survey
Drought rates
Professional Service Agreement
We have reviewed the Preliminary Service Agreement and would like to request the following edits shown in red below.
If selected, we welcome the opportunity to discuss these edits with the City and are not prepared to miss the opportunity to assist the City solely based on contract language. We almost always find a solution. Our edits are below.
3. 3. Indemnification.
B. City and its respective elected and appointed boards, officials, officers, agents, employees and volunteers (individually and collectively, "Indemnities"). shall have no liability to Consultant or any other person for, and Consultant shall indemnify, defend, protect and hold harmless Indemnities from and against, any and all liabilities, claims, actions, causes of action, proceedings, suits, damages, judgments, liens, levies, costs and expenses of whatever nature, including reasonable attorneys' fees and disbursements (collectively "Claims"), which Indemnities may suffer or incur or to which Indemnities may become subject by reason of or arising out of any injury to or death of any person(s), damage to property, loss of use of property, economic loss or other loss occurring as a result of or allegedly caused by Consultant’s performance of or failure to properly perform any services under this Agreement or by the negligent or willful acts or omissions of Consultant,
5.Release of Information/Confidentiality.
A. Consultant in the course of its duties may have access to confidential data of City, private individuals, or employees of the City. Consultant covenants that all data, documents, discussion, or other information developed or received by Consultant or provided for performance of this Agreement are deemed confidential and shall not be disclosed by Consultant either voluntarily or without written authorization
B. …Consultant agrees to cooperate fully with City and to provide the opportunity to review any response to discovery requests provided by Consultant; provided that any such review does not cause Consultant to violate any obligation City Council Regular Meeting - Page 790 of 1385
RAFTELIS 9
under a summons, complaint, subpoena, notice of deposition, request for documents, interrogatories, request for admissions, or other discovery request and City shall indemnify, defend and hold Consultant harmless in the event of such violation . However, City's right to review any such response does not imply or mean the right by City to control, direct, or rewrite said response.
6. Ownership of Work Product.
A. Consultant shall maintain complete and accurate records with respect to sales, costs, expenses, receipts, and other such information required by the City that relate to the performance of services under this Agreement. Consultant shall maintain adequate records of services provided in sufficient detail to permit an evaluation of services. All such records shall be maintained in accordance with generally accepted accounting principles and shall be clearly identified and readily accessible. Consultant shall provide free reasonable access…
B. Upon completion of, or in the event of termination or suspension of this Agreement, all original documents, designs, drawings, maps, models, computer files, surveys, notes, and other documents prepared in the course of providing the services to be performed pursuant to this Agreement shall become the sole property of the City and may be used, reused, or otherwise disposed of by the City without the permission of the Consultant; provided that any reuse and/or modification shall be at the sole risk of the City and the City shall indemnify, defend and hold Consultant harmless from claim or liability whatsoever with respect to such reuse or modification.
Litigation
Raftelis has been joined as a third-party defendant in a lawsuit filed by local developers against the Town of Fuquay- Varina, North Carolina. The subject of this currently pending litigation is development impact fees assessed by the town and developed by Raftelis. This is the only legal case in which Raftelis has been joined as a party in the history of our firm. Raftelis intends to vigorously defend the allegations and claim.
City Council Regular Meeting - Page 791 of 1385
RAFTELIS 10
Project Approach
Note: We have assumed that staff meetings will be virtual. City Council meetings, community meetings, and public hearings will be attended in person by either the Project Manager or the Project Director.
Task 1: Project Management, Kick-off Meeting and QA/QC
Kick-Off Meeting
The goals for the kick-off meeting include:
• Discuss project drivers
• Acquaint City staff with our project team
• Identify areas of concern or key issues and confirm study goals and objectives • Finalize the work plan and schedule
• Discuss the City’s rate objectives
• Discuss the data request and any additional data requirements • Discuss outreach goals and key stakeholders
Prior to the kick-off meeting, we will prepare a data request that identifies the information needed. If the data is provided in time, Raftelis will review the initial data before the kick-off meeting and will come prepared with our questions to get the most out of the meeting.
Project Management and QA/QC
Task 1 includes time for project management and Quality Assurance and Quality Control (QA/QC). The project management task also involves client correspondence, progress updates, timely billing, and internal management of Raftelis staff.
To ensure robust quality control, the Project Manager will review the data, model, and results to ensure they are based on sound rate-making principles. The QA/QC reviews take place at each project task milestone which means it occurs several times during the project. The project manager and task leaders each perform QA/QC.
MEETING(S):
• One web meeting with City staff
DELIVERABLE(S):
• Kick-off meeting presentation and minutes and data request list
Task 2: Benchmarking (Item B.19)
Item B.19 requests that Raftelis provide a comparison of current water and sewer system costs (operations, capital improvements, bonded debt) against appropriate industry benchmarks, and comparable municipal entities in Southern California.
Raftelis has extensive experience benchmarking utility data. A Raftelis staff member served on the AWWA national Benchmarking Advisory Committee that develops the AWWA publication, Utility Benchmarking: Performance Management
APPROACH TO THE PROJECT
City Council Regular Meeting - Page 792 of 1385
RAFTELIS 11
for Water and Wastewater. We also work with dozens of utility organizations in Southern California from which we can draw benchmarking data. Raftelis will use this experience and accumulated utility data to provide a comparison of the City’s financial, operational, and capital investment activities with similar utilities and applicable national data from AWWA. We will include high-level operating metrics such as the number of full-time equivalent (FTE) utility staff per customer account, and the cost of water delivered per customer account. These will allow us to normalize data from other utilities based on their respective number of customers. In addition, we will provide data on financial metrics such as annual capital spending per customer account and the amount of debt per customer account. Raftelis will discuss proposed metrics, potential peers, and available data with the City so there is an understanding of the process and outcomes. Raftelis will summarize the results as part of our report using tables and charts, and a brief write-up discussing the data.
MEETING(S):
• None
DELIVERABLE(S):
• Benchmarking analysis to be incorporated into report or as a technical memorandum
Task 3: Water, Recycled Water, and Wastewater
Financial Plan Models
We will develop financial plan models for the water (including recycled water) and wastewater utility with similar features and format so that if staff is familiar with one model, they are also familiar with the other model. The financial plan assesses each enterprise’s current financial status and suggests revenue adjustments to ensure long-term fiscal sustainability. Raftelis will project expenses and revenue requirements over a 10-year planning horizon. Doing so illustrates future rate impacts and potential challenges to the City’s financial health so the City can plan expenses, reserve balances, or capital project scheduling to smooth rate impacts. The financial plan will incorporate all items mentioned in the request for proposal and objectives including but not limited to:
1. Current and expected future costs
2. Bond covenants
3. “Deferred” or unfunded maintenance
4. Capital costs and depreciation
5. Reserve policies
6. Water purchase costs
Raftelis understands the importance of developing a user-friendly, flexible model that the City can use for future financial planning. All of our models include a financial plan dashboard, as a standard feature with the following features:
• Flexibility to change many assumptions such as water or wastewater use, CIP levels, and revenue adjustments • Error flagging and problematic results such as failure to meet debt coverage, below target reserves, etc. • Sensitivity analyses and various “what-if” scenario assessments, so that impacts can be viewed instantaneously with built-in screen graphics
A dashboard is an effective tool to visually assess how each assumption or scenario impacts the financial plan so that decisions regarding revenue adjustments, capital financing through pay-go or debt, and reserve balances can be made quickly. A sample model dashboard is shown on the next page.
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RAFTELIS 12
Raftelis will develop a customized financial model for the City that incorporates a dashboard to allow you to easily run scenarios and see the impacts in real time.
Shown below is a sample dashboard that we developed for another project.
Raftelis will hold up to two webinars to review assumptions and finalize the financial plan with which to calculate rates.
MEETING(S):
• Up to two web meetings with City staff
DELIVERABLE(S):
• Draft financial planning model in Microsoft Excel
Task 4: Cost of Service Analysis
We will perform a cost-of-service analysis for each utility which will include estimating recycled water costs. The cost-of- service analysis is needed to provide a nexus between utility rates and the City’s costs for Proposition 218 defensibility.
Although Raftelis tailors a utility’s cost of service analysis to meet each utility’s needs, we make sure to conform to industry standards and regulatory requirements. Typically, a utility cost-of-service study involves the following three steps:
• Functionalizing revenue requirements to functions. Water and wastewater systems each have different functions.
For example, water functions include supply, treatment, transmission and distribution, customer service, and meter reading.
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RAFTELIS 13
• Allocating those functions to cost causation components for water and wastewater. For water the cost components commonly include base costs, peaking costs, customer service and meter reading costs. • Distributing cost components to customer classes based on how customers use the services of the utility. For water, cost components are commonly distributed according to peaking factors for each class.
Raftelis will review parameters for each utility that affect the cost of service such as peaking factors for water, wastewater flow for wastewater. We will discuss any warranted changes to customer classes with City Staff. The costs of service analysis calculates unit costs for each utility, which are applied to each classes’ flow and peaking for water and flow for wastewater to determine each classes’ share of costs. Once we know each classes’ cost responsibility, we will calculate rates as discussed in Task 4.
MEETING(S):
• None
DELIVERABLE(S):
• Cost of service analysis in Microsoft Excel
Task 5: Rate Design and Calculation
Raftelis will calculate up to three separate rate alternatives for water and wastewater utilities that are based on the cost to serve each class derived in Task 4. Recycled water is most often a uniform rate. Rate models typically consist of three modules: a financial planning module (Task 3), a cost-of-service module (Task 4), and a rate calculation module (Task 5).
The rate calculation module calculates rates that balance the City’s objectives for simplicity, fairness, conservation, and defensibility.
For the water utility we will review the current uniform rates and assess current water use characteristics which forms the basis for customer classification.
The model is created using Microsoft Excel and will incorporate industry standard rate setting methodology consistent with the American Water Works Association for the water rate study and the Water Environment Federation guidelines for the wastewater study. During the project, we can provide City staff with working copies of the rate model, if desired, so that they can review and provide input to the final results.
Raftelis will also determine the potential financial impact on customers that result from the proposed rate structures. The model will include a series of tables and figures that show projected rate impacts on different types of customers at various use levels.
MEETING(S):
• One web meeting with City staff to review results
DELIVERABLE(S):
• Rate model in Microsoft Excel
Task 6: Drought Rates
Drought rates endeavor to recover lost revenue during a drought when customers reduce water use and therefore revenue declines. Raftelis will prepare drought rates that are aligned with the drought stages described in the City’s drought City Council Regular Meeting - Page 795 of 1385
RAFTELIS 14
management plan. We will also discuss the best way to apply the drought rates – whether through a fixed charge, uniform volumetric rate or tiered volumetric rate.
MEETING(S):
• Drought rates will be discussed in other meetings
DELIVERABLE(S):
• Drought rate calculation in Microsoft Excel
Task 7: Rate Survey
Raftelis will survey up to eight surrounding agencies so that the City can compare a typical single family residential bill with its neighboring agencies. While these comparisons are common, they must be interpreted carefully as many factors affect the typical bill such as capital reinvestment, system age, water source, property tax revenue, topography amongst other factors.
MEETING(S):
• Virtual web meetings with City staff to review results
DELIVERABLE(S):
• Rate model in Microsoft Excel
Task 8: Draft and Final Reports
The report will contain all items listed in the RFP on page 8, Deliverables Item 3, a. through y. Most importantly it will describe the financial plan and proposed rate structures, along with preliminary rate recommendations and the methodology used. It will also include all rate design assumptions and methodologies used to develop the financial plan and rates. Raftelis will incorporate City staff comments on the draft report. The report will include supporting data from the model to address the requirements of Proposition 218.
MEETING(S):
• Phone calls as needed to discuss the draft report
DELIVERABLE(S):
• Draft and Final Rate Study Report in Microsoft Word
Task 9: System Development Charges
Raftelis will calculate water and wastewater capacity fees. We will discuss the three different capacity methodologies – the buy-in, the incremental and a hybrid approach – to discuss the most applicable method. It is likely that the buy-in method is appropriate since the City is most likely built out and is not planning large capital projects to add water and wastewater capacity.
MEETING(S):
• Phone calls as needed to discuss system development charges
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RAFTELIS 15
DELIVERABLE(S):
• None
Task 10: Review Overhead Distribution Formulas
Raftelis will review existing overhead distribution formulas and provide recommendations to improve equity in the application of overhead and among the various water classifications in the water enterprise fund.
MEETING(S):
• Phone calls as needed to discuss overhead distribution formulas and recommendations
DELIVERABLE(S):
• None
Task 11: Miscellaneous Fee Template
Miscellaneous fees, such as turn on/turn off fees, reconnection charges, late payment fees etc. are based on the time and materials needed to render the service. City staff knows the approximate time and materials needed to complete the services. Therefore, to economically complete the fees, Raftelis will prepare an excel based template preloaded with staff’s benefit burdened hourly rate. City staff will use this template to input the time and materials require to render each service. The template will calculate the miscellaneous fee. This is the most economical way to calculate miscellaneous fees. We will provide a template for water and wastewater related miscellaneous fees including:
1) Water reconnection charges
2) Water service turn-on fee
3) Flow test
4) Abandonment of existing sewer or water services
5) Late payment fees
We assume we will provide a template for up to 12 miscellaneous fees. We normally do not prepare a report for miscellaneous fees and have not included a report.
MEETING(S):
• Phone calls as needed to discuss the miscellaneous fee template
DELIVERABLE(S):
• None
Task 12: Model Training
We assume time to prepare for and complete a webinar with City staff on model use. We will prepare a short PowerPoint presentation on model use and then walk staff through the model.
MEETING(S):
• One webinar
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RAFTELIS 16
DELIVERABLE(S):
• PowerPoint presentation
Task 13: Public Outreach Community Meetings
Gone are the days when rate and fee adjustments could be made by a small group of decision-makers. Today, wise municipal leaders are proactive in their approach to engage and educate customers and stakeholders. Using modern videoconferencing technology, we’ll engage audiences in ways that make it easy to safely participate in the process.
Raftelis will host up to two community meetings to communicate the value of water and wastewater services the City provides as well as summarize the challenges being faced and planned investments to deliver a secure water future. Also during these meetings will be a summary of the rate study public process to date and provide specific examples of how public input has informed and helped guide the study. This will also be an opportunity to share recommendation(s), including anticipated bill impacts, answer questions, and gather feedback. Feedback collected in these sessions will be incorporated into the draft and final recommendations to City Council.
MEETING(S):
• Two in-person public outreach meetings
DELIVERABLE(S):
• PowerPoint presentation
• Outreach materials outlined in Task 14 in English
Task 14: Communication and Outreach Materials
Raftelis’ in-house Strategic Communications Services is a team of accredited public relations experts who hold certificates in public participation. They have spent decades in utility and public sector communications as consultants and leaders of public affairs programs for large and small utilities across the country. The team specializes in providing strategic communications counsel, public engagement, and community involvement, and can provide the City with guidance, structure, strategies, tools, and tactics to communicate clearly and broadly to your customers and key stakeholders.
They are experts at developing fact-based messages that are woven together to tell your story in ways that are easy for even the layperson to grasp. Our work goes beyond satisfying Proposition 218 requirements to:
• Build an appreciation for the value of water and wastewater services • Properly frame the need for continued infrastructure investment • Explain – at a high level – how rates and fees are calculated • Communicate the potential changes and impacts for the typical customer
These elements will be core to the communication tools and pieces we develop in support of the City, including:
• A press release to announce the community meetings
• Social media content
• A short article for publication in “Lynwood ‘N Perspective,” the City’s monthly newsletter • A set of frequently asked questions and answers for use as talking points by City staff and elected officials, as well as posted to the City’s website
• Development of the Proposition 218 Notice (see Task 16 on the following page) City Council Regular Meeting - Page 798 of 1385
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OPTIONAL*
As an option, Raftelis offers specialized communication outreach support for which we are prepared to provide any level desired. We can provide significant value all along the spectrum from low to high. A higher level of support could mean developing a strategic communications and outreach plan on your behalf, or designing a robust suite of supporting communications tools, like bill inserts, postcard mailers, infographics, videos, and fact sheets.
*Optional scope items, pricing available on request.
MEETING(S):
• Up to three virtual meetings with the City’s marketing, communications, and media staff
DELIVERABLE(S):
• Draft and final outreach materials as proposed in English
Task 15: Two City Council Meetings
Raftelis will present the rate study results to City Council and answer questions as directed by City staff. The first City Council Meeting is to solicit buy-in and explain the need for revenue adjustments and the rationale and basis for rate structure changes (if warranted and/or desired). Raftelis will field questions and solicit input from City Council. At the second City Council meeting, we will recap the first meeting and discuss the revised financial plan and rates and confirm the direction to move forward with the Public Notice and Public Hearing.
MEETING(S):
• Two in-person City Council Meetings
DELIVERABLE(S):
• Presentation materials in Microsoft PowerPoint
Task 16: Public Hearing Notice
While requirements of Proposition 218 notifications are easy to satisfy, too many municipalities and utilities miss the opportunity to strategically educate and inform ratepayers. Over the years, Raftelis has designed countless Proposition 218 notifications that go beyond the minimum dictated by statute; delivering visually appealing pieces that customers want to read. Raftelis will develop graphics and narrative content needed for the City's Proposition 218 public notices, which must be postmarked to all property owners in the City's service area no fewer than 45 days prior to the public hearing. Content will include all statutorily required elements, along with strategic communications messages about the value of water services the City provides, the need for investment to deliver a secure water future, etc. Beyond satisfying legal requirements, the goal of the notice will be to describe the public process that went into the recommendations and make the case for why adoption is critical.
Once the content passes City Attorney review, Raftelis' Creative Services group will flow the content into an attractive design that will encourage City ratepayers to read the information and have a broader understanding of the issues.
Our pricing includes development of a press-ready PDF. It is anticipated that City staff will liaise with the printer and mail house, and contract directly with them for payment. We are able to provide liaison services at our standard hourly rates.
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MEETING(S):
• Phone calls as needed to discuss the Public Notice
DELIVERABLE(S):
• Press-ready PDF of the Public Notice in English
Task 17: Public Hearing
The RFP requests two public hearings, however, only one public hearing is required as it needs to be noticed 45-days in advance. At this hearing, if less than 50% plus 1 protest the proposed rates, City Council can vote on rate implementation. Raftelis will present at a public hearing to present the need for increased rates, the rate setting basis and methodology and will take questions from the public as directed by Staff and City Council. Note the RFP requests two public hearing presentations.
MEETING(S):
• One public hearing
DELIVERABLE(S):
• Presentation materials in Microsoft PowerPoint
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RAFTELIS 19
Experience
RAFTELIS HAS THE MOST EXPERIENCED UTILITY FINANCIAL AND MANAGEMENT CONSULTING PRACTICE IN THE NATION.
Our staff has assisted more than 1,200 local government agencies and utilities across the U.S., including some of the largest and most complex agencies in the nation. In the past year alone, Raftelis worked on more than 1,200 financial, organizational, and/or technology consulting projects for over 600 agencies in 46 states, the District of Columbia, and Canada. Below, we have provided descriptions of projects that we have worked on that are similar in scope to the City’s project. We have included references for each of these clients and urge you to contact them to better understand our capabilities and the quality of service that we provide.
City of Lynwood CA
Reference: Lorry Hempe, Public Works Special Projects Manager 11330 Bullis Road, Lynwood, CA 90262 / P: 310.603.0220 ext.500 / E: [email protected]
The City of Lynwood (City) created an Authority which leases water and wastewater assets. Raftelis valued the water and wastewater systems using three approaches: 1) the cost approach; 2) the market multiples approach; and 3) the income approach. We used unit pipeline costs to calculate current replacement costs for the cost approach. For the market multiples approach, we researched dozens of transactions and chose the were most similar. The income approach was the hardest, and perhaps least applicable. We assumed that an investor owned utility would earns a rate of return on the City’s assets. All three methods were considered in the final valuation.
EXPERIENCE
RAFTELIS HAS PROVIDED FINANCIAL/
ORGANIZATIONAL/TECHNOLOGY ASSISTANCE
TO UTILITIES SERVING MORE THAN
25% OF THE U.S. POPULATION.
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RAFTELIS 20
City of El Monte CA
Reference: Sal Mendez, Utilities Manager
11333 Valley Boulevard, El Monte, CA 91731 / P: 951.202.6604 / E: [email protected]
In 2019, the City of El Monte (City) engaged Raftelis to perform a water rate study. The city had a few goals for the study which included:
1. Performing a Cost Allocation Plan to properly allocate City’s central services to the water utility,
2. Planning for an increase in capital spending,
3. Repaying the general fund for a prior loan,
4. Meet debt coverage requirements.
Raftelis included these goals in a financial plan and created a tiered rate structure. Raftelis presented the financial plan and rates at a City Council meeting at which the Council directed staff to proceed with a public hearing. Raftelis prepared a public hearing notice. At the public hearing the City Council voted to implement the rates.
City of Lakewood CA
Reference: Jose Gomez, Finance Director
5812 Arbor Road, Lakewood, CA 90713 / P: 562.866.9771 ext. 2701 / E: [email protected]
Raftelis helped the City of Lakewood (City) establish water and recycled water rates. The City will move from a 2-tiered rate structure for single family residential customers to a 3-tiered rate structure. The first tier of the existing structure is a free tier with no commodity/volumetric rate. The City chose to phase in Raftelis’ recommendations over the course of five years. The resulting phased in approach mitigated customer rate shock. The City will also move from a uniform multi-family residential rate to a 3-tiered rate structure. All rates are based on the cost to serve customers in accordance with Proportion 218.
Industry Public Utilities CA
Reference: Roy Frausto, General Manager
112 N 1st Street, La Puente, CA 91744 / P: 626.330.2126 / E: [email protected]
Raftelis is calculating capacity fees for the City of Industry Public Utilities (City). The City is mostly built-out and as such we are using the Buy-in method – both the System Buy-in and the Equity Buy-in method. There are subtle differences between the two methods in that the equity method adds reserves and uses a smaller denominator (current number of equivalent meters as opposed to the build-out number of meters) to calculate the fee.
City of Long Beach CA
Reference: Anatole Falagan, Assistant General Manager
1800 E. Wardlow Road, Long Beach, CA 90807 / P: 562.570.2317 / E: [email protected]
The City of Long Beach Water Department (LBWD or Depar
tment) maintains a system of water, sewer, and recycled water infrastructure that provides services to nearly 470,000 Long Beach residents. LBWD receives its potable water supply from two main sources: groundwater produced from the Central Groundwater Basin, regulated by the Water Replenishment District of Southern California (WRD), and purchases from the Metropolitan Water District of Southern California (MWD).
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RAFTELIS 21
The prior water and sewer rates were developed in 1996 and updated annually across the board to account for rising operating and capital costs. LBWD engaged Raftelis to conduct a cost of service and rate design study for its water and sewer services and develop an administrative record that demonstrates a nexus between LBWD’s costs and rates to meet the requirements of Proposition 218.
Raftelis collaborated with LBWD staff to develop the rate design framework for water, recycled water, and sewer rates based on the policy priorities such as promoting conservation, being easy to administer and for customers to understand, and providing affordability for essential use. The current three-tier inclining rate structure for residential customers achieves most of these pricing objectives. LBWD meets the needs of its customers through a diverse portfolio of water resources, including local groundwater combined with imported supplies. To better align residential usage tiers with available water supply, Raftelis proposed to define tier breakpoints by water supply source.
The LBWD Board of Water Commissioners (Board) commits to continue the Exemption Program to provide affordability for essential water use for eligible customers in need in conjunction with the City of Long Beach Utility Users Tax Exemption Program. To continue to support the Exemption Program, Raftelis and LBWD staff recommended to use non-rate revenue such as rental income as qualified funding sources.
Raftelis conducted a detailed and vigorous cost of service analysis for water, recycled water, and sewer services and rate calculations demonstrating the nexus and proportionality between the costs and the rates to ensure compliance with Proposition 218. To help communicate with customers about the drivers and rationale behind the proposed rates, the water quantity rates include several cost-based rate components, including water supply costs, delivery, peaking, conservation and revenue offsets. To facilitate informed decisions by policy makers, sensitivity and customer impact analyses were conducted for all customer classes at various usage levels receiving water, recycled water, and sewer services. Raftelis developed an Excel-based, non-proprietary financial plan and rate model documenting all of the data and assumptions used in the study. The rate model presents the results of the study in a series of tables and charts that allows the Department to quickly review the impacts of different rates alternatives, so that policy makers can make informed decisions.
At the end of the study, Raftelis presented the results to the Board in a workshop illustrating the nexus between the costs and rates to ensure that the proposed water, recycled water, and sewer rate structures complied with Proposition 218 requirements. As part of the study, Raftelis developed the cost of service and rate study report to be used as an administrative record. The report highlighted the major issues and decisions made during the course of the study and discussed and explained the cost of service analysis and methodology used to develop the final rates. The explanation of the methodology found within the report demonstrates that the rates: are equitable, reflect the Department’s policies and values, and are driven by the Department’s revenue requirements. The final report was submitted to the LBWD, the Long Beach Board of Water Commissioners conducted a public hearing to consider the proposed changes outlined in the Proposition 218 legal notice, and the City Council adopted an ordinance approving the new rate structure.
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RAFTELIS 25
We believe that Raftelis is the right fit for this project. We provide several key factors that will benefit the City and help to make this project a success.
RESOURCES & EXPERTISE: This project will require the resources necessary to effectively staff the project and the skillsets to complete all of the required components. With more than 140 consultants, Raftelis has the largest water-industry financial and management consulting practice in the nation. Our depth of resources will allow us to provide the City with the technical expertise necessary to meet your objectives. In addition to having many of the industry’s leading rate consultants, we also have experts in key related areas, like stakeholder engagement and data analytics, to provide additional insights as needed.
DEFENSIBLE RECOMMENDATIONS: When your elected officials and customers are considering the validity and merit of recommended changes, they want to be confident that they were developed by experts using the latest industry standard methodology. Our senior staff is involved in shaping industry standards by chairing various committees within the American Water Works Association (AWWA) and the Water Environment Federation (WEF). Raftelis’ staff members have also co-authored many industry- standard books regarding utility finance and rate setting. Being so actively involved in the industry will allow us to keep the City informed of emerging trends and issues and to be confident that our recommendations are insightful and founded on sound industry principles. In addition, with Raftelis’ registration as a Municipal Advisor, you can be confident that we are fully qualified and capable of providing financial advice related to all aspects of utility financial planning in compliance with federal regulations.
HISTORY OF SIMILAR SUCCESSES: An extensive track record of past similar work will help to avoid potential pitfalls on this project and provide the know-how to bring it across the finish line.
Raftelis staff has assisted 1,000+ utilities throughout the U.S. with financial and rate consulting services with wide-ranging needs and objectives. Our extensive experience will allow us to provide innovative and insightful recommendations to the City and will provide validation for our proposed methodology ensuring that industry best practices are incorporated.
USER-FRIENDLY MODELING: A modeling tool that your staff can use for scenario analysis and financial planning now and into the future will be key for the City going forward. Raftelis has developed some of the most sophisticated yet user-friendly financial/rate models available in the industry. Our models are tools that allow us to examine different policy options and cost allocations and their financial/customer impacts in real time. Our models are non-proprietary and are developed with the expectation that they will be used by the client as a financial planning tool long after the project is complete.
RATES THAT ARE ADOPTED: For the study to be a success, rates must be successfully approved and implemented. Even the most comprehensive rate study is of little use if the recommendations are not approved and implemented. Raftelis has assisted numerous agencies with getting proposed rates successfully adopted. We develop a message regarding the changes that is politically acceptable and convey that message in an easy-to-understand manner. We focus on effectively communicating with elected officials about the financial consequences and rationale behind recommendations to ensure stakeholder buy-in and successful rate adoption.
QUALIFICATIONS
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RAFTELIS 26
29 years
serving the
public sector
How we stack up
RAFTELIS HAS PROVIDED ASSISTANCE FOR
1,200+
public agencies
and utilities
25%
of the
U.S. population
that serve more than
38 of the nation’s
50 largest cities
including the agencies serving
1,000+
projects
for
in the past year alone, we worked on
600+
agencies
in
46 states
OUR TEAM INCLUDES
160+
consultants focused on
finance/management/communication/
technology for the public sector
2 members of
AWWA and WEF utility finance and
management committees and subcommittees
chairs
&
16 &
A Past President of AWWA
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RAFTELIS 27
Raftelis staff shape industry standards
for water and wastewater utility finance
and management through our active
leadership in AWWA, WEF, EPA, and
SESWA. Leadership positions for these
organizations include:
AWWA
• Past President
• Asset Management Committee - 1 member
• Finance, Accounting, and Management Controls
Committee - 2 members
• Public Affairs Council - 1 member
• Rates and Charges Committee - 4 members
• Strategic Management Practices Committee - Chair
WEF
• Finance and Administration Subcommittee - Chair
• Government Affairs Committee - 1 member
• Technical Practices Committee - 1 member
• Utility Management Committee - 5 members
• WEFTEC Conference Planning Committee - 1 member
EPA
• Environment Financial Advisory Board - 1 member
Southeast Stormwater Association (SESWA)
• President
Leading
the industry
Raftelis staff have co-authored many of
the industry’s leading guidebooks
regarding water and wastewater financial
and management issues, including:
• Affordability of Wastewater Service (WEF)
• Manual of Practice No. 27, Financing and Charges for
Wastewater Systems (WEF)
• Manual M1, Principles of Water Rates, Fees and
Charges (AWWA)
• Manual M5, Water Utility Management (AWWA)
• The Effective Water Professional (WEF)
• Water and Wastewater Finance and Pricing: The
Changing Landscape
• Water and Wastewater Rate Survey (conducted and
published in collaboration with AWWA)
• INSIGHT database and survey (conducted in
collaboration with AMWA)
• Water Rates, Fees, and the Legal Environment (AWWA)
We wrote
the book
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RAFTELIS 28
Project Team
OUR TEAM IS COMPRISED OF SUBJECT MATTER EXPERTS IN RATE SETTING, AND COMMUNICATIONS TO REACH THE CITY’S RATE-
SETTING GOALS.
Our team includes senior-level professionals to provide experienced project leadership with support from talented consultant staff. This close-knit group has frequently collaborated on similar successful projects, providing the City with confidence in our capabilities.
Here, we have included an organizational chart showing the structure of our project team. On the following pages, we have included detailed resumes for each of our team members as well as a description of their role on the project.
CITY OF
LYNWOOD
PROJECT MANAGER
Brian Bass
STAFF CONSULTANTS
Charles Diamond
Sarah Wingfield
Lindsay Roth
Nicholas Kennedy
PROJECT DIRECTOR
Steve Gagnon, PE (AZ)
PUBLIC OUTREACH
Gina DePinto, APR
Matt Wittern, APR
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RAFTELIS 29
Steve Gagnon PE (AZ)
PROJECT DIRECTOR
Senior Manager
ROLE
Steve will be responsible for overall project accountability and will be available to provide quality assurance and control, industry perspective, and insights into the project.
PROFILE
Steve has 24 years of experience in financial analysis and environmental engineering. For the past 14 years Steve has provided financial planning and rate setting services to agencies all over California. He has also helped utilities make major investment decisions such as whether to invest in food waste to energy projects. He has also managed the construction and installation of water treatment equipment and oversaw Superfund remediation for the U.S. Army.
KEY PROJECT EXPERIENCE
Utility Rate Studies and Long-Range Planning Experience City of Manhattan Beach (CA)
Steve is helping the City of Manhattan Beach to create a water financial plan and set rates. The City had two major concerns; 1) wells were impaired in the near term and the city would have to purchase more imported water and 2) the City was unsure about tiered rates given recent litigation. Steve worked with city staff to discuss the pros and cons of tiered rates. After reviewing these pros and cons with the city attorney and manager, staff is recommending cost based tiered rates as of this writing. Steve will present the financial need and rate study results to city council and the public.
Otay Water District (CA)
Steve led a recent water rate study for the District in the Spring of 2022. Working with the District he updated their cost-of-service study, rate structure which included tier breakpoints. The District decided to use the Commodity Demand method and only base (commodity) and max day cost components as opposed to max day and max hour components. Based on discussions with District operations staff, the project team decided to allocate water purchase costs to what is termed base costs, reducing the water rate for tiers 1 and 2.
City of Tracy (CA)
In 2019, the City of Tracy (City) engaged Raftelis to perform a wastewater rate study. Raftelis is currently working with City staff to best plan for expenses to minimize customer impacts, and Steve is serving as Project Manager.
Specialties
• Utility cost-of-service & rate
structure studies
• Conservation rate studies
• Economic feasibility studies
• Capital budgeting studies
• Wastewater rate studies
• Capital recovery/capacity fee
studies
• Survey research of water &
wastewater utility characteristics &
rates
Professional History
• Raftelis: Senior Manager (2020-
present); Manager (2017-2019);
Senior Consultant (2014-2016)
• APTwater, Inc. (Now Ultura): project
manager (2011-2014)
• PBS&J (now ATKINS): project
manager - Utility Finance (2005-
2011)
• Earth Tech (now AECOM): Senior
project manager (2004-2005)
• Malcolm Pirnie, Inc. (now
ARCADIS): Consultant (2002-2003)
• National Parks Conservation
Association - Business Plan
Initiative: Business Plan Consultant
(2000)
• U.S. Army Corps of Engineers -
New England Division: project
manager (1995-1999)
• Geophex, Limited: Graduate
Research Assistant (1994)
Education
• Master of Business Administration -
University of Southern California
(2001)
• Master of Science in Environmental
Engineering - University of
Massachusetts (1995)
• Bachelor of Science in Civil
Engineering - University of
Massachusetts (1994)
Certifications
• Registered Professional
Environmental Engineer in Arizona
• Series 50 Municipal Advisor
Representative
Professional Memberships
• AWWA
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RAFTELIS 30
City of San Diego (CA)
The City of San Diego (City) is considering a renewable energy project to take landfill gas and create electricity. Steve prepared a financial model evaluating three alternatives: 1) do nothing and purchase electricity from a regional provider, 2) enter into a contract with a private entity to run and the renewable energy facility and sell electricity to the City at an agreed upon rate, 3) to purchase the facility and run it with City staff. The analysis gives the City a range of acceptable electricity rates for negotiating with a private party for option 2.
Delta Diablo Sanitary District (CA)
Steve, as a sub-consultant to HDR, is preparing the financial analysis for a potential food waste to energy project in which the Delta Diablo Sanitary District (District) would take food waste slurry, convert it to biogas and sell electricity. There are many unknowns in the project including exact operations and maintenance costs and the tipping fee from the nearby landfill. Steve is performing a Monte Carlo simulation to help the District visualize the probability of a financially viable project given all the unknowns.
Running Springs Water District (CA)
Steve is assisting the Running Springs Water District (District) establish water and wastewater rates and evaluate the financial health of the Fire and Ambulance Department. The District is unique in that many residents are absentee owners of vacation homes. As such, the District is maintaining a higher than average level of fixed charges for both water and sewer to equitably distribute costs among full-time and part time residents. Steve also prepared a 10-year financial plan for the Fire and Ambulance Department showing its financial health under different property tax, other revenue and expenses assumptions, including fire engine replacement.
Encina Wastewater Authority (CA)
Steve is helping the Encina Wastewater Authority (Authority) analyze the Net Present Value of three large capital investments: 1) their co-generation facility, 2) the heat dryer and 3) the fats, oils and greases (FOG) receiving facility that supports Encina’s co-digestion facility operation. For the co-gen facility, the analysis involves calculating the Net Present Value of electricity purchase costs with and without the co-gen facility. The heat dryer analysis involves calculating the equivalent annual cost of operating solely the centrifuge (with the associated disposal cost of sludge) versus operating the heat dryer and its reduced sludge disposal costs. Lastly, he is helping the Authority analyze its options for alternative digester fuels for co-digestion to enhance digester gas production - FOG versus beer waste - based on the tipping fees and associated maintenance costs of each.
Hi-Desert Water District (CA)
Steve is helping the Hi-Desert Water District (District) establish defensible and affordable water rates for a District with a high number of low-income residents. The study includes an update of their miscellaneous fees. The District has one main source of water, which limits the rate differentiation between tiers. The study includes an extensive outreach program to educate customers as to the need for rate adjustments.
City of Port Hueneme (CA)
The City of Port Hueneme (City) has some of the highest water rates in the area due to the amount of capital reinvestment needed to maintain the system. Steve is helping City Council and Staff assess the impacts of their decisions, including capital reinvestment, loan refinancing and fixed charge pricing on customer bills. The study included a rate workshop with City Council to show the Council the effects of their decisions.
Mesa Water District (CA)
Mesa Water District (District) prides itself on the fact that it is no longer dependent on imported water. Steve helped the District revise their water and recycled water rates in a few months during a fast-paced rate study. The study included over 10 financial plan options for the Board to select from.
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RAFTELIS 31
City of Pomona (CA)
Steve is currently helping the City of Pomona (City) establish water, recycled water and wastewater rates. He is establishing defensible tiered rates based on the City’s multiple sources of water and use characteristics. He is also establishing pumping charges based on the costs associated with serving water to high elevation customers. The engagement includes working with rate committee members, Staff and council members to ascertain their rate setting goals. It also includes a 10-year financial plan and modeling rates under industry standard reserve targets.
City of Lakewood (CA)
Steve helped the City of Lakewood (City) develop cost-of-service based tiered water rates. Of note, Steve recommended revising the current practice of providing free water for the first four units of water in single family first tier. To ease the impacts of this change, the City decided to transition the rates over a 5-year period. The study included a full five-year financial plan and a review and recommendations on reserve levels.
City of Orange (CA)
Steve is helping the City of Orange (City) update its water rates and rate structure to ensure that rates are based on cost- of-service principles. The study includes a financial plan to fully fund operational and capital expenses and reserves. Steve also helped the City establish wastewater rates for its sanitation enterprise. The rates were revised to reflect sewer whereas they were previously based on water use.
Channel Islands Beach Community Services District (CA)
Steve helped the Channel Islands Beach Community Services District (District) establish equitable water and wastewater rates. Particularly noteworthy in this study was a class of customers that required the District to reserve capacity in the water treatment plant for possible future growth. Steve explained the cost causation-based rate for this customer class at Board meetings and the Public Hearing. Steve also held special web-based workshops with this customer class to explain cost-of-service principles and the basis for the rates.
City of Shasta Lake (CA)
The City of Shasta Lake’s (City) water revenue dropped significantly during the recent drought - while their water costs increased due to emergency water purchases from expensive sources. In addition, the City’s infrastructure was over 80 years old which necessitated significant capital expenditures. Steve worked with City staff to develop a water financial plan that fully funded their capital program, reserves and operational expenses. The financial plan called for a 30% revenue increase in one year. Steve presented the basis for revenue adjustments and rate development at a well-attended public hearing at City Hall.
Santa Fe Irrigation District (CA)
Santa Fe Irrigation District (District) has one of the largest per capita water use rates in the State due to its large lots, many of which have orchards and other agriculture requiring irrigation. Steve worked with City Staff and Board members to establish water cost-of-service based rates which included a complete restructuring of their fixed charges so that the District could pass through their fixed wholesaler charges. The consumption rates were based on the peaking characteristics of each class. Steve presented at a contentious Public Hearing, in which that rates were adopted, to answer Board and the Public’s questions.
City of Encinitas (San Dieguito Water District, CA)
Steve helped the City of Encinitas (City) establish water rates that are based on cost-of-service principles. Cost-of-service based rates creates large bill impacts for the agricultural class. Steve worked with City staff and the Board rate setting committee to evaluate rates and explain rate setting basics to the committee and public in a Proposition 218 public hearing.
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Trabuco Canyon Water District (CA)
Steve helped the Trabuco Canyon Water District (District) establish water, wastewater and recycled water rates. The Trabuco Canyon Water District’s revenue plummeted significantly during the recent drought. Steve helped the District established rates, including drought rates, that fully funded operations, capital expenses and reserves. The District previously had a 7-tier rate structure. Steve helped the district establish a 4-tier rate structure in which the rates were based on the supply costs and peaking costs to serve water in each tier - as required by Proposition 218. The study started with a pricing objectives exercise so that the Board could communicate its most important rate setting goals. Steve presented financial plan options and rate study results and a public hearing.
Sweetwater Authority (CA)
Steve evaluated water rates, including drought rates, for the Sweetwater Authority in light of recent legal concerns over their current rate structure. The evaluation includes a cost-of-service study to clearly demonstrate the nexus between the rate for each single-family tier and the associated costs to serve that tier. The study started by soliciting input from Board members regarding their water pricing objectives so that rates could be designed accordingly. Steve concluded the study with presentations to the District Board of Directors and the Public.
Moulton Niguel Water District (CA)
Steve prepared water and wastewater capacity fees and miscellaneous fees in June of 2016. The water and wastewater capacity fees were calculated using the buy-in methodology and varied by meter size. The Moulton Niguel Water District (District) also decided to implement a water demand offset fee for new water connections based on the premise that the recycled water system offsets potable water use and benefits potable water users. Steve attended Board meetings to help staff explain the rationale and basis for the capacity fees.
Steve also helped calculate miscellaneous fees by interviewing staff to assess the time and effort involved with the fees, benefit burden rates and material charges to properly calculate over three dozen fees for the water and wastewater systems. The deliverable included an excel model with which the District could update the miscellaneous fees in the future.
City of Henderson (NV)
Steve is creating water and wastewater rate and financial planning models for the City of Henderson as well as updating their water and sewer system development charges. The models will be used over the next 5 to 10 years not only to calculate water and wastewater rates but also to create yearly financial statements.
City of Redlands (CA)
Steve updated the City of Redland's (City) water and wastewater rates and development impact fees. The rate study process included workshops with the City’s Utility Advisory Committee in which he presented the basics of rate setting and the financial environment of the utilities. The interactive workshops solicited input from committee members and staff regarding revenue adjustments and rates.
Rainbow Municipal Water District (CA)
Steve created water conservation-based sewer rates to complement the Rainbow Municipal Water District’s (District) conservation-based water rate structure. These rates will be based on the actual water usage of each customer within the District. In addition, appropriate sewage strengths will be incorporated into the District’s sewer user rates.
County of San Diego (CA)
Steve prepared integrated financial models for a landmark study for the County of San Diego. The study will not only be updating the sewer user, capacity, and annexation fees for the nine dependent sewer districts but will also include the City Council Regular Meeting - Page 814 of 1385
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economic analysis of creating one “super sanitation district." Long-range financial plans will be prepared for all of the districts as well as the super district including 10 years of operational and capital costs.
Town of Quartzsite (AZ)
Steve performed a third-party rate review of a recently completed water and wastewater rate study for the Town of Quartzsite (Town). The Town is concerned with insuring that their winter RV population is paying their fair share of the water and sewer expenses.
Town of Parker (AZ)
Steve updated the Town of Parker’s (Town) water rates. One of the Town’s main concerns was the fairness and equity of water system cost distribution given the Town’s large population of Native Americans who do not pay sales or utility taxes yet benefit from Town parks and other Town amenities. He also helped the Town establish operating and capital reserves.
Walnut Valley Water District (CA)
Steve performed the Walnut Valley Water District’s (District) first professional rate study which included updating the rate structure. Steve created a three-tier residential rate structure to help decrease discretionary consumption and ensure the District avoids or reduces water purchase surcharges from the Metropolitan Water District. He presented his findings to District staff and the District’s Board of Directors.
Fallbrook Public Utility District (CA)
With water shortages looming in Southern California, this progressive water and sewer district asked for help creating water conservation-based sewer rates to complement their conservation-based water structure. Steve created rates based on the actual water usage of each customer within the Fallbrook Public Utility District (District). In addition, appropriate sewage strengths were incorporated into the District’s sewer user rates.
Rowland Water District (CA)
Steve updated the Rowland Water District’s (District) water rates for the second time. The District had several concerns for the most recent study which included a large debt issue for a recycled water system as well as staff increases and wholesale water rate increases. The model helped the district size its debt issue by performing a rate sensitivity analysis to the size of the debt issue.
Olivenhain Municipal Water District (CA)
Steve created a drought rate model to help the Olivenhain Municipal Water District (District) develop a drought rate ordinance. The model calculated commodity rate adjustments for four drought stages. It allowed for customer voluntary cutbacks in consumption as well as cutbacks due to higher water prices using the price elasticity of water. The model will help ensure the District maintains adequate revenue in times of drought.
Steve helped the District update their wastewater rates and developed a customized model for its unique rate structure.
The District’s residential rates are a flat charge per Equivalent Dwelling Unit (EDU) and the commercial rate structure includes a service charge per EDU and a variable rate based on measured water consumption.
Steve also prepared valuation calculations for the system capacity required for update of water and wastewater connection and annexation fees for the District. The analysis showed that the District would benefit by changing capacity fee calculation methodologies from a growth method to a combined method, thereby imposing less restrictions on the use of capacity fee revenue.
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Steve modeled the long-term cost of several different water sources for the District. Options included purchasing treated water, expanding their water treatment plant and purchasing untreated water from the Metropolitan Water District or partnering with other local agencies to desalinate ocean water. The model contained many variable inputs to allow “what-if” scenario analysis. Although purchasing treated water was the least costly option, the authority favored plant expansion due to other benefits such as reliability of water supply.
City of Poway (CA)
Steve completely rebuilt the City of Poway’s water and wastewater rate models to reflect the latest rate setting practices.
Helix Water District (CA)
Steve created an economic model to add life-line and a water waster tier to the Helix Water District’s (District) three-tier rate structure. In addition, budget-based water rates were created for all irrigation accounts. The District is transitioning slowly to budget-based rates due to staffing limitations. In 2010 they will implement budget-based rates for all commercial accounts.
Steve also performed all of the economic modeling in the preparation of the District’s first Capacity Fee study. The capacity fee was designed to collect a buy-in portion based on replacement costs of the District’s current water system and the incremental cost of adding a new water supply, the El Monte Valley Ground Water Recharge project.
City of Anaheim (CA)
Steve prepared a commercial and residential wastewater rate study for the City of Anaheim (City). The proposed rate structure was based on water consumption to replace the antiquated structure based on the number of toilets. Proper water use and wastewater return to sewer analysis is required to ensure proper revenue generation for the City.
City of Coronado (CA)
Steve is helping restructure the City of Coronado’s wastewater rates from a flat parcel-based fee for residential users to one with a consumption-based charge and a fixed charge.
City of Lemon Grove (CA)
Steve helped update the commercial and residential wastewater rates for the City of Lemon Grove. The rate structure included 20 different user classes for residential, commercial, and institutional customers.
Western Municipal Water District (CA)
Steve prepared a long-range financial plan to help ensure the Western Municipal Water District’s (District) financial health. Based on the District’s five-year CIP, inflationary water rate adjustments, and reserve policies, the plan showed that a debt issue was needed to execute the CIP and maintain adequate reserves.
Julian and Pine Valley Sanitation Districts (CA)
Steve updated the wastewater rates and connection fees for both sanitation districts. The wastewater fees had not been updated for several years in one district and over 15 years in the other necessitating large rate increases. He developed a few different scenarios which included postponing CIP projects or lowering reserve balances, to ease ratepayers into higher rates.
San Antonio Water System (TX)
Steve prepared a sewer impact fee economic model and study for the City of San Antonio. This included a valuation of the system’s facilities using several asset-based approaches. Ultimately the total net book value without depreciation was selected as the basis for the valuation of the System’s assets. In addition, an equity residual model was prepared that City Council Regular Meeting - Page 816 of 1385
RAFTELIS 35
included the allocation of the present value of past and future debt service payments. The study also analyzed a number of impact fee structures to determine the most fair and equitable fee.
La Habra Heights County Water District (CA)
Steve assisted with the update in water user rates, capacity charges, and long-range financial plan for the La Habra Heights County Water District (District). The 2001 study set the District’s user rates for five years and expired in 2005.
The District had recently completed an updated Water Master Plan and wished to incorporate the new cost of replacement capital facilities for the next 10 years into their long-range financial plan and user rates.
City of La Habra (CA)
Steve helped prepare the City of La Habra’s (City) first professional sewer user rate study. This study followed industry standards and an EPA approved rate structure. The City plans to create a formal enterprise fund for their sewer utility to properly finance their sewer operations and maintenance. He developed the long-range financial plan modeled year-end cash reserves to ensure execution of the City’s $21 million capital improvement program and to fund operations and maintenance.
City of Webster (TX)
Steve is constructing a stormwater model for the City of Webster (City). The rates are based on the impervious surface of each parcel. The City plans using water meters to bill customers.
City of Norman (OK)
Steve is constructing a stormwater rate model for the City of Norman. The model is constructed in several different ways to allow the city council to choose from alternative rate structures, including the contentious issue of whether or not Oklahoma University, which owns large parcels of impervious surface area, will support the stormwater utility.
Boxelder County (UT)
Steve assisted Boxelder County in the determination of how they will finance their required stormwater improvements.
They plan to create a stormwater utility through diverse funding sources including impact and user fees, a community financing district, and grants and loans. The goal of this study was to identify and size a system of improvements which will achieve the greatest defined economic benefit (both local and regional) per dollar of cost, based on the 100-year floodplain extents.
City of Fullerton (CA)
Steve conducted a field audit to determine appropriate return to sewer flows as well as fats, oils and greases surcharge rates for the top 50 industrial water customers in the City of Fullerton.
Utility and Water Right Valuations Experience
Blue Plains Wastewater Treatment (DC)
Steve is valuing the largest advanced wastewater treatment plant in the world (370 MGD) using several different valuation methods for Metropolitan Washington Council of Governments. The study values capacity rights in a treatment plant shared by several users. Valuation methodologies include original cost, reproduction cost, and market comparables.
Metro Wastewater Joint Powers Authority (CA)
Steve updated a prior valuation study which values treatment capacity in the San Diego Metropolitan Wastewater System. The valuation study considered several different valuation methodologies including the asset approach, prior sale (market comparables); buyer’s avoided cost, seller’s potential future cost and alternative investment value.
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City of Pico Rivera (CA)
Steve is slated to help the City of Pico Rivera value groundwater pumping rights. Groundwater pumping rights will likely be valued using both a market comparables approach and a buyer’s avoided cost approach.
Other Financial and Management Experience
Town of Parker (AZ)
Steve is performing a benchmarking analysis of the Town of Parker’s (Town) water, parks and recreation and streets departments due to efficiency concerns. The study will compare the Town’s cost efficiency with other small towns.
Marine Corps Base Camp Pendleton (CA)
Steve led an asset inventory and condition assessment of the water and wastewater systems on Marine Corps Base Camp Pendleton. The inventory included field visits and literature reviews to document and describe the extent and condition of all utility assets. Asset data was compiled in a database and linked to GIS mapping.
Olivenhain Municipal Water District (CA)
Steve developed an economic model that evaluates the cost benefit analysis of four different water supply options including desalinization, increased use of recycled water, and expansion of their existing water treatment plant using membrane technology. Proposed funding levels were prepared for the long-range financial plan to match projects against the revenue levels necessary to support them.
Confidential Fortune 500 Aerospace Corporation (CA)
Steve created an excel based financial model to cost and budget one of the largest corporate environmental liabilities - a nine-mile long plume of rocket fuel-related contamination - underlying several cities in southern California. Remediation strategies were constantly changing and, thus, the model simulated costs for numerous remediation alternatives. The model also allowed for monthly and yearly budgeting and total clean-up expenditures.
Earth Tech (CA)
Steve developed an Operation Excellence Plan to ensure client satisfaction on the execution of a multimillion-dollar Master Services Agreement with a Fortune 500 Aerospace Corporation. The plan provided guidance in many areas including QA/QC, client feedback, staff allocation, etc. The plan also included performance measures to evaluate client satisfaction, program success, and failures.
Otay Water District (CA)
Steve assisted in facilitating performance metric workshops with the Otay Water District management staff. The workshops discussed performance metric basics, analyzed dozens of performance metrics, how to calculate them, and eventually helped staff narrow down the metrics they believed were best for their utility.
Keweenaw National Historical Park, National Park Service (MI) Steve coauthored a business plan submitted to the U.S. Congress to seek additional funding to expand a national park in Michigan. The business plan included a historical cost accounting analysis of prior fund use and projected future fund needs.
U.S. Army Sudbury Annex Superfund Site (MA)
Steve was the project manager for the remediation and real estate transfer of a 2,000-acre army ammunition depot and research installation in central Massachusetts. Steve oversaw project funds, environmental studies, and construction contracts with consulting firms and partnered with the U.S. EPA to determine clean-up goals and strategies.
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PROJECT LIST
• City of Anaheim (CA) - Wastewater rate study
• Boxelder County (CO) - Stormwater funding research
• Blue Plains Wastewater Treatment Plant (DC) - Valuation study • Confidential Fortune 500 Aerospace Corporation (CA) - Strategic remediation financial planning and analysis • City of Coronado (CA) - Wastewater rate study
• Earth Tech (CA) - Operation excellence plan
• Fallbrook Public Utility District (CA) - Water conservation-based sewer rates • City of Fullerton (CA) - Sewer fee assessment
• Helix Water District (CA) - Conservation based water rates; capacity fee study • Julian and Pine Valley Sanitation Districts (CA) - Wastewater rate study • Keweenaw National Historical Park, National Park Service (MI) - Business plan • City of La Habra (CA) - Sewer rate study and long-range financial plan • La Habra Heights County Water District (CA) - Water user rate study and long-range financial plan • City of Lemon Grove (CA) - Wastewater rate study
• Marine Corps Base Camp Pendleton (CA) - Utility privatization • Metro Wastewater Joint Powers Authority (CA) - Valuation of treatment capacity • City of Norman (OK) - Stormwater rate study
• Olivenhain Municipal Water District (CA) - Drought water rates; wastewater rate update; capacity and annexation fee update; long-term water planning financial model; water supply cost benefit analysis • Otay Water District (CA) - Capacity fees update; water rate structure update and drought phasing plan; performance metrics
• Town of Parker (AZ) - Water rate study; benchmarking and efficiency analysis • City of Pico Rivera (CA) - Valuation of groundwater
• pumping rights
• City of Poway (CA) - Water and wastewater rate models • Town of Quartzsite (AZ) - Third party rate review
• Rainbow Municipal Water District (CA) - Water conservation-based sewer rates • Rowland Water District (CA) - Water rate study
• San Antonio Water System (TX) - Sewer impact fee study • County of San Diego (CA) - Sewer utility rate study
• Sweetwater Authority (CA) - Water rate study
• U.S. Army Sudbury Annex Superfund Site (MA) - Base realignment and closure • Walnut Valley Water District (CA) - Water rate study
• City of Webster (TX) - Stormwater rate study
• Western Municipal Water District (CA) - Long-range financial plan
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Brian Bass
PROJECT MANAGER
Manager
ROLE
Brian will manage the day-to-day aspects of the project, ensuring it is within budget, on schedule, and effectively meets the City’s objectives. He will also lead the consulting staff in conducting analyses and preparing deliverables for the project. Brian will serve as the City’s main point of contact for the project.
PROFILE
Brian has over 18 years of experience in consulting providing financial, project management and engineering services to utility clients. He has performed cost of service rate studies, bond feasibility studies, water and wastewater rate design studies, long-term financial plans for asset management programs, financial capability and affordability studies, and provided recommendations on appropriate financial ratios and metrics for municipal utilities.
KEY PROJECT EXPERIENCE
Washington Suburban Sanitary Commission (MD)
Brian completed a cost-of-service analysis for Washington Suburban Sanitary Commission (WSSC) to determine if fixed charges were adequately recovering revenue requirements proportionately from each customer class. The study included a cost-of-service analysis for the water and sewer departments and a workshop for WSSC.
City of Lancaster (OH)
Brian completed a water and sewer rate study and cost of service analysis for the City of Lancaster (City) to provide adjustments to the rate structure so each customer class was paying a fair and equitable rate as outlined in American Water Works Association’s M1 Manual of Practice. The study included a capacity fee analysis and attending a City Council Meeting to answer questions about the project and proposed changes.
City of St. Mary’s (OH)
Brian completed a sewer rate study and cost of service analysis for the City of St. Mary’s (City) to determine if adjustments were merited for outside-city and wholesale customers. The cost of service analysis was completed in accordance with Water Environment Federation’s Manual of Practice No. 27 – Financing and Charges for Wastewater Systems. Brian also prepared a 5-year financial plan with proposed rate increases to help the City meet its fiscal requirements and targets.
City of Newton Falls (OH)
Brian completed a rate study and cost of service evaluation for the City of Newton Falls’ (City) water utility. He developed a 6-year financial forecast to determine rates increases that were necessary to cover projected water revenue requirements and maintain sufficient water utility operating fund balances. The analysis used the base-extra capacity method outlined in American Water Works Association’s M1 Manual of Practice to determine the cost of service for each customer class. Results of the cost of service evaluation were used to adjust the City’s water rate structure.
Specialties
• Utility cost of service and rate structure
studies
• Capacity fee studies
• Financial capability assessment and
affordability studies
• Bond feasibility studies
• Water and sewer rate studies
• Economic feasibility studies
Professional History
• Raftelis: Manager (2022-present)
• Arcadis: Senior Management
Consultant (2004–2022)
Education
• Master of Business Administration –
Indiana University (2013)
• Bachelor of Science in Agricultural and
Biological Engineering – The Ohio State
University (2004)
Professional Memberships
• AWWA Rates and Charges Committee
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City of Columbus (OH)
Brian completed cost of service rate studies for the City of Columbus’ (City) water and wastewater utilities. Results of these analyses were used to compare alternative rate designs and gradually modify the City’s rate structure to improve rate equitability. Brian analyzed the City’s water and wastewater utility capacity fees and miscellaneous fees and assessed whether the City should adopt new fees.
City of Bedford (OH)
Brian completed a rate study and cost of service evaluation for the City of Bedford’s (City) water utility. He developed a 5-year financial forecast to determine revenue increases from rates that are necessary to cover projected revenue requirements and maintain sufficient utility operating fund balances. The base-extra capacity method as outlined in American Water Works Association’s M1 Manual of Practice was used to determine cost of service for each customer class. Results of the evaluation were used to determine an appropriate rate for a customer planning to have a significant increase in water usage.
PortMiami (FL)
Brian completed the financial analysis section of the Consulting Engineer’s Report for issuing $1.2 billion in revenue refunding bonds to restructure PortMiami’s debt portfolio, which was their largest bond financing transaction to date. He developed projections of PortMiami’s net revenues based on contractual commitments and projected outlooks for cruise line and cargo operations, other revenues, operating expenses, and capital expenses for the current fiscal year and a five- year forecast period. Brian developed a projection of debt service coverage requirements for senior and subordinate debt in accordance with the Master Bond Ordinance. He also projected revenues for compliance with the Rate Covenant Requirements. The project also included an analysis of the potential impact of the COVID-19 pandemic on future cruise line revenues and issuance of future debt obligations with a stress test to determine if debt service coverage requirements for senior and subordinate debt would still be achieved.
