Water Rate Study
Rate Study Process
Financial Plan: How much revenue is needed overall?
Rate Design: What is the best way to recover that revenue from different types of customers?
Financial Plan: Process
Revenue
Rate Revenue
Misc. Revenue
Growth
Financial Policies
Reserve Targets
Debt Coverage
Expenses
O&M
Capital
Financial Plan: Current Condition
Utility rate revenue is $13 million per year.
Basic operating expenses are $19 million per year.
Cash balance at the beginning of the fiscal year was $6.4 million.
Financial Plan: Rate History
Financial Plan: Operating Expenses
The forecast of system operating expenses is based on prior year budgets.
Staff reviewed future needs to determine the FY 2026 expense forecast.
Estimated inflation factors applied to future years – average of 4.5% per year.
Forecast includes projection of new employees needed as the utility grows.
Water purchases from South San Joaquin Irrigation District (SSJID) account for about 25% of City O&M.
Includes debt service of approximately $1.1 million per year through 2034 for the Series 2012 bonds.
Financial Plan: Capital Expenditures
Source of Supply Renovations
Well 29 and Well 30
New Utilities Building
Pipeline Repair and Maintenance
About $5.7 million through 2029
Miscellaneous Upgrades and Improvements
Vehicles, water meters, storage tanks, etc
Approximately $10 million through 2029
Financial Plan: Recommendations
The City should adjust rates in May 2025 to collect an additional $1.1 million through the end of the fiscal year.
The City should implement additional rate adjustments July 1, 2026 and each year thereafter.
Cumulatively, these adjustments would increase annual revenue to $25 million in FY 2029.
The water utility operating fund should borrow $10 million from the water capacity fee fund in FY 2025 and $5 million in FY 2026.
Rate Design: Process
Overall Objective: Align costs with users based on demand.
Key Topics:
Monthly Fixed Charge
Volumetric Rate Structure
Rate Design: Current Rates
Fixed Charge
$17.15 per month for customers with the smallest meter size Customers with larger meters pay a higher charge
Volumetric Charges
Inclining block structure
Higher water use costs more per unit of water
Different tier breakpoints for larger meter sizes
Rate Design: Recommendations
Revise fixed charges to align with current cost structure.
All charges will increase, but by different amounts.
In general, charges for larger meters will increase more than charges for small meters.
The City should adopt a uniform rate structure.
Each unit of water costs the same.
Rates for lower water use will increase the most. Rates for water currently in Tier 3 will decline.
Rate Schedule
Bill Impacts: Comparison to Other Communities
Monthly cost for a residential customer with a 3/4” meter using 16 hcf per month.
Bill Impacts: Residential
Bill Impacts: Commercial
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