Village of Attica (OH)
Brian completed a system valuation using the cost approach of Village of Attica’s (Village) water and sanitary sewer systems. The study provided the Village with insight for a fair and reasonable outcome should they decide to sale the water and sanitary sewer systems. The study also highlighted impacts the sale could have on Attica’s other existing staffing requirements.
Lake County (OH)
Brian completed developed long-term financial planning models to forecast revenues, expenses, cash balances, debt service coverage ratios, rate revenue requirements, and rate increases for the Lake County’s (County) water, sewer, and solid waste utilities. The financial plans enabled the County to proactively control rates by setting aside capital and operating reserves, plan for debt issuance, accelerate or postpone capital projects, review multiple scenarios of different revenue and cost projections to determine the impact on rates, and ensure sufficient revenues were available for future infrastructure needs. Brian also completed cost of service studies for each utility to evaluate their existing rate structure.
City of Dayton (OH)
Brian developed a long-term financial planning model to forecast rate revenue requirements for the City of Dayton’s water and wastewater utilities. Brian also completed a cost-of-service analysis to determine Montgomery County’s proportionate share of water costs.
City of Youngstown (OH)
Brian completed a comprehensive sewer financial plan to analyze the City of Youngstown’s (City) long-term cash flow projections and determine optimal fiscal management strategies. The financial plan enabled the City to consider and implement proposed rate increases that would allow them to maintain minimum operating fund balances and meet debt City Council Regular Meeting - Page 821 of 1385
RAFTELIS 40
service coverage targets. Brian calculated multiple scenarios with various capital costs to aid in mitigating the customer impact due to high sewer rates. The project also included meeting with City Council and the Ohio Environmental Protection Agency.
City of Newark (OH)
Brian developed a financial planning model to project system revenue, expenses, and cash flow to assess the financial feasibility of the water system. He also projected revenue requirements necessary for creating a debt service reserve fund and maintaining a sufficient cash balance in the operating fund. Brian coordinated with Bond Council and Underwriter to provide preliminary and final bond feasibility studies for release of preliminary and official statements.
City of Alliance (OH)
Brian completed a financial capability assessment in accordance with the United States Environmental Protection Agency Guidelines of the City of Alliance’s (City) wastewater utility to determine if the proposed secondary treatment expansion would place an additional hardship on the City and its customers. He developed a financial plan for the City’s wastewater utility to assess the impact of the expansion on rate revenue requirements and associated rate increases.
PROJECT LIST
• Akron (OH) – Long-term financial plan for asset management program. • Alliance (OH) – Financial capability assessment and rate study. • Attica (OH) – System valuation.
• Bedford (OH) – Water rate and cost of service study.
• Bucyrus (OH) – Sewer rate study.
• Canton (OH) – Long-term financial plan for asset management program. • Cambridge (OH) – Water rate study and long-term financial plan. • Columbus (OH) – Water and sewer cost of service studies; capacity fee evaluation; financial impact of cogeneration on the Division of Power.
• Confidential Client – Financial impact in relation to PFAS contamination. • Dayton (OH) – Water cost of service analysis; water and sewer long-term financial plans. • Elkhart (IN) – Long-term financial plan for asset management program. • Evart (MI) – Long-term financial plan for asset management program. • Hackensack (NJ) – Financial capability assessment.
• Heath (OH) – Water and sewer rate studies.
• Jersey City Municipal Utilities Authority (NJ) – Long-term financial plan for asset management program. • Kent (OH) – Stormwater fee analysis.
• Lake County (OH) – Rate study and cost of service analysis for water, sewer, and solid waste utilities. • Lancaster (OH) – Water and sewer rate and cost of service studies, capacity fee evaluation, and financial capability assessment.
• Lebanon (OH) – Water and sewer financial plan and rate study. • Marysville (OH) – Analyze policies and financial services to promote growth. • Middlesex County Utilities Authority (NJ) – Long-term financial plan for asset management program. • Newton Falls (OH) – Water rate and cost of service study. • Newark (OH) – Bond feasibility study.
• Norwood (OH) – Water rate study and long-term financial plan. • Passaic Valley Sewerage Commission (NJ) – Long-term financial plan for asset management program. • PortMiami (FL) – Bond feasibility study.
• Portsmouth (VA) – Stormwater rate study.
• Steubenville (OH) – Long-term financial plan for asset management program. • St. Marys (OH) – Sewer rate and cost of service study. • The Ohio State University (OH) – Economic analysis for beneficial use of dredged sediments.
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• Tinley Park (IL) – Water and wastewater rate study.
• Washington Suburban Sanitary Commission (MD) – Cost of service analysis. • Youngstown (OH) – Sewer rate study.
PRESENTATIONS
• “Assessment Today to Prepare for Tomorrow,” Indiana Water Environment Association Annual Conference, 2022. • “Long Term Planning for Utility Managers,” American Water Works Association Michigan Annual Conference and Exhibits, 2022.
• “Building the Foundation of Equitable Water Rates,” Metropolitan Planning Council’s Drinking Water Academy (IL), 2019.
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Gina DePinto APR
PUBLIC OUTREACH
Manager
ROLE
Gina will lead communications and prepare outreach materials for the rates studies to effectively meet the City’s objectives. She will serve as the City’s main point of contact for communications and outreach, assisted by Matt Wittern.
PROFILE
Gina is an award-winning and accredited public relations professional with more than 34 years of experience and leadership in crisis communications, community outreach, advocacy, stakeholder engagement, marketing, and media relations in the public and private sectors. Gina’s leadership experience includes communications program management for $2 billion in public transportation and water infrastructure projects, including the Port of Long Beach Gerald Desmond Bridge Replacement Project and the Orange County Groundwater Replenishment System. The GWRS has been covered by international media including National Geographic, Wall Street Journal, New York Times, BBC, CNN, and NPR to name a few. Prior to joining Raftelis, Gina served the residents of Santa Barbara County as the first executive Communications Manager in the County of Santa Barbara’s 171-year history. She advised the County Executive Team on strategic communications programs, crisis communication, media relations, issues management, internal communications, branding and culture change. During her tenure, the County Emergency Operations Center was activated 19 times and included two federally declared disasters, a global pandemic, two mass casualty incidents, and a $2M embezzlement in the Public Works Department. Born and raised in Phoenix, Arizona, DePinto served as public information officer for the City of Phoenix, public relations director for Farnam Companies, Inc. (animal health and pet products), and coordinated publicity for Olympic and World Champion figure skater Dorothy Hammill prior to relocating to California. Gina has a bachelor’s degree in organizational communication from Arizona State University and is accredited in public relations from the Public Relations Society of America. Gina is currently a member of the California Association of Public Information Officials (CAPIO), Public Relations Society of America (PRSA), and the Municipal Management Association of Southern California (MMASC).
KEY PROJECT EXPERIENCE
Infrastructure Outreach and Communications (Port of Long Beach, CA)
As Account Director at Orange County-based Westbound Communications, Gina led a team of six practitioners to design and manage the communication strategy for the $1.8 billion Port of Long Beach Gerald Desmond Bridge Replacement Project, one of the largest and most significant highway infrastructure projects in California. Roughly 15 percent of the nation’s waterborne cargo is trucked over it, and the bridge is a critical access route for Specialties
• Strategic communications planning
• Crisis & risk communications
• Reputation management
• Stakeholder engagement
• Media relations & media training
• Development & oversight of earned
social and paid media
• Writing, copyediting, script writing
• Collateral development and art
direction
• Branding and marketing
• Public speaking
Professional History
• Raftelis: Manager, Strategic
Communications (2022-present)
• County of Santa Barbara:
Communications Manager (2016-
2022)
• Westbound Communications:
Account Director (2013-2016)
• Orange County Water District:
Communications Specialist (2006-
2013)
• Bylines Public Relations &
Marketing: Owner/Principle (1996-
2006)
• Farnam Companies: Public
Relations Director (2000-2003)
• City of Phoenix: Public Information
Officer (1998-2000)
• Martz Goldwater Public Relations:
Senior Account Executive (1996-
1997)
• Dorothy Hamill’s Ice Capades:
Marketing Manager & Publicist
(1993-1995)
Education
• Accredited in Public Relations –
PRSA (2013)
• Bachelor of Arts in Organizational
Communication - Arizona State
University (1987)
Professional Memberships
• Public Relations Society of America
• California Association of Public
Information Officials
• Municipal Management Association
of Southern California
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commuters between the Port of Long Beach (Port), downtown Long Beach and surrounding communities. The new bridge supplants an old one in dire need of replacement and is the centerpiece of the Port’s $4 billion capital improvement plan. At 205 feet above the shipping channel, the new cable-stayed bridge is 50 feet higher than the old bridge, thus enhancing the Port’s capacity to handle today’s larger cargo ships. The Port established a unique design-build project team headquarters where the contractor, traffic engineers, Caltrans inspectors, construction managers and communications worked side-by-side to enhance collaboration and decision making.
Infrastructure Outreach and Communications Mobile App (Port of Long Beach, CA) The challenges of a seven-year transportation construction project replete with long-term road closures, detours and congestion required clear communication and solid relationships with a broad spectrum of audiences and media. The comprehensive outreach plan to update stakeholders at every phase of the project included development of a content-rich website and mobile application to deliver real-time information directly to app customers. The app provided traffic conditions, construction updates, links to social media and live cameras, and bilingual audio reports to deliver hands-free updates to professional truck drivers and commuters. The app quickly became an important tool to reach stakeholders and build loyalty by keeping them informed through this highly visual and easily accessible new media platform. Within months of launching the app it was featured as a successful communications case study in PR Week magazine.
Infrastructure Outreach and Communications For Water Reuse Project (Orange County, CA) Gina led communications and outreach for the world's largest advanced water purification system for potable reuse.
While Orange County’s Groundwater Replenishment System (GWRS) is one of the most celebrated civil engineering and water reuse projects in the world, its success is equally recognized for the robust strategic public engagement and outreach program. In the early 2000s, public opposition had prevented or shuttered similar water reuse projects in Los Angeles and San Diego, but Orange County’s (County) system earned the public’s trust and overwhelming support. The strategic communications plan included a support letter campaign, citizens advisory group, multicultural outreach, media outreach, speaker’s bureau, and facility tour program with technology demonstrations and water tasting. To date, the GWRS has never been publicly opposed. Initially producing 70 million gallons of purified water per day in 2012, the GWRS final expansion will increase capacity from 100 MGD to 130 MGD, enough to secure water reliability for more than 1 million people.
Water Education and Outreach Program Development (Orange County, CA) Community engagement is important to educate and inform stakeholders about critical and emerging issues. While leading strategic communications at the Orange County Water District (OCWD), Gina was engaged with planning and directing content, and engaging partners and sponsors for several signature events to engage generational audiences about regional and state water resources and supplies, water efficiency, and environmental sustainability. Key partners and sponsors include The Walt Disney Company, National Geographic, Wyland Foundation, UC Irvine, UCLA, NASA JPL, USGS, National Water Research Institute, California Department of Water Resources, and others to support events like the annual O.C. Water Summit, Children’s Water Education Festival, and the Groundwater Adventure Tour. The Water Summit brings together academics, business professionals, elected officials, and water industry representatives to talk about water issues, projects, and emerging technologies in a dynamic forum atmosphere. The Children’s Water Education Festival is the largest of its kind in the U.S. reaching 7,000 elementary students annually with interactive presentations that complement or expand upon subject matter taught in California elementary schools and adhere to Next Generation Science Standards. OCWD’s all-day Groundwater Adventure Tour takes participants to its H2O Learning Center, Groundwater Replenishment System, Advanced Water Quality Assurance Laboratory, downstream Anaheim Recharge Basins, and upstream Prado Wetlands in Riverside County.
Stakeholder Engagement for Groundwater Protection (Orange County Water District, CA) As the agency responsible for managing the groundwater basin, the Orange County Water District (OCWD) initiated the South Basin Groundwater Protection Program (SBGPP) to detect the location, size, and source of groundwater contamination after levels of volatile organic chemicals and perchlorate that exceeded the maximum contaminant level allowed by the California Department of Public Health were detected in drinking water wells. Orange County’s City Council Regular Meeting - Page 825 of 1385
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groundwater basin is the source of 75 percent of the drinking water for 2.4 million people. To measure the direction and speed of the migrating contamination, OCWD planned to construct six new monitoring wells. Gina developed and managed the construction outreach plan to build support from municipal leaders and assure residents that while their drinking water was safe, construction of the monitoring wells was needed to protect the deep aquifer and assure future water supplies. Construction impacts to businesses and residents required an outreach plan to determine potential impacts, mitigation efforts, and methods to communicate with stakeholders. Outreach tactics included written materials, face-to-face communication, and community meetings with maps, pictures, visuals, and experts to address questions. The successful outreach program achieved 100% support of the program from all municipal partners, no public opposition, 80% acceptance from businesses and residents, and set the foundation for the construction of extraction wells, pipeline, and treatment facility.
Strategic Media Relations for Groundwater Replenishment System (Orange County, CA) Gina drove media relations for Orange County’s Groundwater Replenishment System (GWRS) interfacing with national and international broadcast, print, and online journalists. As the world’s largest water reuse project of its kind, the GWRS was covered extensively by broadcast and print media including The Wall Street Journal, New York Times, Time, National Geographic, USA Today, The Economist, Der Spiegel (Germany), Christian Science Monitor, Discovery Channel, CNN, NBC News, and NPR. GWRS water was featured in the 2011 water documentary, “Last Call at the Oasis” written by Alex Prud’homme and directed by Oscar-winning documentarian Jessica Yu. In a National Geographic story about California’s water supply crisis (April 2010), the GWRS opened and closed the article with a quote about the ultra-pure recycled water tasting like “California’s future.” Following the publication, a National Geographic Vice President of Communications said of Gina’s efforts that, “Nobody pitches ‘National Geographic,’ but somehow you found a way.” Gina also initiated relationships with National Geographic “Emerging Explorer” Alexandra Cousteau, and EarthEcho International founded by Philippe Cousteau. The GWRS is featured in EarthEcho’s educational book series called “Going Blue.”
Crisis Communications and Disaster Response (Santa Barbara County, CA) One month after being recruited by the County of Santa Barbara (County) to serve as its first executive Communications Manager, a wildfire began on the Gaviota Coast. Without a central communications structure in place, Gina pulled together and led a team of employees through a nine-day activation of the County Emergency Operations Center/Joint Information Center to issue 24/7 critical timely and accurate information. The fire forced evacuations for people, pets and livestock, and intermittent closures of Hwy 101, CA State Route 1, and regional and interstate passenger trains and freight service. Two months later, another fire burned near the Santa Ynez Valley and Cachuma Lake impacting a busy commuter route. Gina initiated custom bilingual emergency messaging across all communication channels, which is now the standard in California. Over nearly six years, Gina developed bilingual communication strategies for 15 extended emergencies including two federally declared disasters, a global pandemic, and two mass casualty incidents: the Montecito 1/9 debris flow and “Conception” dive boat tragedy, California’s worst maritime accident. The back-to-back fire and debris flow disasters in December 2017 and January 2018 necessitated staffing the JIC for seven continuous months to issue public information on preparedness, recovery and rebuilding; a 16-month Local Assistance Center; and long-term Recovery Strategic Plan for Montecito.
Crisis Communication Messaging and Media Training (Santa Barbara County, CA) Gina developed a crisis communication plan, key messaging, Q&A, and media spokesperson training for two separate high-profile issues at the County of Santa Barbara (County): a $40 million pension rebalance and $2 million embezzlement in the Public Works Department. For the media training, Gina and a media training consultant provided off and on-camera guidance where participants learned how to bridge, flag and deflect. Participants were filmed so they could apply what they learned in mock, on-camera interviews. For the pension rebalance, employees were engaged through a series of face-to-face meetings with the executive and budget teams to address questions and concerns. The pension rebalance program ultimately led the County to embark on a 5-year transformation initiative and strategic plan called Renew 2022. Following the embezzlement, process improvements were implemented, and Gina developed messaging and collateral for a whistleblower program overseen by the County Auditor’s Office.
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Corporate Strategic Planning (Santa Barbara County, CA) In 2017, the County of Santa Barbara embarked on a five-year initiative to transform how the County government does its work. The Renew 2022 initiative originated with an internal strategic organizational plan in 2015, followed by the Budget Rebalance effort in 2016, which was intended to address significant pension cost increases. Recognizing that the pressures and challenges the County faces were unlikely to abate in the near term, Renew ‘22 seeks to build the County’s capacity for innovation and continuous improvement through organizational transformation. The importance of this need was fortified after the Thomas Fire and Montecito debris flow disasters and most recently the COVID-19 pandemic.
Quarterly and annual reporting to the Board, employees, and the public provided an overview of the County’s continuing progress toward achieving “big picture goals” and other Renew ’22 initiatives. The transformation was not limited to a re- evaluation and re-tooling of how and what the County does; it sought to empower change, improve operations, develop sustainable revenue strategies, prepare the next generation of leaders, and refocus on customer service including multicultural and equitable public outreach – all in alignment with the priorities set by the community and the Board of Supervisors. In her role at the County, Gina was a member of the executive decision-making team and developed a comprehensive Communications and Engagement Plan, along with a “mission-vision-values” campaign to communicate the County’s commitment to Renew ’22 and its core values and behaviors that were defined and honed through the strategic planning process, employee surveys, and department leadership workshops. Deliverables included a messaging platform, fact sheets, video presentations, employee and public presentations, employee feedback surveys, logo development and branding guide, and four sessions of a one-day custom leadership development seminar scripted by Gina that was offered to 300 middle managers.
Stakeholder Engagement Program (County of Santa Barbara, CA) In 2016, recreational cannabis was overwhelmingly approved by voters in Santa Barbara County (County), but it remains a controversial and divisive land use, water, agriculture, and environmental issue. Gina led proactive and transparent outreach to ensure all stakeholders were engaged throughout the ongoing development of the permitting and licensing ordinance that included more than 100 public meetings. In 2018, the County Board of Supervisors voted to limit retail storefront licenses to no more than six total countywide. For the industry, six was not enough and securing a license would be competitive. For many community members, six were six-too-many. Gina developed an outreach program to address the challenge of creating a fair and legal process for retail storefront operators to apply for a license while also ensuring the community had every opportunity to provide input and address questions and concerns about security, traffic, parking, odor, and proximity to schools, daycare, and youth sports. Six in-person community engagement meetings were replaced with virtual meetings due to the COVID-19 public health emergency at a time when using Zoom was new, uncomfortable, and seen as a barrier to participation by those who preferred in-person meetings. The objective was to create as many ways as possible to engage and inform the community leading up to and long after the series of virtual meetings. Tactics included interactive maps, bilingual videotaped presentations available on the website ahead of the meetings, FAQs and a Zoom how-to guide, custom email and business hours phone access, videos of the meetings including public comment, and a neighborhood compatibility survey. The cannabis retail storefront outreach program was recognized by the California State Association of Counties with a 2021 Infrastructure Challenge Award. Out of 433 entries, only 21 Challenge Awards were distributed.
Results Driven Marketing and Media Relations (Phoenix, AZ) As the Public Relations Director for Farman Companies, Inc., Gina led public and media relations efforts for one of the largest privately held animal health product manufacturers that launched an average of 40 new products annually on top of an aggressive acquisition and strategic alliance program (Farnam was acquired in 2006 by Central Garden & Pet).
Gina developed strategies and communication programs to generate brand awareness and consumer trust, ultimately influencing image, reputation, user knowledge and sales. Tactics included press releases, newsletters, video news releases, satellite media tours, advertorials, mat releases, and collateral development. In her first 18 months, earned media results included more than 75 million impressions valued at about $6 million. On average, she generated a minimum of $4 million worth of editorial coverage annually on a budget of only $250,000.
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Habitat Restoration Communications and Engagement (Phoenix, AZ) Gina developed the initial strategic communications and engagement plan for the Rio Salado Habitat Restoration Project to restore the native wetland and riparian habitats of the Salt River, replacing what had become a waste disposal area with an ecosystem supporting both flora and fauna. Gina guided a multi-disciplinary team of city employees through a discovery and planning process to assure key stakeholders were informed of the project and opportunities to provide input into the design. Gina also guided the production and dissemination of bilingual information about the project.
PRESENTATIONS
“Business Communications,” County of Santa Barbara Employee University training and development curriculum (2019)
“Elevate Your Leadership Communication Strategies,” County of Santa Barbara Leadership Certificate Program curriculum (2018)
“Front Line Crisis Communications: Are You Prepared?” 2019 Public Relations Society of America Western District Conference, Phoenix, Ariz.
“Emergency Communications: Technical Solutions, Political Risks, Community Information and Lessons Learned” (panelist), 2019 League of California Cities City Manager Conference, San Diego, Calif. “Emergency Situations and Crisis Plans for PEG Channels” (panelist), National Association of Telecommunications Officers and Advisors (NATOA), Webinar
“Communication Tools and Methods During Times of Crisis,” 2018 California Association of Public Information Officials (CAPIO) Annual Conference, Santa Rosa, Calif. “California’s Year of Wildfires” (panelist), 2018 California Association of Public Information Officials (CAPIO) Annual Conference, Santa Rosa, Calif.
“Emergency Communications and the Joint Information Center” (panelist), 2018 Summer Session, Municipal Managers Association of Southern California (MMASC), Pasadena, Calif. “Natural Disasters” panelist “Santa Barbara County Thomas Fire and 1/9 Montecito Debris Flow Communications,” 2018 National Information Officers Association (NIOA) Annual Conference, Clearwater Beach, Fla.
PUBLICATIONS
“Customer Satisfaction Plunges As Rates Rise; What the Latest J.D. Power Study Report Tell Us and What You Can Do About It,” Think Tank, Raftelis, June 2022
“Alisal Fire – Flood After Fire Threat Preparations,” consumer preparedness article, October 17, 2021 “Behind the Scenes with the Emergency Public Information Communicators (EPIC),” guest editorial, Santa Barbara Noozhawk, April 13, 2017
“Environmental Law Practice Grows,” guest editorial, Arizona Capitol Times, March 28, 1997 “Build Brand Equity: A Race to the Finish,” guest editorial, Equestrian Retailer (B2B), September 2003 “A New Way to Behave,” contributed feature article, Pet Business (B2B), February 2003
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Matt Wittern APR, PMP
PUBLIC OUTREACH
Senior Consultant
ROLE
Matt will assist with communications and preparing outreach materials for the rates studies to effectively meet the City’s objectives.
PROFILE
Matt has a 20+ year public relations career serving clients and customers in the public utility, engineering and construction sectors. He excels at designing and implementing strategic communications campaigns that incorporate stakeholder input to inform, advocate and achieve behavior change. His specialty is successfully translating complex subjects and concepts into messages that are easily understood by target audiences. At Raftelis he manages strategic communications planning and implementation, as well as stakeholder engagement initiatives. Prior to joining Raftelis, Matt managed a variety of public affairs efforts at Denver Water, which included designing the public engagement and public information strategies for nearly a billion dollars’ worth of infrastructure projects, spearheading the public process for the utility’s policy decision regarding Community Water Fluoridation, and led development of processes to gain stakeholder support for preventative maintenance on critical infrastructure. He earned a B.A. in journalism, is Accredited in Public Relations (APR) from the Public Relations Society of America (PRSA) and achieved status as a Project Management Professional (PMP) from the Project Management Institute. Matt has presented at national conferences including the American Water Works Association’s ACE and the City-County Communications and Marketing Association’s (3CMA) Annual Conference. Matt’s work has earned prestigious Gold Pick Awards from the Colorado Chapter of PRSA and SAVVY Awards from 3CMA.
KEY PROJECT EXPERIENCE
Government and Stakeholder Relations (Denver Water, CO) Matt served for many years in Denver Water’s Public Affairs Division, where he managed community outreach and public information initiatives from small water main replacement projects impacting neighborhoods all the way up to strategic communications for the half-billion-dollar project to raise Gross Reservoir Dam to increase the facility’s storage capacity. Matt also spearheaded the public process to evaluate alternatives related to the Denver Water Board of Water Commissioners’ Community Water Fluoridation policy.
Stakeholder Engagement and Proposition 218 Compliance
(Tuolumne Utilities District, CA)
Matt was the project manager on an engagement to build stakeholder awareness of and support for the District’s efforts to acquire its own water rights. The rights – some dating back to the Gold Rush era – are owned by power provider PG&E.
Specialties
• Strategic communication planning
• Stakeholder engagement
• Public involvement
• Community outreach
• Primary & secondary research
• Expert positioning
• Media relations
• Social media
• Art direction
• Reputation management
• Coalition building
• Advocacy campaigns
Professional History
• Raftelis: Senior Consultant (2019-
present)
• Denver Water: Senior Community
Relations
Specialist/Communications Manager
(2015-2019)
• Communication Infrastructure
Group: Counselor (2006-2015)
• CollegeInvest: Marketing
Communications Manager (2005-
2006)
• Transportation Expansion (T-REX)
Project: Community Relations
Manager (2002-2005)
• LawsComm: Client Service
Coordinator (1998-2002)
Education
• Bachelor of Arts in Technical
Journalism (Public Relations) -
Colorado State University (1999)
Professional Memberships
• Public Relations Society of America:
Accredited in Public Relations (APR)
• Project Management Institute -
Project Management Professional
(PMP)
• International Association of Public
Participation (IAP2) - Certified in
Public Participation
• WEF
• AWWA
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While PG&E was offering the rights and associated water collection infrastructure at a good price, the acquisition would require customer water rates to increase. Starting with in-depth interviews of community leaders and individuals who were skeptical of the acquisition, Raftelis designed a multi-pronged campaign designed to create a fact-based community conversation about the opportunity and anticipated bill impacts. As the community became more aware, sentiments from one-on-one conversations and coverage in local media started to change. Unfortunately, just as the District sent out a Proposition 218 notice to cement its legal ability to close the deal, leadership at PG&E changed and the utility pulled out of the deal. The campaign is on indefinite hold until PG&E returns to the negotiating table.
Bill Payment Plan Communications (Charlotte Water, NC)
Matt was the project manager for the team that designed and is implemented a campaign that help Charlotte Water reduce the number of past due accounts by promoting the utility’s payment assistance program. Raftelis created a nine- month, measurable promotional campaign that included in-person events, posters placed in local businesses, direct mail, paid digital ads, transit advertising, social media, Spotify ads, billing inserts, newsletter articles, website updates, and direct emails to account holders.
Biosolids Communication Toolkit (Water Environment Federation) WEF hired Raftelis to develop a communication toolkit to help wastewater agencies communicate confidently about biosolids. Matt was on the copywriting team that researched biosolids media coverage and interviewed agencies with successful outreach programs; then wrote a comprehensive guide and training module that walks readers through the steps needed to develop and execute a successful biosolids communication effort. The toolkit includes guidance for making the business case for proactive outreach, it covers best practices for handling a “hit piece,” for managing pushback from the community, using social media and much more, including downloadable imagery, infographics, social media posts and templates. The team also supported WEF with training on the use of the toolkit.
Community Redevelopment Communications and Engagement (Fairfax County/City, VA) Matt played a support role in implementing the strategic communications and engagement plan for the joint redevelopment of the Sherwood-Willard health and community center. The Raftelis team guided a large, multi- disciplinary team of city and county employees through a discovery and planning process to assure key stakeholders are informed of the project and opportunities to provide input into the design.
Water Quality Communications (CCR Report Template) (EPIC) Matt was on a multi-disciplinary team of writers, graphic designers and data visualists to develop an award winning entry into the Environmental Policy and Innovation Center’s contest to reimagine the Consumer Confidence Report. Raftelis’ team created an online and print template for the CCR that improved its accessibility to all audiences, using the CDC Clear Communication Index, the Flesch-Kincaid reading scale, and best-in-class design. Raftelis was selected through a competitive process to also design a national template for the CCR. That project is underway now.
Water Quality Communications (CCR Report) (Augusta County Service Authority, VA) Based on their first-place win on the CCR contest sponsored by EPIC, Raftelis was invited by The Virginia Health Catalyst to help them develop a CCR template to be used by Augusta County Service Authority. That project is underway now, with Matt serving as project manager.
Water Rate Change Stakeholder Engagement and Communications (City of Port Hueneme, CA)
A rate study had not been performed for some time for this small coastal city, and the City Council stressed that affordability was a key factor for their approval. They also stressed the importance of transparency, especially as it related to ensuring the community’s significant population of individuals for whom English was not their primary language. As the strategic communications project coordinator, Matt conducted public outreach efforts for the City of Port Hueneme City Council Regular Meeting - Page 830 of 1385
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(City) that included the development of an infographic that explains the City’s rate structure changes, a Proposition 218 notice, and facilitated three public workshops to explain the changes. All materials were translated into Spanish-language versions to enable communication across a potential language barrier. Raftelis’ recommended rates were subsequently adopted by City Council.
Water Rate Change Communications (Montecito Water District, CA) This coastal community faced the opportunity to reduce its reliance on surface water sources that are becoming less and less certain due to the effects of climate change and drought. Their solution was to switch over to a guaranteed source using a state-of-the-art desalination plant. This change modified the cost structure paid by customers, but also came with benefits that were not obvious at first glance. Matt managed the implementation of a strategic communications plan that included development of a variety of communication tools and pieces that effectively made the case for why the changes planned will provide long-term community benefits. Raftelis’ recommended changes were subsequently adopted by the board of directors, who also voiced appreciation for the communications and outreach performed in the months leading up to their vote.
Water Rate Change Stakeholder Engagement and Communications (Oklahoma City Water Utilities Trust, OK)
Raftelis was hired by this major central US utility to perform comprehensive water rates, solid waste, and tap fee studies to ensure its ability to fund a major pipeline project, ensure adequate reserves to fund winter storm cleanup operations and maintain its outstanding bond rating. Matt designed and facilitated a series of stakeholder workshops at the start of the study to gather input that would set the course of the studies. As the results came into focus, Matt led the team in developing an immersive set of communications tools that effectively communicated key elements and findings of the studies to elected officials and decision makers. Ultimately, these efforts paid off with the City’s approval of rate and fee recommendations.
Water Rate Change Communications (City of Arcadia, FL)
Rarely do we find ourselves in the position to recommend a reduction in water and sewer rates, but that was the case in early 2021 for the City of Arcadia, FL. Matt worked closely with the City to develop a set of compelling key messages, graphics, and communication tools the City published and distributed to explain rate structure benefits to its customers.
As a measure of the value, the client wrote that the deliverables were “the best money (she’d) ever spent on consulting services.”
Water Rate Change Communications (Sterling Heights, MI) As part of Raftelis’ rate study, the City made changes to its rate structure and rates to ensure they remained fair and reasonable, as low as the best service will allow, and supported a financially strong system that delivers high-quality water to you today and in the future. Matt was the architect of the strategic communications plan that included detailed analysis of key stakeholders, messages designed to communicate complex concepts in a clear and concise manner, and printed tools designed to raise awareness and support for the changes.
Water Rate Change Communications (Town of Erie, CO)
Late in the rate study process, with dollars remaining unspent in the project budget, Matt was engaged to liaise with the town’s Public Information Officer to develop messages and communication tools to build awareness and support for proposed changes. These tools helped the Town overcome objections from opponents to proposed rate changes by helping communicate the value of water and the need for critical infrastructure investments.
Water Utility Acquisition Communications (Bullhead City, AZ) In a bid to take over the City’s privately-owned water utility and make it owned by its customers, Raftelis was engaged by Bullhead City to develop a defensible valuation. The owners of the utility were resistant to the idea and launched a public City Council Regular Meeting - Page 831 of 1385
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relations campaign in a bid to scuttle the effort. Raftelis developed a series of communication tools that refuted the existing disinformation campaign and set the record straight. In the end, voters in Bullhead City approved the vision and authorized the City to continue down the path of purchasing the utility.
Water Rate Change Communications (PRASA, Puerto Rico)
Raftelis was hired by PRASA – the government entity in Puerto Rico charged with providing water and wastewater treatment services to the island – to perform a comprehensive rates and fees study and provide strategic communications services. As the study neared completion, Raftelis delivered a turnkey public information campaign with accompanying messages, tools, and tactics. The PRASA communications staff took it from there, and worked diligently to share the information with stakeholders and customers.
Water Rate Change Communications (Cucamonga Valley Water District, CA) The Cucamonga Valley Water District, in California’s Inland Empire, was updating its rates and fees to account for a modified pass-through fee for State Water Project water, along with aligning its tiered rate structure to more closely follow the varied costs of different sources of water. In addition, CVWD’s financial plan and Capital Investment Plan called for infrastructure upgrades to its aging water infrastructure before costly breaks and outages became more common. Matt coordinated the implementation of a strategic communications and outreach plan that included communication tools such as bill stuffers, FAQs, a fact sheet/infographic, and Proposition 218 notice. Misinformation about the proposed rate increase was quickly rebutted and the board of directors unanimously approved Raftelis’ rate recommendation in 2021.
Proposition 218 Compliance (Crestview-Lake Arrowhead Water Agency, CA) Crestview-Lake Arrowhead Water Agency (CLAWA) had not had a rate increase in 26 years and needed to ensure compliance with California’s Proposition 218 requirements. CLAWA sought specialized assistance communicating the purpose and need for rate increases to customers on a strict implementation timeline. Matt provided strategic communications assistance, including guidance on messaging strategy and tactics, resulting in a successful adoption of the recommended rate adjustment.
Water Rate Change Stakeholder Engagement and Communications (Amador Water Agency, CA)
Amador Water Agency (AWA or “Agency”) provides treated water, untreated water, and wastewater collection and treatment services to approximately 10,000 customers across 568 square miles in Amador County. Over the years, the Agency has absorbed a variety water and wastewater systems that collectively make up its current system. These systems joined Amador Water Agency in various states of repair – often operating below industry standards and best practices.
Prior rate adjustments were difficult, and the Agency struggled to perform maintenance and make improvements on its systems to raise levels of service. Raftelis was engaged early in the rate study process, and Matt developed a customized strategic communications plan and messaging that helped the agency tell its story effectively. Using a suite of communications tools, the Agency successfully made the case for the need for rate adjustments and set itself on a path to success.
Water Rate Change Stakeholder Engagement and Communications, Proposition 218 Compliance (City of Santa Cruz, CA)
Residents of this popular tourist destination are some of the most water wise in the entire country, and pride themselves on their low per-capita water usage. Raftelis was engaged to perform a detailed water rates study that included a concurrent public involvement component. Over a period of 18 months – and made more difficult by the COVID-19 pandemic – Matt and colleagues at Raftelis provided strategic communications counsel and facilitated stakeholder outreach and engagement activities that informed the rate study process. This process included development of an online engagement community from scratch, multiple community presentations and strategic communication tools. Further, City Council Regular Meeting - Page 832 of 1385
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Matt led development and provided art direction on the Proposition 218 Notice, which is a legal requirement before City Council votes to adopt rate change recommendations.
Water Efficiency Communications (City of St. Helena, CA) Like many of its neighbors, the City of St. Helena is working to combat the effects of climate change. For this community in California’s wine country, customers needed to dramatically curtail their water usage to avoid more painful water restrictions. But with a modest in-house staff, the city asked Raftelis to jump in to help communicate a suite of conservation messages. Within just a period of days, Matt developed conservation messaging, social media content, infographics, newsletter articles, giveaways, fact sheets, and other tools to raise awareness among the city’s water customers, which helped result in considerable water conservation.
Expert Positioning (Western Municipal Water District, CA) Following a successful water rate study and after defeating a court challenge, the District hired Raftelis to draft an article to share its story with other nearby providers on the tricky issue of water budgets. Working closely with the District Manager and legal counsel, Matt authored a piece and developed accompanying graphics that have been accepted for publication by editors at Journal AWWA.
Water Rate Change Communications and Proposition 218 Notice (City of Newport Beach, CA) The City of Newport Beach (City) Utilities Division provides water service to more than 86,000 people over 50 square miles. A high-income community composed of primarily single-family residential properties, there was significant resistance to past water rate increases. For the past four years, City Council declined to increase rates, but with costs such as purchasing supplemental water rising by 75% in recent years, the time had come for action. Matt was on the Raftelis team charged with developing a comprehensive strategic communications plan, messages and communications tools, including a Proposition 218 notice. The effort communicated the great need for infrastructure improvements to ensure continued deliver of high-quality drinking water and water for fire protection. City Council voted to increase rates at the end of 2019.
Impact Fee Study Stakeholder Involvement and Outreach (Elbert County, CO) During a recent update of Elbert County’s impact fees for Parks/Recreation, Public Facilities, Sheriff, and Transportation, Matt was the strategist behind development of the strategic communications and community outreach plan. It prescribed an extensive stakeholder engagement process featuring interactive online meetings and surveys, which informed the study prior to online work sessions with County Commissioners. County leaders credited this work with raising awareness in the community, making the study and recommendations less controversial and thus more politically acceptable.
Impact Fee Study Stakeholder Involvement and Outreach (City of Greeley, CO) Matt was the architect of two key elements of the impact fee study project the City of Greeley hired Raftelis to perform.
On the front end, Matt managed the stakeholder outreach component that brought together key influencers and gathered input that subsequently informed the study. This was primarily accomplished by hosting a series of public virtual open houses where information was shared and feedback was gathered. Matt also lent his skills to the development of slide decks that greatly simplified the issues and helped City Council understand critical components of the process.
Ultimately, the process was successful in providing “maximum supportable” impact fee recommendations to Council, who later adopted lower than maximum fees.
Impact Fee Study Stakeholder Involvement and Outreach (La Plata County, CO) Matt was the architect of a comprehensive stakeholder outreach process that informed La Plata County’s impact fee study. Matt brought together key influencers and gathered input that subsequently informed the study. Input gathered City Council Regular Meeting - Page 833 of 1385
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helped staff at the County understand the significant resistance to impact fee adoption, and the process was shelved as impacts of the COVID-19 pandemic became more and more pronounced.
Strategic Planning Stakeholder Involvement (Lawrence, KS) Raftelis was hired to develop and implement a stakeholder involvement component to supplement the City’s Strategic Planning process (also led by Raftelis). As part of the engagement team, Matt facilitated stakeholder involvement sessions that gathered critical information about the vision residents had for the future of Lawrence; information that helped chart the course of the City’s Strategic Plan.
Water Rate Change Stakeholder Engagement and Communications (Town of Jackson, WY) The Town of Jackson, located in Teton County, boasts among the highest incomes of any county in the United States.
Juxtaposed against that is the thousands of hourly and service industry jobs that support the vibrant tourism industry, and Raftelis accepted the challenge to develop a water and wastewater rate structure that was fair and equitable, while pricing in complications such as the prevalence of seasonal homes that only had seasonal demand and impact on the system.
Matt led the creation of a Citizen Review Committee made up of representatives from myriad stakeholder groups.
Through a series of meetings facilitated by Matt, the CRC ensured that the recommendation ultimately delivered to the Town Council was representative of the community and included measures for affordability. In addition, Matt was the architect of a multi-pronged strategic communications program that helped raise awareness of, and support for, changes to the rate structure among town residents. This included developing a suite of communication tools including newsletter articles, website copy, bill stuffers, graphics, social media content, and a capstone printed piece that summarized the study process.
Strategic Communications and Stakeholder Outreach (Northern Colorado Water Conservancy District, CO)
Like many parts of the state, Northern Colorado is experiencing exceptional growth, with a population that is expected to double to a half-million people by 2050. As a key raw water provider to municipalities and agricultural interests, the Northern Colorado Water Conservancy District began plans in the 1980s to provide valuable source water to 15 partners working together to make the Northern Integrated Supply Project a reality. Today, on the cusp of state and federal regulatory approvals, NISP faces opposition from a very small but vocal minority who threaten to derail the public process and stop the project by any means necessary. Millions of dollars, years of planning and thorough environmental study and protections hangs in the balance. Raftelis was hired to assist Northern with development of a comprehensive public outreach and information campaign to ensure continued public support for this critical $1.1 billion project. Matt Wittern conducted thorough primary and secondary research to inform a plan that when implemented will ensure those who will benefit most from the project will understand the value it brings and its role to help ensure a continued thriving community for years to come.
Stakeholder Engagement and Brand Identity Development (City of Wheat Ridge, CO) Matt was the project manager on the team hired to design and implement a community-based brand identity development for the City of Wheat Ridge (City). The City’s existing brand was designed by a high school student in the mid-1970s and despite the brand’s age and dated nature, there were voices in the community opposed to the City’s rebranding. Matt designed a process that brought together key community stakeholders using a variety of public engagement techniques to draw out from them their view of what was quintessentially Wheat Ridge. These elements were then distilled down to core themes that were woven into the City’s new identity. While there was no consensus on what made Wheat Ridge Wheat Ridge, each group could literally point to an element of the brand and buy-in to the brand as a whole. The result was a process that members of City Council praised as the model for how City staff should encourage public involvement. A post-project survey found that 70 percent of respondents agreed that the new identity represents the City as a positive, progressive community.
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PRESENTATIONS
• "Developing Water Conservation Communication Campaigns That Aren’t All Wet” 2022 North Texas Water Conservation Symposium
• “Is This Working? Determining Utility Communications Success” 2022 NACWA Strategic Communications H2O Workshop
• “Internal Communications: How to Effectively Talk with Your Own Employees” 2022 NACWA Strategic Communications H2O Workshop
• “Building Support for Water Rate Increases” AZ Water Association 2022 Annual Conference • “Building Support for Water Rate Increases” Colorado Municipal League 2021 Annual Conference • “Biosolids Communication Toolkit Workshop” Water Environment Federation • “Re-imagining Engagement: Harvesting what we’ve learned about virtual public engagement for the future” ACE ’21 Annual Conference
• “Re-imagining Engagement: Harvesting what we’ve learned about virtual public engagement for the future” Arizona Water Association 2021 Annual Conference
• “It’s Human Nature: Using Social Science to Enhance Your Communications,” RMSAWWA/RMWEA, 2020 • “Ensuring Public Process Legitimacy Through the Lens of The Community Water Fluoridation Issue,” AWWA ACE Conference, 2016
PUBLICATIONS
• “Protecting Against Water Rate Challenges With the Equivalent of Bear Spray”, Article, Journal AWWA, 2022 • “Leverage Social Media in Times of Crisis”, Article, Journal AWWA, 2020
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Charles Diamond
STAFF CONSULTANT
Senior Consultant
ROLE
Charles will work at the direction of Brian in conducting analyses and preparing deliverables for the project.
PROFILE
Charles has a background in natural resource economics and water resources management. His expertise lies in financial modeling and data analysis. He joined Raftelis initially in 2017 as an associate consultant upon receiving a master’s degree from the University of California, Santa Barbara’s Bren School of Environmental Science & Management. Charles has developed financial models and conducted analyses for water and wastewater rate studies as well as capacity fee studies.
KEY PROJECT EXPERIENCE
Alameda County Water District (CA)
Alameda County Water District (ACWD) engaged Raftelis in 2017 to provide multi-year rate design and financial advisory services. Charles provided ACWD staff with technical support in updating the existing financial plan model that Raftelis had developed for ACWD’s previous financial plan update. Additionally, Charles designed alternative inclining tiered rates for consideration by the ACWD Board and developed drought rates to be activated during ACWD’s varying drought stages as defined in the agency’s Urban Water Management Plan. Charles developed a study report for ACWD staff that outlined the financial plan update and the newly proposed drought rates.
Charles also assisted other Raftelis staff in conducting a facility capacity fee study for ACWD during this time.
Antelope Valley-East Kern Water Agency (CA)
The Antelope Valley-East Kern Water Agency (Agency) engaged Raftelis in 2019 to provide an annual update of the Agency’s five-year financial plan and to propose rates for 2020. Charles served as lead analyst on the study update. He updated the existing financial plan model, and also worked with Agency staff to evaluate potential rate structure alternatives to be considered in future years. Charles developed a study report to document the key results of the study.
Antelope Valley State Water Contractors Association (CA) The Antelope Valley State Water Contractors Association (AVSWCA) engaged Raftelis in 2018 to conduct a financial analysis study to develop a proposed replacement water assessment for groundwater users in the area. Charles conducted financial analyses necessary to develop an equitable and defensible replacement water assessment that accounts for State Water Project costs incurred by AVSWCA’s member agencies. As the lead analyst on the project, Charles developed an Excel-based replacement water assessment model and drafted a study report for AVSWCA staff.
City of Brentwood (CA)
The City of Brentwood (City) engaged Raftelis to conduct a water and wastewater rate study. In 2017, Raftelis helped the City evaluate the current water and wastewater utilities’ cost-of-service and adjusted rates accordingly. Recently Charles Specialties
• Utility financial analysis
• Data collection & analysis
• Statistical analysis
Professional History
• Raftelis: Senior Consultant (2021-
present); Consultant (2019-2020);
Associate Consultant (2017-2018)
Education
• Master of Environmental Science &
Management (Water Resources
Management) - University of
California, Santa Barbara (2017)
• Bachelor of Science in
Environmental Economics & Policy -
University of California, Berkeley
(2013)
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updated a financial plan model and performed a cost-of-service analysis for the City’s wastewater utility. Charles assisted with the update of existing rates as well as the development of a proposed alternative rate structure and rates.
Cucamonga Valley Water District (CA)
The Cucamonga Valley Water District (District) engaged Raftelis in 2019 to conduct a water financial plan and cost-of- service study. The Study included the development of a five-year financial plan, a cost-of-service analysis, and the development of a proposed five-year schedule of rates. Raftelis also developed drought rates to be implemented during periods of declared water supply shortages per the District’s Water Supply Shortage Contingency Plan. Charles served as lead analyst, conducting technical analysis and preparing key deliverables for the study. The study was temporarily postponed due to the COVID-19 pandemic, and proposed rates were successfully adopted by the District’s Board of Directors in September 2021.
City of Dixon (CA)
The City of Dixon (City) engaged Raftelis in 2018 to conduct a water rate study to develop updated water rates for the City’s water utility. Charles developed a 10-year financial plan model, performed a cost-of-service analysis, and developed a five-year schedule of proposed water rates. Charles also assisted in the preparation of presentation materials for water rate workshops with the City Council.
City of El Monte (CA)
The City of El Monte (City) engaged Raftelis in 2019 to conduct a water rate study. Charles attended meetings with City staff, collected and reviewed necessary data for the study, developed a user-friendly five-year financial plan model, and developed a proposed rate schedule over a five-year period. Additionally, Charles developed water shortage rates to be implemented by the City during times of declared water supply shortages. He also developed a Cost Allocation Plan model in concurrence with the water rate study to assist the City in allocating personnel costs associated with providing water service to the City’s water utility.
Goleta Water District (CA)
The Goleta Water District (District) engaged Raftelis in 2019 to conduct a water rate study. Charles developed a multi- year financial plan model, performed a cost-of-service analysis, and developed a five-year schedule of proposed water rates as Raftelis’ lead analyst on the study. Additionally, Charles prepared presentation materials for meetings with the District’s Board of Directors tings and the rate study report and drafted the study report to serve as an administrative record.
City of Huntington Beach (CA)
The City of Huntington Beach (City) engaged Raftelis in 2017 to conduct a cost-of-service analysis and rate study for the water utility. The 2017 study established a five-year financial plan for the City’s water utility and proposed water rates. In 2019, Raftelis was engaged to update the 2017 study, develop an updated five-year financial plan, and establish updated water rates. The primary purpose of this study update was to revise the rate structure based on customer feedback.
Charles served as lead analyst for the 2019 study update. He updated the financial plan projections, conducted a revised cost-of-service analysis, developed revised water rates over a five-year period, and drafted the study report.
La Cañada Irrigation District (CA)
La Cañada Irrigation District (District) engaged Raftelis to conduct a water rate study. Since the last rate study was performed in 2008, Raftelis helped the District evaluate the cost-of-service and adjusted rates accordingly. In 2017, Charles developed a financial plan model for the District to support the financial plan development for fiscal years 2018 to 2027. Charles also recently performed a cost-of-service analysis to assist with the update of the District’s rates.
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City of Long Beach (CA)
The City of Long Beach (City) engaged Raftelis in 2018 to develop an updated financial plan model for the City’s water and wastewater utilities. Raftelis had previously conducted a comprehensive water and wastewater cost-of-service rate study in 2016 for the City. Charles developed an updated financial plan model to be used by City staff in future financial planning efforts. The financial plan model was designed specifically to facilitate ease of use and understanding while providing for convenient and flexible scenario analysis. Charles worked with City staff to provide customized model features with specific functionalities based on requests and input from City staff.
Olivenhain Municipal Water District (CA)
Olivenhain Municipal Water District (District) engaged Raftelis in 2019 to conduct a comprehensive water rate study. As a member agency of the San Diego County Water Authority (SDCWA), the District provides water service to over 80,000 people in northern San Diego County. Raftelis had conducted the previous cost-of-service analysis and rate study for the District in 2014. As part of the rate study effort, Charles developed a new financial plan model for the District’s water enterprise, performed a cost-of-service analysis, and developed updated tiered rates based on current customer usage characteristics. Additionally, Charles assisted in redesigning the District’s water supply shortage rates, which are activated during periods of reduced water demand in order to recover reduced revenues from volumetric rates.
Municipal Water District of Orange County (CA)
The Municipal Water District of Orange County (District) engaged Raftelis in 2020 to conduct a study to establish service charges for the District (which is a wholesale water importer) to recover its costs from its member agencies. Raftelis evaluated the District’s existing rate structure and recommended changes as necessary. Charles conducted all technical analysis and prepared deliverables to be presented to District staff and its member agencies. Charles documented the results of the study in a final report to District staff.
National Water and Sewerage Authority of Grenada (Eastern Caribbean) The National Water and Sewerage Authority of Grenada (NAWASA) engaged Raftelis in 2019 to conduct a water and sewer rate study for the eastern Caribbean country of Grenada’s national water and sewer utility. Charles developed a water and wastewater financial plan and rate model in Microsoft Excel and travelled out to Grenada for a week of onsite meetings with NAWASA staff. Charles worked directly with NAWASA staff to develop and refine model results, and assisted with the development of a study report to document the key results of the study.
Rancho California Water District (CA)
Rancho California Water District (District) engaged Raftelis in 2017 to conduct a water capacity fees study. Raftelis reviewed and updated the existing methodology for calculating the District’s water capacity fees, developed a water capacity fee model for use in calculating updated capacity fees. As part of the study, Charles developed the water capacity fee model, calculated updated water capacity fees, and drafted the study report.
The District engaged Raftelis in 2018 to conduct a two-year water, recycled water, and wastewater rate study. Raftelis developed a cost-of-service rate model to allocate costs and calculate rates for fiscal years 2019 and 2020. Charles assisted with rate model revisions, prepared presentation materials for meetings with the District’s Board of Directors, and drafted the rate study report.
Santa Ana Watershed Project Authority (CA)
The Santa Ana Watershed Project Authority (Authority) engaged Raftelis in 2017 to develop a rate model for the Inland Empire Brine Line, which is a pipeline used to divert non-reclaimable wastewater of high brine content from the upper Santa Ana River Basin. Raftelis reviewed and recommended changes to the Authority’s reserve policies, developed a 10- year financial plan for the Brine Line Enterprise Fund, performed a multi-year cost-of-service analysis, and developed a rate model for use in calculating rates assessed to the Brine Line’s dischargers. Additionally, Raftelis assessed and City Council Regular Meeting - Page 838 of 1385
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recommended potential methodologies to be used in the development of long-term capacity leasing rates and rental charges. Charles developed the financial plan, assisted with the cost-of-service analysis and rate calculation, drafted the study report, and attended multiple meetings with the Authority’s staff.
Scotts Valley Water District (CA)
The Scotts Valley Water District (District) engaged Raftelis in 2020 to conduct a water cost-of-service study for the District’s potable water and recycled water funds. The Study included the development of a five-year financial plan, a cost-of-service analysis, and the development of proposed five-year rate schedules for the potable water fund and recycled water fund. Charles served as lead analyst, conducting all technical analysis and preparing all key deliverables for the study. The proposed rates were successfully adopted by the District’s Board of Directors in October 2021.
City of Simi Valley (CA)
The City of Simi Valley (City) engaged Raftelis in 2019 to conduct a water rate study for the City’s water utility. The Study included the development of a five-year financial plan, a cost-of-service analysis, and the development of proposed water rates over a five-year period. Charles served as lead analyst and conducted the vast majority of the technical analyses required for the study.
City of Sonoma (CA)
The City of Sonoma (City) engaged Raftelis in 2018 to conduct a water rate study for the City’s water utility. The study included the development of a five-year financial plan, a cost-of-service analysis, and the development of proposed water rates for fiscal years 2019-2023. Charles processed and analyzed account level billed water consumption data, assisted in development of the water rate model, and drafted the water rate study report.
City of Thousand Oaks (CA)
The City of Thousand Oaks (City) engaged Raftelis in 2021 to conduct a water cost-of-service and wastewater financial plan update study for the City’s water and wastewater utilities. The Study included the development of a five-year financial plan for water and wastewater, a cost-of-service analysis for water, and the development of proposed water and wastewater rates. Charles served as project manager for the study. The proposed rates were successfully adopted by City Council in December 2021.
City of Watsonville (CA)
Raftelis was engaged to develop 10-year financial plans for the City of Watsonville’s (City) water, wastewater, and solid waste enterprise funds. The goal was to develop a financial plan model that could be used as a financial planning tool to determine the necessary rate adjustments and bond issuances for maintaining operations as well as handling several large capital projects. Charles assisted with developing a water, wastewater, and solid waste financial plan and cost of service rate model as part of the study.
PROJECT LIST
• Alameda County Water District (CA) – Water rate update study • Antelope Valley-East Kern Water Agency (CA) – Water rate update study • Antelope Valley State Water Contractors Association (CA) – Replacement water assessment study • Borrego Water District (CA) – Water affordability assessment • City of Brentwood (CA) – Water and wastewater rate study • Castaic Lake Water Agency (CA) – Facility capacity fee update study • Cucamonga Valley Water District (CA) –Multi-year water and drought rate study • City of Dixon (CA) – Water rate study
• City of El Monte – Water rate study and cost allocation plan • Goleta Water District (CA) – Water rate study
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• City of Huntington Beach (CA) – Water rate study update • County of Inyo (CA) – Water rate study
• La Cañada Irrigation District (CA) – Water rate study • Las Virgenes Municipal Water District (CA) – Water and wastewater rate study • City of Lincoln (CA) – Water rate study
• City of Long Beach (CA) – Water and wastewater financial plan development • Marin Municipal Water District (CA) – Miscellaneous fee study • Mojave Water Agency (CA) – Strategic financial plan
• Municipal Water District of Orange County (CA) – Core service charge allocation study • National Water and Sewerage Authority of Grenada (Eastern Caribbean) – Water and sewer rate study • Olivenhain Municipal Water District (CA) – Water rate study • Rancho California Water District (CA) – Water capacity fee study • Rancho California Water District (CA) – Water cost of service study • Sacramento Suburban Water District (CA) – Water rate study • Santa Ana Watershed Project Authority (CA) – Inland Empire Brine Line rate model • Santa Rosa Plain, Sonoma Valley, & Petaluma Valley Groundwater Sustainability Agencies (CA) – Groundwater sustainability agency fee analysis and rate setting services • Scotts Valley Water District (CA) – Water and recycled water rate study • South Mesa Water Company (CA) – Water rate study and connection fee update • City of Simi Valley (CA) – Water rate study
• City of Sonoma (CA) – Water rate study
• South Mesa Water Company (CA) – Water rate study
• City of Thousand Oaks (CA) – Water financial plan update and wastewater cost of service rate study • City of Thousand Oaks (CA) – Water cost of service and wastewater financial plan update study • City of Ventura (CA) – Water and wastewater rate study • Victor Valley Wastewater Reclamation Authority (CA) – Wastewater rate study and capacity fee study • City of Watsonville (CA) – Water, wastewater, and solid waste rate study
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Sarah Wingfield
STAFF CONSULTANT
Associate Consultant
ROLE
Sarah will work at the direction of Brian in conducting analyses and preparing deliverables for the project.
PROFILE
Sarah is a recent graduate from Georgetown University with a range of academic and professional experience in water resources management. Through her work with the California Data Collaborative and the Latitude Zero Ecuador Research Initiative, Sarah has developed a broad knowledge of analytical methods, as well as management approaches and legislation relevant to rate implementation and utilities management. Sarah’s work on Challenges to Water Management in Ecuador:
Legal Authorization, Quality Parameters, and Socio-Political Responses was recently published in the open-access journal, Water.
KEY PROJECT EXPERIENCE
Padre Dam Municipal Water District (CA)
Padre Dam Municipal Water District is currently updating its financial model and cost allocation system to evaluate different CIP scenarios, reserve policies, a comprehensive rate study, debt issues, and other financial/rate matters. The District has recently established two significant capital improvement projects and is in the process of developing advanced purification programs for its recycled water utility. Sarah is currently working with the District and Raftelis team staff to design the 2022 update to the financial and cost allocation models for the District’s sewer, potable, and recycled utilities.
City of Orange (CA)
The City of Orange is currently updating its 2015 financial model (also conducted by Raftelis) to evaluate different water demand factors, reserve policies, and other financial/rate matters. With Raftelis’ help, the City recently implemented a new rate structure and is now working to understand the long-term impacts to the City’s financial health and customer affordability. Sarah is currently working with the City and Raftelis team staff on completing the 2021 update.
California Data Collaborative Communications and Marketing Intern (CA) Sarah served as the Communications and Marketing intern with the California Data Collaborative (CaDC). Sarah worked directly with water utilities agencies and academics to analyze and describe the impacts of new legislation on water allocation and conservation in California. These provided valuable resources for water agencies to adapt their data collection and analytical methods and improve operations in their service areas.
Latitude Zero Ecuador Research Initiative Research Assistant (Ecuador) Sarah served as a Research Assistant in the Latitude Zero Ecuador Research Initiative (LOERI) Environmental Engineering Lab at the Universidad de San Francisco in Quito, Ecuador. Sarah collaborated with several USFQ-affiliated researchers to develop a comprehensive study of the Ecuadorian water and wastewater system. Sarah’s work was recently published in the open-access journal, Water, and provides a unique perspective to her work in the water sector.
Professional History
• Raftelis: Associate Consultant
(2021-present)
• California Data Collaborative:
Communications and Marketing
Intern (2020-2021)
• Latitude Zero Ecuador Research
Initiative: Research Assistant (2019-
2021)
Education
• Bachelor of Science in International
Affairs - Georgetown University
(2021)
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Lindsay Roth
STAFF CONSULTANT
Associate Consultant
ROLE
Lindsay will work at the direction of Brian in conducting analyses and preparing deliverables for the project.
PROFILE
Lindsay has over two years of experience working in the environmental field and has a graduate degree in water resources management. At Raftelis, she has contributed to financial models and analyses for water and wastewater rate studies as well as bill impact analyses. Prior to joining Raftelis, Lindsay was a student consultant for the North Carolina Department of Environmental Quality, assessing the state’s algal bloom monitoring program and nutrient criteria. She also interned for the Conservation Trust for North Carolina, developing best practices for the organization to participate in community-based environmental justice. She is based in Raftelis’ Los Angeles Office.
KEY PROJECT EXPERIENCE
Carpinteria Valley Groundwater Sustainability Agency (CA) The Carpinteria Groundwater Sustainability Agency (Agency) engaged Raftelis in 2021 to conduct a GSA Fee Study to proposed groundwater user fees to fund Phase Two of GSA Operations. Lindsay served as the lead analyst on the fee study. She developed a financial plan and worked with the project team as well as Agency staff to evaluate the best methodology for calculating the GSA user fee.
City of Coronado (CA)
The City of Coronado (City) engaged Raftelis in 2021 to review and evaluate the City’s current rate-setting methodology, update the financial plan for a five-year period, and propose rates for 2022. The City’s sewer rates included contracted transportation and treatment fees for three US Navy Campuses. Lindsay served as the lead analyst on the study update.
She developed a financial plan and worked with the project team to evaluate potential rate structure alternatives.
City of Hayward (CA)
The City of Hayward (City) engaged Raftelis in 2021 to conduct a comprehensive water cost of service and rate study proposing rates for the next two years and to provide a financial plan and rate model to serve as a planning resource for future use. The project required a balance of multiple financial objectives, including managing increasing water costs from the San Francisco Public Utilities Commission while also producing rates that were affordable for all customer classes.
Lindsay served as an associate consultant on the project and assisted in the development of an updated 10-year financial plan for the City and a detailed rate study report explaining each step of the rate study process.
City of Hollister (CA)
City of Hollister (City) engaged Raftelis in 2021 to conduct a water and wastewater cost of service and rate study as well as a water and wastewater capacity fee study. Lindsay served as an associate consultant on the project and was the lead analyst for the water cost of service and rate study. The study required Raftelis to develop rates that built up reserves over Specialties
• Data analysis & visualization
• Water & sewer financial analysis
• Statistical analysis
Professional History
• Raftelis: Associate Consultant
(2020-present)
• North Carolina Department of
Environmental Quality: Student
Consultant (2019-2020)
• Conservation Trust for North
Carolina: Disaster Mitigation and
Climate Resiliency Intern (2019)
Education
• Master of Environmental
Management in Water Resources
Management - Nicholas School of
the Environment, Duke University
(2020)
• Bachelor of Science in Earth and
Environmental Sciences - Tulane
University (2016)
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time without creating rate shock to water users as well as work with the project team and City staff to evaluate various rate structure options. Lindsay also wrote a detailed rate study report explaining every step of the water rate study and water capacity fee study process.
City of Pleasanton (CA)
City of Pleasanton (City) engaged Raftelis in 2019 to update its water, recycled water, and wastewater rates as well as conduct capacity fee and drought rate studies. Lindsay is serving as lead analyst on the City’s rate study. The study involves developing long-term financial plans, conducting cost of service analyses, and designing rate structures for each of the three enterprises. The main considerations for the study include funding capital projects to remediate PFAS groundwater contamination, maintaining financial sufficiency for all enterprises, encouraging conservation during periods of drought, and reducing rate shock to customers.
City of Thousand Oaks (CA)
City of Thousand Oaks (City) engaged Raftelis in 2021 to conduct water and wastewater financial plan update as well as a water rate study. Lindsay served as an associate consultant on the project and helped to develop an updated water rate model and an updated wastewater financial plan model forecasting projected revenues and expenditures for the next 5 years. The study required Raftelis to develop rates that accounted large CIP project expenditures planned for the study period for both the water and wastewater utilities while avoiding rate shock for customers. The updated models also included various capital expenditure and rate adjustment scenarios in order to aid in the City’s decision-making process.
City of Torrance (CA)
City of Torrance (City) engaged Raftelis in 2021 to conduct wastewater rate study update. Lindsay served as the lead analyst on the project and helped to build a wastewater rate model projecting revenues and expenditures for the next 5 years. The City had recently taken on more CIP projects under the wastewater fund due to a new policy that required stormwater projects to fall under wastewater’s jurisdiction. The study required Raftelis to develop cost of service rates that generated enough revenue to fund these projects without having to issue any debt while maintaining fairness and affordability goals for all customer classes.
City of Ventura (CA)
The City of Ventura (City) engaged Raftelis in 2020 to conduct a comprehensive water and wastewater cost of service and rate study. Lindsay served as an associate consultant on the project and helped analyze the impacts of the proposed rates on monthly water and wastewater bills for each customer class.
San Benito County Water District (CA)
San Benito County Water District (SBCWD) engaged Raftelis in 2021 to develop a longer-term financial plan to capture planned major capital improvements that will come from the pending water master plan, as well as updating the cost allocating methodology. The SBCWD has a unique water system driven by allocations of purchased water, groundwater sources, and maintaining adequate water reserves in storage. Lindsay is building the financial planning and cost of service model.
RELEVANT PROFESSIONAL EXPERIENCE
North Carolina Department of Environmental Quality: Student Consultant (2019-2020) The Division of Water Resources at the North Carolina Department of Environmental Quality works to understand and manage the proliferation of algal blooms in lakes and reservoirs across the state. Lindsay worked with a team of Nicholas School students to analyze ambient water quality monitoring data and provide recommendations on how the agency could improve their harmful algal bloom nutrient criteria and management strategies. Her work included the City Council Regular Meeting - Page 843 of 1385
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development of multiple linear regression statistical models to understand the morphological drivers of lakes and reservoirs for algal blooms across the Piedmont region of North Carolina.
PROJECT LIST
• Borrego Water District (CA) – Water & Wastewater Capacity Fees • Carpinteria Valley Groundwater Sustainability Agency (CA) – GSA Fee Study • Carpinteria Valley Water District (CA)– Water rate study • Coastside County Water District (CA) – Drought rate study • Contra Costa Water District (CA) – Drought rate study • City of Coronado (CA) – Wastewater rate study
• City of Hayward (CA) – Water rate study
• City of Hollister (CA) – Water rate study
• Montecito Water District (CA) – Financial plan update • City of Pleasanton (CA) – Water, Wastewater, Capacity Fee, and Drought Rate Study • Rincon Del Diablo (CA) – Reserve policy survey study
• San Benito County Water District (CA) – Water rate study • City of Torrance (CA) – Wastewater rate study
• Thousand Oaks (CA) – Water and wastewater rate study
• City of Ventura (CA) – Water and wastewater bill impact study • Yorba Linda Water District (CA) – Capacity fee study
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Nick Kennedy
STAFF CONSULTANT
Associate Consultant
ROLE
Nick will work at the direction of Brian in conducting analyses and preparing deliverables for the project.
PROFILE
Nick is an Associate Consultant based in the Los Angeles office with a professional background in sustainable community development and data analysis. He holds a BS in Environmental Economics with a focus in Business Sustainability from Ohio State University. Nick joined Raftelis after graduating in December 2020.
KEY PROJECT EXPERIENCE
City of Hollister (CA)
The City of Hollister (City) engaged Raftelis in 2021 to conduct a comprehensive water and wastewater cost-of-service and rate study as well as a capacity fee study for the water and wastewater utilities. Nick served as an associate consultant on the project and was the lead analyst for the wastewater cost-of-service, rate study, and capacity fee study. The rate study required Raftelis to develop wastewater rates that would keep reserves in a healthy position while still providing fair and equitable rates to wastewater customers.
Padre Dam Municipal Water District (CA)
Padre Dam Municipal Water District (PDMWD) engaged Raftelis in 2021 to complete a comprehensive cost of service and rate study for their potable, recycled, and sewer enterprises as well as establishing an updated fully burdened hourly rate and creating a miscellaneous fee calculator for District use. Nick served as an associate analyst on the project and assisted in the development of rates for all three enterprises. Nick served as the lead analyst in creating an updated fully burdened hourly rate and creating the miscellaneous fee calculator.
PROJECT LIST
• City of Hollister (CA) – Wastewater rate study
• Padre Dam Municipal Water District (CA) – Water, recycled, and wastewater rate study • Mesa Water District (CA) – Cost comparison study
RELEVANT PROFESSIONAL EXPERIENCE
City of Columbus Department of Development Intern (OH)
Nick served as a Department of Development intern with the City of Columbus (City). He collaborated within the City’s government as well as other cities across the country. Nick led process reviewing recent updates to zoning codes in similar cities in the United States and making recommendations for the City moving forward, specifically pertaining to sustainable and equitable development. Research was also done to compare the City’s waste reduction goals compared to other cities. Recommendations were made and implemented into the Office of Sustainability’s 2030 Waste Reduction Plan.
Specialties
• Environmental Economics
• Community Development
• Business Sustainability
Professional History
• Raftelis: Associate Consultant
(2021-Present)
• City of Columbus: Department of
Development Intern (2020-2020)
• Brightview Enterprise Solutions:
Data Analytics Intern (2020-2020)
Education
• Bachelor of Science in Environment,
Economy, Development, and
Sustainability – Ohio State
University (2020)
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Brightview Enterprise Solutions: Data Analytics Intern (OH) Nick served as a data analytics intern with Brightview Enterprise Solutions in New Albany, OH. He worked across all business fronts in the company, including the Finance, Client Analytics, and Data Analytics teams. Nick created an annual breakdown within the Client Analytics team for one of the company’s largest clients and made recommendations on where money is best spent in future years based off the historical data. He assisted the Finance department in billing clients and paying vendors, as well as ensuring data quality. Nick used GIS applications to map out properties. He also created a dashboard for executive leadership to universally track KPI’s across different clients within the Data Analytics department.
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References
We have included references for each of these clients and urge you to contact them to better understand our capabilities and the quality of service that we provide.
City of Lynwood
CALIFORNIA
Reference: Lorry Hempe, Public Works Special Projects Manager 11330 Bullis Road, Lynwood, CA 90262 / P: 310.603.0220 ext.500 / E: [email protected]
City of El Monte
CALIFORNIA
Reference: Sal Mendez, Utilities Manager
11333 Valley Boulevard, El Monte, CA 91731 / P: 951.202.6604 / E: [email protected]
City of Lakewood
CALIFORNIA
Reference: Jose Gomez, Finance Director
5812 Arbor Road, Lakewood, CA 90713 / P: 562.866.9771 ext. 2701 / E: [email protected]
Industry Public Utilities
CALIFORNIA
Reference: Roy Frausto, General Manager
112 N 1st Street, La Puente, CA 91744 / P: 626.330.2126 / E: [email protected]
City of Long Beach
CALIFORNIA
Reference: Anatole Falagan, Assistant General Manager
1800 E. Wardlow Road, Long Beach, CA 90807 / P: 562.570.2317 / E: [email protected]
REFERENCES
City Council Regular Meeting - Page 847 of 1385
RAFTELIS 66
Project Schedule
Based on our experience a rate study with fewer public outreach meetings takes at least six months. The challenge is that the project includes four meetings (two public outreach and two City Council), which will take at least two months.
Raftelis needs two months to complete the work and meet with the City to review results. The Proposition 218 noticing period is one and a half months alone. Assuming the City provides all needed data by January 1, 2021, we could hold a public hearing by the end of June as shown in the below schedule.
Tasks
Contract Award
1. Project Management, Kick-off
Meeting, and QA/QC
City Provides All Data
2. Benchmarking
3. Water, Recycled Water, and
Wastewater Financial Plan Models
4. Cost of Service Analysis
5. Rate Design and Calculation
6. Drought Rates
7. Rate Survey
8. Draft and Final Reports
9. System Development Charges
10. Review Overhead Distribution
Formulas
11. Miscellaneous Fee Template
12. Model Training
13. Public Outreach Community
Meetings
14. Communication and Outreach
Materials
15. Two City Council Meetings
16. Public Hearing Notice
Public Haring Noticing Period
17. Public Hearing
In-Person Meetings
Web Meetings
Deliverables
MAYDEC JAN FEB MAR APR
2022 2023
JUN
PROJECT SCHEDULE
City Council Regular Meeting - Page 848 of 1385
RAFTELIS 67
Cost Proposal
The following table provides a breakdown of our proposed fee for this project. This table includes the estimated level of effort required for completing each task and the hourly billing rates for our project team members. Expenses include costs associated with travel and a $10 per hour technology charge covering computers, networks, telephones, postage, etc.
SG BB GD SC Corp Total
1. Project Management, Kick-off Meeting,
and QA/QC 1 16 10 2 4 32 $8,640
2. Benchmarking 1 8 16 25 $5,575
3. Water, Recycled Water, and Wastewater
Financial Plan Models 2 8 18 54 80 $17,840
4. Cost of Service Analysis 4 10 40 54 $11,780
5. Rate Design and Calculation 9 15 34 58 $13,355
6. Drought Rates 2 6 14 22 $4,950
7. Rate Survey 1 4 8 12 $2,640
8. Draft and Final Reports 8 12 44 64 $14,280
9. System Development Charges 1 6 16 23 $5,055
10. Review Overhead Distribution
Formulas 1 4 8 13 $2,935
11. Miscellaneous Fee Template 2 8 26 36 $7,870
12. Model Training 1 2 6 8 $1,720
13. Public Outreach Community Meetings 2 2 16 12 30 $9,327
14. Communication and Outreach Materials 1 2 4 16 2 24 $6,190
15. Two City Council Meetings 2 2 26 4 6 38 $11,047
16. Public Hearing Notice 6 8 14 $3,160
17. Public Hearing 1 13 4 2 19 $5,549
Total Meetings / Hours 6 5 58 162 44 288 0 552
$285 $250 $250 $190 $85
$16,530 $40,500 $11,000 $54,720 $0 $122,750
Total Fees $122,750
Total Expenses $9,163
Total Fees & Expenses $131,913
Total Fees &
Expenses
SG - Steve Gagnon
BB - Brian Bass
GD - Gina DePinto
SC - Staff Consultants
Corp - Corporate Functions
Tasks
Web
Meetings
In-person
Meetings
Hours
Hourly Billing Rate
Total Professional Fees
COST PROPOSAL
City Council Regular Meeting - Page 849 of 1385
RAFTELIS 68
Hourly Billing Rates
Project team hours and expenses will be billed on the same invoice. Expenses related to travel will be billed at cost.
Additional services outside the agreed upon scope of work will be billed on a time and materials basis. Raftelis’ billing rates can be found below. These rates will be in effect for calendar year 2022 and will then increase annually by 3% unless specified otherwise by contract.
POSITION HOURLY BILLING RATE**
Chair/Chair Emeritus $475
Chief Executive Officer/President $400
Executive Vice President $350
Vice President $325
Senior Manager $285
Principal Consultant $270
Manager $250
Senior Consultant $225
Consultant $195
Creative Director $195
Associate $165
Graphic Designer $140
Analyst $120
Administration $90
Technology Charge* $10
*Technology/Communications
Charge: This is an hourly fee
charged monthly for each hour
worked on the project to recover
telephone, facsimile, computer,
postage/overnight delivery,
conference calls,
electronic/computer webinars,
photocopies, etc.
**For services related to the
preparation for and participation in
deposition and trials/hearings, the
standard billing rates listed above
will be increased by an amount up to
50 percent.
City Council Regular Meeting - Page 850 of 1385
RAFTELIS 69
Copy of a Rate Study
On the following pages, we have included samples of rate study reports for the City of Long Beach and the City of Manhattan Beach.
COPY OF A RATE STUDY
City Council Regular Meeting - Page 851 of 1385
Cost-of-Service Update for Water,
Reclaimed Water, and Sewer Rates
Report / September 29, 2022
Long Beach Water
Department
City Council Regular Meeting - Page 852 of 1385
This page intentionally left blank to facilitate two-sided printing.
City Council Regular Meeting - Page 853 of 1385
24640 Jefferson Ave, Suite 207
Murrieta, CA 92562
www.raftelis.com
September 29, 2022
Mr. Brandon Walker
Director of Finance
Long Beach Water Department
1800 E Wardlow Rd,
Long Beach, CA 90807
Subject: Report for the Cost-of-Service Update for Water, Reclaimed Water, and Sewer Rates
Dear Mr. Walker,
Raftelis is pleased to provide the Long Beach Water Department (Department) with this report which describes our work on the Cost-of-Service Update of the Department’s Water, Reclaimed Water, and Sewer Rates (COS Update). The overarching purpose of the COS Update was to compare the actual FY 2021 rates implemented by the Department to FY 2021 rates recalculated by Raftelis using actual revenue, cost, and demand inputs. This comparison allows for a high-level determination of whether the Department’s FY 2021 rates, and by inference its current FY 2022 rates, reflect the proportional demands and associated costs imposed by each customer class. To accomplish this objective, Raftelis completed two primary tasks:
• Completion of an FY 2021 COS Study Using Actual Demands and Costs. Raftelis completed a comprehensive COS study for FY 2021. This study was based on the actual revenues, costs, and demands experienced by the Department’s water, reclaimed water, and sewer utilities during the period of October 1, 2020 – September 30, 2021. The outcome of this study was the “recalculation” of FY 2021 rates.
• Comparison of the Recalculated FY 2021 Rates to Actual FY 2021 Rates. Raftelis compared the actual FY 2021 water, reclaimed water, and sewer rates charged by the Department to the recalculated FY 2021 rates.
The results of this comparison demonstrate that the FY 2021 rates charged by the Department fully recovered the operating and capital costs incurred to provide service. Except as noted in this report, these rates were generally reflective of the proportional demands and associated costs imposed by each customer class. By inference, Raftelis concludes this is also the case with Department’s current FY 2022 rates.
In addition to the primary tasks discussed above, Raftelis also completed research on financial and operational policy issues related to water rate design and developed a new rate model for the use of the Department’s staff. The report provides a detailed discussion of our key findings and recommendations. It has been a pleasure working with you and other members of the Department’s staff. Thank you for the support you provided during this study.
Sincerely,
John Wright Cleo Koenig
Senior Manager Associate Consultant
City Council Regular Meeting - Page 854 of 1385
City Council Regular Meeting - Page 855 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES Table of Contents
1. EXECUTIVE SUMMARY ................................ ................................ ................................ ..................... 1
1.1. STUDY OBJECTIVES ...................................................................................................................................... 1
1.2. IMPORTANCE OF ROUTINE COST-OF-SERVICE UPDATES ...................................................................... 1
1.3. DEPARTMENT DETERMINATION OF FY 2021 RATES ................................................................................ 2
1.4. PROCESS USED TO MAKE THE FY 2021 RATE COMPARISON ................................................................ 2
1.5. SUMMARY CONCLUSIONS............................................................................................................................ 3
1.6. SUMMARY FINANCIAL AND RATE COMPARISONS ................................................................................... 3
1.6.1. Validation of FY 2021 Rate Revenues .................................................................................................................... 3
1.6.2. Adequacy of FY 2021 Cost Recovery .................................................................................................................... 4
1.6.3. FY 2021 Fixed and Variable Revenue Recovery ................................................................................................... 5
1.6.4. Comparison of FY 2021 Water and Reclaimed water Volumetric Rates ............................................................. 6
1.6.5. Comparison of FY 2021 Water and Reclaimed water Daily Service Charges..................................................... 7
1.6.6. Comparison of FY 2021 Fire Line Daily Service Charges .................................................................................... 7
1.6.7. Comparison of FY 2021 Sewer Volumetric Rates ................................................................................................. 8
1.6.8. Comparison of FY 2021 Sewer Daily Service Charges ........................................................................................ 8
2. DEPARTMENT DESCRIPTION ................................ ................................ ................................ ........... 9
2.1. HISTORY .......................................................................................................................................................... 9
2.2. SERVICE TERRITORY .................................................................................................................................... 9
2.3. POTABLE WATER SYSTEM .......................................................................................................................... 9
2.3.1. Water Supply ........................................................................................................................................................... 9
2.3.2. Historical Potable Water Demand and Peaking Factors .................................................................................... 10
2.3.3. Water System Infrastructure ................................................................................................................................ 10
2.4. SEWER SYSTEM ........................................................................................................................................... 11
2.5. RECLAIMED WATER SYSTEM .................................................................................................................... 12
2.5.1. Long Beach Water Reclamation Plant ................................................................................................................. 12
2.5.2. Reclaimed Water Customer Base ........................................................................................................................ 12
3. REGULATORY ENVIRONMENT ................................ ................................ ................................ ....... 13
3.1. LEGAL AND STATUTORY CONSIDERATIONS .......................................................................................... 13
3.1.1. Compliance with Proposition 218 ........................................................................................................................ 13
3.1.2. Overview of Proposition 218 ................................................................................................................................ 13
3.1.3. California Constitution – Article X, Section 2 ..................................................................................................... 14
3.2. THE RATE-SETTING PROCESS AND PROPOSITION 218 ........................................................................ 14
4. WATER REVENUE REQUIREMENT ................................ ................................ ................................ 15
4.1. VALIDATION OF FY 2021 WATER RATE REVENUES ............................................................................... 15
4.2. ADEQUACY OF FY 2021 WATER COST RECOVERY ................................................................................ 15
4.3. O&M COSTS IN THE FY 2021 REVENUE REQUIREMENT ........................................................................ 16 City Council Regular Meeting - Page 856 of 1385
LONG BEACH MUNICIPAL WATER DEPARTMENT
4.4. VALIDATION OF FY 2021 WATER SUPPLY COSTS .................................................................................. 17
4.5. RATE FUNDED CAPITAL COSTS IN THE FY 2021 REVENUE REQUIREMENT ...................................... 19
5. WATER CUSTOMER UNITS OF SERVICE ................................ ................................ ...................... 20
5.1. FY 2021 CUSTOMER CLASS PEAKING FACTORS ................................................................................... 20
5.2. FY 2021 CUSTOMER ACCOUNTS ............................................................................................................... 20
5.3. FY 2021 EQUIVALENT METERS .................................................................................................................. 21
5.4. FY 2021 WATER PRIVATE FIRE LINES ...................................................................................................... 22
6. WATER COST ALLOCATIONS ................................ ................................ ................................ ........ 23
6.1. COS METHODOLOGY .................................................................................................................................. 23
6.2. STEPS IN THE COS PROCESS .................................................................................................................... 24
6.3. STEP 1: IDENTIFICATION OF OPERATING AND CAPITAL COSTS ......................................................... 25
6.4. STEP 2: COST FUNCTIONALIZATION ........................................................................................................ 27
6.5. STEP 3: ALLOCATION TO COST CAUSATION COMPONENTS ............................................................... 29
6.5.1. System Peaking Factors and Demand Ratios..................................................................................................... 30
6.5.2. Revenue Requirement Allocations ...................................................................................................................... 32
6.6. STEP 4: ALLOCATION OF COSTS TO FIXED AND VARIABLE RATE COMPONENTS .......................... 35
6.7. STEP 5: CUSTOMER CLASS RATE CALCULATION ................................................................................. 37
6.7.1. Recalculation of FY 2021 Daily Service Charges ................................................................................................ 37
6.7.2. Recalculation of FY 2021 Potable Water Volumetric Rates ............................................................................... 40
6.7.3. Recalculation of FY 2021 Reclaimed Water Volumetric Rates .......................................................................... 46
7. SEWER REVENUE REQUIREMENT ................................ ................................ ................................ 48
7.1. VALIDATION OF FY 2021 SEWER RATE REVENUES ............................................................................... 48
7.2. ADEQUACY OF FY 2021 SEWER COST RECOVERY ................................................................................ 48
7.3. O&M COSTS IN THE FY 2021 REVENUE REQUIREMENT ........................................................................ 49
7.4. RATE FUNDED CAPITAL COSTS IN THE FY 2021 REVENUE REQUIREMENT ...................................... 50
8. SEWER CUSTOMER UNITS OF SERVICE ................................ ................................ ...................... 51
9. SEWER COST ALLOCATIONS ................................ ................................ ................................ ........ 52
9.1. STEP 1: IDENTIFICATION OF OPERATING AND CAPITAL COSTS ......................................................... 52
9.2. STEP 2: COST FUNCTIONALIZATION ........................................................................................................ 52
9.3. STEP 3: ALLOCATION TO COST CAUSATION COMPONENTS ............................................................... 55
9.3.1. Revenue Requirement Allocations ...................................................................................................................... 55
9.4. STEP 4: ALLOCATION OF COSTS TO FIXED AND VARIABLE RATE COMPONENTS .......................... 56
9.5. STEP 5: CALCULATION OF CUSTOMER CLASS RATES ......................................................................... 56
9.5.1. Recalculation of FY 2021 Daily Service Charges ................................................................................................ 57
9.5.1. Recalculation of FY 2021 Volumetric Rates ........................................................................................................ 58
10. SECONDARY OBJECTIVES ................................ ................................ ................................ ........... 60
10.1. BASIC HUMAN NEEDS WATER CONSUMPTION .................................................................................... 60 City Council Regular Meeting - Page 857 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES
10.2. PRE- AND POST- COVID WATER DEMANDS .......................................................................................... 61
10.3. CHANGES IN RESIDENTIAL DEMANDS ................................................................................................... 62
10.4. ADVANCED METERING INFRASTRUCTURE ........................................................................................... 62
City Council Regular Meeting - Page 858 of 1385
LONG BEACH MUNICIPAL WATER DEPARTMENT
List of Tables
Table 1-1: Comparison of FY 2021 Rate Methodologies ................................................................................ 2 Table 1-2: FY 2021 Rate Revenue Validation ................................................................................................... 4 Table 1-3: FY 2021 Revenue Adequacy (Rate Revenues vs Costs) .............................................................. 5 Table 1-4: FY 2021 Fixed and Variable Revenue Recovery vs. Costs .......................................................... 6 Table 1-5: Recalculated FY 2021 Water and Reclaimed Water Volumetric Rates vs. Actual ..................... 7 Table 1-6: Recalculated FY 2021 Water and Reclaimed Water Daily Service Charges vs. Actual ............ 7 Table 1-7: Recalculated FY 2021 Fire Line Daily Service Charges vs. Actual ............................................. 8 Table 1-8: Recalculated FY 2021 Sewer Volumetric Rates vs. Actual .......................................................... 8 Table 1-9: Recalculated FY 2021 Sewer Daily Service Charge vs. Actual ................................................... 8 Table 2-1: Water System Demand and Peaking Factors (2016-2019) ......................................................... 10 Table 4-1: FY 2021 Water Rate Revenue Validation ..................................................................................... 15 Table 4-2: FY 2021 Water Revenue Adequacy .............................................................................................. 16 Table 4-3: Detail of the FY 2021 Water O&M Revenue Requirement .......................................................... 17 Table 4-4: Validation of FY 2021 Water Supply Costs .................................................................................. 18 Table 4-5: Detail of FY 2021 Water Rate Funded Capital Expenditures ..................................................... 19 Table 5-1: Water Customer Class Peaking Factors ...................................................................................... 20 Table 5-2: FY 2021 Water Accounts by Meter Size and Customer Class ................................................... 21 Table 5-3: FY 2021 Water Accounts and Equivalent 3/4” Meters ................................................................ 21 Table 5-4: FY 2021 Water Private Fire Lines and Public Hydrants ............................................................. 22 Table 6-1: FY 2023 Water Revenue Requirement Operating and Capital Cost Components .................. 26 Table 6-2: Water Utility Functions .................................................................................................................. 27 Table 6-3: Functionalized FY 2021 Water O&M Costs .................................................................................. 28 Table 6-4: FY 2021 Functionalized Water Asset Values ............................................................................... 28 Table 6-5: Water System Peaking Factors and Demand Ratios .................................................................. 30 Table 6-6: Water Fire Protection Capacity Requirements ............................................................................ 30 Table 6-7: Allocation of Functionalized Potable Water Costs to Cost Causation Components ............. 31 Table 6-8: Allocation of Functionalized Reclaimed Water Costs to Cost Causation Components ........ 31 Table 6-9: Results of the Water O&M Cost Allocations ............................................................................... 31 Table 6-10: Results of the Water Asset Value Allocations .......................................................................... 32 Table 6-11: Water Revenue Requirement and Allocation Factors .............................................................. 32 Table 6-12: Water Net Revenue Requirement Allocated to Cost Causation Components ...................... 33 Table 6-13: Water General & Administrative Cost Allocation...................................................................... 33 Table 6-14: FY 2021 Water Fire Protection Units of Service ........................................................................ 34 Table 6-15: FY 2021 Water Public and Private Fire Protection Capacity ................................................... 34 Table 6-16: FY 2021 Water Public Fire Protection Reallocation .................................................................. 34 Table 6-17: Reallocated Water FY 2021 Revenue Requirements ................................................................ 35 Table 6-18: FY 2021 Water Revenue Requirement by Cost Causation Components ............................... 35 Table 6-19: FY 2021 Water Cost Allocations to Rate Components ............................................................. 36 Table 6-20: Water FY 2021 Fixed Revenue Requirement ............................................................................. 36 Table 6-21: FY 2021 Water Variable Revenue Requirement ........................................................................ 37 Table 6-22: FY 2021 Reclaimed Water Variable Revenue Requirement ..................................................... 37 Table 6-23: Water Meter Capacity Ratios ....................................................................................................... 38 Table 6-24: Water Fire Line Capacity Ratios ................................................................................................. 38 Table 6-25: FY 2021 Water Units of Service for Daily Service Charge Component .................................. 38 City Council Regular Meeting - Page 859 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES Table 6-26: Development of FY 2021 Water Daily Service Charge Unit Costs .......................................... 39 Table 6-27: Recalculated FY 2021 Water Daily Service Charges vs. Actual .............................................. 39 Table 6-28: Recalculated FY 2021 Water Daily Service Charges for Fire Lines vs. Actual ...................... 40 Table 6-29: Water Volumetric Rate Component Descriptions ..................................................................... 40 Table 6-30: Water Volumetric Rate Component Framework ....................................................................... 40 Table 6-31: FY 2021 Water Supply Sources - Quantity and Unit Cost Data ............................................... 41 Table 6-32: FY 2021 Non-Residential Blended Water Supply Rate ............................................................. 41 Table 6-33: FY 2021 Other Water Supply Unit Costs .................................................................................... 41 Table 6-34: FY 2021 “All-In” Water Supply Unit Costs ................................................................................. 42 Table 6-35: FY 2021 Water Delivery Costs ..................................................................................................... 42 Table 6-36: FY 2021 Equivalent Peaking Usage Units .................................................................................. 42 Table 6-37: FY 2021 Peaking Unit Costs ........................................................................................................ 43 Table 6-38: Development of FY 2021 Conservation Unit Costs .................................................................. 43 Table 6-39: FY 2021 Conservation Unit Costs ............................................................................................... 43 Table 6-40: True Cost of Tier 1A Water .......................................................................................................... 44 Table 6-41: FY 2021 Rental Revenue Applied to Tier 1B .............................................................................. 44 Table 6-42: FY 2021 Revenue Offsets ............................................................................................................ 44 Table 6-43: Recalculated FY 2021 Potable Water Volumetric Rates vs. Actual ........................................ 45 Table 6-44: Change in the Profile of Water Supply Costs (FY 2017 Projected vs. FY 2021 Actual) ........ 45 Table 6-45: Change in the Residential Peaking Factors (FY 2017 Projected vs. FY 2021 Actual) .......... 45 Table 6-46: Equivalent Peaking Usage Units ................................................................................................ 46 Table 6-47: FY 2021 Reclaimed Water Volumetric Rates Revenue Requirements ................................... 46 Table 6-48: FY 2021 Reclaimed Water Volumetric Rates Revenue Requirements ................................... 46 Table 6-49: Reclaimed Demand (FY 2021 Actual vs. FY 2017 Projected) .................................................. 47 Table 7-1: FY 2021 Sewer Rate Revenue Validation ..................................................................................... 48 Table 7-2: FY 2021 Sewer Revenue Adequacy (Rate Revenues vs Incurred Costs) ................................ 49 Table 7-3: Detail of the FY 2021 O&M Revenue Requirement ..................................................................... 50 Table 7-4: Detail of FY 2021 Sewer Rate Funded Capital Expenditures ..................................................... 50 Table 8-1: Detail of FY 2021 Sewer Customer Units of Service .................................................................. 51 Table 9-1: FY 2021 Sewer Revenue Requirement Operating and Capital Cost Components .................. 53 Table 9-2: Sewer Utility Functions .................................................................................................................. 54 Table 9-3: FY 2021 Functionalized Sewer O&M Costs ................................................................................. 54 Table 9-4: FY 2021 Functionalized Sewer Asset Values .............................................................................. 54 Table 9-5: Allocation of Functionalized Sewer Costs to Cost Causation Components ........................... 55 Table 9-6: FY 2021 Sewer Revenue Requirement and Allocation Factors ................................................. 55 Table 9-7: FY 2021 Sewer Net Revenue Requirement Allocated to Cost Causation Components ......... 55 Table 9-8: FY 2021 Sewer Allocations to Rate Components ....................................................................... 56 Table 9-9: FY 2021 Sewer Volumetric Rate Components ............................................................................ 56 Table 9-10: FY 2021 Sewer Daily Rate Components .................................................................................... 56 Table 9-11: FY 2021 Sewer Units of Service for Daily Service Charge Components ............................... 57 Table 9-12: Development of FY 2021 Sewer Daily Service Charge Unit Costs.......................................... 58 Table 9-13: Recalculated FY 2021 Sewer Daily Service Charge vs. Actual ............................................... 58 Table 9-14: Recalculated FY 2021 Sewer Quantify Rates vs. Actual FY 2021 ........................................... 59 Table 10-1: Basic Human Needs Water Use Comparison ............................................................................ 61 Table 10-2: Changes in Customer Demand During COVID-19 (ccf) ............................................................ 61 Table 10-3: Changes in Customer Demand FY 2016 to FY 2021 (ccf) ........................................................ 62 City Council Regular Meeting - Page 860 of 1385
City Council Regular Meeting - Page 861 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 1
1. Executive Summary
1.1. Study Objectives
The Long Beach Municipal Water Department (Department) retained the services of Raftelis to complete a Cost- of-Service Update of the Department’s water, reclaimed water, and sewer rates (COS Update). The overarching purpose of the COS Update was to compare the actual FY 2021 rates charged by the Department to the FY 2021 rates recalculated by Raftelis using actual revenue, cost, and demand inputs. This comparison allows for a high- level determination of whether the Department’s FY 2021 rates, and by inference its current FY 2022 rates, reflect the proportional demands and associated costs incurred to serve each customer class. Rates that meet this criterion are believed to align with industry-standard principles of cost-of-service (COS) equity and the requirements of California Proposition 218.
At the request of the Department, Raftelis also analyzed the following items:
• The appropriateness of the Tier 1 residential water rate structure which currently features a consumption width of 0 – 6 ccf
• Changes in residential consumption characteristics during the period FY 2016 to FY 2021 • The quantification of pre- and post-COVID demands on the Department’s potable water system • Potential uses of water consumption data recorded by the Department’s advanced metering infrastructure in future COS studies and potential future rate designs
Raftelis also created a new Microsoft Excel financial planning and COS model for use by Department staff.
1.2. Importance of Routine Cost-of-Service Updates
There is no Proposition 218 requirement that agencies providing municipal utility services complete a COS study on a specific schedule. However, the completion of routine COS studies can enhance the probability that the rates paid by customers are aligned with both industry-standard COS principles and the requirements of Proposition 218 (See Section 3.2). Some California utility agencies complete forward-looking COS studies approximately every four to five years. The outcome of these studies is a projection of rates and charges that are intended to comply with the requirements of Proposition 218.
Other utility agencies, including the Department, complete COS studies less frequently. Instead, they adjust rates using across-the-board increases correlated to the annual required percentage increase in rate revenues developed during their annual budgeting/financial planning process. The Department completed its last comprehensive COS study in FY 2016. Prior to FY 2016, rates were developed using the across-the-board approach.
In addition to enhancing the probability that rates reflect principles of COS equity, routine COS studies are beneficial in two other ways. First, they help utility staff, governing bodies, and customers understand the process used to calculate utility rates. Transparency in this regard provides stakeholders with a better understanding of the costs that municipal utilities incur to provide service. It also enhances stakeholder confidence in the process used to calculate utility rates for each customer class.
Second, the completion of routine COS studies can also serve as an important management information tool. COS studies require staff to acquire a detailed understanding of revenue, cost, and demand relationships that form the basis for utility rates. They also assist utility staff in assessing the effectiveness of their rate structure(s) in achieving City Council Regular Meeting - Page 862 of 1385
2 LONG BEACH MUNICIPAL WATER DEPARTMENT
specific financial, cost-based water use efficiency, and public policy objectives as determined by the utility governing body.
1.3. Department Determination of FY 2021 Rates
As noted previously, the foundation for the Department’s actual FY 2021 water, reclaimed water, and sewer rates was a comprehensive COS study completed by Raftelis in FY 2016. Several water rate structure alternatives were considered during the FY 2016 COS Study process and public workshops were conducted to solicit input from the Board and other stakeholders on each alternative. An outcome of the FY 2016 COS Study was the Department’s adoption of its current Residential rate structure which was specifically designed to enhance customer bill affordability through the creation of Tier 1A (no volumetric rates paid by qualifying customers) and the allocation of low-cost water supplies to Tier 1B.
The FY 2016 COS Study was “forward-looking” in its rate calculation approach. Specifically, the FY 2017 rates calculated in the study were based on projected FY 2017 revenue, cost, and demand relationships. These FY 2017 rates were adopted by the Board and became effective on October 1, 2016.
The rates adopted and implemented by the Department during the period FY 2018 - FY 2021 were not calculated as part of a COS study. Instead, as has been customary for the Department, rates were adjusted using across-the- board increases correlated to the annual required percentage increase in rate revenues developed during the annual budgeting/financial planning process.
1.4. Process Used to Make the FY 2021 Rate Comparison
The rate comparison completed by Raftelis reflects ex-ante and ex-post methods for calculating the Department’s FY 2021 rates. The ex-ante method is the approach used by the Department to determine the rates it charged in FY 2021 (discussed in Section 1.3 above). The ex-post method is the approach used by Raftelis to re-calculate FY 2021 rates based on actual FY 2021 revenue, cost, and demand relationships. Table 1-1 summarizes the differences between these two approaches.
Table 1-1: Comparison of FY 2021 Rate Methodologies
Actual FY 2021 Rates (Ex-Ante Approach) Raftelis Recalculated FY 2021 Rates (Ex-Post Approach)
• FY 2021 rates were based on annual across-the-board
increases applied to FY 2017 rates during the years FY 2018 – FY 2021.
• The original FY 2017 rates were developed in the FY 2016 COS Study were based on projected FY 2017 demand,
revenue, and cost relationships.
• Recalculated FY 2021 rates were based on actual FY 2021 revenue, cost, and demand inputs as recorded in the
Department’s financial accounting and billing systems.
• As required, the cost allocations originally used in the FY 2016 COS Study were, as required, updated to reflect changes in the Department’s operating characteristics and financial accounting system.
Raftelis used a two-step process to complete a comparison of actual versus recalculated FY 2021 rates.
Step 1: Completion of an FY 2021 COS Study Using Actual Demands and Costs. Raftelis completed a comprehensive COS study for FY 2021. This study featured the actual revenues, costs, and demands experienced by the Department’s water, reclaimed water, and sewer utilities during the period of October 1, 2020 – September 30, 2021. The outcome of this study was the “recalculation” of FY 2021 rates that are based on actual experience.
City Council Regular Meeting - Page 863 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 3 Step 2: Comparison of the Recalculated FY 2021 Rates to Actual FY 2021 Rates. Raftelis compared the actual FY 2021 water, reclaimed water, and sewer rates charged by the Department to the recalculated FY 2021 rates. The results of this comparison demonstrate that the FY 2021 rates charged by the Department were generally reflective of the actual FY 2021 demands and associated costs incurred to serve customers.
By inference, Raftelis concludes that the Department’s current FY 2022 rates are also aligned with underlying principles of COS equity.
1.5. Summary Conclusions
The results of the comparison of recalculated FY 2021 rates to the Department’s actual FY 2021 rates indicate the following:
• Actual FY 2021 water, reclaimed water, and sewer rates fully recovered the operating expenses and rate- funded capital expenditures incurred to provide service.
• The proportionate share of fixed and variable revenues earned by the Department in FY 2021 were aligned with the targets established in the FY 2016 COS Study. These same proportionate fixed and variable revenue contributions were replicated in the FY 2021 COS Update.
• The FY 2021 rates charged by the Department were generally aligned with the actual demands and the associated costs imposed by each customer class. The key exceptions, as fully explained later in this report, were Tier 1B and Tier 3 Residential rates and reclaimed water rates. These exceptions are explained by changes in the Department’s water supply cost profile and changes in customer demand characteristics since the completion of the 2016 COS Study.
• Based on our analysis, the Department’s existing water, reclaimed water, or sewer rate structures do not require modification.
• The Department’s current Residential water rate structure which features a Tier 1 consumption allowance of 0 – 6 ccf remains appropriate from two perspectives. First, it complies with State of California requirements for indoor water usage. Second, it provides an amount of water that is adequate for basic human needs.
• Water usage during FY 2020 and FY 2021 was minimally impacted by the COVID pandemic.
• The detailed customer water consumption information recorded by the Department’s advanced meter reading (AMR) infrastructure can produce data useful to make incremental improvements in the Residential water rate structure. However, the primary benefit of AMR will be from a customer service and management information perspective.
1.6. Summary Financial and Rate Comparisons
1.6.1. VALIDATION OF FY 2021 RATE REVENUES
As an initial step in the FY 2021 COS process, Raftelis validated the rate revenues reported in the Department’s financial accounting system. The validation required Raftelis to independently calculate FY 2021 rate revenues based on actual customer billing data obtained from the Department’s customer information system (CIS). As City Council Regular Meeting - Page 864 of 1385
4 LONG BEACH MUNICIPAL WATER DEPARTMENT
shown on line 4 of Table 1-2, the Raftelis calculation of water and reclaimed water rate revenues was within 0.6% of the revenue reported in the Department’s financial accounting system. As shown on line 9, the Raftelis calculation of sewer rate revenues is within 1.4% of the Department’s reported total. Both of these calculated variances are within a reasonable range of accuracy and require no further investigation.
Table 1-2: FY 2021 Rate Revenue Validation
Line Water and Reclaimed Water
FY 2021 Reported
Rate Revenue
FY 2021 Rate Revenue
Calculated by Raftelis $ Difference % Difference
1 Fixed Revenue (1) $34,900,811 $36,251,570 $1,350,759 3.9% 2 Water Variable Revenue (2) $74,435,459 $74,380,998 ($54,461) -0.1% 3 Reclaimed Variable Revenue (3) $4,887,556 $4,239,053 ($648,503) -13.3% 4 Total $114,223,826 $114,871,621 $647,795 0.6%
5 6 Sewer
FY 2021 Reported
Rate Revenue
FY 2021 Rate Revenue
Calculated by Raftelis $ Difference % Difference
7 Fixed Revenue (4) $11,162,309 $11,047,754 ($114,556) 1.0% 8 Sewer Variable Revenue (5) $5,793,225 $6,150,008 $356,783 -5.8% 9 Total $16,955,534 $17,197,762 $242,228 1.4%
10 11 (1) Fixed Revenue = Revenue from Daily Service Charges + Fire Line Daily Service Charges 12 (2) Water Variable Revenue = Revenue from Potable Water Volumetric Rates 13 (3) Reclaimed Variable Revenue = Revenue from Reclaimed Volumetric Rates 14 (4) Fixed Revenue = Revenue from Sewer Daily Service Charges 15 (5) Sewer Variable Revenue = Revenue from Sewer Volumetric Rates
1.6.2. ADEQUACY OF FY 2021 COST RECOVERY
A second critical question in assessing the Department’s FY 2021 rates is whether rate revenues were adequate to recover the actual operating and capital costs incurred to provide service. Table 1-3 shows the analysis completed by Raftelis which verifies the adequacy of FY 2021 cost recovery.
The FY 2021 rate revenues shown on lines 1 - 3 of Table 1-3 were calculated by Raftelis based on billing data obtained from the Department’s CIS. The revenue requirement components (i.e., costs) shown in lines 7 - 15 are the actual costs recorded in the Department’s financial accounting system. Except for water supply costs, Raftelis did not audit the Department’s reported FY 2021 operating or capital costs.
In FY 2021, approximately $114.8 million in rate revenues were collected from water and reclaimed water customers (line 4). After the inclusion of a Measure M transfer to the General Fund of $10.6 million (line 10) and an increase of cash reserves of $7.9 million (line 11), the final net revenue requirement incurred to provide water and reclaimed water service was also $114.8 million (line 15). On annual basis, municipal utilities routinely experience increases or decreases in cash reserves. These changes can be intentional (i.e., budgeted) or the result of normal actual-to-budget variances. From the perspective of Raftelis, the actual FY 2021 increase in cash reserves of $7.9 million was reasonable.
In FY 2021, approximately $17.2 million in rate revenues was collected from sewer customers (line 4). After the inclusion of a Measure M transfer to the General Fund of $2.1 million (line 10) and a decrease in cash reserves of $155K (line 11), the final net revenue requirement (net costs) incurred to provide sewer service was also $17.2 million (line 15).
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COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 5
Table 1-3: FY 2021 Revenue Adequacy (Rate Revenues vs Costs) Line Rate Revenues (Calculated by Raftelis) Water & Reclaimed Sewer 1 Daily Service Charges $31,995,332 $11,490,180
2 Volumetric Rates $80,841,731 $5,707,582
3 Fire Service Charge $2,034,558 $0
4 Total Revenues $114,871,621 $17,197,762
5 6 Revenue Requirement (Costs Reported by the Department) Water & Reclaimed Sewer 7 O&M Expenses $86,927,049 $10,784,292
8 Existing Debt Service $6,221,000 $729,000
9 Rate Funded Capital Projects $15,616,814 $6,885,645
10 Transfer to the General Fund $10,575,042 $2,118,236 11 Change in Cash Reserves $7,856,441 ($154,789)
12 Gross Revenue Requirement (Gross Costs) $127,196,347 $20,362,384 13 14 Less: Revenue Offsets $12,324,725 $3,164,622
15 Total Net Revenue Requirement (Net Costs) $114,871,621 $17,197,762 16 17 Unexplained Difference (Line 4 – Line 15) $0 $0
1.6.3. FY 2021 FIXED AND VARIABLE REVENUE RECOVERY
An outcome of the COS process is the identification of fixed and variable costs and the determination of the proportion of rate revenue that should be recovered from fixed versus variable rates. In the FY 2016 COS Study, rates were designed to ensure that approximately 30% of water and reclaimed revenues were earned from fixed sources (daily service charges and fire line daily service charges) and that approximately 70% of revenues were earned from variable sources (volumetric rates). Similarly, sewer rates were designed to achieve approximately 65% revenue recovery (sewer daily service charges) and 35% variable revenue recovery (volumetric rates).
To determine if the Department’s FY 2021 revenue recovery profile remains aligned with the targets established in the FY 2016 COS Study, Raftelis completed the analysis shown in Table 1-4. Column A of Table 1-4 shows the actual proportion of FY 2021 fixed and variable rate revenue recovery as reported in the Department’s financial accounting system. Column B of Table 1-4 shows the Raftelis calculated level of fixed and variable rate revenue recovery as determined in the FY 2021 COS Update. Both the Department’s actual FY 2021 revenue recovery profile and the Raftelis calculated revenue recovery profile are closely aligned with the targets established in the FY 2016 COS Study.
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6 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 1-4: FY 2021 Fixed and Variable Revenue Recovery vs. Costs
Column A Column B Column C Column D
Line Water and Reclaimed Water
FY 21 Reported
Rate Revenue
FY 2021
Raftelis COS
$ Difference
Reported vs COS
% Difference
Reported vs COS
1 Fixed Revenue (Daily Service Charge + Fire
Line Charges) $34,900,811 $36,251,570 $1,350,759 3.9%
2 Water Variable Revenue (Volumetric Rates) $74,435,459 $74,380,998 ($54,461) -0.1% 3 Reclaimed Water Variable Revenue
(Volumetric Rates) $4,887,556 $4,239,053 ($648,503) -13.3% 4 Total $114,223,826 $114,871,621 $647,795 0.6%
5 6 Fixed Revenue (Daily Service Charge + Fire
Line Daily Service Charges) 30.6% 31.6%
7 Water Variable Revenue (Volumetric Rates) 65.2% 64.8% 8 Reclaimed Water Variable Revenue
(Volumetric Rates) 4.3% 3.7%
9 Total 100% 100%
10 11 Column A Column B Column C Column D
12 Sewer FY 21 Reported
Rate Revenue
FY 2021
Raftelis COS
$ Difference
Reported vs COS
% Difference
Reported vs COS
13 Fixed Revenue (Sewer Daily Service Charge) $11,162,309 $11,047,842 ($114,467) 1.0% 14 Sewer Variable Revenue (Volumetric Rates) $5,793,225 $6,149,920 $356,695 -5.8% 15 Total $16,955,534 $17,197,762 $242,228 -1.4%
16 17 Fixed Revenue (Daily Service Charge) 65.8% 64.2%
18 Sewer Variable Revenue (Volumetric Rates) 34.2% 35.8% 19 Total 100.0% 100.0%
1.6.4. COMPARISON OF FY 2021 WATER AND RECLAIMED WATER
VOLUMETRIC RATES
When recalculating the rates for any past historical year it is virtually impossible to match the rates actually charged. This is because the actual revenue, cost, and demand data used to recalculate past rates will invariably differ from the assumptions used in the original rate calculation. Thus, the key objective of the FY 2021 rate comparisons made by Raftelis is not to achieve perfection. Instead, it is to determine if the recalculated FY 2021 rates are reasonably correlated to the actual FY 2021 rates charged by the Department. The concept of “reasonableness” in this context is qualitative in nature rather than quantitative in nature. This is because there is no specific industry standard that indicates that recalculated rates must fall within a certain percentage range of the actual rates charged in the past.
Table 1-5 shows a comparison of the Department’s actual FY 2021 water and reclaimed water volumetric rates vs. the FY 2021 rates recalculated by Raftelis. As discussed in Section 6.7.2 of this report, the differences shown for Residential rates in Tier 1B (line 4) and Tier 3 (line 6) are due to changes in the profile of water supply costs and customer usage characteristics when compared to the assumptions used in the FY 2016 COS Study. The differences shown for reclaimed water (lines 12 – 14) are due to changes in the profile of customer usage characteristics compared to the assumptions used in the FY 2016 COS Study. Notwithstanding these two exceptions, Raftelis concludes that the FY 2021 water and reclaimed water volumetric rates charged by the Department were generally aligned with the actual demands and associated costs imposed by each customer class.
Raftelis recommends no change to the water or reclaimed water volumetric rate structure.
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COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 7 Table 1-5: Recalculated FY 2021 Water and Reclaimed Water Volumetric Rates vs. Actual Line Customer Class
Actual
FY 2021 Rates
Recalculated
FY 2021 Rates $ Difference % Difference
1 Water
2 Residential
3 Tier 1A $0.00 $0.00 $0.00 0.0%
4 Tier 1B $2.44 $2.74 $0.31 12.5%
5 Tier 2 $4.66 $4.50 ($0.16) -3.5%
6 Tier 3 $6.81 $6.35 ($0.45) -6.6%
7 Commercial $3.62 $3.39 ($0.23) -6.5%
8 Industrial $3.62 $3.45 ($0.17) -4.7%
9 Irrigation $3.62 $3.57 ($0.05) -1.5%
10 11 Reclaimed Water
12 Peaking $2.36 $2.39 $0.03 1.3%
13 Non-Peaking $2.00 $1.77 ($0.23) -11.3%
14 Interruptible $2.00 $1.77 ($0.23) -11.3%
1.6.5. COMPARISON OF FY 2021 WATER AND RECLAIMED WATER DAILY
SERVICE CHARGES
Table 1-6 shows a comparison of the Department’s actual FY 2021 water and reclaimed water daily service charges vs. the FY 2021 daily service charges recalculated by Raftelis. We conclude that the Department’s FY 2021 water and reclaimed water daily service charges were generally aligned with the actual demands and associated costs imposed at each meter size. Raftelis recommends no change to the structure of the Department’s water and reclaimed water daily service charge structure.
Table 1-6: Recalculated FY 2021 Water and Reclaimed Water Daily Service Charges vs. Actual Line Meter Size
Actual FY 2021
Daily Service
Charges
Recalculated FY
2021 Daily
Service Charges $ Difference % Difference
1 5/8” or 3/4” $0.70 $0.72 $0.02 3.3%
2 1” $1.03 $1.10 $0.07 6.9%
3 1-1/2” $1.87 $2.07 $0.19 10.3%
4 2” $2.88 $3.22 $0.34 11.7%
5 3” $6.08 $6.87 $0.80 13.1%
6 4” $10.27 $11.68 $1.41 13.7%
7 6” $22.87 $26.11 $3.23 14.1%
8 8” $47.23 $53.99 $6.76 14.3%
9 10” $70.76 $80.92 $10.16 14.4%
10 12” $89.23 $102.07 $12.84 14.4%
11 16” $131.23 $150.16 $18.92 14.4%
1.6.6. COMPARISON OF FY 2021 FIRE LINE DAILY SERVICE CHARGES Table 1-7 shows a comparison of the Department’s actual FY 2021 water fire line daily service charges vs. the FY 2021 charges calculated by Raftelis. We conclude that the Department’s FY 2021 water fire line charges were generally aligned with the actual demands and associated costs imposed at each fire line diameter. Raftelis recommends no change to the structure of the Department’s water fire line charges.
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8 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 1-7: Recalculated FY 2021 Fire Line Daily Service Charges vs. Actual Line Fire Line Size
Actual
FY 2021 Daily
Fire Line Charges
Recalculated
FY 2021 Daily
Fire Line Charges $ Difference % Difference
1 2” $0.41 $0.37 ($0.04) -9.28%
2 3” $0.83 $0.82 ($0.01) -1.67%
3 4” $1.55 $1.58 $0.03 1.71%
4 6” $4.13 $4.31 $0.18 4.36%
5 8” $8.58 $9.02 $0.44 5.16%
6 10” $15.28 $16.11 $0.84 5.47%
7 12” $24.56 $25.94 $1.38 5.63%
8 16” $52.11 $55.11 $3.00 5.77%
1.6.7. COMPARISON OF FY 2021 SEWER VOLUMETRIC RATES
Table 1-8 shows a comparison of the Department’s actual FY 2021 sewer volumetric rates vs. the FY 2021 volumetric rates recalculated by Raftelis. Raftelis concludes that the FY 2021 sewer volumetric rates charged by the Department were generally aligned with the actual demands and associated costs incurred to serve customers.
Raftelis recommends no change to the sewer rate structure.
Table 1-8: Recalculated FY 2021 Sewer Volumetric Rates vs. Actual Line Billed Usage
Actual
FY 2021 Rates
Recalculated
FY 2021 Rates $ Difference
Actual
FY 2021 Rates
1 All $0.36 $0.38 $0.03 7.8%
1.6.8. COMPARISON OF FY 2021 SEWER DAILY SERVICE CHARGES Table 1-9 shows a comparison of the Department’s actual FY 2021 sewer daily service charges vs. the FY 2021 daily service charges calculated by Raftelis. As explained in Section 9.5 of this report, the differentials shown in Table 1-9 (e.g., lines 8, 9, and 10) are due to changes in the average daily winter water usage of customers with large meter sizes. Despite these differences, Raftelis concludes that the Department’s FY 2021 sewer daily service charges were generally aligned with the actual demands and associated costs imposed at each meter size. Raftelis recommends no change to the structure of the Department’s sewer daily service charges.
Table 1-9: Recalculated FY 2021 Sewer Daily Service Charge vs. Actual Line Meter Size
Actual FY 2021
Daily Service
Charges
Recalculated FY
2021 Daily
Service Charges $ Difference % Difference
1 5/8” or 3/4” $0.23 $0.21 ($0.02) -8.0%
2 1” $0.33 $0.32 ($0.01) -3.9%
3 1-1/2” $0.87 $0.84 ($0.04) -4.2%
4 2” $1.51 $1.33 ($0.18) -12.0%
5 3” $3.51 $3.98 $0.47 13.3%
6 4” $5.08 $4.14 ($0.94) -18.5%
7 6” $14.15 $14.39 $0.24 1.7%
8 8” $15.00 $22.79 $7.79 51.9%
9 10” $23.22 $54.43 $31.21 134.4%
10 12” $29.28 $54.43 $25.14 85.9%
11 16” $43.07 $54.43 $11.36 26.4%
City Council Regular Meeting - Page 869 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 9
2. Department Description
2.1. History
During the early years of the twentieth century, Long Beach seemed destined to someday become a large city. To sustain the expected growth anticipated to occur in future years, it was critical that the City identify and secure a reliable source of water. In recognizing the importance of this, on June 27, 1911, Long Beach voters approved the purchase of two private water companies that had been providing water supplies to the Long Beach population. On June 30, 1911, the Long Beach city council approved an emergency ordinance creating the Long Beach Water Department, giving the City its own municipal water agency to control the use, sale, and distribution of water owned or controlled by the City.
In 1931, two additional milestones took place for the Department. The first was the creation of the Long Beach Board of Water Commissioners (Board), which governs the Department and is comprised of five members appointed by the Mayor, subject to confirmation by the City Council. Members of the Board serve overlapping five-year terms to provide continuity of operations. That same year, the City also became one of the original 13 founding members of the Metropolitan Water District of Southern California (MWD). Joining MWD allowed the Department to eventually acquire imported water as a supplement to the City’s groundwater supplies.
In February 1988, the Department assumed responsibility for the various functions of the City’s sanitary sewer system, including operations and maintenance. In April 1990, the citizens of Long Beach passed a City Charter amendment that allowed greater autonomy for the Department in administering the City’s sanitary sewer operations.
2.2. Service Territory
The Department’s service area encompasses the boundaries of the City of Long Beach, the seventh largest city in the State, with an area of approximately 50 square miles (32.000 acres) and a population of approximately 500,000 with some customers outside the City limits. Customers include a range of residential properties, commercial and downtown high-rise buildings, and large industrial areas. The City is also home to different types of regionally important facilities, such as The Port of Long Beach, Long Beach Airport, California State University of Long Beach, major healthcare facilities, and large energy production facilities. The City is almost fully built-out and future development is expected to be focused on redevelopment in the downtown and urban areas along major highways or along major arterial roads.
2.3. Potable Water System
2.3.1. WATER SUPPLY
The Department obtains its potable water supply from groundwater wells located in the Central Basin Aquifer and imported water from MWD. As discussed in the Department’s Water Distribution System Master Plan dated September 2020 (Water Master Plan), the average production from the Central Basin was 29,930 AFY (26.7 MGD) during the period 2001 to 2019. The total amount of imported water purchased for the potable water system during this same period averaged 19,978 AFY (17.8 MGD).
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10 LONG BEACH MUNICIPAL WATER DEPARTMENT
Two groundwater basins underlie the Department’s service area, the Central Basin, and the West Coast Basin.
Both groundwater basins are managed by the Water Replenishment District of Southern California. As described in the Water Master Plan, the Department has an allowable pumping allocation of 32,692 AFY from the Central Basin and currently pumps all its groundwater supply from this source. The Department has an allowable pumping allocation of 0.7 AFY from the West Coast Basin but currently does not exercise its right to pump from this basin.
MWD is the purveyor of imported water for most of Southern California, providing supplemental water to 26 public agencies, including the Department through a regional distribution network of canals, pipelines, reservoirs, treatment plants, pump stations, hydropower plants, and other appurtenances.
2.3.2. HISTORICAL POTABLE WATER DEMAND AND PEAKING FACTORS As discussed in the Water Master Plan, a water system is designed to meet the maximum demands placed on it.
Maximum month and maximum day demands are important factors in sizing a system’s supply capability.
Maximum day demands usually dictate the design criteria for both system transmission and storage needs.
Maximum hour peak demands measure the adequacy of transmission, distribution, and operational storage capacity. Table 2-1 shows the potable water system demand and peaking factors for the period 2016-2019 as they appear in the Department’s Water Master Plan.
Table 2-1: Water System Demand and Peaking Factors (2016-2019) Demand Description Millions of Gallons per Day Acre-Feet per Year Minimum Day (1) 31,200,000 34,910
Minimum Month (2) 36,500,000 40,910
Average Day (3) 48,700,000 54,910
Maximum Month (2) 58,400,000 65,456
Maximum Day (1) 65,300,000 73,002
Peak Hour (4) 117,000,000 130,993
(1) Peaking factor based on 2016-2019 daily flow demands (2) Peaking factor based on 2016 - 2019 monthly flow demands (3) Average demand based on 2016 - 2019 total flow demand average (4) Based on the hydraulic model maximum day scenario, which includes diurnal use patterns for all water uses
2.3.3. WATER SYSTEM INFRASTRUCTURE
As described in the Water Master Plan, the Department’s existing potable water system consists of the following key components:
• Two primary pressure zones
• Approximately 4.8 million linear feet of (916 miles) of transmission and distribution mains with pipe diameters ranging from 2” through 54”
• 2 water storage tank farms
o Alamitos Tank Farm with 21 potable water tanks (69.3 MG total storage) o JW Johnson Tank Farm with 12 potable water tanks (39.6 MG total storage) • 3 pumping booster stations
• 24 active groundwater wells
• 11 imported water connections
• 7,010 fire hydrants
• 93,414 customer service connections
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COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 11 Pressure Zones
To accommodate the Department’s service area elevations, the potable system consists of two (2) primary pressure zones. The Main Zone covers 30,956 acres. It is an open pressure zone with 69.3 MG of storage at the Alamitos Tank Farm and 39.6 MG of storage at the JW Johnson Tank Farm. The tank farms have a high-water level in each tank of 203.75 feet. The Boosted Zone is supplied by the 32nd Street Booster Pump Station. The Boosted Zone elevations range from 20 feet to 130 feet.
Transmission and Distribution System
Of the Department’s 916 miles of transmission and distribution mains, approximately 41% percent are 6” in diameter and 27% are 8” in diameter. The majority of the Department’s water mains were constructed from 1940 to 1990. Approximately 20% of the Department’s transmission and distribution mains have been replaced in the past 20 years as part of the Department’s ongoing pipe replacement program.
Groundwater Wells
The Department owns and operates 24 active wells. The wells pump into a pipeline collection system that conveys groundwater to the Department’s Groundwater Treatment Plant. The total capacity of the groundwater wells is approximately 52.6 MGD. In addition, the Department also has an 8” permanent interconnection with the City of Lakewood. Well water from the City of Lakewood is also conveyed to the Groundwater Treatment Plant. The current average capacity of the City of Lakewood interconnection is 2.2 MGD.
Groundwater Treatment Plant
The Department has one Groundwater Treatment Plant with a capacity of 62.5 MGD. The treatment process includes coagulation, sedimentation, chlorine disinfection, filtration through fine coal and silicate sand, chloramine disinfectant, and fluoride. At the end of the treatment process, the treated water is stored in a 13 MG cistern (covered reservoir). The potable water is then pumped into the water distribution system via two booster pump stations.
Storage Tanks
The Department’s potable water system includes two tank farms with multiple storage tanks at each facility.
There is about 3.3 MGD of storage in each tank. The Alamitos Tank Farm includes 21 potable water storage tanks (total capacity of 69.3 MG) and 3 recycled water storage tanks. The JW Johnson Tank Farm (JWJ Tank Farm) includes 12 potable water storage tanks (total capacity of 39.6 MG).
Booster Pump Stations
The Department’s water distribution system includes three booster pump stations, two at the Groundwater Treatment Plant and the 32nd Street Booster Station. The pump stations at the Groundwater Treatment Plant pump treated groundwater into the distribution system and up to the storage tanks at the Alamitos Tank Farm.
The 32nd Street Booster Station 2.5 to 7 MGD of water to the Boosted Zone pressure zone.
Imported Water Connections
The Department has eleven (11) imported water connections with MWD.
2.4. Sewer System
The Department operates and maintains over 700 miles of sanitary sewer lines that deliver up to 40 million gallons of wastewater per day to the Sanitation Districts of Los Angeles County (LACSD) for treatment. Most of the wastewater delivered to the LACSD is directed to the Joint Water Pollution Control Plant in Carson located to the City Council Regular Meeting - Page 872 of 1385
12 LONG BEACH MUNICIPAL WATER DEPARTMENT
northwest of the City of Long Beach. The remaining portion of the customer wastewater discharges is delivered to the Long Beach Water Reclamation Plant (LBWRP).
2.5. Reclaimed Water System
2.5.1. LONG BEACH WATER RECLAMATION PLANT
LACSD owns and operates the LBWRP. The LBWRP treats wastewater collected from the cities of Long Beach, Lakewood, Cerritos, and other parts of Los Angeles County. However, the Department has exclusive rights to the full amount of tertiary effluent discharged from the LBWRP. The LBWRP has a maximum treatment capacity of about 25 million gallons per day. On an annual basis, the plant produces an average of 17,300 acre-feet of reclaimed water.
2.5.2. RECLAIMED WATER CUSTOMER BASE
In FY 2021, there were a total of 151 reclaimed water customers served by the Department. As described in the Department’s Water Resources Plan dated September 2019 (Water Resources Plan), irrigation customers (golf courses and landscape) account for the majority of reclaimed water service connections within the Department’s service area. The next largest single user of reclaimed water is THUMS Long Beach Company (THUMS), a consortium of oil companies. THUMS extracts oil from the eastern offshore section of California's Wilmington oil field beneath Long Beach Harbor and uses reclaimed water for groundwater injection to re-pressurize offshore oil- bearing strata to prevent land subsidence. The remainder of reclaimed water generated within the Department’s service area is projected to be for further treatment and injection into the Alamitos Seawater Barrier to prevent seawater from traveling into and degrading the groundwater in the Central Basin aquifer.
The Department has three (3) three 3.3 MGD reclaimed water storage tanks at Alamitos Reservoir and two pressure zones: a North Branch System, which flows to Virginia Lake, and a South Branch System which terminates at the intersection of Obispo Avenue and Second Street.
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COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 13
3. Regulatory Environment
3.1. Legal and Statutory Considerations
3.1.1. COMPLIANCE WITH PROPOSITION 218
Utility rates charged by California government agencies must comply with the requirements of Proposition 218.
Raftelis does not take a position as to the Department’s compliance with the requirements of Proposition 218 in FY 2021, and by extension, FY 2022. Instead, as noted throughout this report, we believe that the FY 2021 water, reclaimed water, and sewer rates charged by the Department were generally aligned with the actual demands and associated costs incurred to serve each customer class. Rates that meet this criterion are generally considered to align with industry-standard COS principles and the requirements of California Proposition 218.
3.1.2. OVERVIEW OF PROPOSITION 218
In November 1996, California voters approved Proposition 218, which amended the California Constitution by adding Article XIII C and Article XIII D. Article XIII D placed substantive limitations on the use of the revenue collected from property-related fees and on the amount of the fee that may be imposed on each parcel.
Additionally, it established procedural requirements for imposing new, or increasing existing, property-related fees.
The California Supreme Court has determined that water and sewer service fees are property-related fees. These provisions require that a property-related fee must meet all the following requirements:
• Revenues derived from the fee must not exceed the funds required to provide the property-related service.
• Revenues from the fee must not be used for any purpose other than that for which the fee is imposed.
• The amount of a fee imposed upon any parcel or person as an incident of property ownership must not exceed the proportional cost of the service attributable to the parcel.
• The fee may not be imposed for a service, unless the service is used by, or immediately available to, the owner of the property subject to the fee. A fee based on potential or future use of a service is not permitted and stand-by charges must be classified as assessments subject to the ballot protest and proportionality requirements for assessments.
• No fee may be imposed for general governmental services, such as police, fire, ambulance, or libraries, where the service is available to the public in substantially the same manner as it is to property owners.
The five substantive requirements in Article XIII D are structured to place limitations on (1) the use of the revenue collected from property-related fees and (2) the allocation of costs recovered by such fees to ensure that they are proportionate to the cost of providing the service attributable to each parcel.
As stated in the American Water Works publication, Manual of Water Supply Practice M1, Principles of Water Rates, Fees, and Charges, 7th Edition (AWWA Manual M1), “water rates and charges should be recovered from classes of customers in proportion to the cost of serving those customers.” Similarly, the Water Environment Federation (WEF) publication, Financing and Charges for Sewer Systems, WEF Manual of Practice No. 27, 4th Edition (WEF Manual 27), states, "the process of identifying the service characteristics of the utility's customers and distributing costs in proportion to their service demands are critical steps in the development of equitable rates and charges."
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14 LONG BEACH MUNICIPAL WATER DEPARTMENT
Proposition 218 requires that water rates cannot be “arbitrary and capricious,” meaning that the rate-setting methodology must be sound and that there must be a nexus between the costs and the rates charged in addition to meeting the substantive requirements set forth therein. California Courts have also made clear that, while agencies are authorized to use industry-standard rate-setting methodologies as set forth in AWWA Manual M1 and WEF Manual 27, rates for water and sewer service must meet the substantive requirements of Proposition 218. This study demonstrates that such requirements have been met for the Department’s water and sewer fees.
3.1.3. CALIFORNIA CONSTITUTION – ARTICLE X, SECTION 2
Article X, Section 2 of the California Constitution (established in 1976) states the following:
“It is hereby declared that because of the conditions prevailing in this State the general welfare requires that the water resources of the State be put to beneficial use to the fullest extent of which they are capable, and that the waste or unreasonable use or unreasonable method of use of water be prevented, and that the conservation of such waters is to be exercised with a view to the reasonable and beneficial use thereof in the interest of the people and for the public welfare.”
Article X, Section 2 institutes the need to preserve the State’s water supplies and to discourage the wasteful or unreasonable use of water by encouraging conservation. As such, public agencies are constitutionally mandated to maximize the beneficial use of water, prevent waste, and encourage conservation.
3.2. The Rate-Setting Process and Proposition 218
The probability of compliance with both industry-standard principles of COS equity and Proposition 218 can be enhanced through a thoughtful and comprehensive rate-setting process that includes the following key steps:
• Revenue Requirement Determination: The rate-setting process starts by determining the "test-year" (rate- setting year) revenue requirement from rates. The revenue requirement should sufficiently fund the utility’s O&M, debt service, capital expenses, and other identified costs with funding to reserves (positive cash) or using reserves (negative cash), all based on a long-term financial plan.
• COS Analysis: The annual cost of providing water and sewer service is distributed among customer classes in proportion to their service requirements. A COS analysis involves the following key steps:
▪ Assignment of Costs to Functions: Examples of water system functions include storage, treatment, and distribution. Examples of sewer system functions include collection, conveyance, and treatment.
▪ Allocation of Costs to Cost Causation Components: Examples of water cost components include base demand, maximum day demand, and maximum hour demand. Examples of sewer cost causation components include flow, biochemical oxygen demand, and suspended solids.
▪ Distribution of Costs to Customer Classes: Costs are distributed to customer classes in proportion to the demands they place on the water and sewer systems.
• Rate Design/Rate Calculations: Rates do more than simply recover costs. Properly designed rates should support and optimize a blend of various utility objectives, such as promoting cost-based water use efficiency, affordability for essential needs, and revenue stability, among other objectives.
City Council Regular Meeting - Page 875 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 15
4. Water Revenue Requirement
4.1. Validation of FY 2021 Water Rate Revenues
As an initial step in the FY 2021 water COS process, Raftelis validated the rate revenues reported in the Department’s financial accounting system. The validation required Raftelis to independently calculate FY 2021 rate revenues based on actual customer billing data obtained from the Department’s CIS. As shown on line 4 of Table 4-1, the Raftelis calculation of water and reclaimed water rate revenues was within 0.6% of the revenue reported in the Department’s financial accounting system. This calculated variance is within a reasonable range of accuracy and requires no further investigation.
Table 4-1: FY 2021 Water Rate Revenue Validation
Line Water and Reclaimed Water
FY 2021 Reported
Rate Revenue
FY 2021 Rate Revenue
Calculated by Raftelis $ Difference % Difference
1 Fixed Revenue
2 Potable Daily Service Charge $32,357,899 $31,488,702 ($869,197) -2.7% 3 Reclaimed Daily Service Charge $508,353 $506,631 ($1,723) -0.3% 4 Fire Line Charges $2,034,558 $2,034,558 $0 0.0% 5 Total Fixed Revenue $34,900,811 $34,029,891 ($870,920) -2.5% 6 7 Volumetric Revenue
8 Potable $74,435,459 $75,942,316 $1,506,857 2.0% 9 Reclaimed $4,887,556 $4,899,414 $11,858 0.2%
10 Total Volumetric Revenue $79,323,015 $80,841,731 $1,518,715 1.9% 11 12 Total Rate Revenue $114,223,826 $114,871,621 $647,795 0.6%
4.2. Adequacy of FY 2021 Water Cost Recovery
A second question that must be answered when assessing the Department’s FY 2021 rates is whether rate revenues were adequate to recover the actual operating and capital costs incurred to provide service. Table 4-2 shows the analysis completed by Raftelis which verifies the adequacy of FY 2021 cost recovery. Highlights of Table 4-2 include:
• The FY 2021 rate revenues shown on lines 1 - 12 of Table 4-2 were calculated based on billing data obtained from the Department’s CIS.
• The revenue requirement components (i.e., costs) shown in lines 15 - 25 are the actual costs recorded in the Department’s financial accounting system. Except for water supply costs, Raftelis did not audit the Department’s reported FY 2021 operating or capital costs.
• The revenue offsets shown in lines 30 – 38 were recorded in the Department’s financial accounting system.
• In FY 2021, approximately $114.9 million in rate revenues were collected from water and reclaimed water customers (line 12). After the inclusion of a Measure M transfer to the General Fund of $10.6 million (line 27) and an increase of cash reserves of $7.9 million (line 42), the final net revenue requirement incurred to provide water and reclaimed water service was also $114.9 million (line 43). From the perspective of Raftelis, the actual FY 2021 increase in cash reserves of $7.9 million was reasonable.
City Council Regular Meeting - Page 876 of 1385
16 LONG BEACH MUNICIPAL WATER DEPARTMENT
• Line 46 shows that the difference between total rate revenues (line 12) and the total net revenue requirement (line 43) is $0. This verifies the adequacy of the Department’s FY 2021 rates to pay for the costs incurred to provide water and reclaimed water service.
Table 4-2: FY 2021 Water Revenue Adequacy
Line Rate Revenue Amount Percentage of Total
1 Fixed Revenue
2 Potable Daily Service Charge $31,488,702 27.4%
3 Reclaimed Daily Service Charge $506,631 0.4%
4 Fire Line Charges $2,034,558 1.8%
5 Total Fixed Revenue $34,029,891 29.6%
6 7 Volumetric Revenue
8 Potable $75,942,316 66.1%
9 Reclaimed $4,899,414 4.3%
10 Total Volumetric Revenue $80,841,731 70.4%
11 12 Total Rate Revenue $114,871,621 100.0%
13 14 Revenue Requirement (Costs Paid for by Rates) Amount Percentage of Total 15 O&M Expenses
16 Potable $86,138,887 67.5%
17 Recycled $788,162 0.6%
18 Total O&M Expenses $86,927,049 68.2%
19 20 Capital Costs
21 Debt Service $6,221,000 4.9%
22 Rate Funded Capital Projects $23,828,647 18.7%
23 Total Capital Costs $30,049,647 23.6%
24 25 Subtotal $116,976,696 91.7%
26 27 Transfer to the General Fund $10,575,042 8.3%
28 Total Gross Revenue Requirement $127,551,738 100.0% 29 30 Less: Revenue Offsets
31 Water Other Unallocated Operating Revenue
32 Reclaimed Operating Revenue $9,093,359 72.5%
33 Water Accounting Revenue $1,100,508 8.8%
34 Water Development Revenue $1,088,710 8.7%
35 Conservation Revenue $48,044 0.4%
36 Existing Debt Proceeds $220,000 1.8%
37 Interest $187,187 1.5%
38 Total Revenue Offsets $545,858 4.4%
39 $12,545,922 100.0%
40 Total Costs Before Change in Cash Reserves
41 42 Change in Cash Reserves ($134,195)
43 Total Net Revenue Requirement $114,871,621
44 46 Difference (Line 12 Rate Revenues – Line 43 Net Revenue Requirement) $0
4.3. O&M Costs in the FY 2021 Revenue Requirement
As obtained from the Department's financial accounting system, the actual costs incurred to provide water service in FY 2021 included $86.9 million of operations and maintenance (O&M) expenses (line 18 in Table 4-2). This amount is 68.2% of the total FY 2021 gross revenue requirement of $127.5 million (line 28 of Table 4-2). Table 4-3 shows an itemized detail of actual FY 2021 O&M expenses.
City Council Regular Meeting - Page 877 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 17 Table 4-3: Detail of the FY 2021 Water O&M Revenue Requirement Line Service Amount Percentage of Total
1 Potable O&M
2 Undefined Expenses $993,519 1.1%
3 Executive Admin Expenses $1,116,425 1.3%
4 Commission Expenses $51,809 0.1%
5 Business Admin Expenses $1,173,074 1.3%
6 MIS Expenses $2,796,794 3.2%
7 Safety Expenses $336,225 0.4%
8 Security Expenses $894,080 1.0%
9 Accounting Expenses $916,686 1.1%
10 Budget Expenses $257,095 0.3%
11 Unallocated Expenses $4,579,690 5.3%
12 Legislation Expenses $366,971 0.4%
13 Public Affairs Expenses $457,010 0.5%
14 Eng. Admin Expenses $2,322,146 2.7%
15 Development Expenses $150 0.0%
16 GIS Expenses $693,715 0.8%
17 Inspection Expenses $239,719 0.3%
18 Pipelines Expenses $31,332 0.0%
19 Facilities Expenses $17,043 0.0%
20 Treatment Ops Admin Expenses $4,382 0.0%
21 Treatment Ops Expenses (Includes All Water Supply Costs) $48,830,646 56.2% 22 Water Quality Expenses $1,605,681 1.8%
23 Telemetry Expenses $458,724 0.5%
24 Conservation Expenses $2,091,995 2.4%
25 Water Ops Admin Expenses $702,030 0.8%
26 Support Admin Expenses ($7,701) 0.0%
27 Communications Expenses $579,574 0.7%
28 Fleet Services Expenses $1,411,864 1.6%
29 Warehouse Expenses $857,583 1.0%
30 Facilities Mgmt. Expenses $2,097,883 2.4%
31 Main Construction Expenses $5,906,177 6.8%
32 Meter Expenses $1,236,921 1.4%
33 Valve Ops Expenses $1,534,562 1.8%
34 Backflow Expenses $84,088 0.1%
35 Water Emergency Breaks Expenses $1,482,464 1.7%
36 Water Service Const Expenses $18,531 0.0%
37 Total Potable O&M $86,138,887 99.1%
38 39 Reclaimed O&M
40 Reclaimed Unallocated Expenses $37 0.0%
41 Eng. Admin Expenses $11,687 0.0%
42 Reclaimed Distribution $715,738 0.8%
43 Meter Expenses $60,700 0.1%
44 Total Reclaimed O&M $788,162 0.9%
45 46 Total O&M $86,927,049 100.0%
4.4. Validation of FY 2021 Water Supply Costs
Water supply costs are the largest single cost component incurred by the Department. In FY 2021, the Department reported water supply costs of $40.1 million which is equivalent to 31.4% of the FY 2021 gross revenue requirement of $127.5 million (line 28 of Table 4-2) and 34.9% of the net revenue requirement of $114.9 million (line 43 of Table 4-2). Table 4-4 shows the Raftelis validation of water supply costs which resulted in a water supply cost estimate within 0.2% of that reported by the Department. No additional analysis is required.
City Council Regular Meeting - Page 878 of 1385
18 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 4-4: Validation of FY 2021 Water Supply Costs
Line Description FY 2021
1 Actual Potable Water Sales (AF) 49,558 AF
2 Water Loss 4.0%
3 Potable Water Demand w/ Loss 51,541 AF
4 5 Available Annual Domestic Supply
6 Groundwater (WRD) 32,692 AF
7 Lakewood Interconnect 900 AF
8 MWD Tier 1 57,560 AF
9 10 Water Supply Used to Meet Demand
11 Groundwater (WRD) 32,692 AF
12 Lakewood Interconnect 900 AF
13 MWD Tier 1 17,949 AF
14 Total 51,541 AF
15 16 Water Supply Costs
17 Groundwater (WRD) Pumped Quantity (%) 32,692 AF
18 Oct-Jun 60.0%
19 Jul -Sep 40.0%
20 Groundwater Assessment ($/AF)
21 Oct-Jun $382 / AF
22 Jul -Sep $394 / AF
23 Total Groundwater Supply Cost $12,645,266
24 25 Lakewood Interconnect 900 AF
26 Lakewood Interconnect ($/AF) $662 / AF
27 Total Lakewood Interconnect Costs $595,800
28 29 MWD Variable Costs
30 MWD Purchased Before Jan 1 (%) 20.0%
31 MWD Purchased After Jan 1 (%) 80.0%
32 MWD Tier 1 17,949 AF
33 MWD Rate Increase 2.7%
34 Oct – Dec $1,078 / AF
35 Jan – Sep $1,104 / AF
36 MWD Tier 2
37 Oct – Dec $1,165 / AF
38 Jan – Sep $1,193 / AF
39 MWD Purchased Variable Costs $19,721,997
40 41 MWD Fixed Costs
42 MWD RTS $1,733,220
43 MWD Capacity Reservation Charge $783,900
44 Total Fixed $2,517,120
45 46 MWD LB07A Purchase
47 Tier 1 MWD Purchases for LB07A 4,150 AF
48 % Purchased before January 1 50%
49 % Purchased after January 1 50%
50 Total MWD LB07A Purchase $4,548,400
51 52 Total MWD Costs $26,787,517
53 54 Total Water Supply Costs Calculated by Raftelis $40,028,583 55 56 Reported Actuals $40,107,131
57 Difference -0.2%
City Council Regular Meeting - Page 879 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 19
4.5. Rate Funded Capital Costs in the FY 2021 Revenue
Requirement
Table 4-5 provides a detail of the rate funded capital improvement expenditures included in the FY 2021 water revenue requirement. The expenditures for each project were provided by Department staff.
Table 4-5: Detail of FY 2021 Water Rate Funded Capital Expenditures Line CIP Category Cost
1 In-House Water Main Replacement $2,500,000
2 Meter Replacement Program $50,000
3 Large Valve Replacement $0
4 Water Developer Projects $0
5 Water Pipeline Emergency Repair $0
6 Water Pipeline Improvement $2,520,000
7 Water Pipeline Replace/Install $4,680,973
8 Alamitos Reservoir Improvements $2,116,880
9 Water SCADA Improvements $295,351
10 Treatment Plant Improvements $819,682
11 New Well Development/Equipment $0
12 Water Desalination $0
13 Water Supply Improvements $650,900
14 Well Rehabilitation $8,211,833
15 Reclaimed Water Emergency Repairs $0
16 Reclaimed Water Improvements $207,400
17 Reclaimed Water Pipe Replace/Install $0
18 Reclaimed Developer Projects $0
19 Water Facility Improvements $1,962,815
20 Subtotal $24,015,834
21 22 Less: Available Proceeds from Debt $187,187
23 Total Rate Funded Capital Expenditures $23,828,647
City Council Regular Meeting - Page 880 of 1385
20 LONG BEACH MUNICIPAL WATER DEPARTMENT
5. Water Customer Units of
Service
The FY 2021 COS Update features actual FY 2021 customer class demand information. This section of the report highlights key demand information used in the allocation of costs and the development of customer class rates as discussed in Section 6.
5.1. FY 2021 Customer Class Peaking Factors
Water utility systems must be designed, constructed, and operated to meet the peak demands imposed by customers.
Because water utilities incur higher costs to serve customer class peak volumetric demands, customer classes that impose higher peak demands are allocated more volumetric costs in the COS process and ultimately pay higher rates.
For this reason, estimating the peaking factors of each customer class is a critical component of the COS analysis.
Table 5-1 shows the customer class peaking factors used in the FY 2021 COS Update. The peaking factors are based on actual FY 2021 customer billed consumption. The maximum day peaking factors for each customer class are determined by dividing maximum month demand by average month demand. Maximum hour peaking factors were not used to allocate costs to customer classes due to the lack of actual hourly demand data from the Department’s customer billing system.
Table 5-1: Water Customer Class Peaking Factors
Line Customer Class
FY 2021
Total Usage
Maximum
Month Usage
Average
Month Usage
Peaking Factor
(Maximum Month/Average Month
1 Potable
2 Residential
3 Tier 1 9,161,210 812,564 763,434 1.06
4 Tier 2 4,970,154 483,422 414,180 1.17
5 Tier 3 1,128,699 135,970 94,058 1.45
6 7 Non-Residential 6,327,548 635,108 527,296 1.20
8 Commercial 5,304,634 517,553 442,053 1.17
9 Industrial 127,133 13,369 10,594 1.26
10 Irrigation 895,781 106,502 74,648 1.43
11 12 Reclaimed
13 Peaking 428,973 55,272 35,748 1.55
14 Non-Peaking (1) 854,007 1.00
15 Interruptible (2) 959,242 1.00
16 (1) Non-Peaking is not charged based on peaking factors since they aren't using during peak 17 (2) Interruptible is not charged based on peaking factors since they can be interrupted during peak
5.2. FY 2021 Customer Accounts
The actual number of FY 2021 customer accounts was calculated using data obtained from the Department’s CIS.
As shown in Table 5-2 there were a total of 87,841 potable water customer accounts and 151 reclaimed water customer accounts service by the Department at the end of FY 2021.
City Council Regular Meeting - Page 881 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 21
Table 5-2: FY 2021 Water Accounts by Meter Size and Customer Class Line Meter Size (inches)
Potable Water Reclaimed
Water Single Family Multi Family Duplex Commercial Industrial Irrigation Total Potable 1 5/8" or 3/4” 53,559 5,922 7,133 2,187 100 119 69,020 1 2 1" 5,889 2,653 1,148 1,234 57 226 11,207 5
3 1 1/2" 379 2,586 63 900 33 242 4,203 12
4 2" 52 738 7 1,345 36 410 2,588 65
5 3" 2 119 0 288 5 69 483 20
6 4" 0 33 0 115 1 15 164 23
7 6" 0 28 0 55 2 5 90 16
8 8" 0 10 0 50 2 1 63 8
9 10" 0 1 0 19 0 0 20 1
10 12" 0 0 0 3 0 0 3 0
11 16" 0 0 0 0 0 0 0 0
12 Total 59,881 12,090 8,351 6,196 236 1,087 87,841 151
5.3. FY 2021 Equivalent Meters
To allocate non-volumetric meter-related costs appropriately, the number of 3/4” equivalent meters that existed in FY 2021 must be estimated. By using equivalent meters instead of the actual meter count, the COS analysis reflects the fact that larger meters impose greater demands on the system and thus are more expensive to install, maintain, and replace. The number of equivalent meters is based on the maximum hydraulic capacity at each meter size (gallons per minute of maximum flow). Equivalent meters represent the potential demand on a water system expressed in terms of the smallest commonly used meter size on the system. For example, if a 3/4" meter has a maximum capacity of 30 gallons per minute and a 3" meter has a maximum capacity of 350 gallons per minute, the number of equivalent 3/4" meters represented by a single 3" meter would be 11.7 (350/30 = 11.7).
As shown in Table 5-3 there were a total of 137,686 equivalent 3/4” equivalent connections (potable and reclaimed) at the end of FY 2021. The meter types and flow rate equivalencies are shown in Table 5-3. Note that the flow equivalencies used to estimate the number of equivalent 3/4” meters were obtained from AWWA Manual M1 and are the same as those used in the FY 2016 Study.
Table 5-3: FY 2021 Water Accounts and Equivalent 3/4” Meters Line
Meter Size
(inches) Meter Type Accounts
Flow
Equivalency
Flow
Equivalency
Ratio
Billing &
Customer
Service Flow
Equivalency
Ratio
Total
Equivalent
Meters
1 5/8" or 3/4" Displacement 69,020 30 1.00 1.00 69,020 2 1" Displacement 11,207 50 1.67 1.00 18,678
3 1 1/2" Displacement 4,203 100 3.33 1.00 14,010
4 2" Displacement 2,588 160 5.33 1.00 13,803
5 3" Compound 483 350 11.67 1.00 5,635
6 4" Compound 164 600 20.00 1.00 3,280
7 6" Compound 90 1,350 45.00 1.00 4,050
8 8" Class 2 Turbine 63 2,800 93.33 1.00 5,880
9 10" Class 2 Turbine 20 4,200 140.00 1.00 2,800
10 12" Class 2 Turbine 3 5,300 176.67 1.00 530
11 16" Class 2 Turbine 0 7,800 260.00 1.00 0
12 Total 87,841 137,686
City Council Regular Meeting - Page 882 of 1385
22 LONG BEACH MUNICIPAL WATER DEPARTMENT
5.4. FY 2021 Water Private Fire Lines
To allocate non -volumetric fire protection costs appropriately, the actual number of private fire lines must be estimated. Table 5-4 provides FY 2021 data for private fire lines, public fire hydrants, and private fire lines.
Table 5-4: FY 2021 Water Private Fire Lines and Public Hydrants Line
Fire Service
Size
Public
Hydrants
Private
Hydrants
Private Fire
Lines
1 2" 61
2 3" 52
3 4" 356
4 6" 7,054 65 425
5 8" 256
6 10" 54
7 12" 3
8 16" 2
9 Total 7,054 65 1,209
City Council Regular Meeting - Page 883 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 23
6. Water Cost Allocations
6.1. COS Methodology
Demonstrating proportionality when calculating rates is a critical component of ensuring compliance with Proposition 218. Similar to the 2016 COS Study, the FY 2021 update recovers fixed costs through the Department’s fixed daily service charge. Fixed costs are spread over all accounts or by meter size depending on the type of expense. As such, actual customer usage was not considered nor is it necessary for calculating each customer’s fixed daily service charge.
Conversely, costs that are variable in nature are allocated among customer classes based on the proportionate demands they impose on the Department’s water utility system. AWWA Manual M1 agrees with Proposition 218 that “the costs of water rates and charges should be recovered from customer classes in proportion to the cost of serving those customers.” The Department’s revenue requirements are, by definition, the cost of providing service.
This cost is then used as the basis to develop unit costs for each water cost causation component and to allocate costs to the various customer classes in proportion to the level of volumetric water service rendered.
Individual customer demands vary depending on the nature of the use at the location where service is provided.
For example, water service demand for a family residing in a typical single-family home is different than the water service demand for a commercial, primarily due to peak use behavior which drives the costs incurred to size infrastructure to meet this demand. The concept of proportionality requires that cost allocations consider both the average quantity of water consumed (base fixed demand) and the peak rate (maximum day demand) at which it is consumed. As noted previously, a water system is designed to meet peak demands. The additional costs associated with designing, constructing, and maintaining facilities to meet these peak demands must be allocated to those customers whose usage requires facilities to upsize in response to peak demand.
In allocating the cost-of-service, the industry standard discussed in AWWA M1 Manual is to group customers with similar demand characteristics into customer classes. Rates are then developed for each customer class, with each individual customer paying the average allocated customer class average cost.
Generally speaking, customers place the following demands on the water system and water supplies:
• The system capacity1 (for treatment, storage, and distribution) that must be maintained to provide reliable service to all customers at all times
• The level of water efficiency as a collective group
• The number of customers requiring customer services such as bill processing, customer service support, and other administrative services
Joint costs are proportionately shared among all customers in the system based on their service requirements; some specific costs, such as pumping charges, are borne by a subgroup of customers based on the characteristics of that group alone (i.e., elevation zone).
1 System capacity is the system’s ability to supply water to all delivery points at the time when demanded. The time of greatest demand is known as peak demand.
City Council Regular Meeting - Page 884 of 1385
24 LONG BEACH MUNICIPAL WATER DEPARTMENT
6.2. Steps in the COS Process
After the determination of the net revenue requirement from rates as discussed in Section 4 of this report, a COS analysis distributes the revenue requirement to each customer class based on their proportionate share of total system water demands and associated costs. To accomplish this objective, the FY 2016 COS study and the FY 2021 COS Update required Raftelis to complete a multi-step cost allocation process using industry-standard cost allocation principles as presented in AWWA Manual M1. Whenever possible, the same general cost allocation procedures used in the FY 2016 COS Study were also used in the FY 2021 Update.
The key steps in the water COS process completed for the Department, in both the FY 2021 COS Update and the FY 2016 COS are shown in Figure 6-1 and described below.
Figure 6-1: The COS Process
Step 1: Identification of Revenue Requirement Components: The overall FY 2021 revenue requirement of $114.9 million shown in line 43 of Table 4-1 consists of both operating costs (e.g., O&M expenses) and capital costs (e.g., debt service, rate funded capital expenditures, or changes in cash reserve balances). In Step 1, each individual cost and revenue offset is identified as being either operating or capital in nature to facilitate the allocation of costs described in Steps 2 -5 below.
Step 2: Cost Functionalization: Utilities incur O&M and capital costs to perform specific functional activities such as obtaining water supplies, storage, treatment, pumping, transmission, distribution, meters maintenance, billing, and customer service. The cost functionalization process assigns the costs reflected in the annual net revenue requirement to the specific functions they were incurred to perform.
Step 3: Allocation to Cost Causation Components: Each utility function is designed to meet one or more different types of customer demands. For example, the water treatment function may be designed to meet base fixed demand (i.e., average day) and maximum day demands. Similarly, the distribution function may be designed to meet a combination of maximum day and maximum hour demands. The different types of customer demands that must be met by the utility system are called cost causation components. Cost causation components include variable demands such as base fixed, maximum day, and maximum hour demands. They also include fixed demands that do not vary with the volume of water used, such as billing and customer service or meter Step 1:
Identification of
Operating and
Capital Costs
Step 2:
Functionalization
of Costs
Step 3:
Allocation of Costs
to Cost Causation
Components
Step 4:
Allocation of Costs
to Fixed and
Variable Rate
Components
Step 5:
Customer Class
Rate Calculation
City Council Regular Meeting - Page 885 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 25 maintenance. The cost allocation process assigns the functionalized costs reflected in the annual revenue requirements to cost causation components.
Step 4: Determination of Customer Class Units of Service: In this step of the COS analysis, the total system units of service for each cost causation component are determined. This allows for the calculation of a total system unit COS for each of the components (e.g., $/ccf cost of service base demand or the $/bill of proving billing and customer service functions to each customer).
Step 5: Customer Class Rate Calculation: The final step in the COS process is the distribution of costs to customer classes and the calculation of customer class volumetric rates and daily service charges. This is accomplished by multiplying the total system unit cost-of-service for each cost causation component as developed in Step 4 by the specific customer class units of service for each cost causation component. The summation of the costs across all cost causation component results in the distribution of the proportionate share of the annual total system revenue requirement to each customer class.
6.3. Step 1: Identification of Operating and Capital Costs The starting point of the water COS analysis is to identify the operating and capital cost components of the annual revenue requirement from rates. Table 6-1 on the next page shows this for the Department's actual FY 2021 revenue requirement. The information shown in Table 6-1 was provided in earlier tables presented in this report.
For example:
• See Table 4-2 for the derivation of the gross revenue and net revenue requirements from rates shown in lines 53 and 73 of Table 6-1
• See Table 4-3 for a detail of O&M expenses as shown in lines 1 - 46 of Table 6-1
• See Table 4-5 for a detail of rate funded CIP expenditures as shown in line 51 of Table 6-1
The revenue offsets in shown Table 6-1 include operating revenues from unmetered construction water sales and the reimbursement of imported water purchases for the Vander Lans facility2. Non-operating revenues include interest income, rental income, service connection, grants, other reimbursements, and non-operating revenues from other miscellaneous sources. Other reimbursements include those received from MWD for the Department’s Lawn-to-Garden Conservation Incentive Program and the reimbursement of the O&M costs at the Vander Lans facility3. Grants are non-recurring cash receipts from qualifying federal programs. As shown in line 68 of Table 6-1 (and also line 48 of Table 4-2) the Department had $12.1 million of revenue offsets in FY 2021 which reduced
2 Since Oct 1, 2005, the Department, through a contract with WRD has operated the Leo J. Vander Lans Advanced Water Treatment Facility, which enables WRD to use recycled water from the Long Beach Water Reclamation Plant to replace imported MWD water previously supplied to the Alamitos Barrier. In 2015, the Vander Lans facility expansion was completed, providing the operation flexibility to meet the needs of the barrier almost completely with recycled water and minimize imported water needs. The Alamitos Barrier is an engineered freshwater pressure ridge and seawater trough constructed to prevent seawater instruction into the Central Groundwater Basin of Los Angeles County and neighboring Orange County Groundwater Basin.
3 Includes 100% of labor costs, 75% of Power, chemical and other treatment reclaimed distribution costs incurred in the Department’s Treatment Reclaimed Distribution cost center along with reimbursement from WRD of recycled raw water used at the Vander Lans facility at $100/AF.
City Council Regular Meeting - Page 886 of 1385
26 LONG BEACH MUNICIPAL WATER DEPARTMENT
the number of rate revenues that were collected from customers from $97.5 million (line 53) to $84.5 million (line 73).
Table 6-1: FY 2023 Water Revenue Requirement Operating and Capital Cost Components Line Revenue Requirement Component Operating Capital Total 1 Potable O&M
2 Undefined Expenses $993,519 $0 $993,519
3 Executive Admin Expenses $1,116,425 $0 $1,116,425
4 Commission Expenses $51,809 $0 $51,809
5 Business Admin Expenses $1,173,074 $0 $1,173,074
6 MIS Expenses $2,796,794 $0 $2,796,794
7 Safety Expenses $336,225 $0 $336,225
8 Security Expenses $894,080 $0 $894,080
9 Accounting Expenses $916,686 $0 $916,686
10 Budget Expenses $257,095 $0 $257,095
11 Unallocated Expenses $4,579,690 $0 $4,579,690
12 Legislation Expenses $366,971 $0 $366,971
13 Public Affairs Expenses $457,010 $0 $457,010
14 Eng. Admin Expenses $2,322,146 $0 $2,322,146
15 Development Expenses $150 $0 $150
16 GIS Expenses $693,715 $0 $693,715
17 Inspection Expenses $239,719 $0 $239,719
18 Pipelines Expenses $31,332 $0 $31,332
19 Facilities Expenses $17,043 $0 $17,043
20 Treatment Ops Admin Expenses $4,382 $0 $4,382
21 Treatment Ops Expenses (Includes All Water Supply Costs) $48,830,646 $0 $48,830,646 22 Water Quality Expenses $1,605,681 $0 $1,605,681
23 Telemetry Expenses $458,724 $0 $458,724
24 Conservation Expenses $2,091,995 $0 $2,091,995
25 Water Ops Admin Expenses $702,030 $0 $702,030
26 Support Admin Expenses ($7,701) $0 ($7,701)
27 Communications Expenses $579,574 $0 $579,574
28 Fleet Services Expenses $1,411,864 $0 $1,411,864
29 Warehouse Expenses $857,583 $0 $857,583
30 Facilities Mgmt. Expenses $2,097,883 $0 $2,097,883 31 Main Construction Expenses $5,906,177 $0 $5,906,177 32 Meter Expenses $1,236,921 $0 $1,236,921
33 Valve Ops Expenses $1,534,562 $0 $1,534,562
34 Backflow Expenses $84,088 $0 $84,088
35 Water Emergency Breaks Expenses $1,482,464 $0 $1,482,464 36 Water Service Const Expenses $18,531 $0 $18,531
37 Total Potable O&M $86,138,887 $0 $86,138,887
38 39 Reclaimed O&M $0 $0 $0
40 Reclaimed Unallocated Expenses $37 $0 $37
41 Eng. Admin Expenses $11,687 $0 $11,687
42 Reclaimed Distribution $715,738 $0 $715,738
43 Meter Expenses $60,700 $0 $60,700
44 Total Reclaimed O&M $788,162 $0 $788,162
45 46 Total O&M Costs $86,927,049 $0 $86,927,049
47 48 Other Costs
49 Existing Debt Service $0 $6,221,000 $6,221,000
50 Proposed Debt Service $0 $0 $0
51 Rate Funded Capital Projects $0 $23,828,647 $23,828,647 52 Water Fund Transfer $10,575,042 $0 $10,575,042
53 Total Gross Revenue Requirement $97,502,091 $30,049,647 $127,551,738 54 55 Less: Revenue Offsets
56 Other Operating Revenues
57 Water Other Unallocated Operating Revenue $9,093,359 $0 $9,093,359 58 Reclaimed Operating Revenue $1,100,508 $0 $1,100,508 59 Water Accounting Revenue $1,088,710 $0 $1,088,710
60 Water Development Revenue $48,044 $0 $48,044
61 Reclaimed Distribution Revenue $0 $0 $0
62 Conservation Revenue $220,000 $0 $220,000
63 Warehouse Revenue $0 $0 $0
64 Existing Debt Proceeds $0 $187,187 $187,187
65 Non-Operating Revenues $0 $0 $0
66 Interest $545,858 $0 $545,858
67 Other Non-Operating Revenues $0 $0 $0
68 Total Revenue Offsets $12,358,735 $187,187 $12,545,922 69 70 Adjustment for Change in Cash Reserves $0 ($134,195) ($134,195) 73 Net Revenue Requirement from Rates $85,143,356 $29,996,656 $114,871,621 City Council Regular Meeting - Page 887 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 27
6.4. Step 2: Cost Functionalization
After determining the FY 2021 operating and capital cost revenue requirement components based on actual cost data, the next step in the COS process is to assign the revenue requirement from rates to specific functional categories and then allocate these functionalized costs to specific cost causation components. The assignment of costs to functional categories answers the question: What water utility functions are supported by (i.e., paid for) the rate revenue provided by customers? Cost causation components reflect the types of demands the water utility must have the ability to serve. Table 6-2 shows the functional categories and the cost causation components used in the FY 2021 COS update. These are the same functional categories and cost causation components used in FY 2016 COS Study.
Table 6-2: Water Utility Functions
Line Functions Costs Associated with Each Function
1 Potable Water
2 Potable Supply
Direct water supply costs to produce potable water before distributing to customers, including power costs for treatment, and pumping from groundwater wells, chemical costs, and costs of purchasing water from the City of Lakewood and MWD
3 Production Plant / Wells Operating and capital costs associated with production facilities to produce water 4 Storage Costs associated with water storage within the distribution or transmission systems 5 Pumping Costs associated with pumping water from the treatment facilities to the transmission and distribution systems
6 Treatment Costs associated with treating water to potable water standards, excluding power and chemical costs
7 Transmission Costs associated with transporting water from the point of treatment through a major trunk to locations within the distribution systems
8 Distribution Costs associated with the smaller local service distribution mains transporting water to specific locations within the service area
9 Transmission and Distribution Joint transmission and distribution costs 10 Fire Protection Costs associated with installing and maintaining fire hydrants 11 Meter Services Costs associated with providing customer water meters and associated testing and replacements 12 General and Administrative Represents all other costs that do not serve a specific function 13 Water Replenishment District Water Replenishment District costs allocated to potable water supply 14 Billing Billing costs including meter reading, billing, and collection costs associated with preparing a water customer bill and processing funds received from water users 15 Customer Service Costs include costs associated with customer accounts such as processing complaints, responding to customer inquiries, performing rereads, etc.
16 Conservation Costs associated with conservation programs and services offered to Department customers 17 Revenue Offsets Miscellaneous revenue sources such as reimbursements and grants that offset the revenue requirement from rates
18 Water Rights Costs to acquire and maintain water rights 19 Reclaimed Water
20 Reclaimed Water Average Demand Costs associated with meeting reclaimed water average day demand 21 Reclaimed Water Storage Costs associated with reclaimed water storage within the reclaimed water distribution system 22 Reclaimed Water Pumping Costs associated with pumping within the reclaimed water distribution system 23 Reclaimed Water Distribution Costs associated with the reclaimed water distribution mains transporting water to specific locations within the service area
24 Water Replenishment District Water Replenishment District costs allocated to reclaimed water supply 25 Capital Costs Allocations
26 Capital Costs Capital-related costs such as debt service, rate funded capital expenditures, changes in cash reserves, or facilities-related expenses allocated based on assets
Raftelis reviewed and functionalized the Department’s O&M expenses and assets for the water and reclaimed water systems. Table 6-3 summarizes the functionalized actual O&M costs for FY 2021.
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28 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 6-3: Functionalized FY 2021 Water O&M Costs
Line Type of Costs Cost
1 Potable Water $27,383,317
2 Potable Supply $27,383,317
3 Production Plant $8,305,519
4 Treatment $10,412,126
5 Distribution $2,874,622
6 Transmission and Distribution $7,490,602
7 Meter Services $1,381,709
8 Gen & Admin $9,652,623
9 Billing $517,147
10 Customer Service $3,427,655
11 Conservation $2,091,995
12 Total Potable Water O&M Costs $73,537,315
13 14 Reclaimed Water
15 Reclaimed Water Average Demand $11,687
16 Reclaimed Water Distribution $715,738
17 Water Replenishment District $12,645,266
18 Total Reclaimed Water O&M Costs $13,372,691
19 20 Capital Costs Allocations
21 Capital Costs Identified as O&M $17,043
22 Total Capital Costs $17,043
23 24 Total O&M Costs $86,927,049
Table 6-4 shows FY 2021 functionalized water utility fixed asset values expressed on a replacement cost basis. To reduce rate variability from year-to-year, the allocation of fixed assets to functions and cost causation components is used as a basis for allocating the capital cost revenue requirement. The FY 2021 asset values were escalated from their original acquisition cost to current dollars using the Engineering News Record – Construction Cost Index (ENR CCI) for Los Angeles.
Table 6-4: FY 2021 Functionalized Water Asset Values
Line Type of Asset Value
1 Potable Water
2 Wells $56,250,232
3 Storage $115,901,615
4 Pumping $19,184,737
5 Treatment $163,200,809
6 Transmission $150,048,989
7 Distribution $476,077,508
8 Transmission & Distribution $580,054
9 Fire Protection $26,375,164
10 Meter Services $7,152,898
11 General and Administrative $39,702,751
12 Customer Service $562,744
13 Water Rights $17,093,039
14 Total Potable Water Assets $1,072,130,539
15 16 Reclaimed Water
17 Reclaimed Water Storage $4,856,281
18 Reclaimed Water Pumping $1,987,723
19 Reclaimed Water Distribution $107,289,096
20 Total Reclaimed Water Assets $114,133,100
21 22 Total Assets $1,186,263,639
City Council Regular Meeting - Page 889 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 29
6.5. Step 3: Allocation to Cost Causation Components
The allocation of costs to cost causation components answers the question: What types of customer demands are met by (i.e., paid for) by each function of the water utility system? Raftelis used the Base-Extra Capacity method of cost allocations, as described in the AWWA M1 Manual. These cost causation components include:
• Water Supply Costs are direct costs incurred to produce or purchase water.
• Base Costs are the operating and capital costs of the water system associated with serving customers at a constant, or average, rate of use.
• Extra Capacity Costs or peaking costs represent the costs incurred to meet customer peak demands for water in excess of average day usage. Total extra capacity costs are subdivided into costs associated with maximum day and maximum hour demands. The maximum day demand is the maximum amount of water used in a single day in a year. The maximum hour demand is the maximum usage in an hour on the maximum usage day. Various facilities are designed to meet customer peaking needs. For example, transmission lines or reservoirs (storage) are designed to meet maximum day requirements. Both have to be designed larger than they would be if the same amount of water were being used at a constant rate throughout the year.
The cost associated with constructing a larger line or reservoir is based on system-wide peaking factors. For example, if the maximum day peaking factor is 2.0, then certain system facilities have to be designed at least twice as large as required to meet average daily demand. In this case, half of the cost would be allocated to base fixed (or average day demand) and the other half allocated to maximum day. The calculation of the maximum hour and maximum day peaking factors is explained below. Different facilities, such as distribution and storage facilities, and the O&M costs associated with those facilities are designed to meet the peaking demands of customers. Therefore, extra capacity4 costs include the O&M and capital costs associated with meeting peak customer demand. This method is consistent with the AWWA M1 Manual and is widely used in the water industry to perform COS analyses.
• Customer Service Costs include such costs as meter reading, billing, collecting, and customer accounting.
• Meter Costs or meter service costs include maintenance and capital costs associated with servicing meters.
These costs are assigned based on meter size or equivalent meter capacity.
• Fire Protection includes proportional costs to provide fire protection capacity.
• Conservation includes costs associated with conservation programs and services offered for Department customers.
• Revenue Offsets includes non-rate revenues that can be used to provide affordability for essential use and other affordability programs.
4 The terms extra capacity, peaking, and capacity costs are used interchangeably.
City Council Regular Meeting - Page 890 of 1385
30 LONG BEACH MUNICIPAL WATER DEPARTMENT
6.5.1. SYSTEM PEAKING FACTORS AND DEMAND RATIOS
After establishing the functions and cost causation components to be used in the cost allocation process, system demand ratios must be calculated to accurately allocate the functionalized costs to each cost causation component.
Table 6-5 shows the system peaking factors and demand ratios used to allocate variable costs in the FY 2021 COS update. The potable water demand ratios shown in Table 6-5 were taken from the Water Master Plan and reflect data from the period 2016 – 2019. The reclaimed water demand ratios were calculated by Raftelis based on data provided by Department staff.
Table 6-5: Water System Peaking Factors and Demand Ratios System Demand Ratios
Line Type of Demand
Demand
(MGD)
System
Peaking Factors
Base Fixed
Demand
Maximum Day
Demand
Maximum Hour
Demand
1 Potable Water
2 Average Day (Based Fixed) 48.70 1.00 100.0%
3 Maximum Day 65.30 1.34 74.6% (1) 25.4% (2)
4 Maximum Hour 117.00 2.40 41.6% (3) 14.2% (4) 44.2% (5) 5 6 Reclaimed Water
7 Average Day (Based Fixed) 6.19 1.00 100.0%
8 Maximum Day 11.58 1.87 53.5% (6) 46.5% (7)
9 Maximum Hour 19.44 3.14 31.8% (8) 27.7% (9) 40.4% (10)
Derivation of System Demand Ratios:
74.6% = 1.00 Base Peaking Factor /1.34 Max Day Peaking Factor
25.4% = 100% - 74.6%
41.6% = 1.00 Base Peaking Factor /2.40 Max Hour Peaking Factor
14.2% = (1.34 Max Day Peaking Factor – 1.00 Base Peaking Factor ) / 2.40 Max Hour Peaking Factor
44.2% = 100% - (41.6% + 14.2%)
53.5% = 1.00 Reclaimed Base Peaking Factor /1.87 Reclaimed Max Day Peaking Factor
46.5% = 10% - 53.5%
31.8% = 1.00 Reclaimed Base Peaking Factor /3.14 Reclaimed Max Hour Peaking Factor 27,7% = (1.87 Reclaimed Max Day Peaking Factor – 1.00 Reclaimed Peaking Factor )/3.14 Reclaimed Max Hour Peaking
40.4% = 100% - (31.8% + 27.7%)
Water system infrastructure is designed to meet peak demand plus fire protection. To appropriately allocate costs associated with the fire protection function to causation components the amount of system capacity required for protection must be estimated. Based on fire demand estimates provided by Department staff, as shown in Table 6-6, 21.6% of the water system capacity is reserved for fire protection demand. Therefore, storage, transmission, and distribution costs will have 21.6% allocated to fire protection cost categories.
Table 6-6: Water Fire Protection Capacity Requirements
Line Potable Water Demand (MGD) Notes
1 Fire Demand 17.935 Estimated population of 500,000
2 Max Day Demand 65.30 Table 6-4
3 Fire Protection % 21.5% Line 1 / Line 2
Table 6-7 summarizes the percentage allocation of functionalized water costs to cost causation components. All treated groundwater (65.6%) and purchased water (34.4%) are blended in storage tanks to be used for all water needs including fire protection. Groundwater requires pumping, whereas purchased water does not incur any pumping costs. Thus 65.6% of the water in storage tanks has pumping costs, which is also used for fire protection.
Fire protection makes up 21.5% of the system costs (line 3 in Table 6-6). Thus, 14.1% of pumping costs are allocated to fire protection (65.6%*21.5%=14.1%).
5 Using formulas by American Insurance Association
City Council Regular Meeting - Page 891 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 31 Table 6-7: Allocation of Functionalized Potable Water Costs to Cost Causation Components Line Functions
Water
Supply
Base
Fixed
Maximum
Day
Maximum
Hour
Billing &
Customer
Service
Meters &
Services Conservation General
Fire
Protection
Water
Rights
1 Potable Supply 100.0%
2 Production Plant 100.0%
3 Storage 58.5% 19.9% 21.5%
4 Pumping 64.0% 21.8% 14.1%
5 Treatment 74.6% 25.4% 0.0%
6 Transmission (T) 58.5% 19.9% 21.5%
7 Distribution (D) 32.7% 11.1% 34.7% 21.5%
8 T&D 38.9% 13.2% 26.4% 21.5%
9 Source of Supply 100.0%
10 Fire Protection 100.0%
11 Meter Services 100.0%
12 Gen & Admin 100.0%
13 Billing 100.0%
14 Customer Service 100.0%
15 Conservation 100.0%
16 Revenue Offset
17 Wells 100.0%
18 Water Rights 100.0%
19 WRD Allocations 84.3%
Table 6-8 summarizes the percentages allocation of functionalized reclaimed water costs to cost causation components.
Table 6-8: Allocation of Functionalized Reclaimed Water Costs to Cost Causation Components Line Functions Reclaimed Base Fixed Reclaimed Max Day Reclaimed Max Hour 1 Reclaimed Average Demand 100.0%
2 Reclaimed Storage 53.5% 46.5%
3 Reclaimed Pumping 31.8% 27.7% 40.4%
4 Reclaimed Treatment 53.5% 46.5%
5 Reclaimed Distribution 31.8% 27.7% 40.4%
6 Water Replenishment District Allocations 15.7%
Using the allocation factors from Table 6-7 and the functionalized O&M costs from Table 6-3, Table 6-9 summarizes the allocation of FY 2021 O&M expenses to cost causation components. Similarly, Table 6-10 uses the allocation factors from Table 6-7 and the functional costs from Table 6-4, summarizes the allocation of Water Fund fixed asset values (by replacement costs as of September 30, 2021) to cost categories and allocation percentage for capital related costs.
Table 6-9: Results of the Water O&M Cost Allocations
Line Cost Component FY 2021 O&M Allocation Factors
1 Water Supply $38,037,555 43.8%
2 Base Fixed Demand $19,926,843 22.9%
3 Maximum Day Demand $3,960,997 4.6%
4 Maximum Hour Demand $2,973,350 3.4%
5 Billing & Customer Service $3,944,811 4.5%
6 Meters & Services $1,381,812 1.6%
7 Conservation $2,091,995 2.4%
8 General & Administrative $9,653,194 11.1%
9 Fire Protection $2,236,155 2.6%
10 Water Rights $246 0.0%
11 Total $86,927,049 100.0%
City Council Regular Meeting - Page 892 of 1385
32 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 6-10: Results of the Water Asset Value Allocations Line Cost Component FY 2021 O&M Allocation Factors
1 Water Supply $0 0.0%
2 Base Fixed Demand $501,542,476 42.3%
3 Maximum Day Demand $151,783,393 12.8%
4 Max Hour $165,193,034 13.9%
5 Billing & Customer Service $562,744 0.0%
6 Meters & Services $7,152,898 0.6%
7 Conservation $0 0.0%
8 General & Administrative $39,702,751 3.3%
9 Fire Protection $189,100,203 15.9%
10 Water Rights $17,093,039 1.4%
11 Total $1,186,263,639 100.0%
6.5.2. REVENUE REQUIREMENT ALLOCATIONS
Table 6-11 shows the total revenue requirement for each major revenue requirement component detailed in Table 6-1. As noted previously, debt service, capital replacement, reserve funding, and certain non-operating revenues are considered capital revenue requirements. It is important to note that the amounts shown in Table 6-11 do not reflect the final allocation of General & Administrative costs or the final allocation of Public Fire Protection costs.
Table 6-11: Water Revenue Requirement and Allocation Factors Line Description FY 2021 Allocation Basis
1 Revenue Requirements
2 O&M Expenses $86,927,049 O&M Allocation
3 Debt Service $6,221,000 Asset Allocation
4 Capital Improvement Projects $15,616,814 Asset Allocation 5 Adjustment for Change in Cash Reserves $8,118,697 Asset Allocation 6 General Fund Transfer (Measure M) $10,575,042 Based on lines 2-6 7 Gross Revenue Requirement $127,458,602
8 9 Less: Revenue Offsets
10 Other Operating Revenues
11 Water Other Unallocated Operating Revenue $9,093,359 100% to General & Administrative 12 Reclaimed Operating Revenue $1,100,508 100% to General & Administrative 13 Water Accounting Revenue $1,088,710 100% to General & Administrative 14 Water Development Revenue $48,044 100% to General & Administrative 15 Conservation Revenue $220,000 100% to Conservation
16 Interest $586,917 Asset Allocation
17 Existing Debt Proceeds $187,187 Asset Allocation
18 Reclaimed Contract Rate Revenue $262,256 Asset Allocation 19 Subtotal Revenue Offsets $12,586,981
20 21 Net Revenue Requirement from Rates $114,871,621
Table 6-12 summarizes the result of allocating the components of the revenue requirement from rates shown in Table 6-7 and Table 6-8.
City Council Regular Meeting - Page 893 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 33 Table 6-12: Water Net Revenue Requirement Allocated to Cost Causation Components Line Cost Causation Component
FY 2021
Revenue Requirement
1 Water Supply $38,037,555
2 Base Fixed Demand $38,030,182
3 Maximum Day Demand $9,066,548
4 Maximum Hour Demand $8,288,804
5 Billing & Customer Service $4,672,313
6 Meters & Services $1,837,890
7 Reclaimed Water Base Fixed Demand $3,715,224
8 Reclaimed Water Maximum Day Demand $1,176,774
9 Reclaimed Water Maximum Hour Demand $1,620,616
10 Conservation $1,871,995
11 General -$709,507
12 Fire Protection $6,846,266
13 Water Rights $416,960
14 Total $114,871,621
General and Administrative costs are reallocated to all cost causation components, excluding water supply, conservation, and revenue offsets. The allocation of General and Administrative costs is shown in Table 6-13.
Table 6-13: Water General & Administrative Cost Allocation Line Cost Causation Components
General and Administrative Cost Reallocation
A B C=B/B14 D=A Line 11 x C
FY 2021 Revenue
Requirement
Cost Basis for the
Allocation
Percentage Allocation %
General &
Administrative
Allocation
1 Water Supply $38,037,555 N/A
2 Base Fixed Demand $38,030,182 $38,030,182 55.6% ($394,435) 3 Maximum Day Demand $9,066,548 $9,066,548 13.3% ($94,035) 4 Maximum Hour Demand $8,288,804 $8,288,804 12.1% ($85,968) 5 Billing & Customer Service $4,672,313 $4,672,313 6.8% ($48,460) 6 Meters & Services $1,837,890 $1,837,890 2.7% ($19,062) 7 Reclaimed Water Base Fixed Demand $3,715,224 $3,715,224 5.4% ($38,533) 8 Reclaimed Water Maximum Day
Demand $1,176,774 $1,176,774 1.7% ($12,205)
9 Reclaimed Water Maximum Hour
Demand $1,620,616 $1,620,616 2.4% ($16,808)
10 Conservation $1,871,995 N/A
11 General ($709,507) N/A
12 Fire Protection $6,846,266 N/A
13 Water Rights $416,960 N/A
14 Total $114,871,621 $68,408,351 100.0% ($709,507)
Table 6-14 shows the calculation of fire capacity units of service for public and private fire protection. AWWA Manual M1 states that fire capacity is equal to the port size increased by the exponent 2.63. Fire hydrants with 6” connections include two 2” ports and one 4” port with an equivalent fire capacity of 50.70. The Department’s FY 2021 fire protection system included 7,054 public fire hydrants with a 6” connection, 65 private fire hydrants with a 6” connection, and 1,209 private fire line services of various pipe diameters.
Total public fire protection capacity was equal to 357,637 equivalent units and private fire protection capacity was equal to 154,321 equivalent units as shown in Table 6-14. Approximately 69.9% of fire protection for the Department’s water system is reserved for public fire protection, which is reallocated to all benefiting customers within the service area (shown in Table 6-15) and the remaining 30.1% of fire protection costs represents the private fire protection costs to be paid for by customers who have a private fire service meter. Public fire protection (i.e., City Council Regular Meeting - Page 894 of 1385
34 LONG BEACH MUNICIPAL WATER DEPARTMENT
hydrants) costs are related to the capacity of the water system that is allocated to providing fire protection, not the actual costs of extinguishing fires.
Table 6-14: FY 2021 Water Fire Protection Units of Service Line
A B C D F = B x D
Port Size (inch)
Fire Capacity by Port Size (1) 6" Fire Hydrant
# of Private Fireline
Private Fireline Fire
Capacity (2 x 2-in + 1x4-in) (2 x 2” + 1 x 4”)
1 2" 6.19 12.38 61 378
2 3" 17.98
52 935
3 4" 38.32 38.32 356 13,642
4 6" 111.31
425 47,307
5 8" 237.21
256 60,725
6 10" 426.58
54 23,035
7 12" 689.04
3 2,067
8 16" 1,468.37
2 2,937
9 Fire Capacity 50.70 1,209 151,026
10 Public Fire Hydrants 7054
11 Public Fire Demand 357,637
12 Private Fire Hydrants 65
13 Private Fire Capacity 3,295
151,026
14 Total Fire Capacity (11+13) 360,932
151,026
15 16 (1) AWWA M1 Manual, Fire Demand = Port Size ^2.63
Table 6-15 shows the calculation of FY 2021 public and private fire protection capacity based on the data presented in Table 6-14.
Table 6-15: FY 2021 Water Public and Private Fire Protection Capacity Line Type of Fire Service
Fire Capacity
(Table 6-14) % of Total Fire Capacity Notes
1 Public Fire 357,637 69.9%
2 Private Fire 154,321 30.1% Based on Line 13 of Table 5-14 3 Total 511,958
Table 6-16 shows the final reallocation of FY 2021 public fire protection costs to the base fixed demand and meters and services cost causation components.
Table 6-16: FY 2021 Water Public Fire Protection Reallocation Line Cost Causation Components
FY 2021
Revenue
Requirement
Public Protection Cost Reallocation
Cost Basis for the Allocation
Percentage Allocation %
Allocated Public Fire
Protection Costs
A B C=B/B15 D=69.9% x Column A Line 12 x C
1 Water Supply $38,037,555 N/A
2 Base Fixed Demand $37,635,747 $37,635,747 95.4% $4,564,930 3 Maximum Day Demand $8,972,513 N/A
4 Maximum Hour Demand $8,202,835 N/A
5 Billing & Customer Service $4,623,853 N/A
6 Meters & Services $1,818,829 $1,818,829 4.6% $220,610 7 Reclaimed Water Base Fixed Demand $3,676,691 N/A
8 Reclaimed Water Maximum Day Demand $1,164,569 N/A
9 Reclaimed Water Maximum Hour Demand $1,603,807 N/A
10 Conservation $1,871,995 N/A
11 General $0 N/A
12 Fire Protection $6,846,266 N/A
13 Water Rights $416,960 N/A
14 Total $114,871,621 $39,454,575 $4,785,540
City Council Regular Meeting - Page 895 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 35 Table 6-17 summarizes the results from Table 6-11, Table 6-13, and Table 6-16 to show the revenues from rates after general and public fire protection cost reallocation.
Table 6-17: Reallocated Water FY 2021 Revenue Requirements Line
Cost Causation
Components
FY 2021 Revenue
Requirement
General &
Administrative
Reallocation
Public Fire
Protection
Reallocation
Reallocated
Revenue
Requirement
A B C D=A+B+C
1 Water Supply $38,037,555 $38,037,555
2 Base Fixed Demand $38,030,182 ($394,435) $4,564,930 $42,200,677 3 Maximum Day Demand $9,066,548 ($94,035) $8,972,513
4 Maximum Hour Demand $8,288,804 ($85,968) $8,202,835 5 Billing & Customer Service $4,672,313 ($48,460) $4,623,853 6 Meters & Services $1,837,890 ($19,062) $220,610 $2,039,439 7 Reclaimed Water Base
Fixed Demand $3,715,224 ($38,533) $3,676,691
8 Reclaimed Water
Maximum Day Demand $1,176,774 ($12,205) $1,164,569
9 Reclaimed Water
Maximum Hour Demand $1,620,616 ($16,808) $1,603,807
10 Conservation $1,871,995 $1,871,995
11 General ($709,507) $709,507 $0
12 Fire Protection $6,846,266 ($4,785,540) $2,060,726 13 Water Rights $416,960 $416,960
14 Total $114,871,621 $114,871,621
Table 6-18 shows the summary of revenue requirements by cost categories to be recovered from water and reclaimed water rates.
Table 6-18: FY 2021 Water Revenue Requirement by Cost Causation Components Line Cost Categories FY 2021
1 Water Supply $38,037,555
2 Base Fixed Demand $42,197,848
3 Maximum Day Demand $3,676,691
4 Maximum Hour Demand $17,175,348
5 Billing & Customer Service $2,768,377
6 Meters & Services $4,623,853
7 Reclaimed Water Base Fixed Demand $2,039,302
8 Reclaimed Water Maximum Day Demand $1,871,995
9 Reclaimed Water Maximum Hour Demand $416,960
10 Conservation $2,063,691
11 General $114,871,621
6.6. Step 4: Allocation of Costs to Fixed and Variable Rate Components
As discussed in AWWA Manual M1 the COS approach to setting water rates results in the proportionate distribution of costs to each customer class based on demands and associated costs that each customer class imposes on the water utility system. A dual set of rates and charges —fixed and variable—is an extension of this cost causation theory.
The components of water system costs shown in Table 6-18 are recovered through either daily service charges, water volumetric rates, reclaimed water volumetric rates, or a combination of the three. As shown in Table 6-19, the entirety of water supply costs, water peaking costs, and water conservation program costs are recovered City Council Regular Meeting - Page 896 of 1385
36 LONG BEACH MUNICIPAL WATER DEPARTMENT
through water volumetric rates. Reclaimed water peaking costs are recovered through reclaimed water volumetric rates. Billing and customer service costs, along with the cost of meters and services, are fixed in nature and do not vary with water consumption. Thus, they are recovered via the Department’s daily service charge. Private fire services costs are paid by customers who have a private fire service meter through the Department’s private fire line daily service charge.
To provide revenue stability for the Department, Raftelis allocated 40% of potable and reclaimed water base fixed demand costs to daily service charge cost recovery. This was also done in the FY 2016 COS Study to achieve the Department’s fixed revenue recovery target of 30%. The remaining FY 2021 potable and reclaimed water costs are collected via water and reclaimed water volumetric rates. Table 6-20, Table 6-21, and Table 6-22 are derived from Table 6-19 based on the rate components for fixed charges, water volumetric rates, and reclaimed water volumetric rates.
Table 6-19: FY 2021 Water Cost Allocations to Rate Components Line Cost Categories
FY 2021 Revenue
Requirement
Fixed
Charges
Water
Volumetric Rates
Reclaimed
Volumetric Rates
1 Water Supply $38,037,555 $38,037,555
2 Potable Base Fixed $42,197,848 $25,318,709 $16,879,139 3 RW Base Fixed $3,676,691 $2,206,015 $1,470,677
4 Potable Peaking (Max Day + Max Hour) $17,175,348 $17,175,348 5 RW Peaking (RW Max Day + RW Max Hour) $2,768,377 $2,768,377 6 Billing & Customer Service $4,623,853 $4,623,853
7 Meters & Services $2,039,302 $2,039,302
8 Conservation $1,871,995 $1,871,995
9 Water Rights $416,960 $416,960
10 Private Fire Services $2,063,691 $2,063,691
11 Total $114,871,621 $36,251,570 $74,380,998 $4,239,053
The Department’s fixed charge revenue requirement consists of three components: billing and customer service, meter services and capacity, and private fire lines. As shown in line 11 of Table 6-19 and line 6 of Table 6-20, the FY 2021 fixed revenue requirement calculated by Raftelis was $36.3 million.
Table 6-20: Water FY 2021 Fixed Revenue Requirement
Line
Rate Components Cost Categories FY 2021
A B C (Table 6-19) D
1 Billing & Customer Service Billing & Customer Service $4,623,853 $4,623,853 2 Meter Services & Capacity
Potable Base Fixed Demand $25,318,709
$29,564,025 3 Reclaimed Water Base Fixed Demand $2,206,015 4 Meters & Services $2,039,302
5 Private Fire Private Fire Services $2,063,691 $2,063,691 6 Total Raftelis Calculated FY 2021 Fixed Revenue Recovery 31.6% Fixed $36,251,570 $36,251,570 7 Actual FY 2021 Fixed Revenue Recovery Reported by the Department 30.6% Fixed $34,900,811
As shown in Table 6-21, variable water volumetric rates are composed of water supply costs, delivery, peaking, conservation, and revenue offset rate components. The FY 2021 variable water revenue requirement was $74.4 million (line 11 of Table 6-19). The water supply rate recovers direct water supply costs. The delivery rate collects the remaining water system fixed cost to deliver water to end users. The peaking rate collects the peaking costs of the potable water system. The conservation rate reflects the conservation program costs from the upper tiers to promote conservation from large users. The revenue offset rate is used to provide affordability for essential use. As more water system costs are recovered through fixed charges less revenue is collected through water volumetric rates.
City Council Regular Meeting - Page 897 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 37 Table 6-21: FY 2021 Water Variable Revenue Requirement
Line
Rate Components Cost Categories FY 2021
A B C
1 Water Supply Water Supply $38,037,555
2 Delivery Potable Base Fixed $16,879,139
3 Peaking Potable Peaking $17,175,348
4 Conservation Conservation $1,871,995
5 Water Rights Water Rights $416,960
6 Total Raftelis Calculated FY 2021 Water
Variable Revenue Recovery 64.8% $74,380,998
7 Actual FY 2021 Water Variable Revenue
Recovery Reported by the Department 65.2% $74,435,459
Table 6-22 shows the FY 2021 reclaimed water variable revenue requirement.
Table 6-22: FY 2021 Reclaimed Water Variable Revenue Requirement Line
Rate Components Cost Categories FY 2021
A B C
1 Delivery Reclaimed Base Fixed $1,470,677
2 Peaking Reclaimed Peaking $2,768,377
3 Total Raftelis Calculated FY 2021
Reclaimed Water Variable Revenue
Recovery
3.7% $4,239,053
4 Actual FY 2021 Reclaimed Water
Variable Revenue Recovery Reported by
the Department
4.3% $4,887,556
6.7. Step 5: Customer Class Rate Calculation
In Step 5, daily service charges and water volumetric rates for each customer class are developed using the cost allocation results shown in Table 6-20 and Table 6-21.
6.7.1. RECALCULATION OF FY 2021 DAILY SERVICE CHARGES
There are three cost components recovered by the Department’s daily service charges: billing and customer service costs, meter services and capacity costs, and private fire line service costs. The daily service charge recognizes that even when a customer does not use any water, the Department incurs fixed costs in connection with the maintenance of meters, the ability or readiness to serve each connection, and/or the billing services provided to each connection.
The meter services and capacity component of the daily service charge collects capacity-related costs. Capacity costs are allocated to the daily service charge by meter size. This reflects the fact that larger meters have the potential to demand more capacity compared to smaller meters. The capacity demanded is proportional to the potential maximum flow through each meter size as established by the AWWA hydraulic capacity ratios which are shown in the “AWWA Meter Ratio” column D of Table 6-23. The ratios depict the potential flow through each meter size compared to the flow through a 5/8” or 3/4” meter, which is the base meter size used in the study For example, the flow through a 2” meter is approximately 5.33 times that of a 3/4” meter. Similarly, according to AWWA M1 Manual, a 3” fire line has 2.90 times more fire capacity than a 2” fire line, as derived and noted in Table 6-24.
Table 6-25 summarizes the projected number of water and reclaimed water accounts and private fire line services in FY 2017 and illustrates the calculations for equivalent units of service for each fixed service charge component.
The Department bills customer on monthly basis, thus 89,201 (87,841 +151+ 1,209) accounts are equivalent to 1,070,412 monthly bills. The billing and customer service component recovers costs associated with meter reading, City Council Regular Meeting - Page 898 of 1385
38 LONG BEACH MUNICIPAL WATER DEPARTMENT
customer billing and collection, and customer service costs. These costs are the same for all meter sizes as it costs the same to provide billing and customer services to a small meter as it does for a larger meter.
Table 6-23: Water Meter Capacity Ratios
Line
Meter Size Meter Types
AWWA Max
Capacity (gpm)
Meter Flow
Equivalency Ratios
A B C D=C/30 gpm
1 5/8" or 3/4" Displacement 30 1.00
2 1" Displacement 50 1.67
3 1 1/2" Displacement 100 3.33
4 2" Displacement 160 5.33
5 3" Compound 350 11.67
6 4" Compound 600 20.00
7 6" Compound 1,350 45.00
8 8" Class 2 Turbine 2,800 93.33
9 10" Class 2 Turbine 4,200 140.00
10 12" Class 2 Turbine 5,300 176.67
11 16" Class 2 Turbine 7,800 260.00
Table 6-24: Water Fire Line Capacity Ratios
Line
Fire Protection
Capacity by Port Size
Fire Protection
Capacity Ratio
Fire Line Flow
Equivalency Ratios
A B C=B/6.19
1 2" 6.19 1.00
2 3" 17.98 2.90
3 4" 38.32 6.19
4 6" 111.31 17.98
5 8" 237.21 38.32
6 10" 426.58 68.91
7 12" 689.04 111.31
8 16" 1,468.37 237.21
Table 6-25: FY 2021 Water Units of Service for Daily Service Charge Component Meter Ratios Units of Service (EMU / yr)
Line Meter Size
# of
Water
Accts
# of
Reclaimed
Accounts
# of
Private
Fireline
Billing &
Customer
Service
Services
&
Capacity
Private
Fire
Capacity
Billing & Customer
Service
Services &
Capacity
Private Fire
Capacity
A B C D E F G=(A+B+C) x D x 12 H=(A+B) x E x 12 I = C x F x 12 1 5/8" or 3/4" 69,020 1 1.00 1.00 828,252 828,252
2 1" 11,207 5 1.00 1.67 134,544 224,240
3 1 1/2" 4,203 12 1.00 3.33 50,580 168,600
4 2" 2,588 65 61 1.00 5.33 1.00 32,568 169,792 732
5 3" 483 20 52 1.00 11.67 2.90 6,660 70,420 1,813
6 4" 164 23 356 1.00 20.00 6.19 6,516 44,880 26,445
7 6" 90 16 425 1.00 45.00 17.98 6,372 57,240 91,706
8 8" 63 8 256 1.00 93.33 38.32 3,924 79,520 117,717
9 10" 20 1 54 1.00 140.00 68.91 900 35,280 44,655
10 12" 3 3 1.00 176.67 111.31 72 6,360 4,007
11 16" 2 1.00 260.00 237.21 24 5,693
12 Total 87,841 151 1,209 1,070,412 1,684,584 292,767 Table 6-26 illustrates the development of the unit costs (line 4) for each daily service charge component. The revenue requirements from Table 6-20 are divided by the number of bills/equivalent meters per year (from Table 6-25).
City Council Regular Meeting - Page 899 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 39 Table 6-26: Development of FY 2021 Water Daily Service Charge Unit Costs Line
Billing &
Customer
Service
Services &
Capacity
Private Fire
Capacity Notes
1 Revenue
Requirements $4,623,853 $29,564,025 $2,063,691 Table 6-19 (Cost Allocation to Rate Components)
2 Units of Service 1,070,412 1,684,584 292,767 Table 6-25 (Units of Services for Daily Service Charge Components)
3 Units of Service
Description
Monthly bills
per Year
Equivalent Meter
Units per Year
Equivalent Fire
Line Units per
Year
4 Unit Cost of Service $4.32 $17.55 $7.05 Line 1 / Line 2 rounded to $0.01
Table 6-27 shows a comparison of the FY 2021 daily service charges recalculated by Raftelis versus the actual FY 2021 daily service charges assessed by the Department. As shown in column G of Table 6-27, the recalculated daily service charges are up to approximately 14% higher at larger meter sizes. This does not reflect a fundamental flaw in the Department’s daily service charge structure. Instead, it reflects the fact that no cost allocation methodology can result in the calculation of FY 2021 rates and charges that exactly match those actually assessed by the Department. From the Raftelis perspective, the variances shown in column G are within the bounds of reasonableness. This is especially true given that the vast majority of water and reclaimed water customers served by the Department have smaller meter sizes.
Table 6-27: Recalculated FY 2021 Water Daily Service Charges vs. Actual Line Meter Size
Meter Capacity
Ratios
Billing &
Customer
Service
Services &
Capacity FY 2021
Calculated
FY 2021
Actual FY
2021
%
Difference
A
(Table 5-23) B C=A x 17.55 D = B + C
E= D x
12/365 F G=E/F-1
1 5/8" or 3/4" 1.00 $4.32 $17.55 $21.87 $0.72 $0.70 3.3% 2 1" 1.67 $4.32 $29.25 $33.57 $1.10 $1.03 6.9%
3 1 1/2" 3.33 $4.32 $58.50 $62.82 $2.07 $1.87 10.3%
4 2" 5.33 $4.32 $93.60 $97.92 $3.22 $2.88 11.7%
5 3" 11.67 $4.32 $204.75 $209.07 $6.87 $6.08 13.1%
6 4" 20.00 $4.32 $350.99 $355.31 $11.68 $10.27 13.7%
7 6" 45.00 $4.32 $789.74 $794.06 $26.11 $22.87 14.1%
8 8" 93.33 $4.32 $1,637.98 $1,642.30 $53.99 $47.23 14.3% 9 10" 140.00 $4.32 $2,456.96 $2,461.28 $80.92 $70.76 14.4% 10 12" 176.67 $4.32 $3,100.46 $3,104.78 $102.07 $89.23 14.4% 11 16" 260.00 $4.32 $4,562.93 $4,567.25 $150.16 $131.23 14.4%
Table 6-28 shows a comparison of the FY 2021 daily service charges for private fire line service recalculated by Raftelis versus the actual FY 2021 daily service charges for private line service assessed by the Department. As shown in column G of Table 6-28, the recalculated fire line daily service charges range from approximately 9% lower (line 1) and up to approximately 5.8% higher (line 8). This also does not reflect a fundamental flaw in the Department’s daily service charge rate structure for private fire lines. Instead, as discussed previously, it reflects the fact that no cost allocation methodology can result in the calculation of FY 2021 rates and charges that exactly match those actually assessed by the Department. From the Raftelis perspective, the variances shown in column G are within the bounds of reasonableness.
City Council Regular Meeting - Page 900 of 1385
40 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 6-28: Recalculated FY 2021 Water Daily Service Charges for Fire Lines vs. Actual Line
Fire Line
Size
Fire Line
Capacity Ratios
Billing &
Customer
Service
Services &
Capacity FY 2021
Calculated
FY 2021
Actual
FY 2021 % Difference
A (Table 5-24) B C=A x 7.05 D=B+C E= D x 12/365 F G=E/F-1 1 2" 1.00 $4.32 $7.05 $11.37 $0.37 $0.41 -9.3%
2 3" 2.90 $4.32 $20.48 $24.80 $0.82 $0.83 -1.7%
3 4" 6.19 $4.32 $43.63 $47.95 $1.58 $1.55 1.7%
4 6" 17.98 $4.32 $126.75 $131.07 $4.31 $4.13 4.4%
5 8" 38.32 $4.32 $270.11 $274.43 $9.02 $8.58 5.2%
6 10" 68.91 $4.32 $485.75 $490.07 $16.11 $15.28 5.5%
7 12" 111.31 $4.32 $784.62 $788.94 $25.94 $24.56 5.6%
8 16" 237.21 $4.32 $1,672.05 $1,676.37 $55.11 $52.11 5.8%
6.7.2. RECALCULATION OF FY 2021 POTABLE WATER VOLUMETRIC RATES Water volumetric rates are comprised of water supply costs, delivery, peaking, conservation, and revenue offset rate components (Table 6-29).
Table 6-29: Water Volumetric Rate Component Descriptions Line Water Volumetric Rate Components Descriptions
1 Water Supply Recovering Water Supply Related Costs (Fixed & Variable) 2 Delivery Recovering remaining fixed costs of delivering water to customers 3 Peaking Recovering peaking costs
4 Conservation Recovering conservation program related costs 5 Revenue Offset Using Rental income (unrestricted revenues) to provide affordability for essential use
Proposition 218 does not specify the type of rate structure that must be used if the rates reflect the proportional cost of serving customers. Table 6-30 summarizes the framework used to justify the Department’s water volumetric rates in the FY 2016 COS Study and the FY 2021 COS Update. Specifically, the lowest cost water supplies are allocated to Residential Tiers 1A and 1B. The delivery rate is a uniform cost recovery for all usage types. The peaking rate is allocated to customer classes and tier usage based on proportional peaking factors as discussed in Section 5.1. The conservation rate is allocated uniformly to all customer classes; however, residential classes have conservation costs collected in Tier 3 to promote cost-based water use efficiency.
Table 6-30: Water Volumetric Rate Component Framework
Line
Water Supply Delivery Peaking Conservation Revenue Offset Customer Class
Water Supply Source
Allocation
Uniform for All
Usage
Proportional to
Peaking Factors
Usage
Allocation
Offset for
Affordable
Essential Use
1 Residential
2 Tier 1A Groundwater x x
xxx
3 Tier 1B Groundwater x x
4 Tier 2 Blended Lakewood + MWD
Tier 1
x xx
5 Tier 3 MWD Tier 2 x xxx xx
6 Non-Residential Blended GW + Lakewood +
MWD x xxx x
City Council Regular Meeting - Page 901 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 41
6.7.2.1. FY 2021 Water Supply Unit Costs
Table 6-31 shows the FY 2021 availability of water supply sources and their associated variable unit costs. $387/AF or $0.925/ccf represents the water pump tax assessed by the Water Replenishment District for every unit of groundwater pumped from groundwater wells within the Department’s service area. The blended Lakewood and MWD Tier 1 water supply unit cost is $2.612/ccf.
Table 6-31: FY 2021 Water Supply Sources - Quantity and Unit Cost Data
Water Supply
Purchase
Available for
Purchase (AF)
Available for Sales
(After 4% Water Loss)
Unit Cost
(/AF)
Unit Rate
(with 4% water loss)
(/ccf)
Blended Unit
Rate
Line A B C D=C/435.6/(1+4%)
1 Groundwater 32,692 31,435 $387 $0.925 $0.925
2 Lakewood 900 865 $662 $1.583
$2.612 3 MWD Tier 1 57,560 55,346 $1,099 $2.628
4 MWD Tier 2
$1,187 $2.840 $2.840
Table 6-32 shows the FY 2021 blended (i.e., weighted average) water supply unit cost of $1.381/ccf calculated for Non-Residential customers. The costs shown in Table 6-32 are based on calculated usage and the actual cost of water.
Table 6-32: FY 2021 Non-Residential Blended Water Supply Rate Line Description Unit Rate FY 2021 Sales
1 Non-Residential Calculated Sales
6,327,548 ccf 14,526 AF
2 Groundwater $0.925 4,531,708 ccf 10,403 AF
3 Lakewood $1.583 162,302 ccf 373 AF
4 MWD Tier 1 $2.628 1,633,538 ccf 3,750 AF
5 Blended Rate (Weighted Average) $1.381
Other direct water supply costs include power for pumping and treatment, chemicals, and MWD fixed costs such as Readiness-to-Serve (RTS) and capacity charges. The costs shown in Table 6-33 are actual FY 2021 costs as documented in the Department’s financial accounting system. The calculated FY 2021 uniform rate of $0.300/ccf was applied to the water supply rates for all customer usage.
Table 6-33: FY 2021 Other Water Supply Unit Costs
Line Other Water Supply Costs Cost
1 Power $2,845,501
2 Chemical $1,109,778
3 MWD Fixed Costs (RTS & Capacity Charges) $2,517,120
4 Total Other Water Supply Costs $6,472,399
5 Sales 21,587,611 ccf
6 Unit Rate $0.300
Table 6-34 summarizes the actual calculated FY 2021 “all-in” water supply unit costs for all usage types.
Residential Tier 1 demand is met by groundwater. Thus, the Tier 1 water supply unit cost ($1.225/ccf) reflects the groundwater variable unit cost ($0.925/ccf) plus the other water supply unit cost ($0.300/ccf). If all residential usage exceeds Tier 2, the Department must buy the next marginal water supply source which is MWD Tier 2 water at a unit cost of $2.912/ccf, plus the other water supply unit cost. The Non-Residential water supply unit cost is $1.681/ccf, which is derived from the $1.381/ccf blended variable unit cost and the other water supply unit cost.
City Council Regular Meeting - Page 902 of 1385
42 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 6-34: FY 2021 “All-In” Water Supply Unit Costs
Line Customer Class
Water Supply Sources
Water Supply
Variable Rates
Other Water
Supply Rates
All-in Water
Supply Rates
Calculated Sales
(ccf)
A B C D= B + C E
1 Residential
2 Tier 1 Groundwater $0.925 $0.300 $1.225 9,161,210
3 Tier 2 Lakewood & MWD Tier 1 $2.612 $0.300 $2.912 4,970,154 4 Tier 3 MWD Tier 2 $2.840 $0.300 $3.139 1,128,699
5 Non-Residential Blended $1.381 $0.300 $1.681 6,327,548
6.7.2.2. FY 2021 Water Delivery Unit Cost
Table 6-35 shows the calculation of the FY 2021 water delivery unit cost of $0.78/ccf which is uniformly charged to all customer usage to recover the remaining potable base fixed demand costs (see Table 6-20)
Table 6-35: FY 2021 Water Delivery Costs
Line Description Delivery Rate Note
1 Revenue Requirements $16,879,139
2 Units of Service 21,587,611 ccf
3 Unit Cost of Service $0.78 Line 1 / Line 2 rounded to $0.01
6.7.2.3. FY 2021 Peaking Unit Costs
Peaking costs are recovered from customers based on their respective customer class peaking characteristics as determined in Table 5-1. Table 6-36 shows the equivalent peaking usage units for each usage type with respect to the corresponding peaking factors.
Table 6-36: FY 2021 Equivalent Peaking Usage Units
Line Potable Sales Peaking Factors FY 2021 Sales
(ccf)
Equivalent Peaking Usage
(ccf)
A B C = A x B
1 Residential 1.11 15,260,063 17,183,471
2 Tier 1A 1.06 63,925 68,038
3 Tier 1B 1.06 9,097,286 9,682,729
4 Tier 2 1.17 4,970,154 5,801,064
5 Tier 3 1.45 1,128,699 1,631,640
6 Non-Residential 1.20 6,327,548 7,593,058
7 Total (Line 1 + Line 6) 21,587,611 24,776,528
Table 6-37 illustrates the development of water peaking rates for each usage type. Peaking costs for the potable water system ($17.2 million from Table 6-21) are divided by equivalent peaking usage to derive $0.70/ccf for the peaking unit cost of service. The peaking unit cost is then multiplied by the peaking factors of each usage type to derive the respective peaking rates. The calculated rates are rounded up to the nearest $0.001/ccf.
City Council Regular Meeting - Page 903 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 43 Table 6-37: FY 2021 Peaking Unit Costs
Line Description
Peaking Factors Peaking Rate Notes
A B C
1 Revenue Requirements $17,175,348
2 Units of Service 24,531,727
3 Unit Cost of Service $0.70 Line 1 / Line 2 rounded to nearest $0.01 4 5 Residential
6 Tier 1A 1.06 $0.73 B3 x A6 rounded to nearest $0.01
7 Tier 1B 1.06 $0.73 B3 x A7 rounded to nearest $0.01
8 Tier 2 1.17 $0.81 B3 x A8 rounded to nearest $0.01
9 Tier 3 1.45 $1.00 B3 x A9 rounded to nearest $0.01
10 Non-Residential 1.20 $0.84 B3 x A10 rounded to nearest $0.01
6.7.2.4. FY 2021 Conservation Unit Costs
The development of actual FY 2021 conservation unit costs for residential and non-residential classes is shown in Table 6-38. Residential Tier 3 users are the focus of the conservation program, thus residential conservation program costs ($1.3 million) are recovered from Tier 3 users only.
Table 6-38: Development of FY 2021 Conservation Unit Costs Line Description
Sales Conservation Rate
Notes A B
1 Revenue Requirements $1,871,995
2 Units of Service 21,587,611
3 Unit Cost of Service $0.09 Line 1 / Line 2 rounded to nearest $0.01 4 5 Residential 15,260,063 (71%) $1,329,117 71% x B1
6 Non-Residential 6,327,548 (29%) $542,879 29% x B1
7 Unit Conservation Rate
8 Residential Tier 3 = 1,128,699 $1.17 B4 / A8 rounded to nearest $0.01 9 Non-Residential All = 6,327,548 $0.09 B4 / A9 rounded to nearest $0.01
Table 6-39 summarizes the actual FY 2021 conservation unit costs.
Table 6-39: FY 2021 Conservation Unit Costs
Line Customer Class Conservation Rate
1 Residential
2 Tier 1A $0.00
3 Tier 1B $0.00
4 Tier 2 $0.00
5 Tier 3 $1.17
6 Non-Residential $0.09
6.7.2.5. FY 2021 Revenue Offset Unit Costs
The Department funds its Residential Tier 1A exemption program (Tier 1A = $0/ccf) though the application of rental income. As shown in Table 6-40, before any revenue offsets, the calculated FY 2021 cost of providing water service for Tier 1A usage is $2.74/ccf.
City Council Regular Meeting - Page 904 of 1385
44 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 6-40: True Cost of Tier 1A Water
Line Components Tier 1A Costs
1 Water Supply $1.22
2 Delivery $0.78
3 Peaking $0.73
4 Conservation $0.00
5 Water Rights $0.00
6 Total $2.74
Table 6-41 shows the calculation of the remaining rental income offsets that are applicable to Tier 1B usage after funding the exemption program (Tier 1A). The rental income offset applied to Tier 1B is intended to enhance affordability for basic and essential usage.
Table 6-41: FY 2021 Rental Revenue Applied to Tier 1B
Line Description Revenue Offset Rate Notes
1 Rental Income $291,569
2 Offsetting all Tier 1A Costs ($227,767) -$2.74 x 83,088 ccf (Tier 1A) 3 Remaining Rental Income $63,801 Line 1 - Line 2
Table 6-42 shows the $/ccf revenue offset for each usage type.
Table 6-42: FY 2021 Revenue Offsets
Line Customer Class Revenue Offset
1 Residential
2 Tier 1A ($2.74)
3 Tier 1B $0.00
4 Tier 2 $0.00
5 Tier 3 $0.00
6 Non-Residential $0.00
6.7.2.6. Recalculated FY 2021 Potable Water Volumetric Rates Table 6-43 shows a comparison of the FY 2021 water volumetric rates recalculated by Raftelis versus the actual FY 2021 water volumetric rates charged by the Department. As shown in lines 2 - 4 of column G, the recalculated Residential Tier 1B rate is 12.5% higher than the rate charged by the Department. Correspondingly, the Tier 2 and Tier 3 rates are 3.5% and 6.6% lower, respectively. These residential variances are caused by two factors.
First, as shown in Table 6-44, there has been an increase in the cost of groundwater supplies since the completion of the FY 2016 COS study. As shown in line 1 of Table 6-44, there was a 31.5% increase in groundwater supply costs. Similarly, when viewed on a unit cost basis (line 6 of Table 6-44), there has been a 32.1% increase in groundwater costs.
Second, there has been a change in the intensity of peak water demands in the Residential tiers. As shown in line 5 of Table 6-45, the actual FY 2021 Tier 3 peaking factor was 24.8% lower than the projected FY 2017 Tier 3 peaking factor as developed in the FY 2016 COS Study. The change results in the allocation of more peaking costs to Tier 1B and less peaking costs to Tier 3.
City Council Regular Meeting - Page 905 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 45 Table 6-43: Recalculated FY 2021 Potable Water Volumetric Rates vs. Actual
Water
Supply Delivery Peaking Conservation
Water
Rights
Revenue
Offset
Calculated
FY 2021
Actual
FY 2021
%
Difference
Line
Customer
Class A B C D E F
G=A + B + C +
D + E +F H
I = G / H
- 1
1 Residential
2 Tier 1A $1.22 $0.78 $0.73 $0.00 $0.00 -$2.74 $0.00 $0.00 0.0% 3 Tier 1B $1.22 $0.78 $0.73 $0.00 $0.00 $0.00 $2.74 $2.44 12.5% 4 Tier 2 $2.91 $0.78 $0.81 $0.00 $0.00 $0.00 $4.50 $4.66 -3.5% 5 Tier 3 $3.14 $0.78 $1.00 $1.17 $0.26 $0.00 $6.35 $6.81 -6.6% 6 Non-
Residential $1.68 $0.78 $0.84 $0.09 $0.02 $0.00 $3.41 $3.62 -5.9%
Table 6-44: Change in the Profile of Water Supply Costs (FY 2017 Projected vs. FY 2021 Actual) Water Supply Costs
Line No. Water Source Projected FY 2017
Water Cost (1)
Actual FY 2021
Water Cost (1)
$ Difference % Difference
1 Groundwater $294.20 $386.80 $92.60 31.5%
2 Lakewood $573.00 $662.00 $89.00 15.5%
3 MWD Tier 1 $970.28 $1,098.80 $128.52 13.2%
4 MWD Tier 2 $1,073.71 $1,187.48 $113.77 10.6%
5 (1) Water supply costs were obtained by taking proportion of the previous and test year's rates based on when rate adjustments would have occurred
Water Supply Cost Rate Used for Rate Design
Line No. Water Source
Projected FY 2017
Variable Supply Rate
Component
Actual FY 2021
Variable Supply Rate
Component $ Difference % Difference
6 Groundwater $0.70 $0.92 $0.22 32.1%
7 Lakewood $1.36 $1.58 $0.22 16.2%
8 MWD Tier 1 $2.31 $2.63 $0.32 13.9%
9 MWD Tier 2 $2.55 $2.84 $0.29 11.3%
Detailed Calculation of the FY 2021 Water Supply Unit Cost Line No. Water Source
Actual CY 2020 Rate
* % usage (AF)
Actual CY 2021 Rate
* % usage (AF) Sum of Rates
Conversion to
ccf Rates
Adjustment
for Water
Loss
10 Groundwater $229.20 $157.60 $386.80 $0.89 $0.92
11 Lakewood $662.00 $0.00 $662.00 $1.52 $1.58
12 MWD Tier 1 $215.60 $883.20 $1,098.80 $2.52 $2.63
13 MWD Tier 2 $233.00 $954.48 $1,187.48 $2.73 $2.84
Table 6-45: Change in the Residential Peaking Factors (FY 2017 Projected vs. FY 2021 Actual) Line Customer Class
Projected FY 2017
Peaking Factors
Actual FY 2021
Peaking Factors % Difference
1 Residential 1.22 1.11 -9.2%
2 Tier 1A 1.07 1.06 -0.2%
3 Tier 1B 1.07 1.06 -0.2%
4 Tier 2 1.34 1.17 -12.9%
5 Tier 3 1.92 1.45 -24.8%
6 7 Non-Residential Combined 1.20 1.20 0.3%
8 Commercial 1.20 1.17 -2.2%
9 Industrial 1.20 1.26 5.4%
10 Irrigation 1.20 1.43 19.6%
City Council Regular Meeting - Page 906 of 1385
46 LONG BEACH MUNICIPAL WATER DEPARTMENT
6.7.3. RECALCULATION OF FY 2021 RECLAIMED WATER VOLUMETRIC RATES
As was the case for potable water volumetric rates, reclaimed water rates are calculated using the respective peaking factors for each different reclaimed water service: peaking, non-peaking, and interruptible rates. FY 2021 equivalent peaking usage for reclaimed water services are calculated in Table 6-46.
Table 6-46: Equivalent Peaking Usage Units
Line Service
Reclaimed Water Sales
(ccf) Peaking Factors
Equivalent Peaking Usage
(ccf)
A B C = A x B
1 Peaking 428,973 1.55 664,908
2 Non-Peaking 854,007 1.00 854,007
3 Interruptible 959,242 1.00 959,242
4 Total Non-Contracted Sales 2,242,222 2,478,157
Table 6-47 illustrates the development of delivery and peaking unit costs for reclaimed water services.
Table 6-47: FY 2021 Reclaimed Water Volumetric Rates Revenue Requirements Line
Rate Components Delivery Peaking Notes
A B C D
1 Revenue Requirements $1,470,677 $2,768,377
2 Units of Service 2,242,222 ccf 2,478,157 ccf
3 Units Reclaimed Rates $0.66 $1.12 Line 1 / Line 2 rounded to nearest $0.01 4 5 Peaking $0.66 $1.73 Peaking = Line 3 x 1.55
6 Non-Peaking / Interruptible $0.66 $1.12
6.7.3.1. Recalculated FY 2021 Reclaimed Water Volumetric Rates Table 6-48 shows a comparison of the recalculated FY 2021 reclaimed water volumetric rates versus the actual FY 2021 volumetric rates charged by the Department. As shown in lines 1 and 3 of column G, the recalculated non- peaking and interruptible rates are 11.3% less than those charged by the Department. This variance is due to a significant change in reclaimed water demand patterns. As shown in Table 6-49, actual FY 2021 Peak service demand is approximately 60% less than what projected for FY 2017. Conversely, Non-Peaking and Interruptible service demands are significantly higher (lines 2 and 3). These demand shifts result in a marginally higher $/ccf rate for Peaking service and a significantly lower $/ccf rate for Non-Peaking and Interruptible service.
Table 6-48: FY 2021 Reclaimed Water Volumetric Rates Revenue Requirements Line
Delivery Peaking
FY 2021
Recalculated
Rates
FY 2021
Actual Rates % Difference
Service A B C = A + B D E = C / D - 1
1 Peaking $0.66 $1.73 $2.39 $2.36 1.3%
2 Non-Peaking $0.66 $1.12 $1.77 $2.00 -11.3%
3 Interruptible $0.66 $1.12 $1.77 $2.00 -11.3%
City Council Regular Meeting - Page 907 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 47 Table 6-49: Reclaimed Demand (FY 2021 Actual vs. FY 2017 Projected) Line
Projected FY 2017
Demand
Actual FY 2021
Demand Difference % Difference
Service A B C = B - A D = B / A -1
1 Peaking 1,071,512 428,973 (642,539) -59.97%
2 Non-Peaking 414,249 854,007 439,758 106.16%
3 Interruptible 292,914 959,242 666,328 227.48%
4 Total 1,778,675 2,242,222 463,547 26.06%
City Council Regular Meeting - Page 908 of 1385
48 LONG BEACH MUNICIPAL WATER DEPARTMENT
7. Sewer Revenue Requirement
7.1. Validation of FY 2021 Sewer Rate Revenues
As an initial step in the sewer FY 2021 COS process, Raftelis validated the rate revenues reported in the Department’s financial accounting system. The validation required Raftelis to independently calculate FY 2021 rate revenues based on actual customer billing data obtained from the Department’s CIS. As shown on line 4 of Table 7-1, the Raftelis calculation of sewer rate revenues were within 1.4% of the revenue reported in the Department’s financial accounting system. This calculated variance is within a reasonable range of accuracy and requires no further investigation.
Table 7-1: FY 2021 Sewer Rate Revenue Validation
Line Sewer
FY 2021 Reported
Rate Revenue
FY 2021 Rate Revenue
Calculated by Raftelis $ Difference % Difference
1 Fixed Revenue (1) $11,162,309 $11,490,180 $327,871 2.9% 2 Sewer Variable Revenue (2) $5,793,225 $5,707,582 ($85,643) -1.5% 3 Total $16,955,534 $17,197,762 $242,228 1.4%
4 8 (1) Fixed Revenue = Revenue from Daily Service Charges 9 (2) Sewer Variable Revenue = Revenue from Sewer Volumetric Rates
7.2. Adequacy of FY 2021 Sewer Cost Recovery
A second question that must be answered when assessing the Department’s FY 2021 rates is whether rate revenues were adequate to recover the actual operating and capital costs incurred to provide service. Table 7-2 shows the analysis completed by Raftelis which verifies the adequacy of FY 2021 cost recovery. Highlights of Table 7-2 include:
• The FY 2021 rate revenues shown on lines 1 - 7 of Table 7-2 were calculated by Raftelis based on billing data obtained from the Department’s CIS.
• The revenue requirement components shown in lines 9 - 20 are the actual costs recorded the Department’s financial accounting system.
• The revenue offsets shown in lines 22 – 32 were recorded in the Department’s financial accounting system.
• In FY 2021, approximately $17.2 million in rate revenues were collected from sewer customers (line 7).
After the inclusion of a Measure M transfer to the General Fund of $2.1 million (line 19) and a decrease of cash reserves of $153k (line 36), the final net revenue requirement (i.e., net costs) incurred to provide sewer service was also $17.2 million (line 37). From the perspective of Raftelis, the actual FY 2021 decrease in cash reserves of $153k million was reasonable.
• Line 39 shows that the difference between total rate revenues (line 7) and the total net revenue requirement (line 37) is $0. This verifies the adequacy of the Department’s FY 2021 rates to pay for the costs incurred to provide sewer service.
City Council Regular Meeting - Page 909 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 49 Table 7-2: FY 2021 Sewer Revenue Adequacy (Rate Revenues vs Incurred Costs) Line Rate Revenues Amount % of Total
1 Fixed Revenue
2 Daily Service Charge $11,490,180 66.8%
3 4 Volumetric Revenue
5 Volumetric Rates $5,707,582 33.2%
6 7 Total Rate Revenues $17,197,762 100.0%
8 9 Revenue Requirement
10 O&M Expenses $10,784,292 52.6%
11 12 Capital Costs
13 Existing Debt Service $729,000 3.6%
14 Rate Funded Capital Projects $6,885,645 33.6%
15 Total Capital Costs $7,614,645 37.1%
16 17 Subtotal $18,398,937 89.7%
18 19 Transfer to the General Fund $2,118,236 10.3%
20 Total Gross Revenue Requirement $20,517,173 100.0%
21 22 Less: Revenue Offsets
23 Impact Fees - Sewer Capacity $1,318,805 41.7%
24 Interest - Miscellaneous $4 0.0%
25 Other Investment Income $101 0.0%
26 Contributions in aid of Construction $189,209 6.0% 27 Miscellaneous Funds & Reimbursements $1,326,659 41.9% 28 OTH Dept SVC to Prop Funds Rev $86,400 2.7%
29 Interest $128,184 4.0%
30 Existing Debt Proceeds $1,450 0.0%
31 Other Non-Operating Revenues $115,260 3.6%
32 Total Revenue Offsets $3,166,072 100.0%
33 34 Total Costs Before Change in Cash Reserves $17,351,101
35 36 Change in Cash Reserves ($153,339)
37 Total Net Revenue Requirement $17,197,762
38 39 Difference $0
7.3. O&M Costs in the FY 2021 Revenue Requirement
The actual costs incurred to provide sewer service in FY 2021, as obtained from the Department’s financial accounting system, included $10.8 million of O&M expenses (line 10 in Table 7-2). This amount is 52.6% of the total FY 2021 sewer gross revenue requirement of $17.2 million (line 37 of Table 7-2). Table 7-3 shows an itemized detail of actual FY 2021 O&M expenses. Raftelis did not audit the Department’s reported FY 2021 sewer O&M expenses.
City Council Regular Meeting - Page 910 of 1385
50 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 7-3: Detail of the FY 2021 O&M Revenue Requirement Line Expense Amount Percentage of Total
1 Undefined Expenses $180,770 1.7%
2 MIS Expenses $306,774 2.8%
3 Unallocated Expenses $3,853,291 35.7%
4 Development Expenses $604,945 5.6%
5 GIS Expenses $15,774 0.1%
6 Inspection Expenses $398 0.0%
7 Pipelines Expenses $2,932 0.0%
8 Facilities Expenses $222,996 2.1%
9 Sewer Pump Station Expenses $958,675 8.9%
10 Water Ops Admin $5,799 0.1%
11 Sewer Ops Admin Expenses $146,619 1.4%
12 Facilities Management Expenses $8,179 0.1%
13 Sewer Main Const Expenses $4,425,437 41.0%
14 Sewer Emergency Breaks Expenses $0 0.0%
15 Sewer Service Const Expenses $48,255 0.4%
16 Sewer Debt Unallocated Expenses $3,450 0.0%
17 Total O&M Expenses $10,784,292 100.0%
7.4. Rate Funded Capital Costs in the FY 2021 Revenue
Requirement
Table 7-4 provides a detail of the rate funded capital improvement expenditures included in the FY 2021 sewer revenue requirement ($6.9 million in line 11). The expenditures for each project by Department staff and have not been audited Raftelis staff.
Table 7-4: Detail of FY 2021 Sewer Rate Funded Capital Expenditures Line CIP Category Cost
1 Sewer Pipeline Rehab $2,150,000
2 Sewer Developer Projects $0
3 Sewer Pipeline Emergency Repair $0
4 Sewer Operations $1,050,000
5 Sewer Pipeline Rehab/Install $1,050,000
6 Sewer Lift Stations $2,637,094
7 Subtotal $6,887,094
8 9 Less: Available Proceeds from Debt $1,450
10 11 Total Rate Funded Capital Expenditures $6,885,645
City Council Regular Meeting - Page 911 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 51
8. Sewer Customer Units of
Service
Sewer customers receive a monthly bill that includes a daily service charge based on their water meter size and a volumetric charge for billed usage. Billed usage is calculated based on average winter water consumption during the months of December – March. Column B of Table 8-1 shows the calculated FY 2021 billed sewer usage for all customers (15.987 ccf) based on billing data obtained from the Department’s CIS. Column C shows the monthly average winter sewer usage on a per account basis. Column D shows the daily winter average usage for each meter size and Column E shows the ratio of daily winter average ratios which are calculated using the baseline of a 5/8” or 3/4” connection. As discussed in Section 7.1, the daily winter average ratios in Column E are used in the calculation of the winter daily service charge.
Table 8-1: Detail of FY 2021 Sewer Customer Units of Service Line
Meter Size
Annual Use
(All Accounts)
Monthly Average
Winter Use Per
Account
Daily Winter
Average Daily Winter Average Ratios
A B C D E=D/0.35
1 5/8" or 3/4" 7,185,878 10.51 0.35 1.00 2 1" 1,924,252 17.20 0.57 1.64 3 1 1/2" 1,967,918 47.84 1.59 4.55 4 2" 1,928,287 76.82 2.56 7.31 5 3" 898,008 233.85 7.80 22.24 6 4" 450,536 243.39 8.11 23.15 7 6" 754,670 850.96 28.37 80.94 8 8" 431,240 1,348.36 44.95 128.25 9 10" 393,925 3,222.82 107.43 306.54 10 12" 52,909 3,222.82 107.43 306.54 11 16"
107.43 306.54
12 Total 15,987,624
City Council Regular Meeting - Page 912 of 1385
52 LONG BEACH MUNICIPAL WATER DEPARTMENT
9. Sewer Cost Allocations
The sewer COS analysis follows the same basic steps as the water COS analysis process previously discussed in Section 6 of this report:
• Step 1: Identification of Revenue Requirement Components • Step 2: Cost Functionalization
• Step 3: Allocation to Cost Causation Components
• Step 4: Determination of Customer Class Units of Service • Step 5: Customer Class Rate Calculation
9.1. Step 1: Identification of Operating and Capital Costs The starting point of the sewer COS analysis is to identify the operating and capital cost components of the annual revenue requirement from rates. Table 9-1 on the next page shows this for the Department's actual FY 2021 revenue requirement. The information shown in Table 9-1 was provided in in earlier tables presented in this report. For example:
• See Table 7-2 for the derivation of the gross revenue and net revenue requirements from rates shown in lines 26 and 47 of Table 9-1
• See Table 7-3 for a detail of O&M expenses shown in lines 1 - 18 of Table 9-1
• See Table 7-4 for a detail of rate funded CIP expenditures as shown in line 22 of Table 6-1
9.2. Step 2: Cost Functionalization
After determining the FY 2021 operating and capital cost revenue requirement components based on actual cost data, the next step in the COS process is to assign the revenue requirement from rates to specific functional categories. Table 9-2 shows the functional categories and the cost causation components used in the FY 2021 COS update. These are same functional categories and cost causation components used in FY 2016 COS Study
City Council Regular Meeting - Page 913 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 53 Table 9-1: FY 2021 Sewer Revenue Requirement Operating and Capital Cost Components Line Revenue Requirement Component Operating Capital Total 1 O&M
2 Undefined Expenses $180,770 $0 $180,770
3 MIS Expenses $306,774 $0 $306,774
4 Unallocated Expenses $3,853,291 $0 $3,853,291
5 Development Expenses $604,945 $0 $604,945
6 GIS Expenses $15,774 $0 $15,774
7 Inspection Expenses $398 $0 $398
8 Pipelines Expenses $2,932 $0 $2,932
9 Facilities Expenses $222,996 $0 $222,996
10 Sewer Pump Station Expenses $958,675 $0 $958,675 11 Water Ops Admin $5,799 $0 $5,799
12 Sewer Ops Admin Expenses $146,619 $0 $146,619
13 Facilities Management Expenses $8,179 $0 $8,179
14 Sewer Main Const Expenses $4,425,437 $0 $4,425,437 15 Sewer Emergency Breaks Expenses $0 $0 $0
16 Sewer Service Const Expenses $48,255 $0 $48,255
17 Sewer Debt Unallocated Expenses $3,450 $0 $3,450 18 Total O&M Expenses $10,784,292 $0 $10,784,292
19 20 Other Costs
21 Debt Service $0 $729,000 $729,000
22 Rate Funded CIP $0 $6,885,645 $6,885,645
23 Sewer Fund Transfer $2,118,236 $0 $2,118,236
24 Total Other Costs $2,118,236 $7,614,645 $9,732,881 25 26 Total Gross Revenue Requirement $12,902,528 $7,614,645 $20,517,173 27 28 Less: Revenue Offsets
29 Other Operating Revenues
30 Permits - Industrial Waste
$0 $0
31 Impact Fees - Sewer Capacity
$1,318,805 $1,318,805
32 Interest - Pooled Cash
$0 $0
33 Interest – Miscellaneous
$4 $4
34 Other Investment Income
$101 $101
35 Contributions in aid of Construction $189,209 $189,209 36 Sale of Property/Equipment
$0 $0
37 Miscellaneous Funds & Reimbursements
$1,326,659 $1,326,659
38 Damage Claims Recoveries
$0 $0
39 OTH Dept SVC to Prop Funds Rev $86,400 $86,400
40 Interest
$128,184 $128,184
41 Other Non-Operating Revenues
$115,260 $115,260
42 Existing Debt Proceeds
$1,450 $1,450
43 Total Revenue Offsets $0 $3,166,072 $3,166,072
44 45 Adjustment for Change in Cash Reserves $0 ($153,339) ($153,339) 46 Net Revenue Requirement from Rates $12,902,528 $4,295,234 $17,197,762
City Council Regular Meeting - Page 914 of 1385
54 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 9-2: Sewer Utility Functions
Line Functions Costs Associated with Each Function
1 Flow Costs incurred to transport customer sewer discharges to across the Department’s sewer collection and conveyance system
2 Sewer Services Costs incurred to provide customer connections to sewer mains. The Department’s sewer daily service charge is based, in part, on the size of the customer’s water meter 3 Billing & Customer Service
Billing costs including meter reading, billing and collection costs associated with preparing a sewer customer bill and processing funds received from sewer users. Customer service costs include costs associated with customer accounts such as processing complaints, responding to customer inquiries, performing rereads, etc.
4 General Represents all other costs that do not serve a specific function 5 Revenue Offsets Miscellaneous revenue sources such as reimbursements and grants that offset the revenue requirement from rates
Raftelis reviewed and functionalized the Department’s sewer O&M expenses and assets. Table 9-3 summarizes the functionalized actual O&M costs for FY 2021.
Table 9-3: FY 2021 Functionalized Sewer O&M Costs
Line Cost Component FY 2021 O&M Allocation Factors
1 Flow $977,778 9.1%
2 Billing & Customer Service $794,761 7.4%
3 Sewer Services $4,473,692 41.5%
4 General $4,538,061 42.1%
5 Total $10,784,292 100.0%
Table 9-4 shows FY 2021 functionalized sewer utility fixed asset values expressed on replacement cost basis. The FY 2021 asset values were escalated from their original acquisition cost to current dollars using the Engineering News Record – Construction Cost Index (ENR CCI) for Los Angeles.
Table 9-4: FY 2021 Functionalized Sewer Asset Values
Line Cost Component FY 2021 O&M Allocation Factors
1 Flow $413,100,336 98.0%
2 Billing & Customer Service $7,910,191 1.9%
3 Sewer Services $259,210 0.1%
4 General $220,882 0.1%
5 Total $421,490,619 100.0%
City Council Regular Meeting - Page 915 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 55
9.3. Step 3: Allocation to Cost Causation Components
Table 9-5 summarizes the allocation of functionalized sewer costs to cost causation components.
Table 9-5: Allocation of Functionalized Sewer Costs to Cost Causation Components Line Function Flow
Billing &
Customer
Service
Meters &
Services General Total
1 Pumping 100.0% 100.0%
2 Collection 100.0% 100.0%
3 Gen & Admin 100.0% 100.0%
4 Billing 100.0% 100.0%
5 Customer Service 100.0% 100.0%
6 Sewer Services 100.0% 100.0%
7 Sewer O&M 9.1% 7.4% 41.5% 42.1% 100.0%
8 Sewer Capital (From Assets) 98.0% 1.9% 0.1% 0.1% 100.0%
9.3.1. REVENUE REQUIREMENT ALLOCATIONS
Table 9-6 shows the total revenue requirement for each major revenue requirement component detailed in Table 9-1. As noted previously, debt service, capital replacement, reserve funding, and certain non-operating revenues are considered capital cost requirement components and allocated based on functionalized asset values.
Table 9-6: FY 2021 Sewer Revenue Requirement and Allocation Factors Line Description FY 2021 Allocation Factors
1 Revenue Requirements
2 O&M Expenses $10,784,292 O&M Allocations
3 Debt Service $729,000 Asset Allocation
4 Rate Funded CIP $6,885,645 Asset Allocation
5 Net Operating Cashflow (excl. Revenue Adjustments) ($153,339) Asset Allocation 6 General Fund Transfer $2,118,236 Based on Lines 2-5
7 Gross Revenue Requirement $20,363,834
8 9 Less Revenue Offsets
10 Other Operating Revenues $2,921,179 Asset Allocation 11 Interest $128,184 Asset Allocation
12 Other Non-Operating Revenues $115,260 Asset Allocation 13 Proceeds from Existing Debt $1,450 Asset Allocation
14 Subtotal Other Revenues $3,166,072
15 16 Net Revenue Requirement from Rates $17,197,762
Table 9-7 summarizes the allocation of the revenue requirement from rates shown in Table 9-6 to cost causation components.
Table 9-7: FY 2021 Sewer Net Revenue Requirement Allocated to Cost Causation Components Line Cost Component FY 2021 Net Revenue from Rates
1 Flow $6,150,008
2 Billing & Customer Service $983,896
3 Sewer Services $4,996,243
4 General $5,067,616
5 Total $17,197,762
City Council Regular Meeting - Page 916 of 1385
56 LONG BEACH MUNICIPAL WATER DEPARTMENT
9.4. Step 4: Allocation of Costs to Fixed and Variable Rate Components
Table 9-8 summarizes the allocation of the FY 2021 revenue requirement to rate components: fixed (daily service charges) and variable (volumetric rates).
Table 9-8: FY 2021 Sewer Allocations to Rate Components Line Cost Categories Daily Service Charges Volumetric FY 2021 1 Flow
$6,150,008 $6,150,008
2 Billing & Customer Service $983,896
$983,896
3 Meters & Services $4,996,243
$4,996,243
4 General & Admin $5,067,616 $0 $5,067,616
5 Total $11,047,754 $6,150,008 $17,197,762
As shown in line 5 of Table 9-8, the FY 2021 variable sewer revenue requirement was $6.1 million. Variable sewer rates are composed of costs in the flow cost causation component (line 1). As shown in Table 9-9, the total proportion of variable revenue recovery in FY 2021, as calculated by Raftelis, was 35.8%.
Table 9-9: FY 2021 Sewer Volumetric Rate Components
Line Rate Components Cost Categories FY 2021
1 Flow Charges Flow $6,150,008
2 Total Raftelis Calculated FY 2021 Sewer
Variable Revenue Recovery 35.8% $6,150,008
3 Actual FY 2021 Sewer Variable Revenue
Recovery Reported by the Department 34.2% $5,793,225
As shown in Table 9-10, sewer daily service charges are composed of billing and customer service and sewer services costs. The FY 2021 sewer daily service charge revenue requirement was $11.0 million (line 5 of Table 9-8).
As shown in Table 9-10, the total proportion of fixed revenue recovery in FY 2021, as calculated by Raftelis, was
64.2%.
Table 9-10: FY 2021 Sewer Daily Rate Components
Line Rate Components Cost Categories FY 2021
1 Billing & Customer Service Billing & Customer Service $983,896 2 Sewer Services Meters & Services, General
& Administrative $10,063,858
3 Total Raftelis Calculated FY 2021
Sewer Fixed Revenue Recovery 64.2% $11,047,754
4 Actual FY 2021 Sewer Fixed Revenue
Recovery Reported by the Department 65.8% $11,162,309
9.5. Step 5: Calculation of Customer Class Rates
In Step 5, daily service charges and sewer volumetric rates are developed, for each customer class, using the cost allocation results shown in Table 9-8.
City Council Regular Meeting - Page 917 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 57
9.5.1. RECALCULATION OF FY 2021 DAILY SERVICE CHARGES
The sewer daily service charges is composed of two components: billing & customer service and meters & services.
This charge recognizes the fact that even when a customer does not discharge any sewage, the Department incurs fixed costs due to the maintenance of the sewer systems, the ability or readiness to serve each connection, and/or the billing services provided to each connection.
Table 9-11 summarizes the number of sewer accounts in FY 2021 and illustrates the calculations for equivalent units of service for each daily service charge component. The Department bills its sewer customers monthly; thus 91,167 accounts are equivalent to 1,094,004 monthly bills. The billing and customer service component recovers costs associated with meter reading, customer billing and collection, and customer service costs. These costs are the same for all meter sizes as it costs the same to provide billing and customer services to a small meter as it does for a larger meter.
The services component recovers sewer service capacity related costs. Capacity related costs are allocated to and recovered through the daily service charge by meter size. This reflects the fact that larger meters have the potential to demand more capacity compared to smaller meters. The potential capacity demanded is proportional to the potential flow through each meter size as established by the daily winter average. The daily winter average is a proxy to estimate indoor usage and return flows to sewer system. The daily winter average is the average usage during the winter months of December 2021 to March 2022 for each meter size. The ratios depict the potential flow through each meter size compared to the flow through a 5/8” or 3/4” meter, which is the base meter size for this study. For example, the flow through a 2” meter is approximately 7.31 times that of a 3/4” meter.
It is important to note that the sewer services capacity ratio shown in Column C in Table 9-11, which is based on daily winter average water usage, differ significantly from the values estimated for FY 2017 in the FY 2016 COS Study. The values projected for FY 2017 were based on calculated daily winter average usage during the period December 2014 to March 2015. As noted previously, the values shown in Column C are based on calculated on daily winter average water usage during the period December 2021 to March 2022. The approximate 7-year time differential in these data points may account for the change in daily winter average usage. Table 8-1 provides a detail of the calculation of FY 2021 daily winter average water use.
Table 9-11: FY 2021 Sewer Units of Service for Daily Service Charge Components Meter Ratios Units of Service (EMU/Year)
Line Meter Size
FY 2021 #
of Sewer
Accounts
Billing &
Customer
Service
Sewer Services
Capacity Based on
Actual FY 2021 Daily
Winter Average
Water Usage
Sewer Services
Capacity Based on
Estimated FY 2017
Daily Winter Average
Water Usage from the
FY 2016 COS Study
FY 2021
Billing &
Customer
Service
FY 2021 Sewer
Services
Capacity
A B C D E = A x B x 12 F = A x C x 12
1 5/8" or 3/4" 72,687 1.00 1.00 1.00 872,244 872,244
2 1” 11,457 1.00 1.64 1.66 137,484 224,936
3 1 1/2" 4,117 1.00 4.55 4.92 49,404 224,789
4 2” 2,201 1.00 7.31 8.75 26,412 192,972
5 3” 413 1.00 22.24 20.06 4,956 110,235
6 4” 150 1.00 23.15 30.35 1,800 41,670
7 6” 82 1.00 80.94 85.17 984 79,643
8 8” 48 1.00 128.25 90.31 576 73,871
9 10” 8 1.00 306.54 140.00 96 29,427
10 12” 4 1.00 306.54 176.67 48 14,714
11 16” 0 1.00 306.54 260.00 0 0
12 Total 91,167 1,094,004 1,864,501
City Council Regular Meeting - Page 918 of 1385
58 LONG BEACH MUNICIPAL WATER DEPARTMENT
Table 9-12 illustrates the development of unit service charges for each daily service charge component. This calculation divides the revenue requirements from Table 9-10 by the number of equivalent bills/meters per year from Table 9-11.
Table 9-12: Development of FY 2021 Sewer Daily Service Charge Unit Costs Line Description Billing & Customer
Service
Sewer Services Capacity Notes
1 Revenue Requirement $983,896 $10,063,858
2 Units of Service 1,094,004 1,864,501
3 Monthly Bills /Year Equivalent Meter
Units/Year
4 Unit Cost of Service $ 0.90 $ 5.40 Line 1 / Line 2 rounded to $0.01 5 Daily Unit Service Cost $ 0.03 $ 0.18 Line 4 * 12 / 365
Table 9-13 shows a comparison of the FY 2021 daily service charges recalculated by Raftelis using actual cost and demand data versus the actual FY 2021 daily service charges assessed by the Department. As shown in column G of Table 9-13, the recalculated daily service charges differ significantly for some meter sizes (e.g., 4”, and 8” - 16”).
Raftelis believes these variances are due to changes in the daily winter average water usage shown in Columns C and D of Table 9-11. This does not reflect a fundamental flaw in the Department’s daily service charge rate structure. Similar to all of the cost and demand data used in this report for sewer, water, and reclaimed water, Raftelis recommends using updated daily winter average water usage information in the Department’s next comprehensive COS analysis.
Table 9-13: Recalculated FY 2021 Sewer Daily Service Charge vs. Actual Line Meter Size
Daily Winter
Average Ratio
Billing &
Customer
Service
Sewer
Services
Daily FY
2021
Actual FY
2021 $ Difference % Difference
A B C = A * 0.18 D = B + C E F = D - E G = D / E -1
1 5/8" or 3/4" 1.00 $0.03 $0.18 $0.21 $0.23 ($0.02) -8.0% 2 1" 1.64 $0.03 $0.29 $0.32 $0.33 ($0.01) -3.9%
3 1 1/2" 4.55 $0.03 $0.81 $0.84 $0.87 ($0.04) -4.2%
4 2" 7.31 $0.03 $1.30 $1.33 $1.51 ($0.18) -12.0%
5 3" 22.24 $0.03 $3.95 $3.98 $3.51 $0.47 13.3%
6 4" 23.15 $0.03 $4.11 $4.14 $5.08 ($0.94) -18.5%
7 6" 80.94 $0.03 $14.36 $14.39 $14.15 $0.24 1.7%
8 8" 128.25 $0.03 $22.76 $22.79 $15.00 $7.79 51.9%
9 10" 306.54 $0.03 $54.40 $54.43 $23.22 $31.21 134.4%
10 12" 306.54 $0.03 $54.40 $54.43 $29.28 $25.14 85.9%
11 16" 306.54 $0.03 $54.40 $54.43 $43.07 $11.36 26.4%
9.5.1. RECALCULATION OF FY 2021 VOLUMETRIC RATES
Table 9-14 shows a comparison of the FY 2021 sewer volumetric rates as recalculated by Raftelis using actual cost and demand data versus the actual FY 2021 daily service charges assessed by the Department. The $0.03/ccf differential (7.8%) is within the bounds of reasonableness.
City Council Regular Meeting - Page 919 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 59 Table 9-14: Recalculated FY 2021 Sewer Quantify Rates vs. Actual FY 2021 Line Description Flow Note
1 Revenue Requirements $6,150,008
2 Units of Service 15,987,624 ccf
3 Unit Cost of Service $0.38 Line 1 / Line 2 rounded to nearest $0.01 4 5 FY 2021 $/ccf Rate $0.38
6 Actual FY 2021 $0.36
7 $ Difference $0.03
8 % Difference 7.8%
City Council Regular Meeting - Page 920 of 1385
60 LONG BEACH MUNICIPAL WATER DEPARTMENT
10. Secondary Objectives
10.1. Basic Human Needs Water Consumption
The Department’s current rate structure for the Residential customer class features a first tier (Tier 1A and Tier 1B) with a width of 0-6 ccf. As part of the FY 2021 COS Study, the Department sought an analysis of whether this current tier width provides an adequate level of water to satisfy the basic human needs of residential customers.
To answer this question, Raftelis conducted a review of industry literature with a focus on three studies. The first study was from Dr. Peter Gleick, a scientist from the Pacific Institute who has won awards for his work on water resources. Dr. Gleick studied basic human needs water usage by first estimating how much water the average person must drink each day with a range based on climate. After adding water usage for cooking, he produced an estimate of approximately 13 gallons per person per day. This estimate, which did not include water usage estimates for appliances or running toilets, results in a tier width of approximately 1.9 ccf per account per month for a three-person household. 1.9 ccf was the lowest basic human needs estimate identified in our literature review.
The second study reviewed by Raftelis was from the textbook “Data Statistics and Useful Numbers for Environmental Sustainability,” written by Dr. Benoit Cushman-Roisin, a professor of engineering at Dartmouth University’s Thayer School of Engineering. His text explores the average cost of water for appliances in addition to the drinking water required to survive. He calculates that, on average in America, people require 69.3 gallons per person per day or approximately 8.3 ccf per account per month for a three-person household. This calculation is based on a nationwide estimate, where water needs vary based on climate and socio-economic conditions. 9.3 ccf was the maximum basic human needs estimate identified in our literature review.
The final study reviewed was from the Water Research Foundation (WRF). In 2016, the WRF completed a “residential end use” study, which analyzed household water usage based on end uses such as bathing, cooking, clothes washing, irrigation, etc. The study was national in scope and separated indoor and outdoor water use and even considered appliance water use efficiency. The results indicated that a three-person household requires approximately 5.5 ccf per month which equates to approximately 46 gallons per person per day. 5.5 ccf was the midpoint basic human needs estimate identified in our literature review.
As a final test, Raftelis reviewed current and future California indoor water use standards. The current California indoor water usage standard is 55 gallons per person per day. For a three-person household, the Department’s 0 - 6 ccf first tier equates to approximately 49.9 gallons per day. The 0 - 6 ccf first tier is also below the 50 gallons per person per day standard that will become effective in 2030. On April 14, 2022, the California Senate approved lowering the current standard of 55 gallons per person per day to 47 gallons per person per day in 2025. For a three-person household this equates to 5.6 ccf per month, slightly below the Department’s current 0 - 6 ccf threshold. The legislation has not passed the full California State Assembly. Table 10-1 summarizes our findings on basic human needs water usage.
City Council Regular Meeting - Page 921 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 61 Table 10-1: Basic Human Needs Water Use Comparison
Line Metric
Peter Gleick
(1)
Benoit
Cushman-Roisin
(2)
Water Research
Foundation
(3)
Long Beach
Current
Tier 1
1 ccf per Account per Month 1.9 8.3 5.5 6
2 Gallons per Month per Household 1,188 6,237 4,140 4,488 3 Average Household Density 3 3 3 3
4 Monthly per Person 396 2,079 1,380 1,496
5 Days 30 30 30 30
6 Gallons per Capita per Day 13.2 69.3 46 49.9
7 (1) Based on international water usage data that included developing countries. Often cited by academic researchers 8 (2) Author of "Data Statistics and Useful Numbers for Environmental Sustainability" 9 (3) Water Research Foundation "Residential End Uses of Water Version 2 Executive Report", April 2016
10.2. Pre- and Post- COVID Water Demands
In early 2020, the COVID-19 pandemic arrived in California. The Department asked Raftelis to examine the effects of COVID-19 on the usage characteristics Department customers. Table 10-2 shows the results of our analysis which indicate minimal COVID-19 impacts for residential customers (lines 2 – 5) and slightly more significant impacts for commercial customers (lines 14 – 19).
Table 10-2: Changes in Customer Demand During COVID-19 (ccf) Line Customer Class
Pre-COVID
FY 2019
COVID-19
FY 2020
COVID-19
FY 2021
1 Residential
2 Residential Use 14,544,821 14,962,815 15,260,063
3 Percentage Change in Use
3% 2%
4 Residential Accounts 79,017 79,266 80,322
5 Average Use per Account 184 189 190
6 7 Non-Residential
8 Non-Residential Use 6,475,785 6,219,935 6,327,548
9 Percentage Change in Use
-4% 2%
10 Non-Residential Accounts 7,575 7,647 7,519
11 Average Use per Account 855 813 842
12 13 Commercial
14 Commercial Use 5,636,873 5,340,251 5,304,634
15 Percentage Change in Use
-5% -1%
16 Commercial Accounts 6,195 6,234 6,196
17 Average Use per Account 910 857 856
18 19 Industrial
20 Industrial Use 126,994 118,283 127,133
21 Percentage Change in Use
-7% 7%
22 Industrial Accounts 240 239 236
23 Average Use per Account 529 495 539
24 25 Irrigation
26 Irrigation Use 711,918 761,401 895,781
27 Percentage Change in Use
7% 18%
28 Irrigation Accounts 1,140 1,174 1,087
29 Average Use per Account 624 649 824
30 31 Total
32 Total Use 21,020,606 21,182,750 21,587,611
33 Percentage Change in Use
1% 2%
34 Total Accounts 86,592 86,913 87,841
35 Total Average Use Per Account 243 244 246
City Council Regular Meeting - Page 922 of 1385
62 LONG BEACH MUNICIPAL WATER DEPARTMENT
10.3. Changes in Residential Demands
Although COVID-19 had a minimal impact on residential customers, there have been significant shifts in residential demand characteristics since FY 2016 COS Study. Table 10-3 compares the FY 2017 demand projections used in the FY 2016 COS Study to actual FY 2021 water demand on the Department’s system. During this period, residential usage in all three consumption tiers changed significantly (lines 2 – 5 in Table 10-3). The 28% reduction in Tier 3 demand (line 5) and the 32% increase in Tier 2 demand are particularly notable.
Table 10-3: Changes in Customer Demand FY 2016 to FY 2021 (ccf) Line Customer Class
FY 2017 Demand
Estimate from the FY
2016 COS Study
Actual FY 2021
Demand Difference % Difference
1 Residential 15,171,032 15,260,063 89,031 1%
2 Tier 1A 82,306 63,925 (18,382) -22%
3 Tier 1B 9,759,164 9,097,286 (661,878) -7%
4 Tier 2 3,769,538 4,970,154 1,200,616 32%
5 Tier 3 1,560,024 1,128,699 (431,326) -28%
6 Commercial 5,889,319 5,304,634 (584,685) -10%
7 Industrial 102,548 127,133 24,585 24%
8 Irrigation 754,811 895,781 140,970 19%
9 Total 21,917,710 21,587,611 (330,099) -2%
10.4. Advanced Metering Infrastructure
Advanced Metering Infrastructure (AMI) is a system of controls and communication technologies that automate typically manual tasks for water and electric utility meters. While new to many water utilities, AMI can be a valuable tool for water departments across the United States, from both a customer communication and water usage efficiency perspective. The Department called on Raftelis to investigate how its AMI infrastructure can be used for future rate-setting studies to continue providing equitable and affordable rates.
Part of our investigation involved looking into the electric utility industry where AMI has been successful. While not a one-to-one comparison, it does provide a good foundation for some future potential water utility uses. In electric utilities, AMI can be used to provide hourly usage data as it ties in directly to a power source and so can constantly update demand. This has allowed many electric utilities to implement time-of-use or peak hour rate structures. This is less feasible with water AMI. Water utilities do not have a direct power tie-in and instead rely on batteries. Therefore, water meters must balance remote meter reading frequency with battery life. As a result, AMI may not be entirely effective in developing time-of-use water rate structures.
Where AMI can be used most effectively by water utilities is analyzing customer usage characteristics for use in COS studies. For example, AMI data can be extremely useful in the determination of empirically based calculations of customer class maximum day and maximum hour peaking factors. This information will enhance the accuracy of the cost allocation process and the development of customer class water rates.
Since it can detect these unique demand characteristics on a more intense scale, AMI can also provide opportunities for examining areas of water loss in a utility system. Across the United States, utilities have used AMI to lower water loss in their own systems and thus improved water conservation efforts. This is something the Department can also take advantage of in their ongoing water conservation efforts.
City Council Regular Meeting - Page 923 of 1385
COST-OF-SERVICE UPDATE FOR WATER, RECLAIMED WATER, AND SEWER RATES 63 An additional potential benefit of AMI in Department’s service area is the opportunities for new and improved ways to provide customer service. If properly maintained and invested in, AMI can be used to smooth customer service calls by providing easy-to-access and understandable information to both customer service representatives and the customers themselves. Further, by training customer service representatives to understand AMI charts they can also quickly identify problems for customers and thereby reduce appointments to check meters. This also allows for the implementation of a remote turn-on or turn-off function, which reduces costs to the utility by decreasing the number of trips to meters.
In the case of the water utility in Kansas City, Missouri, it saved approximately $450,000 in reduced field orders and $2.25 million by monitoring vacant properties remotely. When integrated into online resources, AMI can also be used to send high-use alerts to customers so that customers may adjust their usage or investigate any leaks that may be occurring that would result in such high usage.
When properly invested in, AMI can be a valuable tool to increase transparency and encourage good water use habits, both of which are shown to increase customer satisfaction. When combined with efforts by the Department to serve low-cost water to residential tiers, meet basic human needs, and reduce water loss, AMI offers many options for the Department to meet its goals of affordability and conservation.
City Council Regular Meeting - Page 924 of 1385
Water Cost of Service and Rate Design Study
Final Report / May 5, 2022
City of
Manhattan
Beach
City Council Regular Meeting - Page 925 of 1385
City Council Regular Meeting - Page 926 of 1385
445 S Figueroa St, Suite 1925
Los Angeles CA 90071
www.raftelis.com
May 5, 2022
Mr. Erick Lee
Public Works Director
City of Manhattan Beach
1400 Highland Ave.
Manhattan Beach, CA 90266
Subject: Water Cost of Service and Rate Design Study
Dear Mr. Lee,
Raftelis is pleased to provide this Water Cost of Service and Rate Study Report to the City of Manhattan Beach.
The study's purpose was to develop a five-year proposed water rate schedule for the City for Fiscal Year (FY) 2023 through FY 2027 that is fair and equitable.
The study's major goals are to:
» Develop a five-year financial plan to ensure financ ial sufficiency, meet operating costs, fund the lon g-term Capital Improvement Plan (CIP), and maintain prudent reserves. » Conduct a cost-of-service analysis to ensure a stro ng nexus between proposed water rates and the cost to provide service to customers.
It has been a pleasure working with you, and we thank you and other City staff for the support provided to Raftelis during this study.
Sincerely,
Steve Gagnon
Project Manager
City Council Regular Meeting - Page 927 of 1385
WATER COST OF SERVICE AND RATE DESIGN STUDY
Table of Contents
1. EXECUTIVE SUMMARY................................................................................................................... 1
1.1. Study Overview ................................................................................................................................. 1
1.2. Proposed Financial Plan ................................................................................................................... 1
1.3. Proposed Rate Structure Changes ................................................................................................... 4
1.4. Proposed Water Rates ...................................................................................................................... 5
2. INTRODUCTION ............................................................................................................................... 7
2.1. Agency Overview ............................................................................................................................... 7
2.2. Study Overview ................................................................................................................................. 7
3. LEGAL REQUIREMENTS AND RATE SETTING METHODOLOGY .............................................. 8
3.1. Legal Requirements .......................................................................................................................... 8
3.2. Rate-Setting Methodology ................................................................................................................. 8
4. KEY INPUTS AND ASSUMPTIONS .............................................................................................. 10
4.1. Current Water Rates ........................................................................................................................ 10
4.2. Financial Assumptions ..................................................................................................................... 11
4.3. Projected Service Connections ....................................................................................................... 11
4.4. Projected Water Use and Supply .................................................................................................... 12
5. FINANCIAL PLAN .......................................................................................................................... 15
5.1. Revenues From Current Rates ....................................................................................................... 15
5.2. Operations and Maintenance Expenses ......................................................................................... 17
5.3. Debt Service .................................................................................................................................... 18
5.4. Infrastructure Improvement Plan ..................................................................................................... 18
5.5. Financial Policies ............................................................................................................................. 20
5.6. Status Quo Financial Plan ............................................................................................................... 21
5.7. Proposed Financial Plan ................................................................................................................. 23
6. COST OF SERVICE ANALYSIS .................................................................................................... 27
6.1. Methodology .................................................................................................................................... 27
6.2. Revenue Requirement..................................................................................................................... 27
6.3. System Peaking Factors.................................................................................................................. 28
6.4. Functionalization and Allocation of Expenses ................................................................................. 29
6.5. O&M Expense Allocation ................................................................................................................. 32
6.6. Capital Allocation ............................................................................................................................. 35
6.7. Preliminary Cost of Service Allocation ............................................................................................ 37
6.8. Allocation of Public and Private Fire Protection Costs .................................................................... 39 City Council Regular Meeting - Page 928 of 1385
CITY OF MANHATTAN BEACH
6.9. Peaking Units of Service ................................................................................................................. 40
6.10. Adjusted Cost of Service Allocation ................................................................................................ 41
6.11. Unit Cost Development.................................................................................................................... 44
6.12. Customer Class Costs ..................................................................................................................... 46
7. PROPOSED WATER RATES ......................................................................................................... 47
7.1. Proposed FY 2023 Fixed Meter Charges ........................................................................................ 47
7.2. Proposed FY 2023 Volume Charges .............................................................................................. 48
7.3. Proposed FY 2023 Private Fire Line Charges ................................................................................ 48
7.4. Proposed Five-Year Rate Schedule ................................................................................................ 49
7.5. Bi-Monthly Bill Impacts .................................................................................................................... 50
7.6. Bi-Monthly Bill Comparison ............................................................................................................. 51
City Council Regular Meeting - Page 929 of 1385
WATER COST OF SERVICE AND RATE DESIGN STUDY
List of Tables
Table 1-1: Proposed Revenue Adjustments ................................................................................................................. 1 Table 1-2: Proposed Five-Year Water Rate Schedule ................................................................................................. 5 Table 4-1: Current Water Rate Schedule ................................................................................................................... 10 Table 4-2: Inflationary Assumptions ........................................................................................................................... 11 Table 4-3: Projected Number of Water Meters Under E xisting Rate Structure .......................................................... 12 Table 4-4: Projected Number of Fire Lines ................................................................................................................. 12 Table 4-5: Projected Water Use Under Existing Rate Structure ................................................................................. 13 Table 4-6: Projected Water Supply Mix ...................................................................................................................... 14 Table 5-1: Projected Fixed Meter Charge Revenues un der Current Rates ............................................................... 15 Table 5-2: Projected Volume Charge Revenues Under C urrent Rates ...................................................................... 16 Table 5-3: Projected Other Revenues ........................................................................................................................ 16 Table 5-4: Summary of Projected Revenues Under Curr ent Rates ........................................................................... 17 Table 5-5: O&M Summary by Department ................................................................................................................. 17 Table 5-6: Water Purchase Cost Detail ...................................................................................................................... 18 Table 5-7: Schedule of Debt Service Payments ......................................................................................................... 18 Table 5-8: Capital Improvement Plan ......................................................................................................................... 19 Table 5-9: Financial Policies ....................................................................................................................................... 21 Table 5-10: Status Quo Financial Plan ....................................................................................................................... 22 Table 5-11: Proposed Revenue Adjustments ............................................................................................................. 23 Table 5-12: Proposed Financial Plan - Pro Forma ..................................................................................................... 24 Table 6-1: FY 2023 Revenue Required from Rates ................................................................................................... 28 Table 6-2: System Peaking Factor Allocations ........................................................................................................... 29 Table 6-3: Allocation of Functional categories to Cost Causation Components ........................................................ 31 Table 6-4: Functionalization of O&M Expenses by Department ................................................................................. 32 Table 6-5: Summary of O&M Expenses by Functional Ca tegory ............................................................................... 32 Table 6-6: Allocation of O&M Expenses to Cost Causa tion Components .................................................................. 34 Table 6-7: Summary of Capital Assets by Functional Category ................................................................................. 35 Table 6-8: Allocation of Functionalized Capital Assets to Cost Causation Components ........................................... 36 Table 6-9: Preliminary Cost of Service Allocation....................................................................................................... 38 Table 6-10: Equivalent Fire Meters ............................................................................................................................. 39 Table 6-11: Public vs. Private Fire Protection Allocation ............................................................................................ 40 Table 6-12: Peaking Units by Customer Class ........................................................................................................... 40 Table 6-13: Peaking Units for Fire Protection ............................................................................................................. 41 Table 6-14: Summary of Total Peaking Units ............................................................................................................. 41 Table 6-15: Adjusted Cost of Service Allocation......................................................................................................... 43 Table 6-16: Customer Meters by Class ...................................................................................................................... 44 Table 6-17: Equivalent Meter Units ............................................................................................................................ 45 Table 6-18: Development of Unit Costs ...................................................................................................................... 45 Table 6-19: Customer Class Cost of Service .............................................................................................................. 46 Table 7-1: Proposed FY 2023 Fixed Meter Charge Calc ulation ................................................................................. 47 Table 7-2: Proposed FY 2023 Volume Charge Calculati on ........................................................................................ 48 Table 7-3: Proposed FY 2023 Private Fire Line Charg e Calculation.......................................................................... 49 Table 7-4: Proposed Five-Year Water Rate Schedule ............................................................................................... 50 Table 7-5: Customer Bill Impacts ................................................................................................................................ 51
City Council Regular Meeting - Page 930 of 1385
CITY OF MANHATTAN BEACH
List of Figures
Figure 1-1: Capital Financing ........................................................................................................................................ 2 Figure 1-2: Status Quo vs. Proposed Financial Plan .................................................................................................... 3 Figure 1-3: Proposed Financial Plan – Projected End ing Balances ............................................................................. 4 Figure 1-4: Single Family Residential Bill Comparis on with Neighboring Agencies ..................................................... 6 Figure 5-1: Capital Financing Plan ............................................................................................................................. 20 Figure 5-2: Status Quo Financial Plan – Projected Ending Balances ........................................................................ 23 Figure 5-3: Proposed Financial Plan – Projected End ing Balances ........................................................................... 25 Figure 5-4: Proposed vs. Status Quo Financial Plan – Revenue vs. Expenses ......................................................... 26 Figure 7-1: Single Family Residential Bill Comparis on with Neighboring Agencies ................................................... 52
City Council Regular Meeting - Page 931 of 1385
WATER COST OF SERVICE AND RATE DESIGN STUDY
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City Council Regular Meeting - Page 932 of 1385
WATER COST OF SERVICE AND RATE DESIGN STUDY 1
1.Executive Summary
1.1.Study Overview
Public water agencies in California typically conduct cost-of-service and rate studies to ensure there is a strong nexus between rates charged to customers and costs incurred to provide service, as required by Proposition 218.
The City of Manhattan Beach (City) last conducted a cost-of-service study in 2008, which established proposed water rates through Fiscal Year (FY) 2014; rates have not been increased since then. The City engaged Raftelis in 2020 to conduct this Water Cost of Service and Rate Design Study to establish proposed water rates over a five- year period from FY 2023 to FY 2027. Note that the proposed rates presented in this study report may not be implemented until formally adopted by the City Council after a public hearing.
The major study objectives are to:
» Develop a five-year financial plan that sufficiently funds the City's operations and maintenance (O&M) expenses, debt service payments, and Capital Improvement Plan (CIP) while adequately funding reserves and meeting debt coverage requirements.
» Conduct a cost-of-service analysis that establishes a clear nexus between the cost to serve customers and the water rates charged to customers, per Proposition 218 requirements. » Review the City's existing water rate structure and recommend changes as necessary. » Develop a five-year schedule of water rates that is fair, equitable, and compliant with Proposition 218.
1.2.Proposed Financial Plan
Raftelis conducted a status quo cash flow analysis to evaluate whether existing water rates can adequately fund the City’s various expenses over the five-year study period. With the assistance of City staff, annual revenues, O&M expenses, debt service payments, and capital expenditures were projected through FY 2027. Raftelis projects that with no rate increases over the five-year study period, the City will fully deplete its reserves by the end of FY 2025.
This demonstrates a clear need for revenue adjustments (i.e. water rate revenue increases relative to the status quo).
Raftelis worked with City staff to develop the following proposed revenue adjustments over the five-year study period (see Table 1-1). The proposed revenue adjustments were selected to provide financial sufficiency for the City while minimizing impacts to City customers. Additionally, the City has strategically reduced future capital spending during the next five years, when compared to its Water Master Plan, to catch up on a backlog of existing projects. This adjustment also minimizes bill impacts to customers.
Table 1-1: Proposed Revenue Adjustments
Key factors influencing the need for proposed revenue adjustments include:
» Planned capital expenditures: Projects scheduled over the next five years total about $23M. » Increases in purchased water costs from Metropolitan Water District (MWD): The City's cost to purchase treated water is expected to increase substantially. This is partially mitigated by the City’s plan to begin producing more local water.
Description FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Effective Date Nov 1, 2022 Nov 1, 2023 Nov 1, 2024 Nov 1, 2025 Nov 1, 2026 Revenue Adjustment 9.5% 9.0% 8.5% 4.0% 4.0%
City Council Regular Meeting - Page 933 of 1385
2 CITY OF MANHATTAN BEACH
Figure 1-1 shows the proposed capital financing plan over the study period. Capital expenditures significantly increase beginning in FY 2024, after a pause in FY 2023 for City staff to complete work on a backlog of current projects. The proposed financial plan assumes that all capital projects over the study period will be cash funded by rates and reserves.
Figure 1-1: Capital Financing
Figure 1-2 shows the status quo and proposed five-year financial plans. Status Quo revenue is shown by the dark blue line. The proposed revenue is shown by the light gray line. Although current rates result in adequate recovery of O&M expenses in most years, revenue adjustments are required to generate sufficient revenue to cover cash- funded capital projects over the study period. Even under the proposed financial plan, reserves are drawn down in some years to cover a portion of cash-funded capital projects.
City Council Regular Meeting - Page 934 of 1385
WATER COST OF SERVICE AND RATE DESIGN STUDY 3
Figure 1-2: Status Quo vs. Proposed Financial Plan
Figure 1-3 shows projected ending balances over the study period relative to the City’s operating and total reserve targets under the proposed financial plan. Reserves are drawn down in FY 2023 as ongoing capital projects are completed and replenished over the subsequent years. Although not displayed on the chart below, the City is projected to meet its debt coverage requirement under the proposed financial plan in all years.
City Council Regular Meeting - Page 935 of 1385
4 CITY OF MANHATTAN BEACH
Figure 1-3: Proposed Financial Plan – Projected Ending Balances
1.3.Proposed Rate Structure Changes
The City’s customers are currently subject to two primary charges:
1. Fixed Meter Charges are charged bi-monthly and vary by meter size.
2. Volume Charges per hundred cubic feet 1 (HCF) of water delivered that vary by meter size.
Elimination of Tiered Rate Structure
Customers with a 1" or smaller water meter are currently subject to a three-tier Volume charge rate structure; customers with larger meters pay a uniform water rate (a rate that does not vary with the volume of water used). It is common to use a uniform rate for commercial and institutional customers. Though tiered rates for single-family residential customers are very common in southern California, the project team decided to implement a uniform rate for each class for a few reasons:
3. The team evaluated tiered rates, and the rate differential between tiers was small; therefore, tiered rates would likely not provide a strong conservation message,
4. Manhattan Beach customers have relatively small irrigation needs,
5. Uniform rates are easier for customers to understand.
Rates by Customer Class
Different types of customers use water in different ways, which impact the sizing, operation, and maintenance of water facilities and therefore have a different cost impact on the water system. Establishing separate water rates for each class allows the City to recognize these differences and more fairly recover its costs.
1 One HCF equals approximately 748 gallons.
City Council Regular Meeting - Page 936 of 1385
WATER COST OF SERVICE AND RATE DESIGN STUDY 5
1.4.Proposed Water Rates
Table 1-2 shows the proposed five-year water rate schedule through FY 2027. Proposed FY 2023 rates are calculated based on the results of the cost of service analysis. Overall, FY 2023 rates are designed to collect 9.5 percent more rate revenue than current FY 2022 rates in accordance with the proposed FY 2023 revenue adjustment. Proposed rates beginning in FY 2024 are calculated by simply increasing the prior year's proposed rates by the proposed annual revenue adjustments.
Table 1-2: Proposed Five-Year Water Rate Schedule
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Current Nov 1, 2022 Nov 1, 2023 Nov 1, 2024 Nov 1, 2025 Nov 1, 2026 Bi-Monthly Fixed Charges
5/8" or 3/4" $40.46 $28.93 $31.54 $34.23 $35.60 $37.03
1" $63.64 $40.62 $44.28 $48.05 $49.98 $51.98
1.5" $101.48 $69.86 $76.15 $82.63 $85.94 $89.38
2" $147.26 $104.95 $114.40 $124.13 $129.10 $134.27
3" $296.30 $216.05 $235.50 $255.52 $265.75 $276.38
4" $406.60 $379.79 $413.98 $449.17 $467.14 $485.83
6" $787.98 $771.58 $841.03 $912.52 $949.03 $987.00
8" $1,245.64 $1,414.82 $1,542.16 $1,673.25 $1,740.18 $1,809 .79 10" $1,779.60 $2,233.50 $2,434.52 $2,641.46 $2,747.12 $2,857 .01 Volume Rates
1" and Smaller, All Classes
Tier 1 1-14 $4.28
Tier 2 15-48 $5.86
Tier 3 >48 $9.38
1 1/2" and Larger, All Classes Uniform $5.51
Single Family Residential $6.56 $7.16 $7.77 $8.09 $8.42 Multi-Family Residential $6.53 $7.12 $7.73 $8.04 $8.37
Commercial $6.54 $7.13 $7.74 $8.05 $8.38
City / LA County $6.55 $7.14 $7.75 $8.06 $8.39
Schools $6.66 $7.26 $7.88 $8.20 $8.53
Private Fire $5.41 $5.90 $6.41 $6.67 $6.94
Bi-Monthly Private Fire Line Charges
5/8" or 3/4" $13.19 $14.38 $15.61 $16.24 $16.89
1" $17.46 $19.04 $20.66 $21.49 $22.35
1.5" $26.97 $29.40 $31.90 $33.18 $34.51
2" $43.52 $37.76 $41.16 $44.66 $46.45 $48.31
3" $61.82 $71.34 $77.77 $84.39 $87.77 $91.29
4" $82.42 $121.92 $132.90 $144.20 $149.97 $155.97
6" $139.62 $249.22 $271.65 $294.75 $306.54 $318.81
8" $208.28 $443.52 $483.44 $524.54 $545.53 $567.36
10" $288.36 $702.25 $765.46 $830.53 $863.76 $898.32
Description Tiers
City Council Regular Meeting - Page 937 of 1385
6 CITY OF MANHATTAN BEACH
Many residential customers will see a bill increase due to the higher uniform volume charge compared to the current Tier 1 charge for the first 14 HCF per billing period; however, this is partially offset by the reduction in the fixed meter charge. Note that beyond FY 2023, estimated bi-monthly bill increases in each year simply equal the proposed annual revenue adjustment.
Figure 1-4 shows a comparison of Single Family Residential bi-monthly bills with neighboring water agencies. All bills are representative of a typical residential customer using 20 HCF per bi-monthly billing period (equal to the average residential water use in the City). Note that many of the other agencies shown are either scheduled or expected to implement rate increases in FY 2023, which are not reflected in the graph. Many other factors affect rates such as whether or not a water purveyor receives a portion of county property tax revenue, infrastructure age and condition, whether the system has to pump water up to higher elevations, water source (groundwater is less expensive than imported water from the MWD) and the willingness of the agency to reinvest in the system to maintain infrastructure.
Figure 1-4: Single Family Residential Bill Comparison with Neighboring Agencies
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WATER COST OF SERVICE AND RATE DESIGN STUDY 7
2.Introduction
2.1.Agency Overview
The City of Manhattan Beach (City) provides water service to a population of approximately 35,000 people through about 13,600 metered water connections within a service area of approximately 4 square miles in Los Angeles County. The City delivers potable water from the Metropolitan Water District of Southern California (MWD) through 114 miles of distribution pipeline. With the completion of the water treatment facility at Peck Reservoir, the City will expand its capacity to provide treated groundwater to customers at a lower cost than purchasing water from MWD.
2.2. Study Overview
Public water agencies in California typically perform a cost-of-service analysis to ensure that customers are appropriately charged for water service commensurate with the cost to provide service. The City last conducted a cost-of-service study in 2008, which established proposed rates over a five-year period through Fiscal Year (FY) 2014. The City has not raised rates since then. Over this period, the Consumer Price Index, an official measure of inflation, has increased by 21.9%. The City engaged Raftelis in 2020 to conduct this Water Cost of Service and Rate Design Study to establish proposed water rates for FY 2023 through FY 2027. Note that proposed rates cannot be implemented until formally adopted by the City Council after a public hearing. Proposition 218 requires that City customers must be mailed a public hearing notice detailing any proposed rate changes no fewer than 45 days before the public hearing.
Study Objectives
The major study objectives are to:
» Develop a five-year financial plan that sufficiently funds the City's operations and maintenance (O&M) expenses, debt service payments, and capital expenditures while adequately funding reserves and meeting debt coverage requirements.
» Conduct a cost of service analysis that establishes a clear nexus between the cost to serve customers and the water rates charged to customers, per Proposition 218 requirements. » Review the City’s existing water rate structure and recommend changes as necessary to ensure that proposed rates achieve financial sufficiency while furthering the City’s policy goals of affordability and conservation.
» Develop a five-year schedule of water rates that are fair, equitable, and compliant with Proposition 218 requirements.
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3.Legal Requirements and
Rate Setting Methodology
3.1.Legal Requirements
California Constitution - Article XIII D, Section 6 (Proposition 218) Proposition 218, reflected in the California Constitution as Article XIII D, was enacted in 1996 to ensure that rates and fees are reasonable and proportional to the cost of providing service. The principal requirements, as they relate to public water service, are as follows:
1. A property-related charge (such as water rates) imposed by a public agency on a parcel shall not exceed the costs required to provide the property-related service.
2. Revenues derived by the charge shall not be used fo r any purpose other than that for which the charge was imposed.
3. The amount of the charge imposed upon any parcel sh all not exceed the proportional cost of service attributable to the parcel.
4. No charge may be imposed for a service unless that service is actually used or immediately available to the owner of the property.
5. A written notice of the proposed charge shall be mailed to both the customer of record and owner of record of each parcel at least 45 days prior to the public hearing, when the agency considers all written pro tests against the charge.
As stated in the American Water Works Association's (AWWA) Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices - M1 Seventh Edition (Manual M1), "water rates and charges should be recovered from classes of customers in proportion to the cost of serving those customers.” Raftelis follows industry-standard rate- setting methodologies set forth by the AWWA Manual M1 to ensure this study meets Proposition 218 requirements and establishes rates that do not exceed the proportionate cost of providing water services on a parcel basis. The methodology in the Manual M1 is a nationally recognized industry rate-making standard that courts have recognized as consistent with Proposition 218.
California Constitution Article X, Section 2
California Constitution Article X, Section 2 mandates that water resources be put to beneficial use and that the waste or unreasonable use of water be prevented through conservation. Section 106 of the Water Code declares that the highest priority use of water is for domestic purposes, with irrigation secondary. Thus, the management of water resources is part of the property-related service provided by public water suppliers to ensure the resource is available over time.
3.2.Rate-Setting Methodology
This study was conducted using industry-standard principles outlined by the AWWA Manual M1. The process and approach Raftelis utilized in the study to determine water rates is informed by the City’s policy objectives, the current water system and rates, and the legal requirements in California (namely, Proposition 218). The resulting City Council Regular Meeting - Page 940 of 1385
WATER COST OF SERVICE AND RATE DESIGN STUDY 9
financial plan, cost of service analysis, and rate design process follows five key steps, outlined below, to determine proposed rates that fulfill the City’s objectives, meet industry standards, and comply with relevant regulations.
1. Financial Plan: The first study step is to develop a multi-year financial plan that projects the City’s revenues, expenses, capital project financing, annual debt se rvice, and reserve funding. The financial plan is u sed to determine the revenue adjustment, which allows the City to recover adequate revenues to fund expenses and reserves.
2. Revenue Requirement Determination: After completing the financial plan, the rate-making process begins by determining the revenue requirement for the test year, also known as the rate-setting year. The tes t year for this study is FY 2023. The revenue requirement should sufficiently fund the City’s operating costs, annual debt service (including coverage requirements), capital expenditures, and reserve funding as projected based on the annual budget estimates.
3. Cost of Service Analysis: The annual cost of providing water service, or the revenue requirement, is then distributed to customer classes and tiers commensurate with their use of and burden on the water system. A cost of service analysis involves the following steps:
» Functionalize costs – the different components of the revenue requirement are categorized into functions such as supply, transmission, storage, customer service, etc. » Allocate to cost causation components – the functionalized costs are then allocated to cost causation components such as supply, base delivery, peaking, etc. » Develop unit costs – unit costs for each cost causation component are determined using units of service, such as total use, peaking units, equivalent meters, number of customers, etc., for each component.
» Distribute cost components – the cost components are allocated to each customer class and tier using the unit costs in proportion to their demand and burden on the system.
A cost of service analysis considers both the average water demand and peak demand. Peaking costs are incurred during periods of peak consumption, most often coinciding with summer water use. There are additional capacity-related costs associated with designing, constructing, operating, maintaining, and replacing facilities to meet peak demand. Patterns of use impose additional costs on a water utility and are used to determine the cost burden on peaking-related facilities.
4. Rate Design : After allocating the revenue requirement to each customer class, the project team designs and calculates rates. Rates do more than simply recover costs; within the legal framework and industry standards, properly designed rates should support and optimize the City’s policy objectives. Rates also act as a public information tool in communicating these policy obje ctives to customers. This process also includes a r ate impact analysis and sample customer bill impacts.
5. Administrative Record Preparation and Rate Adoption : The final step in a rate study is to develop the administrative record in conjunction with the rate adoption process. This report serves as the administrative record for this study. The administrative record documents the study results and presents the methodologies, rationale, justifications, and calculations used to determine the proposed rates. A thorough and methodological administrative record serves two important functions: maintaining defensibility in a stringent legal environment and communicating the rationale f or revenue adjustments and proposed rates to customers and key stakeholders.
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4.Key Inputs and Assumptions
Raftelis developed a water rate model in Microsoft Excel to project financial and rate calculations over a five-year study period through FY 2027. The City’s fiscal year spans from July 1 through June 30. Projections in future years were generally made based on actual or estimated FY 2021 or FY 2022 data using key assumptions outlined below.
All assumptions were discussed with and reviewed by City staff to ensure that the City’s unique characteristics were incorporated. Note that most table values shown throughout this report are rounded to the last digit shown and may therefore not add precisely to the totals shown.
4.1. Current Water Rates
Table 4-1 shows the current adopted rate schedule developed during the prior rate study. Customers are currently subject to two primary charges: 1) bi-monthly Fixed Meter Charges and 2) Volume Charges per hundred cubic feet (HCF) 2 of water delivered. Fixed Meter Charges vary based on meter size. The volumetric structure depends on the meter size as well. Customers with a 1" or smaller meter are subject to a three-tier structure. The first 14 HCF used each month is charged at the lowest rate, the next 34 HCF at an intermediate rate, and additional use at the highest rate. All water used by customers with larger meter sizes is subject to a uniform Volume Charge as shown by the uniform rate at the bottom of the table.
Table 4-1: Current Water Rate Schedule
2 One HCF equals approximately 748 gallons.
FY 2022
Current
Bi-Monthly Fixed Charges
5/8" or 3/4" $40.46
1" $63.64
1.5" $101.48
2" $147.26
3" $296.30
4" $406.60
6" $787.98
8" $1,245.64
10" $1,779.60
Volume Rates
Tier 1 1-14 $4.28
Tier 2 15-48 $5.86
Tier 3 >48 $9.38
Uniform $5.51
Description Tiers
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4.2. Financial Assumptions
Inflationary assumptions shown in Table 4-2 were used to project O&M expenses beyond FY 2022. All inflationary factors were reviewed by City staff and are based on historical and anticipated cost increases. Over 96 percent of City revenues are generated by water rates. Other miscellaneous revenues (excluding interest earned on cash reserves) are forecasted to remain constant.
For O&M expenses, a general inflation rate of 3 percent is consistent with long-term changes in the Consumer Price Index (CPI), though recent inflation is above 3%. T he inflationary factors shown below are used to pro ject most O&M expenses over the study period. However, projections for imported water supply costs are based on historical wholesale water rate increases, as shown in detail below in Table 5-6.
Table 4-2: Inflationary Assumptions
Interest earnings on cash reserves are projected assuming a 1/2 percent annual interest rate.
4.3. Projected Service Connections
Customer account growth projections are necessary t o estimate water demand and rate revenues over the study period. City staff provided Raftelis with the numbe r of water meters and fire lines by connection size for FY 2020; based on discussions with staff, Raftelis assumed t here would be zero customer growth from FY 2021 thr ough FY 2027. Table 4-3 shows the projected number of water meters by customer class and meter size in FY 2020 and each year of the study period.
Expenses
Gen & Admin 3.0%
Salary & Benefits 4.0%
Insurance 3.0%
Internal Cost Allocation 3.5%
Electricity 3.5%
Annual
Inflation Inflationary Categories
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Table 4-3: Projected Number of Water Meters Under Existing Rate Structure
Table 4-4 shows the projected number of fire lines by connection size over the study period. The total number of fire lines is projected to remain constant over the study period.
Table 4-4: Projected Number of Fire Lines
4.4. Projected Water Use and Supply
City staff provided Raftelis with total annual wate r use data by customer class for FY 2019 and FY 202 0. Raftelis worked closely with City staff to develop water use projections for FY 2021 through FY 2027. Water dem and projections depend on two key assumptions: account growth and water demand factor (i.e., water use per account).
Beginning in FY 2021, annual water use was projecte d at the customer class level using an annual water demand growth rate to determine total annual water use. Table 4-5 shows projected water use by customer class over t he study period. The growth rate is forecasted at 0 pe rcent for FY 2021 to FY 2023, meaning water use wil l remain constant at FY 2020 levels. Beginning in FY 2024, water demand is expected to increase at 1/2 percent per year.
A B C D E F
SFR MFR Comm. City/
County Schools Total
Meter Size
5/8" or 3/4" 7,551 678 191 20 1 8,441 1" 3,599 412 132 27 1 4,171
1.5" 573 90 67 12 1 743 2" 7 18 128 43 3 199 3" - - 19 3 7 29 4" 2 - 3 2 2 9 6" - - 3 3 3 9 8" - - 1 - 1 2 10" - - 1 - - 1 Subtotal 11,732 1,198 545 110 19 13,604 Description
FY 2022
Projected
Private Fire Lines
5/8" or 3/4" 2
1" -
1.5" -
2" 13
3" 2
4" 47
6" 26
8" 5
10" 2
Total 97
Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 13
Table 4-5: Projected Water Use Under Existing Rate Structure
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Projected Projected Projected Projected Projected Projec ted Single Family Residential
Tier 1 754,918 754,918 758,693 762,486 768,205 773,966 Tier 2 499,202 499,202 501,698 504,207 507,988 511,798 Tier 3 23,212 23,212 23,328 23,445 23,621 23,798 Uniform 122,077 122,077 122,687 123,301 124,226 125,157 Subtotal 1,399,409 1,399,409 1,406,406 1,413,438 1,424,039 1,434,719 Multi Family
Tier 1 74,195 74,195 74,566 74,939 75,501 76,067 Tier 2 42,196 42,196 42,407 42,619 42,939 43,261 Tier 3 2,471 2,471 2,483 2,496 2,514 2,533 Uniform 37,123 37,123 37,309 37,495 37,776 38,060 Subtotal 155,985 155,985 156,765 157,549 158,730 159,921 Commercial
Tier 1 15,077 15,077 15,152 15,228 15,342 15,457 Tier 2 20,969 20,969 21,074 21,179 21,338 21,498 Tier 3 17,413 17,413 17,500 17,588 17,719 17,852 Uniform 339,970 339,970 341,127 342,289 344,042 345,808 Subtotal 393,429 393,429 394,853 396,284 398,442 400,616 City / County
Tier 1 1,654 1,654 1,662 1,671 1,683 1,696 Tier 2 2,305 2,305 2,317 2,328 2,346 2,363 Tier 3 2,767 2,767 2,781 2,795 2,816 2,837 Uniform 38,781 38,781 38,975 39,170 39,464 39,760 Subtotal 45,507 45,507 45,735 45,963 46,308 46,655 Schools
Tier 1 1 1 1 1 1 1 Tier 2 - - - - - - Tier 3 - - - - - - Uniform 58,430 58,430 58,722 59,016 59,458 59,904 Subtotal 58,431 58,431 58,723 59,017 59,459 59,905 Private Fire Lines 10,383 10,383 10,435 10,487 10,566 10,645 Total (HCF) 2,063,144 2,063,144 2,072,917 2,082,738 2,097,544 2,112,461 Total (AF) 4,736 4,736 4,759 4,781 4,815 4,850 Description
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Raftelis calculated projected water purchase volumes from each water source based on direction from City Staff, as shown in Table 4-6. The City purchased 100 percent of its water from the MWD in recent years. However, the City has undertaken work to be able to provide treated groundwater to its residents, with plans to begin drawing water in FY 2022 and to provide approximately 25% of the City’s water needs by FY 2024.
Table 4-6 shows the water supply mix projected to meet water demand over the study period. Total water use (from Table 4-5) is converted into acre-feet and adjusted to account for estimated water loss resulting from leaks in the water distribution system. City staff provided Raftelis with the anticipated amount of MWD water and groundwater available each year to meet the required water demand. Costs to purchase this water are forecasted in Table 5-6.
Table 4-6: Projected Water Supply Mix
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Projected Projected Projected Projected Projected Projec ted Required Water Supply
Water Use 4,736 4,736 4,759 4,781 4,815 4,850 Water Loss Factor 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%
Total Water 5,093 5,093 5,117 5,141 5,178 5,215 Water Sources
MWD 4,463 4,476 3,748 3,793 3,822 3,852 Groundwater 630 617 1,369 1,348 1,355 1,362 Total Water 5,093 5,093 5,117 5,141 5,178 5,215 Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 15
5. Financial Plan
Section 5 details the development of a proposed five-year fi nancial plan over the study period. The following subsections include estimates and projections of an nual revenues, O&M expenses, debt service payments, capital expenditures, and reserve funding through FY 2027. The overall purpose of the financial plan is to det ermine the annual rate revenue needed to achieve sufficient ca sh flow, maintain adequate reserves, and meet debt coverage requirements.
5.1. Revenues From Current Rates
The City’s revenues consist of rate revenues, interest earnings on cash reserves, and other miscellaneous revenues.
The rate revenue projections shown below assume that current FY 2022 rates are effective throughout the study period and therefore represent estimated revenues in the absence of any rate increase. This status quo scenario provides a baseline from which Raftelis evaluates the need for revenue adjustments (i.e., rate increases).
Calculated Water Rate Revenues
Raftelis projected water rate revenues from Fixed Meter Charges and Volume Charges for FY 2022 through FY 2027 based on current FY 2022 water rates, the projected number of water meters/private fire lines, and projected annual water use.
Table 5-1 shows projected Fixed Meter Charge revenues under current rates over the study period. Fixed Meter Charge revenues are calculated by connection size/type in each year as follows based on current FY 2022 water rates (from Table 4-1), the projected number of water meters (from Table 4-3), and the projected number of fire lines (from Table 4-4):
Annual Fixed Meter Charge Revenue = [ FY 2022 bi-monthly rate] × [Number of connections] × [6 Bills per year]
Table 5-1: Projected Fixed Meter Charge Revenues under Current Rates
Table 5-2 shows projected Volume Charge revenues under curre nt rates over the study period. Volume Charge revenues are calculated by customer class in each year as follows based on current FY 2022 water rates (from Table 4-1) and projected water use (from Table 4-5):
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Projected Projected Projected Projected Projected Projec ted Customer Class
Residential $3,567,275 $3,567,275 $3,567,275 $3,567,275 $3,567,275 $3,567,275 Multi Family $392,613 $392,613 $392,613 $392,613 $392,61 3 $392,613 Commercial $324,093 $324,093 $324,093 $324,093 $324,093 $ 324,093 City / County $84,861 $84,861 $84,861 $84,861 $84,861 $84 ,861 Schools $42,865 $42,865 $42,865 $42,865 $42,865 $42,865 Private Fire $58,868 $58,868 $58,868 $58,868 $58,868 $58, 868 Total $4,470,575 $4,470,575 $4,470,575 $4,470,575 $4,470 ,575 $4,470,575 Description
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Annual Volume Charge Revenue = [ FY 2022 rate per HCF] × [Annual Water Use in HCF]
Table 5-2: Projected Volume Charge Revenues Under Current Rates
Other Revenues
Table 5-3 shows all other revenues. All FY 2022 other revenues are based on the City’s FY 2022 budget. Additional revenues from FY 2023 through FY 2027 were projected by Raftelis. Interest revenue is estimated beginning in FY 2023 based on estimated fund balances and an assume d interest rate 3. All other revenues are forecasted to remain constant.
Table 5-3: Projected Other Revenues
Table 5-4 shows a summary of projected revenues under current rates over the study period. This represents expected revenues in the absence of any rate increase over the study period. Note that rate revenues (i.e., Fixed Meter Charges and Volume Charges) constitute over 96 percent of the City’s total revenue.
3 Interest Earnings become negative due to the projected fund balance falling below zero under current rates.
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Projected Projected Projected Projected Projected Projec ted Customer Class
Residential $7,046,746 $7,046,746 $7,081,979 $7,117,389 $7,170,770 $7,224,550 Multi Family $792,549 $792,549 $796,512 $800,494 $806,49 8 $812,547 Commercial $2,223,977 $2,223,977 $2,232,104 $2,240,273 $ 2,252,587 $2,264,993 City / County $260,224 $260,224 $261,525 $262,833 $264,8 04 $266,790 Schools $321,954 $321,954 $323,563 $325,181 $327,620 $330 ,077 Private Fire $97,393 $97,393 $97,880 $98,369 $99,107 $99, 850 Total $10,742,841 $10,742,841 $10,793,563 $10,844,539 $1 0,921,385 $10,998,808 Description
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Projected Projected Projected Projected Projected Projec ted Other Revenues
Interest Earnings $388,832 $85,424 $17,015 $8,998 ($10,1 69) ($33,272) Services $192,000 $192,000 $192,000 $192,000 $192,000 $19 2,000 Miscellaneous $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 Total $586,832 $283,424 $215,015 $206,998 $187,831 $164,7 28 Description
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Table 5-4: Summary of Projected Revenues Under Current Rates
5.2. Operations and Maintenance Expenses
Table 5-5 shows O&M expenses by department over the study period. O&M expenses shown in FY 2022 are from the City’s adopted FY 2022 budget. All other projec tions beyond FY 2022 were developed based on inflat ionary assumptions (from Table 4-2) and applying the impact of several known changes, including additional expenses (staff additions) and cost savings (directly conducting certain operations rather than contracting) as estimated by City staff.
Table 5-5: O&M Summary by Department
Table 5-6 shows the detailed forecast of water purchase costs. The City is subject to several charges from MWD, including a fixed annual charge, a capacity charge based on the City’s three-year peak use, and a volumetric rate based on the amount of water used. The City is also responsible for a groundwater replenishment fee applied to the amount of water extracted from its wells.
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Projected Projected Projected Projected Projected Projec ted Revenue
Fixed Charges $4,470,575 $4,470,575 $4,470,575 $4,470,5 75 $4,470,575 $4,470,575 Commodity Charges $10,742,841 $10,742,841 $10,793,563 $ 10,844,539 $10,921,385 $10,998,808 Misc. Other $586,832 $283,424 $215,015 $206,998 $187,831 $164,728 Total $15,800,248 $15,496,841 $15,479,154 $15,522,113 $1 5,579,792 $15,634,111 Description
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Table 5-6: Water Purchase Cost Detail
5.3. Debt Service
Table 5-7 shows the City’s existing debt service obligations associated with its outstanding 2012 Refunding Certificates of Participation. These obligations are secured by a pledge of City revenues and are scheduled to be paid off in FY 2026. The proposed financial plan assumes that no additional debt will be issued by the City over the study period.
Table 5-7: Schedule of Debt Service Payments
5.4. Infrastructure Improvement Plan
The City’s adopted FY 2022 budget includes approximately $2.7M in capital project costs in FY 2022. The City has also developed a long-term capital plan that outlin es capital project expenditures required over the s tudy period to address current and future system needs. These proj ects are shown in detail in Table 5-8 and amount to approximately $23M over the next five years. The pr ojects are associated with distribution system reliability, aging infrastructure replacement, fire flow improvements, or system-wide reliability and safety.
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Projected Projected Projected Projected Projected
Water Purchased 4,476 3,748 3,793 3,822 3,852 Water Produced 617 1,369 1,348 1,355 1,362 Purchased Water Rates
RTS Charge per Year $360,313 $396,031 $435,289 $478,438 $525,865 Capacity Cost per Year $82,796 $85,897 $89,115 $92,453 $ 95,916 Volume Charge per AF
Jul - Dec $1,497 $1,555 $1,615 $1,677 $1,742
Jan - Jun $1,555 $1,615 $1,677 $1,742 $1,810
Groundwater Replenishment per AF $413 $433 $454 $476 $499 Water Costs
MWD RTS $360,313 $396,031 $435,289 $478,438 $525,865
MWD Capacity $82,796 $85,897 $89,115 $92,453 $95,916
MWD Volume $6,811,121 $5,924,882 $6,227,365 $6,518,733 $ 6,823,732 Groundwater Replenishment $254,943 $592,730 $612,170 $6 45,119 $679,847 Total $7,509,173 $6,999,540 $7,363,938 $7,734,744 $8,125 ,361 Description
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Budget Projected Projected Projected Projected Projected 2012 COP
Principal $147,455 $154,157 $157,508 $167,562 $174,264 $0 Interest $31,332 $24,397 $18,231 $11,930 $5,228 $0
Total $178,787 $178,554 $175,739 $179,492 $179,492 $0
Description
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The proposed capital plan includes no new projects to begin in FY 2023 in order to minimize rate impacts and allow City staff to complete a number of ongoing projects . Future years also include a completion factor (90 %) – this assumes the City executes 90% of planned expenditur es as a way to minimize customer bill increases. Th e capital costs assume an annual capital inflation factor of 4% per year. The final line of Table 5-8 presents the total proposed annual new capital spending to be funded from rates.
Table 5-8: Capital Improvement Plan
Figure 5-1 shows the proposed capital financing plan over the study period. Total capital expenditures in each year (from Table 5-8) are represented by the blue stacked bars below. All capital projects over the study period are assumed to be cash funded (i.e., funded by water rates and cash reserves). CIP expenditures significantly increase beginning in FY 2024, demonstrating the need for revenue adju stments to sufficiently fund the City’s planned cap ital expenditures.
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Budget Projected Projected Projected Projected Projected Project Category
Facility Improvements $101,250 $81,000 $168,750 $337,50 0 $337,500 $0 Fire Flow Improvements $1,190,440 $1,331,979 $2,936,58 2 $4,225,642 $4,516,763 $4,179,278 Pipe Replacement Program $1,434,540 $1,309,669 $1,420, 048 $1,492,303 $1,242,212 $1,516,563 Total $2,726,230 $2,722,649 $4,525,380 $6,055,445 $6,096 ,475 $5,695,841 Completion Rate 100% 0% 90% 90% 90% 90%
Cumulative Inflation 100% 104% 108% 112% 117% 122%
Proposed Capital Spending $2,726,230 $0 $4,405,186 $6,1 30,397 $6,418,812 $6,236,875 Description
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Figure 5-1: Capital Financing Plan
5.5. Financial Policies
Agency-specific financial policies must be consider ed during the financial planning process. Financial policies typically define key financial metrics that an agen cy strives to meet or exceed. Table 5-9 shows the City’s current financial policies pertaining to debt coverage and reserve targets.
Required Debt Coverage
The City must meet the minimum coverage requirements on its outstanding debt to ensure that it meets the associated debt covenants. The required debt service coverage ratio (DSCR) is 1.5, which means that the City’s ne t revenue must amount to at least 1.5 times annual debt service. Net revenues equal revenues less O&M expenses. Annual debt service includes annual principal and interest payments on all outstanding debt.
Reserve Targets
Prudent fiscal management requires that the City ma intain reserve balances to provide sufficient worki ng capital, maintain necessary cash on hand to efficiently awar d construction contracts, and provide funding durin g emergencies. The reserve policy recommended by Raftelis consists of two targets:
» O&M Reserve target : The City’s adopted O&M reserve target is four months of annual O&M expenses and debt service. This is intended to ensure sufficient working capital during short-term fluctuations in cash flow.
» Capital Reserve target : The recommended target balance is the average yearly capital spending from FY 2021 to FY 2025.
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Table 5-9: Financial Policies
5.6. Status Quo Financial Plan
In order to evaluate the need for revenue adjustmen ts (i.e., rate increases), Raftelis first developed a status quo financial plan. The status quo financial plan assum es that current FY 2022 rates remain unchanged over the study period. Table 5-10 combines projected revenues (from Table 5-4), O&M expenses (from Table 5-6), debt service (from Table 5-7), capital expenditures (from Table 5-8), and reserve targets (from Table 5-9) to generate cash flow, ending balance, and debt coverage projections under the status quo. It also includes an estimate of capital carryover, which represents continued spending on previously approved, ongoing capital projects, including at Peck Reservoir.
Under the status-quo financial plan, net cash change (revenue less total cash expenses) is negative for most years of the study period and results in a depletion of rese rves by the end of FY 2025. The status quo financia l plan is insufficient to meet the City’s needs. This demonst rates a clear need for revenue adjustments over the study period to increase rate revenues and achieve financial sustainability.
Debt Coverage Ratio 1.50
Reserve Targets
Operating Reserve 4 months
Capital Reserve 1 Year
FY 2023 Total Target $9,690,624
Financial Policy Target
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Table 5-10: Status Quo Financial Plan
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Budget Projected Projected Projected Projected Projected Revenue
Rate Revenue $15,213,416 $15,213,416 $15,264,139 $15,31 5,114 $15,391,960 $15,469,383 Additional Rate Revenue $0 $0 $0 $0 $0 $0
Misc. $586,832 $283,424 $215,015 $206,998 $187,831 $164, 728 Total $15,800,248 $15,496,841 $15,479,154 $15,522,113 $1 5,579,792 $15,634,111 Expenses
O&M $11,652,782 $12,837,337 $12,501,609 $13,045,686 $13, 602,139 $14,184,573 Debt Service $259,547 $178,554 $175,739 $179,492 $179,49 2 $0 Rate Funded Capital $2,726,230 $0 $4,405,186 $6,130,397 $6,418,812 $6,236,875 Total $14,638,559 $13,015,891 $17,082,534 $19,355,575 $2 0,200,443 $20,421,448 Contribution to Reserves $1,161,690 $2,480,950 ($1,603,380) ($3,833,462) ($4,620 ,651) ($4,787,338) Capital Carryover (16,162,731) (16,162,731)
Beginning Balance $32,085,901 $17,084,860 $3,403,078 $1,799,699 ($2,033,7 63) ($6,654,415) Ending Balance 17,084,860 3,403,078 1,799,699 (2,033,763) (6,654,415) (11,441,752) Target 9,299,721 9,690,624 9,579,834 9,759,379 9,943,008 10,135,212 DSCR 15.98 14.89 16.94 13.80 11.02 N/A
Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 23
Figure 5-2 shows the City’s projected ending balances under the status quo (from Table 5-10 ). The operating reserve and total reserve targets are represented by the gr een and blue lines, respectively. Projected ending balances are represented by light blue bars. The FY 2022 fund ba lance includes funds already dedicated for the comp letion of ongoing capital projects including the peck reservoir. The City is projected to fall below its Operati ng Target in FY 2023, with reserves to be fully depleted by the end of FY 2025.
Figure 5-2: Status Quo Financial Plan – Projected Ending Balances
5.7. Proposed Financial Plan
The status quo financial plan demonstrates that the City must increase its revenues from water rates o ver the study period in order to adequately fund its operating and capital expenditures, meet required debt coverage, and generate sufficient reserve funding. Raftelis worked closely with City staff to select the proposed annual revenue adjustments shown in Table 5-11 . Revenue adjustments represent annual percentage i ncreases in rate revenue relative to how much rate revenue would have been collected under the prior year’s water rates.
Table 5-11: Proposed Revenue Adjustments
Table 5-12 shows the proposed financial plan pro forma. This combines projected revenues (from Table 5-4), O&M expenses (from Table 5-6), debt service (from Table 5-7), capital expenditures (from Table 5-8), and reserve targets (from Table 5-9) to generate cash flow, ending balance, and debt coverage projections under the proposed financial plan. Revenue adjustments over the study period generate significant increases in rate revenues over the study period.
This results in positive net operating cash flow and sufficient debt coverage in all years.
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Table 5-12: Proposed Financial Plan - Pro Forma
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Budget Projected Projected Projected Projected Projected Revenue
Rate Revenue $15,213,416 $15,213,416 $15,264,139 $15,31 5,114 $15,391,960 $15,469,383 Additional Rate Revenue $0 $963,516 $2,452,947 $4,000,0 71 $5,072,192 $5,920,389 Misc. $586,832 $283,424 $219,833 $224,105 $225,023 $227, 467 Total $15,800,248 $16,460,357 $17,936,919 $19,539,290 $2 0,689,176 $21,617,238 Expenses
O&M $11,652,782 $12,837,337 $12,501,609 $13,045,686 $13, 602,139 $14,184,573 Debt Service $259,547 $178,554 $175,739 $179,492 $179,49 2 $0 Rate Funded Capital $2,726,230 $0 $4,405,186 $6,130,397 $6,418,812 $6,236,875 Total $14,638,559 $13,015,891 $17,082,534 $19,355,575 $2 0,200,443 $20,421,448 Contribution to Reserves 1,161,690 3,444,466 854,385 183,715 488,732 1,195,790 Capital Carryover (16,162,731) (16,162,731)
Beginning Balance $32,085,901 $17,084,860 $4,366,595 $5,220,980 $5,404,69 5 $5,893,427 Ending Balance 17,084,860 4,366,595 5,220,980 5,404,695 5,893,427 7,089,217 Target 9,299,721 9,690,624 9,579,834 9,759,379 9,943,008 10,135,212 DSCR 15.98 20.29 30.93 36.18 39.48 N/A
Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 25
Figure 5-3 shows the City’s projected ending balance under the proposed financial plan. The light blue bars indicate the ending balance. The operating reserve and total reserve targets are represented by the green and dark blue lines, respectively. The City is projected to continue to draw down its reserves through FY 2023 in order to complete ongoing capital projects. By the end of the study period, the City’s reserves are projected to be on track to eventually meet the combined operating and capital reserve targets.
Figure 5-3: Proposed Financial Plan – Projected Ending Balances
Figure 5-4 shows the proposed versus status quo revenue and expenses, also known as the financial plan. Revenues under the proposed rates and status quo rates are r epresented by the dark blue and light gray lines, r espectively.
Revenue requirements, including O&M expenses, debt service, cash-funded capital, and reserve funding, are represented by the various stacked bars. Although current rates result inadequate recovery of O&M expenses in most years, revenue adjustments are clearly required to generate sufficient revenue to cover debt service p ayments and cash-funded capital.
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Figure 5-4: Proposed vs. Status Quo Financial Plan – Revenue vs. Expenses
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WATER COST OF SERVICE AND RATE DESIGN STUDY 27
6. Cost of Service Analysis
Section 6 details the cost of service (COS) analysis perform ed for FY 2023. The COS analysis allocates the over all rate revenue requirement to customer classes based on their proportion of use of and burden on the Cit y’s water system. This provides the basis for the development of proposed FY 2023 water rates.
6.1. Methodology
The first step in the COS analysis is to determine the revenue required from rates. The total revenue requirement is determined in the financial plan and the proposed r evenue adjustments in Section 5 . The framework and methodology utilized to develop the COS analysis and to apportion the revenue requirement to each customer class and tier is informed by the processes outlined in the AWWA Manual M1.
COS analyses are tailored specifically to meet the unique needs of each water system. However, there are four distinct steps in every COS analysis to recover costs from customers in an accurate, equitable, and defensible manner:
1. Cost functionalization: O&M expenses and capital assets are categorized by their function in the system.
Sample functions may include supply, treatment, distribution, transmission, customer service, etc.
2. Cost causation component allocation: Functionalized costs are then allocated to cost causation components based on their burden on the system. The cost causation components include supply, base delivery, peaking, meter service, and customer service, amongst others . The revenue requirement is allocated accordingly to the cost causation components and results in the to tal revenue requirement for each cost causation component.
3. Unit cost development: The revenue requirement for each cost causation co mponent is divided by the appropriate units of service to determine the unit cost for each cost causation component.
4. Revenue requirement distribution: The unit cost is utilized to distribute the revenu e requirement for each cost causation component to customer classes based on each customer ' 'class's individual service units.
This method of functionalizing costs is consistent with the AWWA Manual M1 and is widely used in the w ater industry to perform COS analyses.
6.2. Revenue Requirement
Table 6-1 shows the rate revenue requirement for FY 2023 (also referred to as the test year or rate-setting year). The revenue requirement is split into operating and capital categories (Columns A and B), which are later allocated based on O&M expenses and capital assets, respectively. T he expenses (Lines 1-4) are equal to FY 2023 expens es. The miscellaneous revenue (Line 5) includes interest ea rnings and miscellaneous revenues that are applied as offsets to the final rate revenue requirement. The contributio n to reserves adjustment (Line 6) is equal to FY 20 23 net cash change and represents the increase in the rate revenue requirement resulting from an addition to reserves in FY 2023.
All aforementioned values are from the proposed fin ancial plan pro forma ( Table 5-12 ). The mid-year adjustment (Line 7) is required to annualize the revenue requi rement since the City plans to implement the new ra tes in November rather than July, the first month of the fiscal year. The adjustment represents the revenue that is foregone by not applying the proposed rates to that four-mon th period at the beginning of the fiscal year; this revenue is not collected but is a necessary part of the rate calcu lation. The final rate revenue requirement (Line 9) is calculated as follows:
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Total revenue required from rates (Line 9) = Revenue requirements (Line 4) + Adjustments (Line 8)
Table 6-1: FY 2023 Revenue Required from Rates
6.3. System Peaking Factors
Different functions of a water system (such as dist ribution storage and distribution piping) are desig ned to meet different peaking requirements. Peaking costs are divided into maximum day (Max Day) and maximum hour (Max Hour) demand. The Max Day demand is the maximum amo unt of water used in a single day over a full year. The Max Hour demand is the maximum use in an hour on the Max Day. For example, storage and treatment components of the water system are designed to handle Max Day requirements, while the distribution system is designed for Max Hour demands.
Table 6-2 shows the system-wide peaking factors provided by t he City’s master plan, which are used to derive the cost component allocation bases for Base Delivery, Max Day, and Max Hour costs. Base Delivery use is considered average daily demand over one year, which has been normalized to a factor of 1.00 (Column A, Line 1). The Max Day peaking factor (Column A, Line 2) indicates tha t the Max Day demand is 1.50 times greater than the average daily demand. Similarly, the Max Hour peaking facto r (Column A, Line 3) shows that the Max Hour demand is
2.31 times greater than the average demand. The all ocation bases (Columns B to D) are calculated using the equations outlined below. Columns are represented i n these equations as letters, and rows are represen ted as numbers. For example, Column D, Line 2 is shown as D2.
The Max Day allocations are calculated as follows:
» Base Delivery: A1 / A2 x 100% = B2
» Max Day: (A2 - A1) / A2 x 100% = C2
The Max Hour allocations are calculated as follows:
» Base Delivery: A1 / A3 x 100% = B3
» Max Day: (A2 - A1) / A3 x 100% = C3
A B C
Operating Capital Total
Expenses
1 O&M $12,837,337 $12,837,337
2 Debt Service $178,554 $178,554
3 Rate Funded Capital $0 $0
4 Subtotal $12,837,337 $178,554 $13,015,891
Adjustments
5 Misc. Revenue ($232,424) ($51,000) ($283,424)
6 Contribution to Reserves $3,444,466 $3,444,466
7 Mid-Year Adjustment $481,758 $481,758
8 Subtotal $3,693,800 ($51,000) $3,642,800
9 Total Revenue Required $16,531,137 $127,554 $16,658,69 1 Line Revenue Requirements
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WATER COST OF SERVICE AND RATE DESIGN STUDY 29
» Max Hour: (A3 - A2) / A3 x 100% = D3
Table 6-2: System Peaking Factor Allocations
6.4. Functionalization and Allocation of Expenses
After determining the revenue requirement and system-wide peaking allocation basis, the next step of the COS analysis is to allocate O&M expenses and capital assets to the following functional categories:
» Supply : purchased water from MWD and groundwater extracti on costs, as well as other minor miscellaneous supply costs
» Treatment : costs associated with the City’s groundwater water treatment system » Pumping: costs related to operating the City’s water pumping stations » Storage : costs related to the City’s water storage system » T&D : costs associated with the City’s water transmission and distribution system » Customer : costs of meter reading, billing, and other customer services » Meters : costs of meter maintenance/repair and some capacity-related costs » Direct Private Fire : costs of maintaining backflow devices associated with private fire connections » General: costs for general administration and operational e xpenses or any other costs that do not clearly relate to a specific functional category
After functionalization costs, we allocate the functionalized costs to cost causation components. Some cost causation components correspond directly to a functional category listed above. The cost causation components include:
» Supply : directly associated with the Supply functional category » Base : costs associated with providing water under average water demand conditions » Peaking (Max Day and Max Hour): extra-capacity costs associated with providing water under peak demand conditions
» Customer : directly associated with the customer functional category » Fire Protection : costs associated with providing water for fire protection purposes, both public and private » Meters : directly associated with the meters functional category » General : directly associated with the general functional category
Table 6-3 shows the basis for allocating each functional category to the various cost causation components. This is the basis for allocating O&M and capital expenses in the following subsections. Most functional categories are allocated entirely to the corresponding cost causation component. The allocation basis for functional categories not allocated entirely to a single cost causation component is as follows:
A B C D E
Factor Base Max Day Max Hour Total
1 Base 1.00 100% 0% 0% 100%
2 Base, Max Day 1.50 67% 33% 0% 100%
3 Base, Max Day, Max Hour 2.31 43% 22% 35% 100%
Line Description
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» Treatment : Because groundwater treatment facilities will onl y provide a portion of the City’s water needs and will not meet the maximum day supply, Treatment costs are allocated to the Base Delivery cost causation component based on the Base allocation from Table 6-2.
» Storage : Because storage/reservoir facilities are typicall y designed to accommodate maximum day water demand, all Storage costs are allocated to the Base Delivery and Max Day cost causation components based on the Max Day allocation from Table 6-2.
» Pumping : Because pumping stations are typically designed to accommodate maximum day water demand, these costs are allocated to the Base Delivery and Max Day cost causation components based on the Max Day allocation from Table 6-2.
» Transmission and Distribution : Because transmission systems are typically design ed to accommodate maximum day water demand, all Transmission costs are allocated to the Base Delivery, Max Day, and Max Hour cost causation components based on the Max Day allocation from Table 6-2.
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WATER COST OF SERVICE AND RATE DESIGN STUDY 31
Table 6-3: Allocation of Functional categories to Cost Causation Components
A B C D E F G H I J
Supply Base
Delivery Max Day Max Hour Customer
Service
Meter
Service
General &
Admin
Private Fire
- Backflow
Private Fire
- Admin Total
Function
1 Supply 100% 0% 0% 0% 0% 0% 0% 0% 0% 100%
2 Treatment 0% 100% 0% 0% 0% 0% 0% 0% 0% 100%
3 Pumping 0% 67% 33% 0% 0% 0% 0% 0% 0% 100%
4 Storage 0% 67% 33% 0% 0% 0% 0% 0% 0% 100%
5 T&D 0% 43% 22% 35% 0% 0% 0% 0% 0% 100%
6 Customer 0% 0% 0% 0% 100% 0% 0% 0% 0% 100%
7 Meter Service 0% 0% 0% 0% 0% 100% 0% 0% 0% 100%
8 Direct Fire Backflow Repair 0% 0% 0% 0% 0% 0% 0% 100% 0% 100 % 9 G&A 0% 0% 0% 0% 0% 0% 100% 0% 0% 100%
Line Description
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6.5. O&M Expense Allocation
The next step of the COS analysis is to develop an allocation basis for the operating revenue requirement based on the functionalization of the City’s O&M expenses. Table 6-4 shows the City’s FY 2023 O&M expenses by department in Column B (from Table 5-5). Each department was assigned to the most closely associated functional category (see Column A) after a detailed review of costs by Raftelis and City staff.
Table 6-4: Functionalization of O&M Expenses by Department
Table 6-5 shows a summary of FY 2023 expenses by function based on the assignment of cost centers to functional categories (from Table 6-4). This intermediate step is necessary in order to allocate total O&M expenses to the cost causation components.
Table 6-5: Summary of O&M Expenses by Functional Category
Table 6-6 shows the allocation of FY 2023 O&M expenses by function to each cost causation component. The percentage allocation of each function to the various cost causation components was determined in Table 6-3.
Total O&M expenses associated with each function (Column J) were determined in Table 6-5. The total dollar B
FY 2023
Forecast
Department
1 Water Administration Customer Service, G&A $2,050,02 3 2 Water Source Of Supply Supply $7,512,130
3 Water Pumping Pumping $1,249,417
4 Water Treatment Treatment $159,168
5 Water Maintenance Storage, T&D, Meters, Fire Backfl ow, Customer $1,866,599 6 Total $12,837,337
Line Description
A
Functional Categories
A
FY 2023
Forecast
Function
1 Supply $7,512,130
2 Treatment $159,168
3 Pumping $1,249,417
4 Storage $130,662
5 T&D $1,175,957
6 Customer $627,681
7 Meter Service $242,658
8 Direct Fire Backflow Repair $37,332
9 G&A $1,702,332
10 Total $12,837,337
Line Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 33
amount allocated to each cost causation component (Line 10) is determined by multiplying the total expense associated with each function by the corresponding percentage allocation and summing across all functions.
The final O&M Allocation percentages (Line 11) represent the proportion of total O&M expenses allocated to each cost causation component. These O&M allocation percentages are later used to allocate the total operating miscellaneous revenues.
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Table 6-6: Allocation of O&M Expenses to Cost Causation Components
A B C D E F G H I J
Supply Base
Delivery Max Day Max Hour Customer
Service
Meter
Service
General &
Admin
Private Fire
- Backflow
Private Fire
- Admin Total
Function
1 Supply $7,512,130 $0 $0 $0 $0 $0 $0 $0 $0 $7,512,130
2 Treatment $0 $159,168 $0 $0 $0 $0 $0 $0 $0 $159,168
3 Pumping $0 $832,945 $416,472 $0 $0 $0 $0 $0 $0 $1,249,417 4 Storage $0 $87,108 $43,554 $0 $0 $0 $0 $0 $0 $130,662 5 T&D $0 $509,072 $254,536 $412,349 $0 $0 $0 $0 $0 $1,175,957 6 Customer $0 $0 $0 $0 $626,426 $0 $0 $0 $1,255 $627,681 7 Meter Service $0 $0 $0 $0 $0 $242,658 $0 $0 $0 $242,658 8 Direct Fire Backflow Repair $0 $0 $0 $0 $0 $0 $0 $37,332 $0 $37,332 9 G&A $0 $0 $0 $0 $0 $0 $1,702,332 $0 $0 $1,702,332
10 Total $7,512,130 $1,588,293 $714,563 $412,349 $626,426 $2 42,658 $1,702,332 $37,332 $1,255 $12,837,337 11 Percent 58.5% 12.4% 5.6% 3.2% 4.9% 1.9% 13.3% 0.3% 0.0% 100.0 % Line Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 35
6.6. Capital Allocation
Capital assets are utilized in COS analyses to allocate the capital revenue requirement to the various cost causation components. The distribution of a short-term capital plan can be heavily weighted to specific cost causation components based on the type of project. Using short-term planned capital projects to allocate capital costs would cause rates to fluctuate and cause customer confusion. The overall capital asset base, however, is considerably more stable in the long term and therefore is more representative of long-term capital investment in the City’s water system. Thus, functionalized capital assets are used to allocate capital costs.
City staff provided Raftelis with a detailed asset listing that included the original cost of each individual asset.
Raftelis calculated the replacement cost of each asset based on the original cost and acquisition year using the Engineering News-' 'Record's 20-City Average Cost Construction Index (CCI) to account for capital cost inflation.
As part of the capital asset analysis, Raftelis assigned each group of asset types to a functional category. Total asset value (replacement cost) by functional category is shown in Table 6-7.
Table 6-7: Summary of Capital Assets by Functional Category
Table 6-8 shows the allocation of capital assets by function to each cost causation component. The percentage allocation of each function to the various cost causation components was determined in Table 6-3. Total asset value associated with each function (Column J) was determined in Table 6-7. The total dollar amount allocated to each cost causation component (Line 10) is determined by multiplying the total asset value associated with each function by the corresponding percentage allocation and summing across all functions. This is consistent with the methodology used to determine the allocation of O&M expenses to cost causation components in Table 6-6 (described in detail in Section 6.5 ). The final capital allocation percentages (Line 11) represent the proportion of total capital assets allocated to each cost causation component (Line 10).
The capital allocation percentages (Line 11) are later used to allocate some miscellaneous revenues.
A
Asset Value
Function
1 Supply $2,074,317
2 Treatment $0
3 Pumping $3,094,578
4 Storage $3,484,763
5 T&D $32,016,011
6 Customer $0
7 Meter Service $0
8 Direct Fire Backflow Repair $0
9 G&A $301,439
10 Total $40,971,107
Line Description
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Table 6-8: Allocation of Functionalized Capital Assets to Cost Causation Components
A B C D E F G H I J
Supply Base
Delivery Max Day Max Hour Customer
Service
Meter
Service
General &
Admin
Private Fire
- Backflow
Private Fire
- Admin Total
Function
1 Supply $2,074,317 $0 $0 $0 $0 $0 $0 $0 $0 $2,074,317
2 Treatment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
3 Pumping $0 $2,063,052 $1,031,526 $0 $0 $0 $0 $0 $0 $3,094,57 8 4 Storage $0 $1,508,556 $754,278 $1,221,930 $0 $0 $0 $0 $0 $3, 484,763 5 T&D $0 $13,859,745 $6,929,872 $11,226,393 $0 $0 $0 $0 $0 $32 ,016,011 6 Customer $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
7 Meter Service $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
8 Direct Fire Backflow Repair $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 9 G&A $0 $0 $0 $0 $0 $0 $301,439 $0 $0 $301,439
10 Total $2,074,317 $17,431,352 $8,715,676 $12,448,323 $0 $0 $301,439 $0 $0 $40,971,107 11 Percent 5.1% 42.5% 21.3% 30.4% 0.0% 0.0% 0.7% 0.0% 0.0% 100.0 % Line Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 37
6.7. Preliminary Cost of Service Allocation
Table 6-9 shows the preliminary allocation of the total FY 2023 rate revenue requirement to the various cost causation components. The preliminary COS allocations (Line 10) are subject to further adjustments based on additional reallocations developed in the following subsections. The results shown in Table 6-9 are calculated as follows based on intermediate results developed in the preceding subsections:
1. Operating Revenue Requirement (Line 1): The total operating revenue requirement consists solely of the City’s O&M expenses. The allocation of the total operating revenue requirement to each cost causation component was previously determined in Table 6-6, Line 10.
2. Capital Revenue Requirement (Line 2): The total capital revenue requirement consists of capital expenditures and debt service payments. The allocation of the total capital revenue requirement to each cost causation component is determined by multiplying the percentage allocations of assets in Table 6-8, Line 11 by the capital expenses shown in Table 6-9, Column J, Line 2, as previously determined in Table 6-1, Column B, Line 4.
3. Revenue Offsets (Lines 3 and 4): Total revenue offsets (from Table 6-1, Columns A and B, Line 5) are allocated to the cost components using the operating and capital allocation percentages determined in Table 6-6 and Table 6-8.
4. Contribution to Reserves and Mid-Year Adjustment (Lines 5 and 6): These adjustments, previously shown in Table 6-1, Lines 6, and 7, are allocated using the operating cost allocation percentages from Table 6-6.
5. Reallocation of General Costs (Lines 9 and 10): The total General revenue requirement (Column G, Line 7) is fully reallocated to all other cost causation components on a proportional basis using the percentages developed on Line 9. Note that the reallocation results in a shifting of costs between cost causation components but does not change the total rate revenue requirement.
6. Preliminary Cost of Service Allocation (Line 10): The preliminary COS allocation to each cost causation component equals the sum of Lines 7 and 10. Note that the total COS allocation (Column J, Line 10) equals the total FY 2023 rate revenue requirement (from Table 6-1, Column C, Line 9).
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Table 6-9: Preliminary Cost of Service Allocation
A B C D E F G H I J
Supply Base
Delivery Max Day Max Hour Customer
Service
Meter
Service
General &
Admin
Private Fire
- Backflow
Private Fire
- Admin Total
Expenses
1 Operating Expenses $7,512,130 $1,588,293 $714,563 $412 ,349 $626,426 $242,658 $1,702,332 $37,332 $1,255 $12,837, 337 2 Capital Expenses $9,040 $75,967 $37,983 $54,250 $0 $0 $1, 314 $0 $0 $178,554 3 Operating Revenue Offset ($136,010) ($28,757) ($12,93 7) ($7,466) ($11,342) ($4,393) ($30,821) ($676) ($23) ($23 2,424) 4 Capital Revenue Offset ($2,582) ($21,698) ($10,849) ($ 15,495) $0 $0 ($375) $0 $0 ($51,000) 5 Contribution to Reserves $2,015,626 $426,165 $191,729 $110,640 $168,080 $65,109 $456,763 $10,017 $337 $3,444,46 6 6 Mid-Year Adjustment $281,914 $59,605 $26,816 $15,475 $2 3,508 $9,106 $63,885 $1,401 $47 $481,758 7 Subtotal $9,680,119 $2,099,575 $947,304 $569,752 $806,67 3 $312,480 $2,193,097 $48,074 $1,617 $16,658,691 9 Percent Expenses less G&A 66.9% 14.5% 6.5% 3.9% 5.6% 2.2% -100.0% 0.3% 0.0% 0.0% 10 Reallocation of G&A $1,467,582 $318,312 $143,619 $86,379 $122,298 $47,374 ($2 ,193,097) $7,288 $245 $0 10 Preliminary Cost of Service $11,147,700 $2,417,888 $1, 090,923 $656,131 $928,971 $359,854 $0 $55,362 $1,862 $16,6 58,691 Line Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 39
6.8. Allocation of Public and Private Fire Protection Costs Water systems provide two types of fire protection: public fire protection for firefighting (i.e., fir e hydrants) and private fire protection (i.e., fire lines for priva te structures with sprinkler systems for fire suppr ession). Raftelis performed a fire demand analysis to determine the s hare of Fire Protection costs allocated to public v ersus private fire protection. The City provided Raftelis with a count of fire hydrants. The number of private fire lines is shown in Table 4-4.
Table 6-10 shows the calculation of equivalent fire demand as sociated with public hydrants and private fire line s.
Each connection size has a fire flow demand factor similar to the hydraulic capacity factor of a water meter. The diameter of the connection (in inches) is raised to the 2.63 power to determine the fire flow demand factor (Column A). 4 The fire flow demand factor is multiplied by the n umber of connections or hydrants by size (Column B) to calculate equivalent fire demand (Column C). Total equivalent fire demand is shown for public hydrants, and private fire lines are shown in Lines 6 and 16, respectively.
Raftelis also uses equivalent cost meters for priva te fire connections in a later step of the rate cal culation process.
These ratios, shown in Column E, are calculated by dividing the cost of a meter at each meter size (Co lumn D) by the cost of a ¾" meter (Column D, Line 7). The resu lting ratios are multiplied by the number of meters in Column B to derive the total equivalent cost meters shown in Column F.
Table 6-10: Equivalent Fire Meters
4 Hazen-Williams equation and AWWA Manual M1
A B C D E F
Demand
Factor Units Eq. Fire
Demand Meter Cost Meter Cost
Ratio
Eq. Cost
Meters
Public Hydrants
1 5/8" or 3/4" - - - 2 2" 6.19 - -
3 3" 17.98 - -
4 4" 38.32 - -
5 6" 111.31 775 86,266.0 6 Subtotal 775 86,266.0
Private Fire Connections
7 5/8" or 3/4" 0.47 2 0.9 $143 1.00 2.00 8 1" 1.00 - - $199 1.39 - 9 1.5" 2.90 - - $313 2.19 - 10 2" 6.19 13 80.5 $425 2.97 38.64 11 3" 17.98 2 36.0 $750 5.24 10.49 12 4" 38.32 47 1,801.0 $1,200 8.39 394.41 13 6" 111.31 26 2,894.1 $2,000 13.99 363.64 14 8" 237.21 5 1,186.0 $3,000 20.98 104.90 15 10" 426.58 2 853.2 $4,000 27.97 55.94 16 Subtotal 97 6,851.7 970.0 Line Connection Size
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40 CITY OF MANHATTAN BEACH
Table 6-11 shows the number of equivalent fire demand units associated with public and private fire protection (from Table 6-10, Column C). The proportional share of equivalent fire demand (Column B) provides the basis for which Fire Protection costs are allocated between public and private in subsequent steps of the COS analysis.
Table 6-11: Public vs. Private Fire Protection Allocation
6.9. Peaking Units of Service
Peaking units of service are developed to calculate unit peaking costs (Max Day and Max Hour) for each customer class and provide a basis to reallocate peaking costs to Fire Protection in subsequent steps of the COS analysis. Public hydrants and private fire lines contribute to syste m capacity-related costs (i.e., peaking costs) and therefore are reallocated a portion of Max Day and Max Hour costs.
Table 6-12 shows calculations used to attribute peaking costs to specific customer classes based on actual water use patterns. Raftelis estimated Max Day (Column C) and Max Hour (Column H) factors based on actual FY 2020 water use and system-wide peaking factors from Table 6-2. Projected FY 2023 water use in Column A (from Table 4-5) is divided by 365 days to determine average daily wate r use (Column B). Average daily use in Column B is then multiplied by the Max Day factor (Column C) to determine Max Day demand (Column D). Max Day requirements (Column E) are determined by subtracting average daily water use (Column B) from Max Day demand (Column D).
Max Hour requirements (Column H) are similarly calculated. Max Hour demand (Column G) equals average daily water use (Column B) multiplied by Max Hour demand (Column F). Max Hour requirements (Column H) equal Max Hour demand (Column G) less Max Day requirements (Column E).
Table 6-12: Peaking Units by Customer Class
Table 6-13 shows a methodology 5 used to calculate peaking units of service associated with Fire Protection based on assumptions regarding the duration and water use rate associated with typical fires:
Max Day Requirements (HCF/day) = Duration of Fire (hrs) × Water Use Rate (gpm) × 60 mins/hr ÷ 748.05 gallons/HCF
5 Per the AWWA Manual M1.
A B
Eq. Fire
Demand
% of Fire
Demand
1 Public Fire Protection 86,266.0 92.6%
2 Private Fire Protection 6,851.7 7.4%
3 Total 93,117.6 100.0%
Line Description
A B C D E F G H
Annual
Water Use
Average
Daily Use
Max Day
Factor
Max Day
Demand
Max Day
Requirement
Max Hour
Factor
Max Hour
Demand
Max Hour
Requirement
Customer Class
1 Single Family Residential 1,399,409 3,834 1.53 5,848 2,014 2.35 9,005 3,158 2 Multi Family 155,985 427 1.32 566 138 2.04 871 305 3 Commercial 393,429 1,078 1.41 1,522 444 2.17 2,343 822 4 City / County 45,507 125 1.46 182 58 2.25 281 98 5 Schools 58,431 160 2.05 329 169 3.16 507 178 Line Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 41
Max Hour Requirements (HCF/day) = [Water Use Rate (gpm) × 60 mins/hr × 24 hrs/day ÷ 748.05 gallons/HCF] – Max Day Requirements (HCF/day)
Table 6-13: Peaking Units for Fire Protection
Peaking units of service (from Table 6-12 and Table 6-13 ) are summarized below in Table 6-14 . The distribution of Fire Protection peaking units in Lines 3 and 4 (fro m Table 6-13 ) is based on proportional equivalent fire demand (from Table 6-11 ). The proportional shares of Max Day and Max Hour units of service are also shown in Columns B and D of Table 6-14, respectively.
Table 6-14: Summary of Total Peaking Units
6.10. Adjusted Cost of Service Allocation
Table 6-15 shows the adjusted allocation of the rate revenue requirement to the various cost causation components. The adjusted COS allocation (Line 6) incorporates adjustments to the preliminary COS allocations developed in Section 6.7 and ultimately provides the underlying basis for proposed FY 2020-21 rate calculations shown subsequently in Section 7. The results shown in Table 6-15 are calculated as follows based on intermediate results developed in the preceding subsections:
1. Preliminary Cost of Service Allocation (Line 1): The preliminary COS allocations were previously developed in Section 6.7 . (see Table 6-9). The General cost causation component is excluded because all General costs were previously reallocated to other costs causation components.
A
Value
1 Duration of Fire (Hours) 3
2 Water Use Rate (gallons/min) 3,000
3 Max Day Requirements 722
4 Max Hour Requirements 5,053
Line Description
A B C D
Max Day
Requirement
% of Max Day
Req.
Max Hour
Requirement
% of Max
Hour Req.
Customer Class
1 Single Family Residential 2,014 56.8% 3,158 32.8% 2 Multi Family 138 3.9% 305 3.2% 3 Commercial 444 12.5% 822 8.5% 4 City / County 58 1.6% 98 1.0% 5 Schools 169 4.8% 178 1.8% 6 Public Fire 669 18.9% 4,681 48.7% 7 Private Fire 53 1.5% 372 3.9% 8 Total 3,544 100.0% 9,614 100.0% Line Description
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42 CITY OF MANHATTAN BEACH
2. Reallocation of Public Fire Costs (Line 2): Public fire protection represents a common benefit. Therefore, all public fire protection costs are reallocated to the Meter Service cost causation component to be recovered from all metered connections. Preliminary Max Day (Column C, Line 1) and Max Hour costs (Column D, Line 1) associated with public fire protection are reallocated from Max Day (Column C, Line 2) and Max Hour (Column D, Line 2) to Meter Service (Column F, Line 2) based on the percentage of peaking units associated with public fire protection ( Table 6-14 , Column B, Line 6). Note that the reallocation results in a shifting of costs between cost causation components but does not change the total rate revenue requirement.
3. Reallocation of Private Fire Costs (Line 3): Preliminary peaking costs (Columns C and D, Line 1) associated with private fire protection are reallocated from Max Day (Column C, Line 3) and Max Hour (Column D, Line 3) to a newly added Private Fire Protection cost component (Column G, Line 3) based on the percentage of peaking units associated with private fire protection ( Table 6-14 , Columns B and D, Line 7). Note that the reallocation results in a shifting of costs between cost causation components but does not change the total rate revenue requirement.
4. Reallocation of Base and Peaking Costs to Meter Service (Lines 4 and 5): The City collects approximately 30 percent of its rate revenues from Fixed Meter Charges. Without this additional cost reallocation, this updated COS analysis would reduce the proportion of revenues from fixed charges to approximately 11 percent. This would reduce revenue stability and increase the risk of revenue insufficiency resulting from decreases in water sales during periods of reduced demand. To increase the proportion of fixed revenue, Raftelis reallocated 80 percent of remaining Max Day and Max Hour costs after the fire reallocations from Max Day (Column C, Line 5) and Max Hour (Column D, Line 5) to Meter Service (Column F, Line 5). A 12 percent portion of Base costs (Column B, Line 4) is also reallocated to the Meter Service component (Column F, Line 4). Utilities invest in and continuously maintain facilities to provide capacity to meet all levels of water consumption, including base and peak demand. These costs must be recovered regardless of the amount of water used during a given period, so these costs are generally considered fixed water system costs incurred regardless of water use. To balance between affordability and revenue stability, it is a common practice that a portion of these costs is recovered in the bi-monthly service charge, along with customer-related costs and meter-related costs.
5. Final Cost of Service Allocation (Line 7): The final COS allocation (Line 7) equals the sum of Lines 1 and 6. This represents the final adjusted allocation of the total revenue requirement (from Table 6-1, Column C, Line 9) to the various cost causation components.
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WATER COST OF SERVICE AND RATE DESIGN STUDY 43
Table 6-15: Adjusted Cost of Service Allocation
A B C D E F G H I J
Supply Base
Delivery Max Day Max Hour Customer
Service
Meter
Service
Private Fire -
Capacity
Private Fire -
Backflow
Private Fire -
Admin Total
1 Preliminary Cost of Service $11,147,700 $2,417,888 $1,090,923 $656,131 $928,971 $359 ,854 $0 $55,362 $1,862 $16,658,691 Reallocations
2 Public Fire ($205,855) ($319,486) $525,340 $0
3 Private Fire ($16,350) ($25,375) $41,725 $0
4 Base to Meter ($290,147) $290,147 $0
5 Peak to Meter ($694,974) ($249,016) $943,991 $0
6 Subtotal $0 ($290,147) ($917,179) ($593,877) $0 $1,759,47 8 $41,725 $0 $0 $0 7 Final Cost of Service $11,147,700 $2,127,741 $173,744 $ 62,254 $928,971 $2,119,332 $41,725 $55,362 $1,862 $16,658 ,691 Line Description
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44 CITY OF MANHATTAN BEACH
6.11. Unit Cost Development
Units of service are used to convert total adjusted costs allocated to each cost causation component (from Table 6-15 ) into unit costs, which are directly incorporated into the proposed rate calculations for FY 2023 in Section 7.
Units of service relating to water use and peaking were previously determined (see Table 4-5 and Table 6-14 ).
However, additional units of service must be determined to develop Customer, Meters, and Fire Protection unit costs.
Additional Units of Service
Table 6-16 shows the development of additional units of service needed to calculate unit costs for Customer, Meter Service, and Fire Protection cost causation components. Customer unit costs are calculated on a per-account basis, as these costs do not vary based on connection type or size. Total accounts are approximated by summing total water meters for each customer class, as previously determined in Table 4-3.
Table 6-17 shows the meter equivalents calculation, which is used to allocate meter-related costs appropriately and equitably. Larger meters impose greater demand, are more expensive to install, maintain, and replace than smaller meters, and require greater capacity within the water system. Equivalent meter units in this study are based on AWWA-rated hydraulic capacities and are calculated to represent the potential demand on the water system relative to a base meter size.
Capacity ratios are calculated by dividing larger meter capacities by the base meter capacity. The base meter in this study is a 3/4-inch meter. AWWA capacity ratios (Column H) are calculated by dividing the capacity of each meter size (Column G) by the capacity of a 3/4-inch meter (Column G, Line 1). The projected number of meters (Table 6-16 ) is multiplied by the AWWA capacity ratios (Column H) to determine equivalent meter units (Columns A to E).
Table 6-16: Customer Meters by Class
A B C D E F
SFR MFR Comm. City/
County Schools Total
Meter Size
1 5/8" or 3/4" 7,551 678 191 20 1 8,441 2 1" 3,599 412 132 27 1 4,171 3 1.5" 573 90 67 12 1 743 4 2" 7 18 128 43 3 199 5 3" - - 19 3 7 29 6 4" 2 - 3 2 2 9 7 6" - - 3 3 3 9 8 8" - - 1 - 1 2 9 10" - - 1 - - 1 10 Subtotal 11,732 1,198 545 110 19 13,604 Line Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 45
Table 6-17: Equivalent Meter Units
Unit Costs
Unit costs comprise the constituent parts from which proposed FY 2023 rates are calculated in Section 7. Table 6-18 shows unit costs for each cost causation component (Column D), which are calculated by dividing the fi nal COS allocation in Column A (from Table 6-15 , Line 7) by the relevant units of service (Column B). The units of service vary by unit cost and are based on either FY 2023 w ater use (from Table 4-5), peaking units (from Table 6-14 ), or the number of accounts/fire lines/equivalent meter units (from Table 6-10 , Table 6-16, or Table 6-17 ). All customer and meter units in those tables have been annualize d to account for the fact that each account will re ceive six bi- monthly bills per year.
Table 6-18: Development of Unit Costs
A B C D E F G H
SFR MFR Comm. City/
County Schools Total AWWA
Capacity
Capacity
Ratio
Meter Size
1 5/8" or 3/4" 7,551 678 191 20 1 8,441 30 1.00 2 1" 5,998 687 220 45 2 6,952 50 1.67 3 1.5" 1,910 300 223 40 3 2,477 100 3.33 4 2" 37 96 683 229 16 1,061 160 5.33 5 3" - - 222 35 82 338 350 11.67 6 4" 42 - 63 42 42 189 630 21.00 7 6" - - 130 130 130 390 1,300 43.33 8 8" - - 80 - 80 160 2,400 80.00 9 10" - - 127 - - 127 3,800 126.67 10 Subtotal 15,539 1,761 1,938 541 356 20,135 Line Description
A B D
COS Units of
Service Unit Cost
Cost Component
1 Supply $11,147,700 2,063,144 Water Use $5.40
2 Base Delivery $2,127,741 2,052,761 Water Use, less Fire $1.04 3 Max Day $173,744 2,822 Max Day Req, less Fire $61.56 4 Max Hour $62,254 4,561 Max Hour Req, less Fire $13.65 5 Customer Service $928,971 81,624 Meters $11.38 6 Meter Service $2,119,332 120,808 Eq. Meters $17.54 7 Private Fire - Capacity $41,725 41,110 Private Fire Eq. Meters $1.01 8 Private Fire - Backflow $55,362 5,820 Private Fire Cost Eq. Meters $9.51 9 Private Fire - Admin $1,862 582 Private Fire Meters $3.20 10 Total $16,658,691
Line Description Units
C
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46 CITY OF MANHATTAN BEACH
6.12. Customer Class Costs
Unit costs developed in Table 6-18 are used to distribute costs to each customer class based on their unique units of service from Table 4-5, Table 6-14 , Table 6-16 , and Table 6-17 , which are summarized again in Lines 1 to 6. The Unit Costs are multiplied by the service units to derive the cost to each class for each cost component in Columns A to I, Lines 7 to 12. The total cost of service for each class is shown in Column J.
Table 6-19: Customer Class Cost of Service
A B C D E F G H I J
Supply Base
Delivery Max Day Max Hour Customer
Service
Meter
Service
Private Fire -
Capacity
Private Fire -
Backflow
Private Fire -
Admin Total
Customer Class Units
1 Single Family Residential 1,399,409 1,399,409 2,014 3,158 70,392 93,232 2 Multi Family 155,985 155,985 138 305 7,188 10,564 3 Commercial 393,429 393,429 444 822 3,270 11,630 4 City / County 45,507 45,507 58 98 660 3,248 5 Schools 58,431 58,431 169 178 114 2,134 6 Private Fire 10,383 41,110 5,820 582 Customer Class Costs
7 Single Family Residential $7,561,369 $1,450,524 $123, 967 $43,101 $801,138 $1,635,567 $0 $0 $0 $11,615,666 8 Multi Family $842,827 $161,683 $8,512 $4,169 $81,807 $18 5,324 $0 $0 $0 $1,284,322 9 Commercial $2,125,799 $407,800 $27,324 $11,216 $37,216 $ 204,025 $0 $0 $0 $2,813,379 10 City / County $245,886 $47,169 $3,547 $1,344 $7,512 $56 ,980 $0 $0 $0 $362,438 11 Schools $315,718 $60,565 $10,394 $2,424 $1,297 $37,437 $ 0 $0 $0 $427,835 12 Private Fire $56,102 $0 $0 $0 $0 $0 $41,725 $55,362 $1,862 $155,051 13 Total $13,210,844 $4,180,502 $176,566 $66,815 $1,010,595 $2,240,140 $82,835 $61,182 $2,444 $16,658,691 Line Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 47
7. Proposed Water Rates
Section 7 details the proposed water rate calculations. Proposed FY 2023 rates are calculated directly from the results of the COS analysis (from Section 6). All proposed rates beginning in FY 2024 are calculated by simply increasing the prior year's proposed rate by the annual revenue adjustment (from Table 5-11 ).
7.1. Proposed FY 2023 Fixed Meter Charges
Table 7-1 shows the detailed calculation of proposed FY 2023 Fixed Meter Charges which are based on Customer and Equivalent meter unit rates. Customer costs do not vary by connection type or size. Therefore, the Customer unit rate, previously derived in Table 6-18 , Column D, Line 5, is applied uniformly to all Fix ed Meter Charges (Column A). Because Meters costs vary by meter size based on hydraulic capacity, the unit cost ( Table 6-18 , Column C, Line 6) is multiplied by the AWWA capacity ratio for each meter size ( Table 6-17 , Column G). For example, the AWWA capacity ratio for a 1” meter is 1.67, which i s multiplied by $17.54 to derive the meter componen t cost of $29.54 (Column B, Line 2). The two fixed charge components in Columns A and B are added in Column C, showing the total proposed bi-monthly fixed charge.
Table 7-1: Proposed FY 2023 Fixed Meter Charge Calculation
A B C D E F
Customer
Component
Eq. Meter
Component
Proposed
Charge
Current
Charge $ Change % Change
Meter Size
1 5/8" or 3/4" $11.38 $17.54 $28.93 $40.46 ($11.53) -28.5% 2 1" $11.38 $29.24 $40.62 $63.64 ($23.02) -36.2%
3 1.5" $11.38 $58.48 $69.86 $101.48 ($31.62) -31.2%
4 2" $11.38 $93.56 $104.95 $147.26 ($42.31) -28.7%
5 3" $11.38 $204.67 $216.05 $296.30 ($80.25) -27.1%
6 4" $11.38 $368.40 $379.79 $406.60 ($26.81) -6.6%
7 6" $11.38 $760.20 $771.58 $787.98 ($16.40) -2.1%
8 8" $11.38 $1,403.44 $1,414.82 $1,245.64 $169.18 13.6% 9 10" $11.38 $2,222.11 $2,233.50 $1,779.60 $453.90 25.5% Line Description
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48 CITY OF MANHATTAN BEACH
7.2. Proposed FY 2023 Volume Charges
Volume Charges are designed to recover the portion of the rate revenue requirement allocated to the following cost causation components: Supply, Base Delivery, and Peaking (Max Day and Max Hour).
Proposed FY 2023 Volume Charge Calculation
Table 7-2 shows the proposed FY 2023 Volume Charge calculations. Although the supply and base delivery unit rates are the same for all customers and have been calculated in Table 6-18 , Column D, Lines 1 and 2, the peaking component of the volume rates varies by customer class in relation to the class peaking factor. Therefore, the volume rate calculation relies on the allocated costs of each component and each class shown in Table 6-19 , Columns A to D, Lines 7 to 12. The total cost to be recovered in the volume charge for each class is shown in Colum n E. The billable units, simply the annual water volume to b e sold, are shown in Column F (from Table 4-5). The proposed rate in Column G is the result of dividing Column E by column F and rounding to the next penny.
Table 7-2: Proposed FY 2023 Volume Charge Calculation
7.3. Proposed FY 2023 Private Fire Line Charges
Fixed charges for private fire lines are calculated in the same manner as the fixed charges in Table 7-1. All Customers pay the same unit rate for administration, as calculated in Table 6-18 , Column D, Line 9 and shown again in Table 7-3, column C. The capacity component (Table 6-18, Column D, Line 7) is scaled to larger meter sizes using the equivalent demand factors from Table 6-10, Column A, while the backflow component is scaled using the meter cost ratio in Column D of that table. These components for each meter size are added in Table 7-3, Column D, and compared to the existing private fire line charges in Column E.
A B C D E F G
Supply Base Max Day Max Hour Total Cost Billable
Units
Proposed
Rate
Customer Class
1 Single Family Residential $7,561,369 $1,450,524 $123, 967 $43,101 $9,178,961 1,399,409 $6.56 2 Multi Family $842,827 $161,683 $8,512 $4,169 $1,017,191 155,985 $6.53 3 Commercial $2,125,799 $407,800 $27,324 $11,216 $2,572,1 38 393,429 $6.54 4 City / County $245,886 $47,169 $3,547 $1,344 $297,946 45 ,507 $6.55 5 Schools $315,718 $60,565 $10,394 $2,424 $389,101 58,431 $6.66 6 Private Fire $56,102 $0 $0 $0 $56,102 10,383 $5.41 Line Description
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WATER COST OF SERVICE AND RATE DESIGN STUDY 49
Table 7-3: Proposed FY 2023 Private Fire Line Charge Calculation
7.4. Proposed Five-Year Rate Schedule
Table 7-4 shows the proposed five-year schedule of water rates through FY 2027. Proposed FY 2023 Fixed Meter Charges (see Table 7-1) and Volume Charges ( Table 7-2) were calculated in the preceding subsections. All proposed rates beginning in FY 2024 are calculated by increasing the prior year’s proposed rate by the proposed annual revenue adjustment (from Table 5-11 ). Current FY 2022 water rates (from Table 4-1) are also shown.
A B C D E F G
Capacity Backflow Admin Proposed
Charge
Current
Charge $ Change % Change
Meter Size
1 5/8" or 3/4" $1.01 $9.51 $3.20 $13.73
2 1" $1.01 $13.24 $3.20 $17.46
3 1.5" $2.95 $20.82 $3.20 $26.97
4 2" $6.28 $28.27 $3.20 $37.76 $43.52 ($5.76) -13.2%
5 3" $18.25 $49.89 $3.20 $71.34 $61.82 $9.52 15.4%
6 4" $38.89 $79.82 $3.20 $121.92 $82.42 $39.50 47.9%
7 6" $112.98 $133.04 $3.20 $249.22 $139.62 $109.60 78.5% 8 8" $240.76 $199.56 $3.20 $443.52 $208.28 $235.24 112.9% 9 10" $432.96 $266.08 $3.20 $702.25 $288.36 $413.89 143.5% Line Description
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50 CITY OF MANHATTAN BEACH
Table 7-4: Proposed Five-Year Water Rate Schedule
7.5. Bi-Monthly Bill Impacts
Table 7-5 shows sample bi-monthly bills for each customer class using the most common meter size for the class and a range of water use volumes to provide a representative sample of impacts across many customers.
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Current Nov 1, 2022 Nov 1, 2023 Nov 1, 2024 Nov 1, 2025 Nov 1, 2026 Bi-Monthly Fixed Charges
5/8" or 3/4" $40.46 $28.93 $31.54 $34.23 $35.60 $37.03
1" $63.64 $40.62 $44.28 $48.05 $49.98 $51.98
1.5" $101.48 $69.86 $76.15 $82.63 $85.94 $89.38
2" $147.26 $104.95 $114.40 $124.13 $129.10 $134.27
3" $296.30 $216.05 $235.50 $255.52 $265.75 $276.38
4" $406.60 $379.79 $413.98 $449.17 $467.14 $485.83
6" $787.98 $771.58 $841.03 $912.52 $949.03 $987.00
8" $1,245.64 $1,414.82 $1,542.16 $1,673.25 $1,740.18 $1,809 .79 10" $1,779.60 $2,233.50 $2,434.52 $2,641.46 $2,747.12 $2,857 .01 Volume Rates
1" and Smaller, All Classes
Tier 1 1-14 $4.28
Tier 2 15-48 $5.86
Tier 3 >48 $9.38
1 1/2" and Larger, All Classes Uniform $5.51
SFR $6.56 $7.16 $7.77 $8.09 $8.42
MFR $6.53 $7.12 $7.73 $8.04 $8.37
Commercial $6.54 $7.13 $7.74 $8.05 $8.38
City / LA County $6.55 $7.14 $7.75 $8.06 $8.39
Schools $6.66 $7.26 $7.88 $8.20 $8.53
Private Fire $5.41 $5.90 $6.41 $6.67 $6.94
Bi-Monthly Private Fire Line Charges
5/8" or 3/4" $13.19 $14.38 $15.61 $16.24 $16.89
1" $17.46 $19.04 $20.66 $21.49 $22.35
1.5" $26.97 $29.40 $31.90 $33.18 $34.51
2" $43.52 $37.76 $41.16 $44.66 $46.45 $48.31
3" $61.82 $71.34 $77.77 $84.39 $87.77 $91.29
4" $82.42 $121.92 $132.90 $144.20 $149.97 $155.97
6" $139.62 $249.22 $271.65 $294.75 $306.54 $318.81
8" $208.28 $443.52 $483.44 $524.54 $545.53 $567.36
10" $288.36 $702.25 $765.46 $830.53 $863.76 $898.32
Description Tiers
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WATER COST OF SERVICE AND RATE DESIGN STUDY 51
Table 7-5: Customer Bill Impacts
7.6. Bi-Monthly Bill Comparison
Figure 7-1 shows a comparison of sample Single Family Residential bi-monthly bills with several nearby water agencies. All bills are calculated based on a 5/8-inch or 3/4-inch water meter size and bi-monthly water use of 20 HCF. Note that many of the other agencies shown are either scheduled or expected to implement rate increases in FY 2023. Many factors affect the cost of serving water by the agency. Some of these factors include:
1. Tax revenue – some agencies receive tax revenue substantially lowering the revenue required from rates,
2. Water sources – agencies who buy more imported water usually pay more for water compared to purveyors who pump groundwater,
3. Topography – hilly agencies will incur costs to pump water compared to agencies with flat topography,
4. System reinvestment – deferred investment in rehabilitation projects will keep rates low compared to agencies are investing in their system,
A B C D E F
Meter Size Water Use Current Bill Proposed Bill $ Chang e % Change 1 Single Family Residential 5/8" or 3/4" 10 $83.26 $94.53 $11.27 13.5% 2 5/8" or 3/4" 15 $106.24 $127.33 $21.09 19.9%
3 5/8" or 3/4" 20 $135.54 $160.13 $24.59 18.1%
4 5/8" or 3/4" 40 $252.74 $291.33 $38.59 15.3%
5 5/8" or 3/4" 75 $552.88 $520.93 ($31.95) -5.8%
6 Multi Family 2" 10 $202.36 $170.25 ($32.11) -15.9%
7 2" 15 $229.91 $202.90 ($27.01) -11.7%
8 2" 22 $268.48 $248.61 ($19.87) -7.4%
9 2" 40 $367.66 $366.15 ($1.51) -0.4%
10 2" 50 $422.76 $431.45 $8.69 2.1%
11 Commercial 1" 40 $284.04 $302.22 $18.18 6.4%
12 1" 80 $504.44 $563.82 $59.38 11.8%
13 1" 120 $724.84 $825.42 $100.58 13.9%
14 1" 150 $890.14 $1,021.62 $131.48 14.8%
15 1" 170 $1,000.34 $1,152.42 $152.08 15.2%
16 City / County 2" 15 $229.91 $203.20 ($26.71) -11.6%
17 2" 30 $312.56 $301.45 ($11.11) -3.6%
18 2" 69 $527.45 $556.90 $29.45 5.6%
19 2" 120 $808.46 $890.95 $82.49 10.2%
20 2" 150 $973.76 $1,087.45 $113.69 11.7%
21 Schools 3" 100 $847.30 $1,045.79 $198.49 23.4%
22 3" 250 $1,673.80 $2,044.79 $370.99 22.2%
23 3" 512 $3,117.42 $3,789.71 $672.29 21.6%
24 3" 630 $3,767.60 $4,575.59 $807.99 21.4%
25 3" 700 $4,153.30 $5,041.79 $888.49 21.4%
Line Description
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52 CITY OF MANHATTAN BEACH
5. Age – newer systems are often in better shape than older systems and require less repair,
6. Size – smaller systems often have a higher cost per customer since they lack economies of scale.
Figure 7-1: Single Family Residential Bill Comparison with Neighboring Agencies
City Council Regular Meeting - Page 984 of 1385
WATER COST OF SERVICE AND RATE DESIGN STUDY 53
8.Conclusions
The City of Manhattan Beach has not raised water rates since 2014. Although the City has managed costs effectively since then, inflation has increased by 21%; given the City’s capital needs over the next five years, rate increases will now be required in order to continue to provide safe, reliable water service.
Raftelis conducted a status quo cash flow analysis to evaluate whether existing water rates can adequately fund the City’s various expenses over the five-year study period. With the assistance of City staff, annual revenues, O&M expenses, debt service payments, and capital expenditures were projected through FY 2027. Raftelis projects that with no rate increases over the five-year study period, the City will fully deplete its reserves by the end of FY 2025.
This demonstrates a clear need for revenue adjustments (i.e. water rate revenue increases relative to the status quo).
The proposed revenue adjustments were selected to provide financial sufficiency for the City while minimizing impacts to City customers.
The need for the proposed increases is most clearly demonstrated in Figure 8-1. Current revenues, as represented by the dark blue line, are insufficient to cover expenses as soon as FY 2023. Revenue under the proposed increases, represented by the gray line, fully fund operations each year of the study period.
Figure 8-1
Additionally, this Raftelis developed a new rate st ructure that the project team believes accurately r eflects the principles required by Proposition 218 and nationally recognized industry standards. The water utility is fully funded by ratepayers; there are no general fund transfers or meaningful outside subsidies. Therefore, it is i mportant to develop rates that fully recover the costs of providing water service from those customers who cause the City to incur them.
City Council Regular Meeting - Page 985 of 1385
RAFTELIS 67
Cost Proposal
The following table provides a breakdown of our proposed fee for this project. This table includes the estimated level of effort required for completing each task and the hourly billing rates for our project team members. Expenses include costs associated with travel and a $10 per hour technology charge covering computers, networks, telephones, postage, etc.
SG BB GD SC Corp Total
1. Project Management, Kick-off Meeting,
and QA/QC 1 16 10 2 4 32 $8,640
2. Benchmarking 1 8 16 25 $5,575
3. Water, Recycled Water, and Wastewater
Financial Plan Models 2 8 18 54 80 $17,840
4. Cost of Service Analysis 4 10 40 54 $11,780
5. Rate Design and Calculation 9 15 34 58 $13,355
6. Drought Rates 2 6 14 22 $4,950
7. Rate Survey 1 4 8 12 $2,640
8. Draft and Final Reports 8 12 44 64 $14,280
9. System Development Charges 1 6 16 23 $5,055
10. Review Overhead Distribution
Formulas 1 4 8 13 $2,935
11. Miscellaneous Fee Template 2 8 26 36 $7,870
12. Model Training 1 2 6 8 $1,720
13. Public Outreach Community Meetings 2 2 16 12 30 $9,327
14. Communication and Outreach Materials 1 2 4 16 2 24 $6,190
15. Two City Council Meetings 2 2 26 4 6 38 $11,047
16. Public Hearing Notice 6 8 14 $3,160
17. Public Hearing 1 13 4 2 19 $5,549
Total Meetings / Hours 6 5 58 162 44 288 0 552
$285 $250 $250 $190 $85
$16,530 $40,500 $11,000 $54,720 $0 $122,750
Total Fees $122,750
Total Expenses $9,163
Total Fees & Expenses $131,913
Total Fees &
Expenses
SG - Steve Gagnon
BB - Brian Bass
GD - Gina DePinto
SC - Staff Consultants
Corp - Corporate Functions
Tasks
Web
Meetings
In-person
Meetings
Hours
Hourly Billing Rate
Total Professional Fees
COST PROPOSAL
City Council Regular Meeting - Page 986 of 1385
RAFTELIS 68
Hourly Billing Rates
Project team hours and expenses will be billed on the same invoice. Expenses related to travel will be billed at cost.
Additional services outside the agreed upon scope of work will be billed on a time and materials basis. Raftelis’ billing rates can be found below. These rates will be in effect for calendar year 2022 and will then increase annually by 3% unless specified otherwise by contract.
POSITION HOURLY BILLING RATE**
Chair/Chair Emeritus $475
Chief Executive Officer/President $400
Executive Vice President $350
Vice President $325
Senior Manager $285
Principal Consultant $270
Manager $250
Senior Consultant $225
Consultant $195
Creative Director $195
Associate $165
Graphic Designer $140
Analyst $120
Administration $90
Technology Charge* $10
*Technology/Communications
Charge: This is an hourly fee
charged monthly for each hour
worked on the project to recover
telephone, facsimile, computer,
postage/overnight delivery,
conference calls,
electronic/computer webinars,
photocopies, etc.
**For services related to the
preparation for and participation in
deposition and trials/hearings, the
standard billing rates listed above
will be increased by an amount up to
50 percent.
City Council Regular Meeting - Page 987 of 1385
City of Lynwood, CA
Water and Sewer Rate Study
November 29, 2022
City Council Regular Meeting - Page 988 of 1385
i
City of Lynwood, CA
Table of Contents
Table of Contents ....................................................................................................................................................... i Cover Letter ................................................................................................................................................................ ii Executive Summary ................................................................................................................................................. 1 Approach to the Project ....................................................................................................................................... 3 Scope of Services ................................ ................................ ................................ ......................... 3 Project Disclaimer ................................ ................................ ................................ ....................... 15 Quality Assurance/Control Program ................................ ................................ ............................ 16 Experience .................................................................................................................................................................. 18 Utility Rate Experience ................................ ................................ ................................ ................ 18 Qualifications ........................................................................................................................................................... 20 Firm Profile ................................ ................................ ................................ ................................ . 20 Project Team ................................ ................................ ................................ .............................. 21 Chris Fisher ................................ ................................ ................................ ................................ 22 Michael Cronan................................ ................................ ................................ ........................... 23 Kevin Burnett, MA ................................ ................................ ................................ ....................... 24 References ................................................................................................................................................................. 25 Project Schedule .................................................................................................................................................... 27 Copy of a Rate Study ............................................................................................................................................ 28 Addenda ..................................................................................................................................................................... 29 Cost Proposal .................................................................................................................Under Separate Cover City Council Regular Meeting - Page 989 of 1385
T 951.587.3500 ▪ 800.755.6864 | F 951.587.3510 ▪ 888.326.6864 | 27368 Via Industria, Suite 200, Temecula, CA 92590 www.willdan.com
Cover Letter
November 29, 2022
Mr. Ernie Hernandez
City Manager
City of Lynwood
11330 Bullis Road
Lynwood, California 90262
Re: Technical Proposal to Conduct Water & Sewer Rate Study for the City of Lynwood Dear Mr. Hernandez:
Based on review of the Request for Proposals, information obtained from the City’s most recent budget and audited financial statements , and our considerable experience in utility rate and financial consulting for cities, Willdan Financial Services (“Willdan”) is pleased to submit the following proposal to conduct a water and sewer rate study on behalf of the City of Lynwood (“City”).
Willdan’s interactive approach will result in a customized Microsoft Excel financial model, that the City will retain, as well as a focused and tailored analysis of the cu rrent utility rates, revenues, capital project and operational expenditures, debt commitments, reserve funding, and other financial data.
The culmination of our analyses will be a comprehensive financial plan that develops projected system operating results for the next five fiscal years for the purposes of recommending updated water and sewer rates and extended out to ten years to provide insight into both utilities’ longer term projected financial performance.
We will employ our proven interactive approach, supported with advanced financial modeling techniques, to develop a sophisticated and flexible financial model to help us guide the City through operating and financial scenarios, while evaluating the impact of policy assumptions and performing sensitivity analysis on utility rates and financial strategies.
Our ability to focus on the financial aspects of operating publicly owned utility systems is coupled with recognized leadership in strategic planning and operations , enabling us to bring unmatched value to our clients. Our team brings a set of nationally recognized qualifications and experts, detailed below, that set us apart.
Direct Recent Experience with the City of Lynwood — Willdan has successfully partnered with the City on a variety of projects in recent years. We worked with the City to evaluate the feasibility of implementing a Community Facilities District to fund City-provided services. We work annually to administer the City’s Landscaping and Lighting Assessment Districts. Finally, we completed the two most recent Cost Allocation Plans and User Fee Studies (2017 and 2019 ) and are currently working with the City on a new update to the Cost Allocation Plan. Through this experience we have gained meaningful understanding of the local community and developed relationships with key City Staff. All of this enhances our understanding of the City’s objectives for this project. Our team will bring th e same level of professionalism and expertise, understanding of the community, and our knowledge of the City’s staff and systems to this proposed engagement. Where possible, we will leverage our knowledge of your operations and relationships with key staff to facilitate and expedite our data gathering and work, focusing less time on data gathering and more on analysis. This allows us to provide meaningful analysis and deeper insight that other firms can’t match , and our understanding of the City reduces questions and streamlines the process, allowing City Staff to focus their time on direct City operations.
Unique Approach and Dynamic Financial Model — Our approach to the development of utility rates has been carefully honed over the years. We will work collaboratively with City Staff to carefully assess and understand the City’s unique utility system concerns and issues, clarify goals and objectives for the study, and develop a tailored approach that will best serve your needs. We do not use a “cookie-cutter” approach, but rather bring a combination of planning and financial expertise providing a thorough understanding of u tility operations and management. Further, we have enhanced the interface and functionality of our model to provide even more options and efficiency for evaluating financial scenarios and changes in key assumptions and input variables.
City Council Regular Meeting - Page 990 of 1385
Mr. Ernie Hernandez, City Manager
City of Lynwood
Proposal to Conduct Water and Sewer Rate Study
November 29, 2022 | Page iii
Unmatched Experience Developing and Implementing Utility Rates — Willdan is nationally recognized for its expertise in developing and implementing utility system financial planning, rate , and impact fee studies, and has extensive experience in California implementing Proposition 218 compliant rate structures.
We recently completed successful comprehensive studies for the Cities of La Palma, Lomita, Richmond, Lakeport, Sebastopol, Grover Beach, Soledad, the McKinleyville Community Services District, and Guadalupe and are currently working with the Cities of Dinuba, Vacaville, and Fillmore, with objectives and experience that relate closely to the goals of the City’s proposed study.
Communicating the Results — Sound technical analysis is only one element of this process. It will be equally important to effectively communicate the results and implications of the proposed rate structure s to City Staff, City Council, key stakeholders, and ultimately to those that will be subject to new rates.
Most of our projects incorporate significant community and/or stakeholder involvement and education efforts, and our experienced consultants are able to communicate complicated technical analysis in a ma nner that is easy to follow and understand.
The intuitive setup of our financial models allows Willdan to discuss and present critical information in a way that facilitates outreach and maximizes engagement . Our reports and presentations provide a solid understanding of the project and the rationale behind the development of the rates .
Due to evolving COVID-19 restrictions, meetings may be in person, or online. We have utilized virtual meetings for years to facilitate quick, on-demand meetings with clients. During the pandemic our capability to continue projects with clients never slowed down, and we have had great success shifting meetings that would typically have been in-person to virtual meeting platforms.
I, Chris Fisher, will serve as the primary contact person for this proposal; as an officer of the firm, I am authorized to negotiate and bind Willdan Financial Services. Provided in the table below is my contact information.
Willdan Financial Services
Proposal Contact
Chris Fisher
Vice President / Director
27368 Via Industria, Suite 200 | Temecula, CA 92590
Tel #: (951) 587-3500 | Fax #: (951) 587-3510
Email: [email protected]
Willdan maintains exceptional experience in utility cost of service and rate analysis and is excited about this opportunity to use our skills and expertise to continue to serve the City of Lynwood.
Sincerely,
WILLDAN FINANCIAL SERVICES
Chris Fisher
Vice President / Director
Financial Consulting Services
City Council Regular Meeting - Page 991 of 1385
Water and Sewer Rate Study 1
City of Lynwood, CA
Executive Summary
Willdan/ City of Lynwood Partnership
Willdan recognizes that developing a partnership with the client is the key to the completion of a successful project.
Our relationship-based approach has afforded us the opportunity to assist many clients throughout California, including Lynwood, and across the country. Willdan has provided transformative solutions to financial, rate and capital planning challenges for communities throughout the nation, and today, we continue leading our clients into a future accelerated by constant change in resources, technology, regulations, and industry trends. Willdan has the in -house experience and expertise, as well as the team capacity, to provide all the requested utility rate study services. 58 Years of Success Serving Government Authorities
& Community Stakeholders
Financing Plans Rate and Capital Planning
Management Stakeholder Outreach
Communication
Communicating with staff throughout the course of the engagement is also key to a successful project. Willdan utilizes an effective combination of communication tools including in-person meetings, video collaboration software, and emails to keep staff members updated on the progress of the project. Such frequent communication will ensure that there are no surprises and that all team members are in agreement with the recommendations to be presented to elected officials. Taking a proactive role in communicating with stakeholders increases trust in the utility provider, improves the stakeholders’ understanding of utility operations and services, and establishes a foundation for future positive relations within the community. Willdan envisions an outreach progra m that utilizes an effective combination of communication tools, reaching numerous people with a message that accurately reflects the City’s goals. We recognize that the presentation of recommendations for rate increases and significant changes in rate structure can be difficult and must be managed with tact, confidence, and honesty. Willdan believes the key to a successful presentation is to keep it in “layman’s” terms to make sure it is relatable to the target audience.
Training
Willdan can offer a hands-on training session to staff members responsible for using the model, as well as post-project phone consultations. Training, which can take place at the city offices or via a webinar, provides staff members with an opportunity to learn the dynamic interactions of the rate model. In addition, Willdan will be available to provide future training on an hourly basis either at the city offices or via webinar.
Additional Information
Additional requested information per the bid packet is provided here:
1) Willdan Financial Services affirms our ability and willingness to execute the City’s Professional Services Agreement (Attachment A). Upon review by our legal team, there was one item requested for clarification in Exhibit B – General Terms and Conditions, Item 2:
2. Standard of Performance : Consultant shall perform all work to the highest professional standards "applicable to the scope of work and jurisdiction in which the work is to be performed," and in a manner reasonably satisfactory to the City Manager or his/her designee. No additional or different tasks or services shall be performed by Consultant other than those specified in Exhibit A.
Per our legal team, the reason for this clarification request is that simply putting “the highest standards” is regarded as too vague by courts/our providers. Thank you for your consideration.
2) Legal Issues – Willdan Financial Services does not have any past or pending litigation, or claims filed, against the firm, principals of the firm, or any of the key consultants, related to services performed for public agencies, or in actions that may affect its performance under a contract with the City.
City Council Regular Meeting - Page 992 of 1385
Water and Sewer Rate Study 2
City of Lynwood, CA
3) Disclosures – Willdan Financial Services, nor any principal of the firm, has been, or currently is, the subject of any investigation by the County, State, and/or Federal agencies within the past five years.
The Willdan Difference: From Data to Decisions
Any provider can tout their model as “the best.” But a model is only as good as the experts driving it. While we provide all the support you need to be self -sufficient, our experts also work with you to make your data meaningful and actionable. Such a partnership leads to consensus among your many stakeholders.
Our models are easy to use, answer “what-if” scenarios, generate customized reports as inputs are changed, produce financial measures and ratios, and will be accompanied by interactive user support. ▪ We provide custom solutions to each client engagement ▪ We serve as an extension of your team
▪ We are a relationship-based company
City Council Regular Meeting - Page 993 of 1385
Water and Sewer Rate Study 3
City of Lynwood, CA
Approach to the Project
Scope of Services
Project Understanding
The following project approach and scope of services is based on Willdan ’s current understanding o f the City of Lynwood’s (“City”) needs and objectives for the water and sewer utility rate study, our review of the most recent audited financial statements and City Budget, and the requested services outlined within the Request for Proposals (“RFP”). If necessary, a final scope and schedule will be determined following further discussions with City staff.
Willdan welcomes this opportunity to bring our existing knowledge of the City of Lynwood and to continue our relationship with the City by developing a comprehensive financial and rate model and presenting an evaluation of the current and projected financial plan and rate alternatives for the water and sewer utilities . Our objective is to provide Staff and the Council with the information it needs to fully understand the water and sewer utility’s current and projected financial condition, evaluate options for moving forward, and make informed decisions regarding recommended rate adjustments based on this process.
The objective of the study is to independently evaluate the City’s current water and sewer rates , determine whether sufficient revenue is being collected for utility activities, and as appropriate, develop an updated schedule of rates for each utility that is simple, equitable, and most importantly, structured to meet the future financial needs of th e City’s utilities. The proposed rate structure must adequately fund the ongoing operating, maintenance and capital improvement needs of the water and sewer utilities.
The City of Lynwood provides water and sewer s ervice to a population of approximately 69,887. Water is provided from local groundwater sources, with supplemental water purchased from the Metropolitan Water District. Wastewater is collected and conveyed through City facilities to the County Sanitation District for treatmen t. Water rates are billed with a combination of a readiness-to-serve (fixed) charge based on meter size , Fire Line Fees based on meter size , and a uniform volumetric rate. Sewer rates are relatively simple, with separate fees for residential and commercial customers.
A brief review of the most recent financial statements (for the Fiscal Year s Ending June 30, 2020 and 2021) available on the City’s website provides some insight into the current financial condition of both utilities, both of which appear to be in good standing, on an operating basis. A review of the 2021/2022 (adopted) and 2022/23 (approved) City Operating Budget yields insight into anticipated financial performance in the coming two fiscal years.
For the water and sewer utilities combined (as they are shown in the financial statements) , for the Fiscal Year Ending (FYE) June 30, 2020, operating revenues were $13.8MM, compared to operating expenses of $9.3MM, resulting in a net positive operating result of $ 4.5M. For FYE June 3 0, 2021, again for the water and sewer utilities combined, operating revenues were $14.9M and operating expenses were $ 9.98M, yielding net positive operating results of $4.96M. Looking forward, the FY 2022/23 City Budget - which breaks the two utilities out separately, and includes the 2021/22 Adopted Budget, as well as the 2022/23 Approved Budget - shows a projected modest decline in utility financial performance. For the water utility, revenues (mostly sales and readiness -to-serve charges) are budgeted at $12.1M for both years, with expenses at $12.2M for FYE 2022 , and $12.0M for FYE 2023 , close to break-even. For the sewer utility, revenues (mostly sewer service charges) are shown at $2.9M for both years, while expenses are budgeted at $2.1M for FYE 2022 and $1.9 M for FYE 2023. Both utilities also show budgeted transfers to the General Fund.
Based on the above information, the preparation of a comprehensive financial plan will be important in helping the utilities address the anticipated change in financial performance. We will develop a comprehensive financial model and evaluate the projected operations for the next five years to confirm this preliminary assumption, and to be sure everything is accounted for, and appropriate recommendations are made. We also will ensure that the appropriate level of operating reserves, and other designated reserves, are maintained as outlined in the City’s financial policies.
The project will entail three primary phases. The first is the review and evaluation of the previous rate study and development of objectives, development of a comprehensive financial plan for each utility, with projections for the next five years for the purposes of recommending rate adjustments extended out to ten years to provide a longer view of potential utility needs, particularly capital projects.
The purpose of the financial plan is to arrive at the required revenue for each utility, which serves as the basis for recommendations going forward, and the development of updated rates, i f necessary. Then, once the results of the financial plan are reviewed with City staff, we will proceed with the cost -of-service analysis and development of rates, and preparation of a report.
City Council Regular Meeting - Page 994 of 1385
Water and Sewer Rate Study 4
City of Lynwood, CA
Clearly all of the above -mentioned factors require a comprehens ive and detailed look at both utilities. Our approach and model incorporate a robust Capital Plan Analysis to ensure the utilities will be best equipped to address upcoming projects and their funding over the next five years, while maintaining required debt service coverage and appropriate reserve fund balances.
When developing the financial plan, it will be important to take into consideration updated costs of operating and maintaining the systems, as well as planned capital projects and their funding sources (including grants) over the next five to ten years. We wil l produce financial analyses and recommendations to account for these critical needs, while balancing them with the potential impact on customers. Willdan will develop a comprehensive financial plan that considers updated forecasts for sales and operating expenses, as well as capital expenses, and provides for:
▪ Sufficient and stable revenue for operations and routine maintenance; ▪ Adequate debt service coverage for existing and/or proposed debt; ▪ Sufficient funds to support new debt issuance, if necessary; ▪ Evaluation of tiered rate options, with a baseline allocation and additional tiers to encourage conservation and reflect increasing marginal costs;
▪ Review readiness-to-serve and fire-line fees, as well as policies for water connection fees; ▪ Consideration of drought impacts on the rate structure; ▪ We will review the City’s policies and conduct a reserve analysis to make recommendations where appropriate for accumulation and maintenance of designated reserves;
▪ Anticipated and routine repair and replacement of existing aging pipelines and infrastructure; and ▪ Major and minor capital projects for both utilities.
This financial plan will serve as the basis for a full cost of service analysis and ultimately the development of any recommendations for updated rates. The cost-of-service analysis will be conducted to ensure any new recommended rates comply with the requirements of Proposition 218 and recent legal decisions.
Specifically, we will review the City’s current water rate structure and discuss options for adjustments as appropriate and necessary. Our recommendations and proposed structure(s) will be developed in compliance with Proposition 218 requirements and recent court decisions, including the San Juan Capistrano case. We have worked recently with a leading Proposition 218 legal expert to develop tiered rates and supporting analysis to address these factors, allowing us to bring this insight to the City of Lynwood’s study.
The financial plan will be created using a highly flexible and interactive model and dashboard that will allow us to work collaboratively with the City to present and evaluate different financial scenarios, and quickly make changes in underlying assumptions based on feedback and discussions. Our goal will be to arrive at a financial plan that meets the City’s objectives, and that provides understanding and education for City staff and ultimately the Council, as they make decisions regarding the proposed rates.
Project Methodology
As described herein , and detailed within the scope of services that follows, our approach to th ese water and sewer rate studies is built around three primary objectives:
Primary Objectives
Working collaboratively with the
City of Lynwood to develop the
comprehensive financial plan and
model for the utilities
Using the model to develop and
evaluate various rate, financial
and capital funding scenarios
Arriving at a final plan and set of
recommended rates that have a
clear and transparent rationale
and basis
City Council Regular Meeting - Page 995 of 1385
Water and Sewer Rate Study 5
City of Lynwood, CA
We propose to conduct this process in a way in which staff and stakeholders gain understanding throughout the process of how the plan is developed, and how policy and financial decisions affect it, so that we can clearly communicate the process and results to City Council and the community. The communication part of the process is critical in gaining acceptance and understanding of the broader community.
Our rate study analysis will include comprehensive financial management plan alternatives for the next ten fiscal years to support the proposed five-year rate plan.
As part of this analysis, Willdan will develop a comprehensive financial analysis — which incorporates the following:
▪ Revenue requirements such as operating expenses, transfers, and reserve requirements; ▪ Major and minor capital expenses;
▪ Cash and debt-funded major capital expenditures, along with existing annual debt service expenses; ▪ Adequate funding of designated reserves including operating and existing debt service, and other reserves as outlined in the City’s financial policies; and
▪ Functional cost breakdown consistent with Proposition 218 requirements and American Water Works Association (AWWA) rate-making standards.
The culmination of the revenue requirements analysis, which will include a capital project financing plan and cost of service allocations, will be alternative rate plans which will provide sufficient revenue to meet the ongoing funding needs of each system, while recovering costs from customers in a manner which is fair, equitable, and within reasonable customer impact parameters.
During this project, we will utilize our Microsoft Excel-based model, with its interactive dashboard, as a comprehensive financial tool to allow for planning and reviewing of variable inputs and assumptions, thereby creating a t horough analysis of revenue requirements to address the City’s goal of ensuring predictable and stable revenue. These analyses are then seamlessly integrated with the rate development component of the model to demonstrate and project various rate design alternatives, and the effects they would have on the City’s financial outlook.
The model is used in meetings, in order to efficiently cycle through rate scenarios and establish the most viable rate plans for the City. During these interactive meetings, we in vite City staff to participate in scenario planning / “what -if” sessions, where we use the dashboard to demonstrate and evaluate the financial/rate impact of alternative data (CIP, operating costs, etc.) and assumptions (interest rates, customer growth, co st escalation, etc.) in real-time to focus on the most critical drivers of the analysis.
This ensures the resulting rate plan alternatives are viable from a financial, operational, managerial, and political perspective.
To the extent revenues are not pro jected to be sufficient to meet requirements including operating expenses, debt service payments and coverage requirements, planned capital expenditures and targeted operating reserves, the model can be used to evaluate variable outcomes and alternatives, providing basis for meaningful discussions with elected officials and stakeholders well in advance of the actual rate increase process.
Real-Time Financial Modeling
The goal of financial forecasting is to provide clear vision regarding the potential financial outcomes of current management decisions. Our goal is to help you mold the existing knowledge base of the City into a viable financial management and rate plan. At Willdan, the development and use of real -time financial models in an int eractive, collaborative process is an integral part of the model development.
Any model is only as effective as the expertise of those who develop it; our state -of-the-art financial modeling techniques allow us to incorporate our considerable experience by asking the correct questions, evaluating, and incorporating appropriate data, providing interactive consulting services, and evaluating multiple scenarios with the City in a real-time setting.
Because our interactive model will be populated with specific data from the City (i.e., division and account structure), each alternative reviewed in real -time during interactive meetings with the City can be done with a complete understanding of specific customer impacts. Further, our experience ensures that the da ta loaded into the model is vetted and validated, and that the baseline results from which forecasts are developed are fully understood from the beginning, so that more time is spent on evaluation of potential solutions, rather than questioning whether the underlying data and assumptions are correct.
The financial planning component
of the model provides
transparency such that users can
develop a viable financial plan and
understand the reasons for
needed revenue adjustments.
City Council Regular Meeting - Page 996 of 1385
Water and Sewer Rate Study 6
City of Lynwood, CA
Model Development as Part of the Consulting Process
The financial planning model will be designed with the following elements:
▪ Graphical dashboard to clearly show the results of various scenarios to the user; ▪ Easily reviewed and modified assumptions;
▪ Validated data tables generated from the City’s financial and operational information; and ▪ A powerful calculation engine.
The model will be “baselined” after an initial meeting with staff to ensure that we ha ve the correct data and a basic understanding of the financial dynamics of your system. We will then conduct interactive financial planning sessions with City staff. After validating our data, calculation approach, and baseline assumptions, we will explore alternative scenarios, varying a number of assumptions and financial planning techniques including:
▪ Rate increase magnitude and timing;
▪ Alternative timing of capital projects;
▪ Alternative financing options (alternative combinations of pay -as-you-go, revenue bond debt and other debt, for example);
▪ Alternative growth/demand forecasts and other “what if” analyses, such as the impact of a loss of one or more service areas or significant customers; and
▪ Effect of increases in other sources of funds.
Given any combination of cost requirements (both operating and capital), non -rate sources of funds, and forecast assumptions, the Willdan team will work with the City to develop a financial plan that:
▪ Meets specified reserve targets;
▪ Addresses identified benchmarks or key performance indicators; ▪ Fully funds capital expenditures using specified financing techniques; and ▪ Meets legal, policy and contractual requirements that are financially measurable, such as existing debt service coverage on revenue bonds.
Subsequent to careful development and validation of the baseline forecast, a series of alternative forecasts will be prepared illustrating various results in the following general categories:
▪ What if things turn out differently? These
alternatives will de monstrate the sensitivity of the
forecast to the significant assumptions used. This
results in a sound understanding of areas where a
conservative forecast approach is warranted.
▪ What happens when we try this? This series of
alternatives focuses on differe nt financial
management approaches. For example, the use of
different financing techniques such as capitalized
interest, interim short -term financing, and capital
appreciation bonds may be explored.
▪ What can we do to make it better? This
approach to foreca sting identifies the factors that
may be causing significant rate increases in a
given year and explores alternatives. For example,
if a large capital project in a single year is the
culprit, we would work with staff and the consulting
engineers to determine whether this project could
be phased or delayed.
▪ How will any adjustments affect our
customers? In examining rate structure
alternatives, we will demonstrate and discuss how
users in various categories or classifications will
be impacted. Our consultant s will use our rate
design model to explore the impact of various rate
structures on bills for each customer class over the
relevant consumption range.
City Council Regular Meeting - Page 997 of 1385
Water and Sewer Rate Study 7
City of Lynwood, CA
Communication as Part of the Consulting Process
Willdan’s experienced professionals are accustomed to communicating with a variety of stakeholder groups, from management and staff, boards, and commissions, as well as the community. Our analytical and modeling approach will be customized to the City’s specific needs. As mentioned, the custom graphical interfaces imbedded in our models allow our consultants to easily track key performance metrics and work through alternative scenarios with the City staff and management. Features of the Excel -based analysis model include the ability to incorporate line -item data and assumptions that are then summarized in a graphic dashboard to show key financial indicators for the utility systems.
The sample dashboard illustrates how we can summarize data, assumptions, an d calculations into an easy -to- understand graphical interface that updates with each alternative scenario evaluated . A copy of the final dashboard model will be provided to the City of Lynwood upon completion of the project.
City Council Regular Meeting - Page 998 of 1385
Water and Sewer Rate Study 8
City of Lynwood, CA
Rate Study Objectives
The overarching rate study objectives are outlined below.
Rate Setting Process
The graphic below summarizes the standard approach commonly employed to develop utility rates. Willdan’s rate - setting process and model has been developed through the completion of many successful studies over the course of time and continues to be the basis for developing proven, well-balanced financial plans that are supported by equitable rate structures. Willdan’s combination of consulting experience and technical e xpertise helps distill the complex decisions into a clear and easy-to-understand process. As there are often competing objectives, for a successful rate study it is necessary to understand not only the technical details and corresponding rates, but also th e social and political corollaries that can often jeopardize the implementation of a technically sound rate structure. Our rate experience goes beyond simply “running the numbers” by creating numerous scenarios and considering stakeholder considerations, such as customer impact (ability to pay) to ensure a complete and unimpeded rate analysis.
Each step of the three -step approach is typically performed in tandem. Although presented sequentially, the overall analysis is circular – as variables in one analy sis may influence another. Thus, it is imperative to constantly review assumptions to determine if variables are fixed (i.e., debt service) or flexible (i.e., consumption or treatment) and monitor how changes in certain variables affect the overall analysis.
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Water and Sewer Rate Study 9
City of Lynwood, CA
Work Plan
The following proposed scope of services is intended to capture the goals and objectives of the City. Willdan is confident the following will effectively meet the stated project objectives. A final scope and schedule will be determined based on further discussions with staff if selected.
Willdan’s work plan will culminate in the successful development of water and sewer projections and rates for five years, an extended ten-year financial plan, and the education of staff and key stakeholders.
Project Initiation
Task 1.1 – Data Collection and Review
Task 1.1.1 – Data Collection. The City will be provided with an initial list of basic data needed to conduct the study.
The data request may include, but will not be limited to:
▪ Financial and operating data (budgets, audits,
financial statements, cash balances, etc.);
▪ Customer account and billing data;
▪ Related reports prepared by others (i.e., Master
Plans);
▪ Capital improvement programs, fixed asset records;
▪ System operating data for the utility;
▪ Service contracts, residential and commercial,
for refuse collection, recycling, and disposal
services;
▪ Bond statements, debt service schedules;
▪ Ordinances, previous rate studies, City codes;
and
▪ City financial, debt and reserve policies.
Task 1.1.2 – Data Review. We propose to conduct initial data collection and review prior to the kick -off meeting to allow for a more meaningful discussion to occur. This will allow for our review of data in advance of the meeting so that we can request clarifications or follow-up information as necessary. However, if the City’s preference is to conduct the kick-off prior to collecting data, we will accommodate that request. The data will be reviewed for completeness and to ensure a sufficient understanding of historical utility operations. The data collection and review process will be ongoing throughout the process as the need for additional information arises.
Task 1.2 – Kick-off Meeting and Planning Discussion
Task 1.2.1 – Project Kick-off. Following initial data collection and review, Willdan will conduct a kick-off meeting with City Staff. During this meeting we will discuss goals and objectives of the study, the schedule, constraints, or challenges that may be encountered, stakeholder considerations and objectives, and political concerns. Discussions may center around the following:
▪ Review of previous rate study and existing rate structure and areas where existing rates have been successful and/or specific areas of focus;
▪ Review of service contracts;
▪ Review of recent financial performance for the utilities; ▪ Discussion of anticipated significant events (i.e., loss or gain of any major customers , major capital projects such as the new sewer treatment facilities);
▪ Components to incorporate into the updated revenue requirements; such as, capital improvements, debt repayment, reserves, annual repair and replacement, ongoing maintenance, cost of imported water, etc.; ▪ Strategy and level of effort for outreach and education; ▪ Conduct a detailed review of the data used in the baseline financial forecast; and ▪ Review and resolve (or develop a plan for resolving) data issues and questions.
For further efficiency and collaboration, the kick-off meeting will include a financial policy discussion. This will serve to address and document the City's financial policies for the utilities to be studied.
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Water and Sewer Rate Study 10
City of Lynwood, CA
Topics of discussion may include:
▪ Rate design approaches and alternatives;
▪ Rate policy objectives;
▪ City financial policies;
▪ Reserve options and target levels (operating, debt
services, rate stabilization, repair, and
replacement);
▪ Conservation objectives and rate options;
▪ Capital Improvement Plan (CIP) financing options
– i.e., PAYGO vs. debt vs. grants;
▪ Customer characteristics and classifications; and
▪ Cost of service factors and Proposition 218.
Water and Sewer Rate Stud ies
Task 2.1 – Financial Plan, Revenue Requirements and Rate Determinants Task 2.1.1 – Historical Billing Data Analysis. The data request document will provide instructions for the development of historical customer billing information. It is anticipated that the billing information will be provided in a format necessary to summarize the water and sewer system accounts and billable flows by customer class for a recent historical period for which audited revenues exist. The customers and flows provide the basis on which operating revenues are derived and are therefore the primary factors utilized in reviewing the user rates an d charges. As such, the historical billing data provides an important basis for analyses that will be used to develop assumptions for projecting revenues under existing and/or proposed rates.
Task 2.1.2 – Customer and Flow Projections. The water and sewer system accounts and billable flows will be forecasted for a five-year planning period. Such projections will be developed by considering historical growth trends, peak demands, climatological patterns, local economic conditions, potential for adding/losin g major utility customers, changes in customer class usage patterns over time, and experienced judgment. The billable flow projections will be based on the projected number of utility accounts and a usage per account analysis to differentiate the historical effects of account growth and increased (decreased) average usage by customer class.
Task 2.1.3 – Projected Revenues Under Existing Rates. Projections of utility system revenues under existing rates for the five-year planning period will be developed for water and sewer, recognizing projected accounts, flow volumes, and usage patterns by customer class (as determined in the billing analysis under the previous tasks).
Task 2.1.4 – Projected Revenue Requirements. Revenue requirements (i.e., system expenditures) will be developed for the utility systems based on an analysis of historical, currently budgeted, and anticipated operating and capital expenditures. The revenue requirements will be projected on a fiscal year cash flow basis, considering expected operational changes, changes in staffing or operating expenditures for new facilities, system growth occurring from new development, anticipated extraordinary expenses, and allowances for inflation. The projections will include, but not be limited to, the following:
▪ Operation and maintenance expenses;
▪ Direct and indirect costs utilizing the City’s existing overhead cost allocation model;
▪ Outlay for annual capital additions and
replacements;
▪ Debt service and reserve requirements on existing and anticipated debt instruments;
▪ Provision for reserves as outlined in the City’s financial policies; and
▪ Other expenditures and transfers.
Task 2.1.5 – Projected Operating Results Based on Existing Rates. The projected revenues and revenue requirements will be summarized into a five and ten-year cash flow statement providing the projected operating results of the water and sewer systems under the existing rates.
The cash flow statement will be used to est imate annual adjustments in utility revenues necessary to fund operating and capital expenditure requirements, meet existing bond covenant requirements, and maintain prudent utility management practices. The estimated timing and magnitude of future debt issues required, if any, to finance proposed capital improvements will also be shown.
Concurrent with the development of the projected operating results, the study will review the general financial health of the utility operations and, as necessary, make rec ommendations for changes in fund balances, reserves, and debt service coverage ratios to maintain financial integrity and a stable bond rating.
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Water and Sewer Rate Study 11
City of Lynwood, CA
The graphic below demonstrates the general rate study methodology and major components of the rate process.
Task 2.2 – Capital Plan Analysis
Task 2.2.1 – Review Capital Improvement Program (CIP) and Asset Replacement Schedules. The City’s existing utility system five-year CIP and asset replacement schedules will be reviewed in conjunction with conversations with City Staff. The objective of such a review is to gain an understanding of the types of projects scheduled; the timing associated with such projects, associated expenditure requirements and the sources of funding each project.
Examining the impacts on the financial objectives of the water and sewer utilities, as well as capital projects associated with rehabilitation and replacement of existing facilities, will be a key objective of not only this task but the entire project.
The results of the financial plan will also help the City to prioritize projects identified within the CIP.
Task 2.2.2 – Develop Capital Needs Plan. Based on
the findings made in the previous task and the Projected Operating Results described in Task 2.1.5, a plan will be developed to provide for the anticipated capital
expenditure activities, including debt issuances, relative to the CIP. Such a plan will include consideration for the use of restricted and unrestricted funds, surplus
operating reserves, capital recovery fees, and future rate adjustments. The analysis will also develop a projection of reserve fund balances and level of liquidity.
Task 2.2.3 – Capital Projects Model. The CIP will drive the future funding options and will directly impact rates.
Therefore, the rate analysis will incorporate the City’s current five -year CIP. The rate model will have the ability to run various CIP funding scenarios and quickly show the estimated impact on utility rates.
Provide a system performance report and meter evaluation to determine Non-Revenue Water Loss and Recovery and how this will impact costs and rates. Provide cost scenarios for new equipment, s ystem requirements, energy, and water savings.
Since we are not serving as the financial/municipal advisor to the City for this project, we will rely on information relative to proposed debt or financing structures provided by the City or its designated fi nancial/municipal advisor. $0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
2017 2018 2019 2020 2021
Projected Unrestricted Reserves
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Water and Sewer Rate Study 12
City of Lynwood, CA
Task 2.3 – Cost-of-Service Allocations
Task 2.3.1 – Functional Cost Allocations. The
analysis will allocate the Test Year revenue
requirement (i.e., costs of providing service) to the
various cost/rate components that constitute
functional classifications of the types of service
provided. The functional cost allocations will
evaluate such aspects as fixed costs, customer-
related costs and volumetric/usage related costs.
The evaluation of allocation factors associated
with applicable costs will be based on existing rate
structures applied by the City, meter size, rate
structures applied by other comparable utility
systems in the region, common industry practice
and standard rate-making principals.
Task 2.3.2 – Determination of Revenue Adequacy. Comparisons of revenues under the existing water and sewer rates with the allocated costs of s ervice will be evaluated in order to determine the degree of cost recovery by the various cost components, and to identify areas that may possibly require adjustments to align the revenues from each rate component with the allocated costs.
Task 2.4 – Rate Analysis and Design; Review of Other Fees Task 2.4.1 – Evaluation of Existing Rate Structures. The existing rate structures will be further evaluated for their effectiveness in equitably recovering costs of utility service from each customer class. The City’s current rate structure will be evaluated, and recommendations will be made for potential modifications to the current rates.
As part of the rate design process, Willdan will discuss with departmental staff the current trends and philosophies in utility ratemaking. Based on these discussions, the analysis will develop and recommend a rate design and philosophy that best meets the objectives of the City. The analysis model will be developed in a dynamic manner allowing the City to compare alternative annual incremental/phasing adjustments to achieve funding goals. Basic standards for rate design accepted by the industry are:
Full Cost Recovery – rate revenue should provide sufficient income so that, when combined with other sources of funds, funding requirements for the system are covered including, all current long-term liabilities, debt obligations and future expansion-related and R&R-related capital needed to replace aging and infrastructure.
Fairness and Equity – based on cost responsibility as ref lected in cost -of-service allocations, in accordance with industry standards.
Technically Defensible – apply industry proven standards and methodologies to help shield the City from potential legal challenges associated with the proposed utility rates.
Resource Conservation – under conditions of scarcity, the pricing of water as a commodity should promote voluntary conservation, discourage unnecessary service use and extend the availability of supply.
Administrative Efficiency – rates should be understandable to customers and efficiently administered by staff.
Customer Acceptance – customers understand the rates, view them as fair, and consider them to be reasonable compared to other costs and other utilities.
Public Health and Welfare – rates are structured so that essential service usage is encouraged through affordability.
Task 2.4.2 – Rate Structure Alternatives. The rate model will be developed in a dynamic manner such that the Willdan Team and City Staff will be able to analyze “what if” scenarios detailing the financial impacts under each scenario utilizing an iterative dashboard view. Baseline rate structures will be recommended as required to fund the utility systems and consider annual inflationary indexed adjustments to rates as needed t o maintain each utility. We will coordinate with City Staff to ensure suggested rate structures are compatible with the City’s utility billing software.
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Water and Sewer Rate Study 13
City of Lynwood, CA
Task 2.4.3 – Projected Operating Results Based on Proposed Rates. The proposed user rates and/or rat e structures will be applied to the projected customers and flows in order to estimate the revenues to be generated from the proposed rates for the Test Year and the subsequent years of the projection period. The projected revenues will consider possible e lasticity effects associated with changes in usage characteristics that may occur from revising the rate structure. In addition, similar to the process described in Task 2.1, the five-year forecast will identify annual adjustments in utility system revenue s necessary to meet existing bond covenant requirements, prudent management practices, and/or sound capital financing considerations.
Task 2.4.4 – Typical Bill Comparison. Comparisons of
typical utility bills under the existing and proposed rates will be developed for each customer class under various levels of usage. The selected customer class usage levels will reflect the results of the billing analysis to better
demonstrate rate impacts on typical customer accounts in each class.
Task 2.4.5 – Neighboring Utility Comparison. A
comparison will be prepared to assess the difference
between existing and proposed rates of the City with those of at least five other comparable municipal utility systems.
Task 2.4.6 – Evaluate Existing Water Connection Fees. We will review the current water connection fees, their structure, and rationale, and make recommendations where appropriate to increase equity and the ability of the fees to provide funding to serve new demand. We will also discuss how and when fees are assessed and provide feedback as appropriate.
Preparation of Reports and Proposition 218 Notices
Task 3.1 – Reports and Deliverables
Task 3.1.1 – Preliminary Draft Report. A draft report will be developed to add ress study findings and proposed recommendations. Contents will also include and executive summary, methodologies used, assumptions relied upon for the projection of customers and usage characteristics, an overview of current and projected financial performance, including revenue requirements, revenues, expenses, capital costs, operating results, the cost recovery profile for each class, the results of the fully allocated cost of service analyses and any proposed adjustments to the utility rates. Upon completion, an electronic PDF copy and ten copies of the draft report will be provided to staff for review. The report and presentations will also include a comparison of the City’s current and proposed water and sewer rates with five other public agencies.
Task 3.1.2 – Final Report. Based on comments received from staff and other participants during the presentation of the Preliminary Draft Report, the Final Report will be revised to incorporate the agreed upon changes . Upon completion, an electronic PDF copy and seven (7) copies of the Final Rate Study Report, as well as the dashboard model spreadsheet will be provided to the City.
Task 3.2 – Proposition 218 Notice Preparation and Mailing Task 3.2.1 – Proposition 218 Notices. Based on our over 25 -year history with Proposition 218 compliance, we will assist with the drafting of the notices that will explain:
▪ The purpose of the rates;
▪ The reason for the increases;
▪ How the rates are structured;
▪ The date, time, and place of the public hearing; and
▪ Details on what constitutes the existence of a majority protest, as it relates to the implementation of a new/increased utility rate structure.
Task 3.2.2 – Proposition 21 8 Notice Processing. We will develop the materials, create a parcel database of properties subject to the new proposed rates, and coordinate the printing and mailing of the materials in conjunction with a mailing house that we typically work with on these types of projects. The additional cost for these services is estimated at $.75 per parcel and includes direct costs associated with the mailing. Our cost proposal does not include these direct costs. They will be billed directly to the City at the time of the mailing once the actual costs are known.
Utility 1
Existing Rates
Utility 2
Utility 3
Utility 4
Proposed Rates
Utility 5
Utility 6
Utility 7
Utility 8
Utility 9
Utility 10
Utility 11
Utility 12
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
Comparison With Other Utility Systems
6,000 Gallons Per Month
Average of Other Utilities
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Water and Sewer Rate Study 14
City of Lynwood, CA
Communicating Results - Presentations & Meetings
Task 4.1 – Meetings and Presentations
Task 4.1.1 – Project Kick-Off. As detailed in Task 1.2, an in-person kick-off meeting will be scheduled with City Staff and other City Consultants at the start of the project to discuss project requirements, finalize project scheduling/milestones and reporting requirements, and receive overall project direction. This discussion will provide the opportunity to review current utility rates, fees, charges, issues, and deficiencies with staff.
Task 4.1.2 – Project Progress Web Conferences. During the project, and prior to meetings with the City Council, team web conferences will be scheduled to present the progression of the analysis to staff in order to obtain input and feedback associated with any rate adjustments that may be presented. These web meetings will assist in the completion of rate design for the utility systems and guide the development of the draft report.
Task 4.1.3 – Public Meeting. As necessary, we will work with City Staff to develop a public outreach strategy and materials, should communications beyond the Proposition 218 notice be required. If requested, we will attend two (2) public community meetings.
Task 4.1.3 – Draft Financial Plan Meeting. The results of the Preliminary Financial Plan and Revenue Requirements will be presented to staff for comment, feedback, and direction.
Task 4.1.4 – Draft Study/Final Report Meetings/Public Hearing. The draft report will be reviewed with City Staff to discuss findings and recommendations, gather feedback and address questions, then presented to the City Council.
The results of the Final Report will be presented to the City Council during up to (2) City Council meetings, and then again at up to two (2) Public Hearings, as required by Proposition 218. Willdan’s project manager will be present to address any questions or concerns raised during the public hearings.
Please note, meetings may need to be conducted remotely using video collaboration software and/or conference calls depending on the public health mandates then in effect due to COVID-19.
City Staff Support / Responsibilities
Willdan recommends that the City of Lynwood assign a key individual as a project manager. As our analysis is developed, the City’s appointed project manager will:
▪ Coordinate responses to informational requests;
▪ Coordinate review of work products; and
▪ Identify appropriate staff members for participation in meetings and facilitate in scheduling.
We will ask for responses to initial information, follow-up requests and comments on reports within five business days or otherwise agreed upon timetable. If there are delays, the project manager will follow up with the parties involved to establish an estimated date for the delivery of information and/or feedback.
To ensure continued progression, the project manager will reconvene with the rest of the team to i dentify tasks that can be started while waiting for requested data.
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Water and Sewer Rate Study 15
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Project Disclaimer
The City of Lynwood further represents, acknowledges, and agrees that:
(i) The City uses the services of one or more municipal advisors registered with the U.S. Securities and Exchange Commission (“SEC”) to advise it in connection with municipal financial products and the issuance of municipal securities;
(ii) The City is not looking to Willdan to provide, and City shall not otherwise request or require Willdan to provide, any advice or recommendations with respect to municipal financial products or the issuance of municipal securities (including any advice or recommendations with respect to the structure, timing, terms, and other similar matters concerning such financial products or issues);
(iii) The provisions of this proposal and the services to be provided hereunder as outlined in the scope of services are not intended (and shall not be construed) to constitute or include any municipal advisory services within the meaning of Section 15B of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations adopted thereunder;
(iv) For the avoidance of doubt and without limiting the foregoing, in connection with any revenue projections, cash- flow analyses, feasibility studies and/or other analyses Willdan may provide the City with respect to financial, economic or other matters relating to a prospective, new or existing issuance of municipal securities of the City, (A) any s uch projections, studies and analyses shall be based upon assumptions, opinions or views (including, without limitation, any assumptions related to revenue growth) established by the City, in conjunction with such of its municipal, financial, legal and oth er advisers as it deems appropriate; and (B) under no circumstances shall Willdan be asked to provide, nor shall it provide, any advice or recommendations or subjective assumptions, opinions or views with respect to the actual or proposed structure, terms, timing, pricing or other similar matters with respect to any municipal financial products or municipal securities issuances, including any revisions or amendments thereto; and
(v) Notwithstanding all of the foregoing, the City recognizes that interpretive guidance regarding municipal advisory activities is currently quite limited and is likely to evolve and develop during the term of the potential engagement and, to that end, the City will work with Willdan throughout the term of the potential Agreement to ensure that the Agreement and the services to be provided by Willdan hereunder, is interpreted by the parties, and if necessary amended, in a manner intended to ensure that the City is not asking Willdan to provide, and Willdan is not in fact providing or required to provide, any municipal advisory services.
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City of Lynwood, CA
Quality Assurance/Control Program
Project Management
At Willdan, we utilize a Project Management Process/Approach that ensures projects are completed on tim e, within budget and most importantly yield results that match our clients’ expectations. We will document discussions leading to important policy decisions and/or the choice of critical assumptions used in constructing the analysis and model.
Following key stakeholder dis cussions, we will schedule a call to summarize findings and direction with City staff, to make certain that we are in agreement with stated objectives, and that feedback is incorporated as appropriate.
Through the process of providing regular updates and conducting status conference calls, potential issues will be highlighted, discussed, and resolved. Any deviances from the project timeline will be identified and plans will be developed for course corrections. If necessary, changes in approach or strategy will be discussed with City staff, to meet the needs of the City of Lynwood. In doing this, we will ensure the project stays on track and evolves, based upon current thinking and outside dynamics.
Project Management
Define the
Project Plan the Project Manage the Project Review the
Project
Communicate the
Project
▪ Identify the
project scope, set
objectives, list
potential
constraints,
document
assumptions.
▪ Define a course of
action and
develop an
effective
communication
plan.
▪ Provide a forum
for applying the
team’s collective
expertise to
solving difficult
analytical issues
that arise in
complex projects.
▪ Collaborate with the
project team and
client staff and
agree upon timeline
to meet the
estimated project
timeline.
▪ Assign workload
functions to
appropriately
qualified staff to
ensure milestones
are met, on time.
▪ Pre-schedule
quality control
meetings with
project team to
maintain the
progressive motion
of the project.
▪ Manage the
execution of the
project.
▪ Direct existing and
upcoming project
tasks.
▪ Control and monitor
work in progress.
▪ Provide feedback to
client and project
team.
▪ Identify and resolve
deviances from
project timeline.
▪ Review all work
product and
deliverables.
▪ Utilize structured
quality
assurance
process
involving up to
three levels of
review at the
peer level,
project manager
level.
▪ Procure
executive officer
level review.
▪ Communicate with
the client regarding
work status and
progress.
▪ Ensure client is in
receipt of regular
status updates.
▪ Schedule regular
conference calls to
touch base.
▪ Inform client of
roadblocks, work
outside of projected
scope.
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City of Lynwood, CA
Quality Assurance / Quality Control Process
Our quality control program is incorporated as a required element of Willdan’s day -to-day activities. There are three levels of reviews incorporated for our deliverables:
1) Peer review;
2) Project Manager review; and
3) Final quality assurance
manager review.
Peer reviews involve one analyst
reviewing the work of another,
while project manager reviews
are conducted prior to delivery to
the quality assurance manager.
The quality assurance manager
then performs a final review. This
ensures that our final product has
been thoroughly evaluated for
potential errors; thus, providing
quality client deliverables, and
high levels of integrity and
outcomes.
The primary mission of our quality control plan is to p rovide staff with the technical and managerial expertise to plan, organize, implement, and control the overall quality effort, thereby ensuring the completion of a quality project within the time and budget established.
Quality Assurance Goals
Goal Lead Task
Quality Assurance /
Control Process Chris Fisher
▪ Establish a set of planned and systematic actions for maintaining a high level of quality in the professional services performed; Emphasize quality in every phase of work;
▪ Ensure efficient use of resources;
▪ Establish a consistent and uniform approach to the services performed; and
▪ Implement appropriate quality control measures for each work task of the project.
Quality Control Plan
Chris Fisher &
Kevin Burnett
▪ Contract deliverables;
▪ Specific quality control procedures;
▪ Special quality control emphasis;
▪ Budget and manpower requirements;
▪ Overall project schedule and budget; and
▪ Project documentation requirements.
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Water and Sewer Rate Study 18
City of Lynwood, CA
Experience
Utility Rate Experience
Willdan’s professional staff has provided
professional consulting services,
including financial planning; rate and
cost-of-service studies; alternative and
feasibility analyses; and operational and
management studies for water, reclaimed
water, wastewater, solid was te, and
stormwater utility clients across the
United States for over t hree decades.
Additionally, Willdan staff are involved
with the development of the rate -setting
methodologies set forth in the American
Water Works Association (AWWA) M -1
manual “Principles of Water Rates, Fees
and Charges,” and the AWWA M -29
manual, “Water Utility Capital Financing.”
Willdan is nationally recognized for its
expertise with staff frequently being
called upon to speak or instruct on utility
financial matters, as subject mat ter
experts, including the AWWA Utility
Management conference.
We are also deeply familiar with the procedural and substantive requirements of Proposition 218. Willdan staff (including Mr. Fisher, proposed as the principal -in-charge for this engagement) sp eak regularly to California industry groups such as the California Special Districts Association (CSDA) and the California Society of Municipal Finance Offices (CSMFO). Further, we recently completed a water and wastewater study for the City of Lakeport wh ere the same team proposed for this engagement worked closely with a leading Proposition 218 law firm in the state to update their tiered water rate structure to be compliant with the requirements of Prop osition 218 and the City of San Juan Capistrano decision. We will bring this recent experience and insight to the City of Lynwood.
Willdan staff is experienced in a broad range of utility planning services; and therefore, understand the importance of an approach that integrates elements of utility planning, engineering, and finance. Willdan team members possess considerable experience in utility rate and cost-of-service studies and have performed these services for hundreds of utilities throughout the country. Our team includes staff with public sector experience spanning 30 years, and staff on the forefront of utility ratemaking and rate -modeling. In addition, team members have held positions as finance directors, deputy city managers, and auditors, and therefore understand the financial, operational, and political realities faced by governmental staff and management; we craft solutions, which are sensitive to this.
Willdan will work with the City to identify, and prioritize operational and fiscal objectives, and match these to specific rate attributes; and use this information throughout the engagement to develop a comprehensive financial plan and design utility rates that effectively meet these goals. The culmination of our analyses will be rate policies that guide the rate setting process, and a financial management plan that develops projected system operating results for the utility for th e forecasted period. Willdan will employ its proven interactive approach, coupled with advanced financial modeling techniques to design rates and a financial plan that meet established goals and performance criteria. These modeling techniques serve as a powerful decision-making tool and provide the City with genuine business solutions and recommendations as to the strategic direction of its utilities.
During rate and financial planning projects we employ tools and techniques, which focus on consensus building among stakeholders to ensure the team understands the future financial implications of current management decisions. Our extensive project experti se is bolstered by our unique interactive financial planning process and model.
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City of Lynwood, CA
Utility Rate Project Experience
The abbreviated table of experience below outlines projects that are similar in nature to those requested.
Willdan Financial Services
Utility Related Experience
Agency Project
City of Albany, CA Sewer Rate Study
City of Avenal, CA Water and Sewer Rate Study
City of Banning, CA Water, Wastewater and Reclaimed Water Rate Study City of Brighton, CO Potable Water Rate Study
City of Calexico, CA Water and Sewer Rate Study
City of Claremont, CA Sewer Rate Study
City of Coachella, CA Proposition 218 Sewer Mailing
City of Delano, CA Water, Sanitary Sewer, Solid Waste Utility Rate Study City & County of Denver, CO Sanitary Sewer & Storm Drainage Benchmarking and Storm Drainage Impact Fee Study
City of Dinuba, CA Water, Sewer, & Solid Waste Rate Study City of Durango, CO Water and Wastewater Rate Study
City of Fillmore, CA Water and Sewer Rate Study
City of Flagstaff, AZ Utility Rate Analysis
City of Fruita, CO Sewer Rate Study
City of Grover Beach, CA Water, Wastewater, and Stormwater Financial Plan and Utility Rate Study City of Guadalupe, CA Water and Sewer Rate Study
City of Hercules, CA Wastewater Financial Plan and Connection Fee Study City of Kingman, AZ Water and Sewer Rate Study
City of La Palma, CA Water and Sewer Rate Study
City of Lakeport, CA Water and Sewer Rate Study
City of Lomita, CA Water Rate Study
City of Norwalk, CA Water Rate Study
City of Pinole, CA Wastewater Rate and Fee Study
City of Richmond, CA Wastewater Rate Study
City of Sebastopol, CA Water and Wastewater Fee Study
City of Soledad, CA Water Rate Study Consulting Services City of Tracy, CA Water Fee Justification Study
City of Tulare, CA Water and Wastewater Rate Study
City of Twentynine Palms, CA Sewer Treatment Facility Fair Share and Sewer Rate Analysis County of San Diego, CA Sewer Rate and Standby Charge Study McKinleyville CSD, CA Water and Wastewater Rate and Capacity Fee Study Mission Springs Water District, CA Water and Sewer Rate and Fee Study Monte Vista Water District, CA Connection Fee Study
Phelan Piñon Hills CSD, CA Water Rate and Fee Study
Rainbow Municipal Water District, CA Water and Wastewater Asset Cost and Capacity Fee Study Town of Apple Valley, CA Sewer Rate and Nexus Study
Town of Gilbert, AZ Water and Sewer Rate Study
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Water and Sewer Rate Study 20
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Qualifications
Firm Profile
Willdan Financial Services, a California Corporation, is an operating division within Willdan Group, Inc. (WGI), which was founded in 1964 as an engineering firm working with local governments. Today, WGI is a publicly traded company (WLDN). WGI, through i ts divisions, provides professional technical and consulting services that ensure the quality, value and security of our nation’s infrastructure, systems, facilities, and environment. The firm has pursued two
primary service objectives since its inception —ensuring the success of its clients and enhancing its communities.
A financially stable company, Willdan has approximately 1,500 employees working in more than 50 offices across the U.S. Our employees include several nationally recognized Subject Matter E xperts for all areas related to the broadest definition of connected communities —three of whom are
committed to contribute their expertise throughout the
duration of the City of Lynwood’s Water and Sewer Rate
Study engagement.
We have solved economic, engi neering, and energy
challenges for local communities and delivered industry - leading solutions that have transformed government and
commerce. Today, Willdan is leading our clients into a future accelerated by change s in resources, infrastructure,
technology, regulations, and industry trends.